Tax Shelters: The IRS Identifies Micro-Captive Insurance Schemes as a Transaction of Interest.

tax-shelters-micro-captive-trasactionsThe IRS periodically identifies tax strategies it considers abusive as “reportable transactions,” a designation that triggers disclosure obligations for material advisors involved in the transactions. See I.R.C. § 6111(a). They also must maintain lists of participants involved in reportable transactions. See I.R.C. § 6112(a). And individual taxpayers must make disclosures with their returns. See Treas. Reg. § 1.6011-4(a).

Reportable transactions come in a variety of forms. Where the IRS determines that a particular type of transaction is a tax avoidance scheme, it will designate it as a listed transaction, making all substantially similar transactions subject to the reporting and record-keeping requirements outlined above.… Read More

Too Many Cooks: A Failed Like-kind Exchange.

While the disposition of property in a sale or exchange normally triggers the recognition of gain or loss, the Code provides an exception for like-kind exchanges: where a taxpayer transfers property used in a trade or business for similar property to be used in a trade or business, no gain or loss will be recognized by reason of Section 1031(a)(1) of the Code. Like-kind exchanges are also permitted in a deferred model, where a qualified intermediary is involved, a taxpayer can then sell property for cash and purchase replacement property while qualifying for like-kind treatment if the cash is received by the qualified intermediary and used to purchase the replacement property.… Read More