The Thursday Report – Issue 342







Thursday, March 14, 2023

 Issue #342

Coming from the Law Offices of Gassman, Crotty & Denicolo, P.A. in Clearwater, FL.

Edited By: Brandon Ketron


Please Note: Gassman, Crotty, & Denicolo, P.A. will be sending the Thursday Report out during the first week of every month.

Article 1

Summary of Key Provisions of the 2025 Biden Administration Revenue Proposals (Greenbook)

Written By: Brandon Ketron

Article 2


CTA: Will It Stay or Will It Go?

Written By: Nickolas Tibbetts & Brandon Ketron

Article 3

Michael Geeraerts & Jim Magner on Captive Rescue: “I Shut Down My Captive, What Do I Do Now?” AKA An Advisor’s Guide to Safely Dismantling an Atomic Bomb

Written By: Michael Geeraerts & Jim Magner

Article 4

Neal Nusholtz: How to Add Two Paragraphs to Your General Powers of Attorney So You Can Cure Defects in Your Form 2848 and Represent Clients Before the Internal Revenue Service

Written By: Neal Nusholtz

Forbes Corner

Your CPA’s Guide to the New ERC Crisis

Written By: Alan Gassman

For Finkel’s Followers

3 Tips to Save Time When Delegating Tasks

Written By: David Finkel

Upcoming Webinar

 Mathematics of Estate Tax Planning

Presented By: Alan Gassman

More Upcoming Events

YouTube Library




Article 1

Summary of Key Provisions of the 2025 Biden Administration Revenue Proposals (Greenbook)


Written By: Brandon Ketron

On March 11, 2024, the Department of Treasury released their 2025 revenue proposals (a/k/a “The Greenbook”).  A common theme throughout the revenue proposals is to increase the tax rate for high net worth individuals and to eliminate the so called “loop holes” in the federal income and estate tax system.

    Below are some of the more important provisions that will have impact on many client situations if the proposals are enacted in their present form.  It is important to note that these are simply proposals and are not law or even on the floor of Congress for a potential vote, but do shed light on potential changes that may come into play if the current administration remains in power after the 2024 election.

    Changes to the federal income tax system would include the following:

    1.    Raising the corporate income tax rate to 28%.

        The proposal would increase the tax rate paid by C corporations from a flat 21% rate to a flat 28% rate.  This proposal would have retroactive effect to the beginning of the 2024 tax year, and even those C corporations that file a fiscal year would pay a flat rate of 21% on income earned in 2023 and a 28% rate on income earned in 2024.

    2.    Enact rules to prevent basis shifting by related parties through the use of partnerships.

        Under present law, partnerships may be used to facilitate transferring basis from a high basis asset to a low basis asset.  This technique is described in a former Thursday Report linked in the footnote below.[1]

        The proposal would essentially apply a matching rule to prevent a step up in basis from occurring until the partner that contributed the low basis asset disposes of the low basis property in a fully taxable transaction.  

        For example, if Partner A contributes a $10,000,000 building with zero basis to a partnership, and Partner B contributes $10,000,000 of Apple stock with a $10,000,000 basis, then after a sufficient period of time has passed and assuming that all other Subchapter K rules are followed, the building could be distributed to Partner B, and B would take a basis in the building equal to his outside basis in the partnership or $10 million.  Partner A would receive the Apple stock and take basis equal to his outside basis in the partnership ($0).  Partner A could then hold the Apple stock until death and receive a full step up in basis on the Apple stock eliminating any underlying gain in both the building and the Apple stock through the use of a partnership. 

        This is an overly simplified example as there are many rules that need to be followed to implement this type of technique, which would still be viable for 2024 as the proposal contemplates an effective date of January 1, 2025.

    3.    Modification to the Excess Business Loss Rules.

        Under present law, business losses in excess of $610,000 for married couples filing jointly and $305,000 for all taxpayers are treated as excess business losses and not allowed as an offset to other income.  Any excess business losses are carried forward and deducted in subsequent years as Net Operating Losses (NOLs).  Since the excess business losses converts to NOLs, there are more favorable rules allowing for the NOL to offset other income by up to 80%.

        The new proposal would not only make the excess business loss limitation permanent rather then expire after the end of the 2025 tax year, it would also treat excess business losses as carried forward excess business losses instead of NOL deductions, which would limit the ability of a taxpayer to use the excess business losses in subsequent years if the loss limitation applies.

        This proposal would take effect for the 2025 tax year.

