The Internal Revenue Service (IRS) had planned to use tape recordings of an undercover agent looking to form an 831(b) captive with Tribeca Strategic
Pilot Series of Fortress Insurance v Commissioner, a case in which the taxpayer is accused of using a captive as a tax shelter, was scheduled for trial on June 3, 2019, although the case has now settled, with the taxpayers conceding beforehand.
This case follows former clients of Artex seeking damages from it in an Arizona-based lawsuit, Shivkov v Artex Risk Solutions, accusing the captive manager of conspiring to design, promote, sell, implement and manage illegal tax-advantaged captive insurance strategies using unlawful attempted 831(b) elections.
An undercover agent recorded three conversations between 2006 and 2008 of Artex executives Karl Huish, Jim Tehero and Ken Kotch, as part of an investigation by the Criminal Investigation Division of the IRS relating to Tribeca and other affiliates.
The recordings were made to help determine whether the primary purpose of the captive insurance programs being offered by Artex was tax avoidance - where programs were designed to have little chance of incurring losses and to avoid IRS audits. These facts are said to be relevant in deciding whether the captive in Pilot v Commissioner lacked economic substance.
Pilot Series of Fortress Insurance v Commissioner involves Jim Cameron, the sole shareholder of glass manufacturing business Cameron Glass, based in Oklahoma, who formed Pilot Series of Fortress Insurance (Pilot) as a Delaware-based captive insurance company with the assistance of Artex Risk Solutions. Pilot subsequently made an election to be taxed as an insurance company under IRC 831(b).
It is alleged that the ownership of the captive was structured to allow some or all of the wealth accumulated in it be passed to Cameron’s children and grandchildren, in order to avoid the application of gift taxes or the use of Cameron’s lifetime exclusion.
During each of the years at issue, Cameron Glass is said to have paid approximately $400,000 to an Artex entity - allegedly for insurance purposes.
Each year, Pilot is said to have received from Provincial Insurance - a separate Artex entity domiciled in Anguilla - an amount roughly equaling the paid premiums, minus a 2.5 percent fee through a supposed reinsurance arrangement where Pilot is to re-insure the first 25 percent of losses for the policies issued to Cameron Glass and that remaining 75 percent of losses for policies of other participants in Artex’s quota share reinsurance risk pool.
Pilot is said to have paid out no claims on the policies issued to Cameron Glass and only paid out minimal amounts for claims purportedly incurred from other participants in Artex’s risk pool.
The court had to determine whether the captive insurance transaction in this case lacked economic substance - transactions that lack business purpose and economic substance other than tax avoidance may be treated as a sham for federal income tax purposes.
Each of these individuals who had been recorded are said to have authenticated their voice in another micro captive insurance case currently pending opinion before Judge Holmes in Caylor Land & Development et al v Commissioner.
One of the lead lawyers involved in Shivkov v Artex Risk Solutions previously said that the alleged conspiracy that Artex sold and managed illegal tax shelter captive insurance strategies is larger than it seems, and that he believes the same type of conspiratorial conduct exists in a number of other major micro captive management companies.
Published on December 12, 2019
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Lance Wallach, CLU, ChFC, CIMC, the National Society of Accountants Speaker of the Year, consults on abusive tax shelters, captive insurance, conservation easements,bitcoin, ,insurance, estate planning, retirement and employee benefit plans,419,412i,section 79 plans and other IRS audit targets etc. As an expert witness his side has never lost a case.
ReplyDeleteLance Wallach advised thousands of high-income clients including hundreds of famous entertainers and athletes about captive insurance, 419, 412i section 79 and other abusive tax shelters. Lance also counseled famous Wall Street luminaries such as Hugh Downs and Louis Rukeyser, the host of 2 long-running programs Wall Street Week with Louis Rukeyser & Louis Rukeyser’s Wall Street.
Speaker at over 50 annual conventions and author for more than 500 publications on tax reduction ideas, abusive welfare benefit and retirement plans, captive insurance companies,abusive tax shelters and conservation easements, cash balance plans, life settlements, premium finance, and more. He is a course developer and instructor for Continuing Professional Education courses administered by
The American Institute of Certified Public Accountants.
Lance is a prolific author, having written or collaborated on numerous books, including 'The CPA Guide to Life Insurance', published by BISK Education, 'The Team Approach to Tax and Financial Planning', published by the American Institute of CPA s, and most recently 'Protecting Clients from Fraud, Incompetence, and Scams', published by Wiley. He has been hired as an expert witness on some issues of which he speaks about, and to this day, Lance Wallach has never lost a case.
Lance Wallach has appeared on radio and TV financial programs, most recently, on National Public Radio and NBC 25. Lance consults on abusive tax shelters like 412i,419, section 79, captive insurance bitcoin, easements, tax shelters and VEBA Plans.
Additionally, Lance Wallach's expertise is sought after by the U.S. Securities and Exchange Commission, U.S. Department of Labor, the Enforcement Unit of the IRS The State Inusrance Dept etc.
For those wishing to protect their captive, we’ll get you compliant.
ReplyDeleteAnd for those facing an audit, we’ll be your defense.
Businesses have been creating captive insurance companies (CICs) for more than 100 years in order to manage risk while taking advantage of the tax benefits offered by the insurance arrangement.
However, the IRS has started to evaluate possible abuses surrounding CICs, and has begun examinations in the area. For those businesses who are unprepared when facing examination, there can be consequences.
alliantNational leFor those wishing to protect their captive, we’ll get you compliant.
And for those facing an audit, we’ll be your defense.
Businesses have been creating captive insurance companies (CICs) for more than 100 years in order to manage risk while taking advantage of the tax benefits offered by the insurance arrangement.
However, the IRS has started to evaluate possible abuses surrounding CICs, and has begun examinations in the area. For those businesses who are unprepared when facing examination, there can be consequences.