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Captive Insurance Companies: Dead or Alive?  


Author:  Michael F. Lynch.; Nicholas C. Lynch.; Davide  Casten.


Source: Volume 30, Number 01, Fall 2016 , pp.43-50(8)




Journal of Taxation and Regulation of Financial Institutions

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Abstract: 

For many years, large corporations have been forming captive insurance companies offshore to obtain insurance coverage that was either unavailable or too costly under a commercial policy. Several states have made it easier and less costly to form and operate a captive, enabling smaller companies to enter the captive arena. And, recent changes made to Section 831(b) by the PATH Act make the tax-free premium that can be received by small captives even more appealing. The IRS has been challenging these small captives as abusive tax shelters, but if properly formed and operated, a small captive can withstand IRS scrutiny and provide substantial tax benefits to such companies and their owners.

Keywords: captive insurance; estate planning; reinsurance; asset protection; risk shifting and distribution; “economic family” doctrine; “small” captive election

Affiliations:  1: Bryant University; 2: California State University, Chico; 3: Bryant University.

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