    4.    Expansion of the limitation on deductibility of compensation in excess of $1,000,000.

        Under current law, Code Section 162(m) disallows a deduction for compensation in excess of $1,000,000 by publicly traded corporations paid to the Chief Executive Officer, the Chief Financial Officer, and the three highest paid non-CEO or non-CFO officers.

        The proposal that would take effect in 2025 would apply the Deduction Disallowance Rule to all corporations (both public and non-public C Corporations) and apply the Rule to all employees that receive compensation from the corporation in excess of $1,000,000.

        In addition, the proposal would apply the Aggregation Rules to treat all members of a controlled group within the meaning of Section 414(b), (c), (m), and (o) as a single employer for purposes of determining who is a covered employee and for applying the Deduction Disallowance Rule for compensation paid in excess of $1,000,000.

    5.    The Greenbook also contains a number of proposals to support Housing and Urban Development by providing tax incentives for investing in low income areas to improve neighborhoods, housing, and resources for such communities. 

    6.    Imposition of digital asset mining energy excess tax.

        The proposal that would take effect for the 2025 tax year would impose an excise tax equal to 30% of the cost of electricity used in digital asset mining.  Digital asset mining requires significant energy consumption due to the computing processing power needed to mine digital assets.  This new proposal would require such miners to be subject to an excise tax equal to 30% of electrical costs.

        The proposal is phased in over a three year period, so a 10% excise tax would apply in 2025, a 20% excise tax in 2026, and a 30% excise tax in 2027 and future tax years.

    7.    Application of the net investment income tax to pass through businesses owned by high income taxpayers.

        Under present law, depending on how the business entity is structured, self-employment taxes and the net investment income tax may be avoided on pass through business income if the correct structure is in place.

        The proposal would essentially cause all pass through business income to be subject to either the net investment income tax or the self-employment tax.  

        In addition to the expansion of the application, the proposal would increase the net investment income tax rate by 1.2% for a tax rate of 5% on net investment income.  This would apply to taxpayers with more than $400,000 of income as adjusted for inflation in future tax years.

        These proposals would have retroactive effect to apply to the 2024 tax year.

    8.    Increase of the top marginal rate for high income earners.

        The proposal would increase the top marginal rate bracket to 39.6%, and apply the top marginal rate at only $450,000 of income for married individuals filing a joint return, and $400,000 of income for single individuals.

        This proposal would have retroactive effect to the beginning of the 2024 tax year.

    9.    Modifications to the taxation of capital gains.

        The proposal would tax long term capital gains and qualified dividends of taxpayer with income in excess of $1,000,000 at ordinary tax rates, and would apply on or after the date of enactment of such proposal.

    10.    Treatment of transfers of appreciated property by gift or death as realization events.

        Under this proposal, there would no longer be a free step up in basis on death, and there would be a deemed realization event as a result of the decedent’s death, and capital gains tax would be owed to the extent the asset’s fair market value exceeds the basis in the asset on death.

        The deemed realization event would have certain exceptions to include the following:

            (a)    transfers to a spouse, transfers to a charity, and all transfers of tangible personal property such as household furnishings and personal effects, but excluding collectibles; and 

            (b)    the $250,000 per person, or $500,000 per married couple, exclusion on the gain of a principle residence would also apply to exempt all or a portion of the primary residence from the deemed realization event.

        The proposal would allow a $5,000,000 per donor exclusion from recognition of unrealized capital gains on property transferred by gift or as a result of the decedent’s death, and would apply a similar concept to the estate tax exemption with respect to the ability of a spouse to “port” his or her unused exemption to a surviving spouse.

        In addition, the proposal contemplates a deferral election to allow for a 15 year fixed rate payment plan with respect to the deemed realization event on certain family owned and operated businesses until the business is sold or ceases to be family owned and operated.

        This proposal would have an effective date of January 1, 2025.

    12.    Minimum tax on wealthy taxpayers.

        This proposal would impose a minimum tax of 25% on total income, which would be inclusive of unrealized capital gains, for taxpayers with a net worth (assets over liabilities) greater than $100,000,000.  The 25% tax would apply to the sum of the taxpayer’s taxable income plus any unrealized gains of the taxpayer.

        The proposal would also require taxpayers with a net worth greater than $100,000,000 to file on an annual basis reports to the Internal Revenue Service reporting basis and estimated value of assets and their total amount of liabilities each year.

        There are certain exceptions that apply, including the ability to pay the tax over a period of time with respect to certain illiquid assets.

    13.    Expansion of the Child Tax Credit, Income Tax Credit, and the Work Opportunity Credit.

        The proposal includes a number of modifications to support workers and families of low income taxpayers.

