What Was The IRS’ Beef With Captives? –

Starting in the mid-1970s, and continuing through the UPS case, the IRS fought captives tooth and nail. Over the course of these cases, they advanced three different legal arguments against captive insurance: the economic family argument, the nexus of contracts and the assignment of income doctrine.

However, it’s important to ask this question regarding the IRS’ legal battle: “what was it about captives that the IRS didn’t like?” To answer that question, we need to go back to a series of cases from the early 20th century called the reserve cases. In all of these cases, a taxpayer foresaw a particular adverse event and started to place money into a reserve fund in Read More