Date: November 10, 2021
From: Oxford Risk Management Group
To: Tax, Legal, Independent Financial Advisors, and P&C Brokers
Re: Breaking News - Tax Court Victory for an Oxford Client
As you are aware, a client of Oxford’s, a family-owned agricultural business, had a prolonged audit by the Internal Revenue Service. At the end of the audit, the owners of the business, as well as their Delaware regulated captive insurance company, filed a petition in Tax Court, asking for a determination that their payments for insurance were deductible, satisfied the exclusion under section 831(b) of the Internal Revenue Code, and complied with the law.
We are pleased to announce that, on October 29, 2021, the United States Tax Court accepted the IRS’s concession of all the taxes and penalties that the Service had initially proposed regarding the captive insurance for the tax years under audit (2015-2018). As part of the resolution, the IRS also agreed that it would not examine two subsequent tax years (2019 and 2020).
While Oxford was not a party to this Tax Court case, this is an important victory for our client, and we are happy to share their great news with you! The IRS went to great lengths to concede the outcome, rather than allow the Court to determine whether the Oxford captive program satisfies the requirements of law (e.g., insurable risks, risk shifting, risk distribution, and insurance in the commonly accepted sense, as well as their valid business purpose in forming the captive). We are unaware of any other such captive that has been scrutinized in the manner and to the degree this case was, and then received a full concession from the Service...
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