    14.    The proposals would make the exclusion of cancellation of indebtedness income  from forgiveness of student loan debt permanent.

    15.    Tax credit for certain first time home buyers.

        The proposal would allow for a credit on the purchase of a primary residence of the lesser of (1) 10% of the purchase price of the home or (2) $10,000.

        The credit would begin to phase out for individuals with income in excess of $100,000 and fully phase out at income in excess of $200,000.

        This proposal would have an effective date of January 1, 2024, and remain in effect until January 1, 2026.

    16.    The proposal also contemplates changes to the partnership tax rules to require carried or profits interest to be taxed at ordinary income rates.

    17.    The proposal also contemplates the repeal of Section 1031 Like-Kind Exchanges in excess of $500,000 per taxpayer ($1,000,000 per married couple).

    18.    Requirement of 100% recapture of depreciation deductions as ordinary income for depreciable real property.

        Under present law there is a favorable rate of 25% with respect to Section 1250 property which generally is business real property.

        The proposal would apply to taxpayers with income in excess of $400,000 to require that the 25% rate no longer apply and that any depreciation recapture would be calculated using the taxpayers ordinary income tax rate.

    There are many other changes not covered under this article that are proposed, that would all have the effect of increasing the tax liability of business entities that earn significant income.

    The Greenbook also contains a number of proposals that would modify the rules that would apply to IRAs and other qualified plans that are mostly designed to prevent the excess accumulation of retirement assets for high income taxpayers, and include the following:

    1.    A special distribution rule for high income taxpayers with large retirement account balances.

        This proposal would require a high income taxpayer, which is defined as taxpayers with gross income in excess of $450,000 for a married couple, or $400,000 for a single taxpayer, to distribute 50% of the retirement account balance that exceeds $10,000,000.

        For example, if a high income taxpayer had an IRA balance of $15,000,000, then the required minimum distribution for the following year would be at a minimum of $2,500,000 (50% of the excess over $10,000,000).

        This proposal would have an effective date of January 1, 2025.

    2.    Limitation on Roth IRA rollovers.

        This proposal would essentially prohibit the rollover of a Traditional IRA to a Roth IRA for a high income taxpayer for tax years beginning in 2025.

    3.    Clarification of disqualified persons for purposes of prohibited transactions under an IRA.

        This proposal would clarify that an individual for whom the IRA is maintained is always considered to be a disqualified person for purposes of the Prohibited Transaction Rules, and have an effective date beginning January 1, 2025.

    4.    Prohibition on IRA investments.

        This proposal would prohibit an IRA from holding an interest in a DISC or FSC.

    5.    Expansion of the statute of limitations.

        This proposal would extend the statute of limitations with respect to the valuation of IRA assets from three years to six years, while also extending the statute of limitations on prohibited transactions from three years to six years.

    The proposal also contains a number of modifications to the estate and gift tax system, which include the following:

    1.    Required reporting of trust assets and other information about the trust.

        The proposal would require that any trust with a value in excess of $300,000, as indexed for inflation for future tax years, to report general information on the nature of the trust, the estimated total value of the trust’s assets, as well as the Generation-Skipping Tax inclusion ratio of the trust.

    2.    Limitation on defined value formula clauses.

        The proposal would require that any gift or bequest that uses a defined value formula clause must determine the value without the need for IRS involvement.  Many defined value clauses assign a percentage of an entity equal to a defined value as finally determined for federal gift tax purposes to avoid transferring more than the value defined by the assignment.  For example, the assignment might contain language that a sufficient number of units in ABC, LLC equal to $5,000,000 is assigned to a trust.  If the IRS were to determine that the percentage transferred is in excess of $5,000,000 then a lower percentage would be transferred, or if the value as finally determined by the IRS is less than $5,000,000 than a larger percentage would be transferred.  

        This new proposal, which would apply for gifts occurring after December 31, 2024, would require that the defined value clause is based on something other than the value as finally determined for federal gift tax purposes by the Internal Revenue Service.  Defined value clauses that use an appraisal that occurs within a reasonably short period of time after the transfer would still be effective, but could not adjust based upon the IRS’ appraisal.

