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In its letter, the IRS said: "...payments to [a] captive are not insurance premiums (because the arrangement does not involve insurance risk, there is no risk distribution, there is no risk shifting, and/or the arrangement is not insurance in its commonly accepted sense) and a revenue agent may deny taxpayer’s claimed deduction." (Photo: ALM Archives) In its letter, the IRS said: “…payments to [a] captive are not insurance premiums (because the arrangement does not involve insurance risk, there is no risk distribution, there is no risk shifting, and/or the arrangement is not insurance in its commonly accepted sense) and a revenue agent may deny taxpayer’s claimed deduction.” (Photo: ALM Archives)

In a recent ruling, the Internal Revenue Service said that owners of abusive micro captives owe the adjustment payments linked to their failures to withhold taxes on the cash used to make the micro-captive premium payments.

A captive insurance company is an arrangement that a company, individual, or group sets up to insure the owner or owners against risk.

Allison Bell

Allison Bell, ThinkAdvisor's insurance editor, previously was LifeHealthPro's health insurance editor. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached at [email protected] or on Twitter at @Think_Allison.

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