When looking at the economic family cases, it’s important to organize them in a comprehensible way. This installment looks at cases with fact patterns similar to Scenario 2 from Revenue Ruling 77-316. The following is taken directly from my book, U.S. Captive Insurance Law.

Situation 2 of Revenue Ruling 77-316 is the same as situation 1, except that the parent and subsidiaries pay premiums to a non-affiliated third party who reinsures 95% of the risk with a captive insurance company.[1] General Counsel Memorandum 35629 fleshes out the service’s thinking regarding situation 2.[2] The service argues the taxpayer should be allowed to deduct any payment not reinsured through the taxpayer’s captive.[3] In other words, risks that are outside the “economic family” and that follow proper insurance Read More