    3.    Limitation of annual gift exclusion.

        Taxpayers would now be subject to an annual limit of $50,000 per donor as indexed for inflation.  Each taxpayer would still have the ability to gift $18,000 under the annual gift tax exclusion per donee, but would have a cumulative limitation of $50,000 with respect to annual exclusion transfers.  This would prevent the use of annual exclusion gifts to trusts using multiple Crummey powers.  For example, if a trust had 10 beneficiaries, under present law the donor could make a transfer of up to $180,000 each year to such trust and qualify for the annual gift tax exclusion so long as the beneficiaries of the trust had a present right to withdrawal the contribution for a period of time.  If this new proposal is enacted, then the cumulative limitation of $50,000 would apply with respect to the transfer, and only $50,000 of such transfer would qualify for the annual gift tax exclusion.

    4.    Limitation on the duration of the Generation-Skipping Tax exemption.

        The proposal would require that the GST exemption would apply only to beneficiaries no more than two generations below the transferor, and to younger generation beneficiaries who are alive at the time of the creation of the trust.  Once the youngest beneficiary who was alive at the time of the creation of the trust is deceased, the GST exemption would expire and the trust would no longer be fully generation-skipping tax exempt.

        This proposal would apply on or after the date of enactment to all trust subject to generation-skipping transfer tax regardless of the existing inclusion ratio of the trust on the date of enactment.

    5.    Modifications to the Grantor Trust Rules.

        The proposal includes a number of changes to the existing rules that apply for grantor trusts, including the following:

            (a)    The proposal would require that transactions between a grantor and a grantor trust are no longer disregarded for income tax purposes resulting in a taxable transaction if the grantor were to sell assets to a grantor trust.

            (b)    The proposal would provide that the payment of income taxes on the income of a grantor trust is treated as a gift to the trust to the extent that the taxes are paid by the grantor and not reimbursed by the trust.

            (c)    The proposal would also treat purchases between a GST exempt grantor trust and a non-GST exempt grantor trust as regarded transactions, meaning that income tax would apply with respect to any sale between such trusts.

    6.    Proposed changes to Grantor Retained Annuity Trusts (GRATs)

        The proposal would require the following apply with respect to GRATs:

            (a)    A minimum value for gift tax purposes equal to the greater of 25% of the value of the assets transferred to the GRAT or $500,000.

            (b)    The proposal would prohibit any decrease in the annuity during the GRAT term.

            (c)    Assets exchanged with the trust before or after the annuity term would result in the recognition of gain or loss for income tax purposes.

            (d)    The GRAT would be required to have a minimum term of 10 years and a maximum term of the life expectancy of the annuitant plus 10 years.
        This would essentially makes GRATs ineffective for estate tax planning.

    7.    Modifications to Charitable Lead Annuity Trusts (CLATs)

        The proposal would require that annuity payments made to a charitable beneficiary be a level fixed amount over the term of the CLAT, in addition to requiring that the value of the remainder interest at the time of the creation of the CLAT must be at least 10% of the value of the property funded to the CLAT.

    8.    Modification of the GST tax rules to ignore certain tax exempt organizations.

        This proposal would require taxpayers to ignore interest in trusts held by tax exempt organizations for purposes of the GST tax.  As a result of this proposal, the inclusion of a charity as a potential beneficiary to prevent the occurrence of a taxable termination for GST tax purposes would no longer be effective.

    9.    Revision of rules related to valuation of promissory notes.

        The proposal would require the consistent valuation of promissory notes.  For example, a taxpayer could no longer take a position that a note issued at the applicable federal rate is a below market rate, or due to the note terms should be discounted for estate tax purposes upon death.  In other words, if assets were sold to the trust in exchange for a $10,000,000 note equal to the fair market value of the assets, then upon death it would become difficult to value the note at anything other than its face value.

    10.    Revision to the rules related to valuation of partial or fractional interest in certain inter-family transfers.

        The proposal would require that business interests transferred to or for the benefit of a family member would be valued at the pro rata share of the fair market value of all interest in the property held be the transferor and the transferor’s family members.  In other words, discounts for lack of control would be limited due to the fact that the attribution rules would require that the asset be valued as if the transferor was transferring all of the transferor’s interest in addition to any interest owned by the transferor’s family.  

        For example, if a transferor were to transfer a 99% non-voting membership interest in an entity and retain the 1% voting membership interest, the transfer of the 99% non-voting membership interest would be deemed to have also been a transfer of not only the non-voting membership interest, but also the voting membership interest, so that there would be limited discount for lack of control essentially resulting in the transfer being valued at 99% of the fair market value of the underlying entity’s assets less some discount for lack of marketability.

    In conclusion, there are a number of proposals contained in the Greenbook that would have a significant impact on income tax and estate and gift tax planning.  It remains to be seen if any of these proposals will be enacted, and the above only covers selected highlights of the Greenbook, which can be accessed in full at the following link:

    Stay tuned as we await to see if any of these proposals make their way into any of the legislation in the coming months.

