Forensic, General & Medical
Expert Witnesses

Abusive Tax Shelters


     By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness

PhoneCall Lance Wallach at (516) 938-5007


As an expert witness on 419 412i and abusive tax shelters my side has never lost a case. Many insurance agents that sold, and were sued, for selling those plans are now selling captive insurance and section 79 plans. The IRS is now looking at these plans. I have also received calls from people who are being audited by the IRS.
In theory these plans can be done properly. The problem is I have only seen one plan that may be run properly. For the aggressive profitable business owner looking for a large tax deduction such a plan may be worth looking at. Below is information that I took off a website about a captive insurance plan that almost looks legitimate.

What is a captive insurance company?
A captive insurance company is a bona fide insurance company, generally established for providing property and casualty coverage’s for its sponsoring company. Captive insurance is a broad term that is used to describe many different ways in which such coverage’s can be structured and utilized.
Using Captive Insurance Arrangements to Maximize Value
For decades, captive insurance has been used by large companies to reduce the premiums paid for the company's property and casualty insurance and reduce the amounts needed to fund self-insured risks associated with the company's tangible and intangible assets. The group captive structure and its segregated cell variation can bring these cost savings to small and medium sized business at a far lower cost than establishing the single parent captive commonly used by large companies.
The group captive and captive cell structures provide an opportunity for cost saving opportunities that can be further enhanced by coupling the structure with income tax and succession planning techniques.


Captive Advantages
Advantages of Captive Insurance are:
· Increased Control of coverage’s and risk levels
· Greater control over claims
· Coverage’s tailored to meet the business' needs
· Reduced operating costs
· Improved cash flow
· Increased coverage and capacity
· Eliminate policy exclusions
· Investment income to fund losses
· Direct access to reinsurance markets
· Funding and underwriting flexibility
· Smaller, self-insured deductible
· Additional negotiating leverage with underwriters
· Incentives for loss control
· Potential tax savings

Implementation steps
1. Business N adopts captive
2. ZIGI provides documentation
3. Business N executes documents
4. Series N applies to reinsurance carrier
5. Captive issues policies to Business N
6. Business N pays premiums to Series N
7. Series N pays reinsurance premiums
8. Series N invests balance of funds
More Lance Wallach commentary:

I always suggest 8886 forms be PROPERLY filed with aggressive plans. That way if the IRS comes after you, you avoid additional large fines for not filing. For more on that Google me, Lance Wallach. Many insurance agents are now pushing abusive section 79 and captive insurance plans. This is very good for my expert witness business. As in the past the IRS will audit and disallow these plans. In addition since most people do not properly file 8886 forms with the IRS they will get extra large IRS fines. Then the lawsuits begin, and I make a lot of money. As an expert witness my side has never lost a case. If a salesman suggests that you buy a section 79, captive insurance, or other aggressive plan Google them and the plan. If you then Google me you can be the judge of who you would trust.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

ABOUT THE AUTHOR: Lance Wallach
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous best selling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications.

Copyright Lance Wallach, CLU, CHFC

More information about Lance Wallach, CLU, CHFC


While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

Find an Expert Witness