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Divided Tax Court Rules Against IRS in Rent-A-Center Captive Case

02.25.2014

Scales of justice and Gavel

U.S. Tax Court Decision Answered Some Questions, Posed Others


In January, a long-awaited decision in the court case Rent-A-Center v. Commissioner addressed the deductibility for federal income tax purposes of premium payments made by brother/sister entities to a commonly controlled captive insurance company.

The IRS challenged Rent-A-Center's captive on several fronts, but in a 10-6 divided opinion, the U.S. Tax Court upheld the deductibility of the premiums paid to the captive.

In light of this decision, captive owners should ensure that:

  1. Their captives have more than sufficient capital to meet their obligations.
  2. Their entities are domiciled in jurisdictions that sufficiently regulate captives; and
  3. Dealings with their captive are beyond reproach.


Alan Fine, Partner, Insurance Advisory Services, discusses the lessons learned and remaining unanswered questions in the linked Captive Insurance Times article.

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Alan FineDo you have questions about captive insurance companies? Schedule a meeting with Alan Fine today.

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