[1]  See Gassman and Ketron: Why All Appreciated Assets May be Best Owned by Partnership Tax Entities…

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Article 2

CTA: Will It Stay or Will It Go?


Written By: Nickolas Tibbetts & Brandon Ketron


On March 1, 2024, the United States District Court for the Northern District of Alabama held that the Corporate Transparency Act (“CTA”) was unconstitutional.[1]  While the current scope of this decision is limited to National Small Business United (“NSBU”) and its members, this first clash between the courts and Congress has flung open the door for more CTA challenges.



            Congress passed the CTA as a small section of a larger act and it became effective as of January 1, 2024 requiring entities formed in 2024 to file the disclosures within 90 days of forming the entity.[2]  Entities that were formed prior to 2024 will have until January 1, 2025 to file the disclosures. The CTA requires certain entities to report information on their beneficial owners.  A “reporting company” is classified as any entity that is created by filing document(s) with a secretary of state (or foreign companies registered in the United States) and that is not subject to one of the many exclusions that apply to companies with existing reporting requirements. 

            A beneficial owner is a senior officer, an individual who can appoint or remove senior officers and directors, or an individual who holds 25 percent or more of the reporting company or otherwise has substantial control.  Beneficial owners and those who report or are responsible for reporting must provide personal information, such as name, address, driver’s license, or passport, to the Financial Crimes Enforcement Network (“FinCEN”) to satisfy the reporting requirement.[3]

            There are serious civil and criminal penalties for failure to comply with the reporting requirements, ranging from fines of $500 per day capped at $10,000 and potential criminal penalties of up to $500,000 and 10 years in federal prison.


NSBU vs. Janet Yellen:

A member of NSBU sued the United States Secretary of the Treasury and the Acting Director of FinCEN, Janet Yellen, alleging the CTA’s reporting requirements were unconstitutional.  The Plaintiff claimed Congress exceeded its powers and infringed upon individual rights, with which the court agreed with the former and did not address the latter.

The government argued that the CTA was constitutional based on three separate grounds:

a. Foreign Affairs powers,

b. Commerce Clause powers, and

c. Necessary and Proper Clause and Taxing powers.


            Foreign Affairs:

                     Congress has the power to regulate foreign affairs and national security, which is balanced against the Executive Branch’s powers.  In this case, since the Legislative and Executive branches agreed, only the lowest standard of a rational relationship between the regulated activity and the policy interests at stake needed to be met to find the law constitutional.  Further, the courts should defer to the political branches when they agree on policy matters.

The court found that Congress’s foreign affairs powers could not justify the CTA.  The court there was no rational relationship because the CTA deals with “purely internal affairs” and there were no agreements with foreign jurisdictions at issue.[4]

            Commerce Clause:

Under existing case law on the Commerce Clause, Congress has the power to regulate activities that substantially affect interstate commerce. 

The court found the regulated activity in question, being the filing of documents to create legal entities, was intrastate and did not use any channels or instrumentalities of interstate commerce.  The court ruled then it did not affect interstate commerce because the regulated activity was not commercial in nature.[5]

Necessary and Proper Clause and Taxing:

Congress has the power to tax, and all of its powers can be extended if such extension is necessary and proper for the exercising of their power.

The court held the link between collecting data and levying taxes is too weak to support inclusion in Congress’s taxing power authorizing the CTA.  While the court admitted the taxing power can be linked with the Necessary and Proper clause to extend its reach beyond strictly collecting taxes, the CTA’s collection of beneficial ownership information was too far removed to be included as what is necessary and proper for Congress to exercise its taxing power.


The court ordered a permanent injunction, which stops the government from enforcing the CTA against the plaintiffs, as opposed to a stay of proceedings, which would pause litigation. As such, the holding will only protect NSBU and its members from enforcement of the CTA’s requirements.  Non NSBU members receive no such protection, and as of the date of this article are still required to file the necessary filings to comply with the CTA. 

The government issued a notice of appeal to the Eleventh Circuit Court on March 11, so the Eleventh Circuit could reverse the injunction.

            FinCEN released a notice in response to the ruling, stating it would comply with the court’s order and would not enforce the CTA against the NSBU and its members as of March 1, 2024.[6] 

Since the court did not address the issue of infringed individual rights, this issue is open and could be another battleground if any similar cases find the CTA to be within Congress’s powers to enact.

