The Tax Cuts and Jobs Act of 2017 has passed, we are currently going through the new tax code to create a guide that will be out in a few weeks. Until then we will update with a few brief snippets, like today’s article in which we will discuss the things that at one point looked like they would make it into the final tax reform bill but did not.
A Captive Insurance Company is a legitimate tool for risk management. Set up properly, it also has significant tax benefits. However, the IRS believes that many Captive Insurance Companies, including Micro Insurance Companies, are abusing the law by arranging into these affairs solely for the purpose of tax avoidance.
With tax reform in the news, the media has found an interest in various absurdities the new law will create. For instance, with an progressive higher tax rates and a phase out of deductions, those who earn just over a million dollars have an effective marginal tax rate of 100%. But this outrage speaks to an unfortunate ignorance of our current tax code. For there are far greater outrages that are currently the law. In this article I will explain one of them — how it is possible to be taxed when you have a loss.
Two recent court decisions, one involving civil FBAR penalties and the other involving a huge alleged criminal conspiracy illustrate the perversion of our legal system. Those who are small-time offenders often are hit the hardest, meanwhile those who are much larger players, somehow avoid the full brunt of the US government.