            With much of CTA landscape still in flux, it is uncertain how or if the CTA will be implemented in the end.  Thus, we recommend all entities and individuals subject to the CTA continue to take steps to comply with the reporting requirements unless further information, legislations, or regulation indicates the contrary. 


[1] National Small Business United v. Janet Yellen, No. 5:22-cv-1448-LCB, at 52-53 (N.D. Ala. Mar. 1, 2024).

[2] Id. at 2 (“When Congress passed the 2021 National Defense Authorization Act, it included a bill called the Corporate Transparency Act (“CTA”). Although the CTA made up just over 21 pages of the NDAA’s nearly 1,500-page total, the law packs a significant regulatory punch…”).

[3] Id. at 5-6.

[4] Id. at 25.

[5] Id. at 49.

[6] UPDATED: Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), U.S. Teasury Fincial Crimes Enfocement Network, (3/11/2024)


Article 3

Michael Geeraerts & Jim Magner on Captive Rescue: “I Shut Down My Captive, What Do I Do Now?” AKA An Advisor’s Guide to Safely Dismantling an Atomic Bomb


Written By: Michael Geeraerts & Jim Magner

“A client walks into your office and says: “I shut my captive down and I’m looking for creative ideas to access the surplus on a tax-advantaged basis. What can you tell me?’ If you need to take a breath before answering, you’re probably not alone.


Captives have long been in the Service’s crosshairs, and many clients who have undergone intensive audits have thrown up their hands and headed for the exits. To competently advise captive owners about their post-dissolution options, sophisticated advisors will need to be conversant on a number of planning techniques and tax issues that don’t typically come up in their everyday practices. Some of these include understanding the distinction between stand-alone versus series/cell captives and the process by which they’re dissolved, personal holding company and accumulated earnings tax issues, the BIG tax if the captive is S Corporation-owned, charitable contributions and Charitable Remainder Trusts, corporate mergers/liquidations, split dollar and offshore private placement life insurance, Section 1202 qualified small business stock, as well as the Corporate Transparency Act.


This newsletter reviews the planning techniques and related tax issues that should be on every advisor’s “Captive Rescue’ punch list so they can safely and successfully help dismantle their client’s atomic bomb.”[1]


Michael Geeraerts and Jim Magner provide members with commentary that reviews the issues and planning techniques advisors need to understand when assisting clients who are contemplating shutting down a captive insurance arrangement.

Michael Geeraerts, CPA, JD, CLU®, NQPATM is an Advanced Markets attorney at Equitable Financial Life Insurance Company.[2] Prior to joining Equitable, Michael was an Advanced Markets attorney at The Guardian Life Insurance Company of America. Prior to Guardian, Michael was a manager at PricewaterhouseCoopers LLP and a tax consultant at KPMG LLP.

Jim Magner is an advanced planning attorney at The Guardian Life Insurance Company of America®.[3] Jim previously worked as an attorney advisor in the IRS’s Office of Chief Counsel in Washington, D.C., where he wrote private and public rulings on estate, gift, GST and charitable remainder trust issues.


Here is their commentary:



This newsletter reviews the planning techniques and tax issues that should be on every advisor’s “Captive Rescue punch list when a client shuts down their captive. The options to deal with the lingering C Corporation after it is no longer a captive insurance company may include:


1.    Do nothing;

2.    Liquidate and transfer its assets to its shareholders;

3.    Convert it to an S Corporation or LLC;

4.    Use the assets to purchase life insurance;

5.    Wrap it using offshore private placement life insurance;

6.    Establish a new company to qualify for Section 1202 qualified small business stock treatment.




Captive Fundamentals

Although they are said to have originated in the 19th century, modern captives were formed to respond to the absence or unwillingness of commercial insurers to cover certain risks.[4] The term “captive insurance” is said to have originated by Frederic Reiss, a property-protection engineer from Youngstown, OH, who in 1962 established the first captive insurance company in Bermuda.[5] In this regard, a “captive” has been defined as:

an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer’s underwriting profits. These points do not clearly distinguish the captive insurer from a mutual insurance company. A mutual insurance company is technically owned and controlled by its policyholders. But no one who is merely a mutual insurance company’s policyholder exercises control of the company. The policyholder may be asked to vote on matters requiring policyholder action. But this usually means that the policyholder will be presented with a proxy and advised by the board that runs the company as to how to exercise its vote. As soon as the insurance ceases, so does the policyholder’s ownership status. The policyholder has not invested any assets in the insurance company and does not actively participate in running it.[6]

Captives have become one of the most significant risk management and wealth creation devices available to sophisticated owners of closely-held businesses, as well as publicly traded companies, and for that reason have experienced explosive growth over the past 30 years:


Today, there are over 7,000 captives globally compared to roughly 1,000 in 1980 according to AM Best Captive Center. Captives can be domiciled and licensed in a wide number of jurisdictions, both in the U.S. and offshore. The captive’s primary jurisdiction is known as its “domicile.” The number of captive domiciles is growing and remains competitive. More than 70 jurisdictions have some form of captive legislation. In terms of number of captives, Bermuda is the largest single jurisdiction followed by the Cayman Islands. In Europe, Guernsey, Luxemburg and Ireland are the market leaders. In the U.S., Vermont is the largest domicile and is considered a leader in captive legislation.[7]

The terminology used to classify captives can be vexing for the uninitiated, and the advisor will often come across descriptors that can be quite confusing.[8] For simplicity’s sake, captives have been described[9] as falling into two main categories:


·      Pure or “stand-alone” captives that are 100% owned, directly or indirectly, by their insureds and insure only the risks of their owner(s).

·      Sponsored captives that are owned and controlled by parties unrelated to the insured. In this regard, the Series LLC and the Protected Cell Company are two of the most important developments with so-called “sponsored” captives over the past decade, as they permit the segregation of assets and liabilities into various series/cells, each of which can be operated as a separate captive insurance company that permits sponsors and users to achieve flexibility, cost savings and administrative efficiencies. Delaware licensed the first Series LLC in 2010 and since then other jurisdictions such as Tennessee have created a hybrid “Series Protected Cell” structure that has become very popular in the marketplace.[10]

Regulatory Scrutiny of 831(b) Captives

Regardless of whether they are stand-alone or series/cell, so-called “micro-captives” that elect to be taxed under Section 831(b) on their investment income have been the target of intense regulatory scrutiny in recent years:

·      831(b) captives have made an appearance on the Service’s so-called “Dirty Dozen” list every year since 2015, only being left off of in 2020.[11]

·      In 2020, the Service deployed 12 new micro-captive examination teams to substantially increase its examinations of micro-captive insurance transactions.

·      In April 2021, the Service warned participants in “abusive” micro-captive arrangements to exit those arrangements as soon as possible,[12] and later announced the establishment of a new Office of Promoter Investigations (OPI) to pursue promoters of abusive tax avoidance transactions including 831(b) micro-captive arrangements.[13]

·      In January 2022, the IRS Office of Chief Counsel announced it was hiring 200 additional attorneys to help the agency combat abusive micro-captive transactions, as well as other abusive schemes.[14]

·      On April 10, 2023, the Service issued proposed regulations identifying certain micro-captive insurance transactions as reportable transactions.[15]

·      On May 31, 2023, the California Franchise Tax Board (FTB) issued FTB Notice 2023-02 which provides a process of reduced penalties to eligible taxpayers under examination by the FTB or IRS regarding their participation in a micro-captive insurance transaction.[16]

This regulatory scrutiny has had a chilling effect on the industry, and has made some clients, particularly those who have experienced intense audits, ask whether now is an appropriate time to surrender their license and exit their captive arrangement.[17]

Captive Exit: What Does the Dissolution Process Look Like?

The dissolution process for series/cell captives is fairly straight forward. Depending on when the last policy was issued, the captive manager will typically prepare a dividend versus commutation calculation that provides estimates for two different paths to dissolve. The designated account manager will then send the calculation to the client and set up a client call to review the estimates.

Essentially, the “dividend” route is an extended dissolution where third-party claims are allowed to run off whereas the “commutation” route is the client’s “get out now” option. At a certain point in extended dissolution, the client may choose to commute whether all third-party claims have run off or not. The dissolution process can then look as follows: 

1.    The captive manager will request the necessary paperwork from outside counsel which they will then email to the series member(s) to review and sign. This typically takes a few weeks to draft and send out.

2.    Once that paperwork is returned, the captive manager will then submit the application to the Department of Insurance for approval, which generally takes about 6 weeks to review and approve.

3.    Once approval is received, the captive manager will then send a “next steps” email outlining the distribution options available less remaining liabilities.

The dissolution process is similar for stand-alone captives, but there could be differences depending upon the captive’s domicile, as well as if funds need to be moved in or out of the operating account to cover outstanding liabilities.[18] Many captives have an “Initial Services Term” of four years, and  there may be a requirement in the Captive Services Agreement to continue to pay the captive management fee even if the captive is dormant.


What Happens After the Captive Surrenders Its Insurance License?


With series/cell dissolutions, the owners can request that the captive manager simply liquidate the assets and send its owners check and a 1099-DIV. Since series/cell captives are LLCs taxed as C Corporations, most owners won’t go the liquidation route and will typically merge the entity into another C Corporation, with the assets going over to the new C Corporation. When a stand-alone captive surrenders its license, the investments that formed the captive’s reserves/surplus simply stay in “solution” inside the former captive.


The fact that captives are taxed as C corporations is significant to understanding many of the post-dissolution planning techniques and tax issues that are addressed further on:


The entity classification rules found under Section 7701 and its accompanying Regulations determine the classification for business entities recognized for tax purposes based on the entity’s ownership. Under those rules, an insurance company is treated as a per se corporation and, thus, is ineligible to elect any other classification than a C corporation for U.S. income tax purposes. To be clear, an insurance company must be taxed as a C corporation and not as a partnership or S corporation.[19]

What Should Happen Next?


The menu of planning opportunities is substantial, but there are tax and legal issues that will need to be carefully evaluated by advisors.


While captive insurance structures are powerful risk management devices, they have the potential to generate significant wealth if claims experience is good and reserves/surplus appreciated. As a result, estate and asset protection planning considerations are critical when establishing a stand-alone captive, and as a consequence there are three common ownership arrangements:


1)   Captive owned by a trust,[20] e.g., NING trust, Self-Settled Asset

Protection Trust or Dynasty trust;[21]

2) Captive owned by the operating business;[22] and/or

3) Captive owned by the owners of the operating business or family



Where a captive is owned by a trust, the trustee’s state law fiduciary duties of care, loyalty, and good faith will need to be considered before making any decisions about the suitability of surplus-related planning techniques. Where the captive is owned by the operating business, the decision-making process is devoid of the fiduciary issues where the captive is trust-owned. If on the other hand the captive is owned by family members, things could get complicated if the interests of the family members are no longer aligned with those of the owners of the operating business.[23]


Corporate Transparency Act (CTA)


The CTA requires corporations, LLCs, and any other entities created by the filing of a document with a secretary of state to report beneficial ownership information.[24] However, there are exemptions to the CTA’s reporting requirements and insurance companies are exempt. A captive insurance company is an insurance company which should meet this exemption. But, once a captive gives up its insurance license and is no longer an insurance company, the remaining C corporation would be a reporting company under the CTA. The CTA requires a reporting company to file an updated report with FinCEN with the company’s current beneficial ownership information when it determines it no longer qualifies for an exemption.[25] Thus, former captives should review their CTA reporting obligations.

Post-Dissolution Planning Strategies


Given this background the following planning strategies should be on the sophisticated advisor’s post-dissolution menu:


1)   Do Nothing: The do-nothing strategy results in the former captive’s investment portfolio simply sitting inside the dormant C corporation. The do-nothing strategy doesn’t help with the client’s initial question about accessing surplus on a tax-advantaged basisbut it does highlight two important issues that need to be addressed before more aggressive planning strategies can be considered: a C corporation that no longer has any ongoing business activities runs audit risk that the Service would impose either the accumulated earnings tax (AET) or the personal holding company (PHC) tax under Sections 531 and 541, respectively.[26] In this regard, advisors need to remember two things about the AET:


·      It doesn’t apply if the entity is deemed to be personal holding company and the PHC tax applies.[27]

·      For tax years beginning after 2012, the American Taxpayer Relief Act of 2012 increased the accumulated earnings tax rate to 20%.[28]


While the application of the AET is subjective,[29] it can be avoided by demonstrating that the C corporation’s “earnings and profits” were not intentionally accumulated beyond the “reasonable needs” of the business.[30] By contrast, it has been noted that the PHC tax is a “different animal from the AET and its avoidance is trickier.[31]  


The personal holding company provisions were enacted to combat the use of “incorporated pocketbooks” by wealthy taxpayers as a means of sheltering investment income from taxation at the higher individual rates, and the original intent was to discourage companies from holding excessive accumulations of earnings by forcing distributions to be paid.


Unlike the AET where the Service must demonstrate the intent to avoid income tax on stockholders through the accumulation of earnings and profits instead of their distribution,[32]  there is no intent factor with the PHC. Instead, determining if the PHC tax applies is simply formulaic, and when it applies the rate is 20%.[33] More specifically, a corporation will be considered a personal holding company if it meets both the Income Test and the Stock Ownership Test:

·      The Income Test states that at least 60% of the corporation’s adjusted ordinary gross income for the tax year is from certain dividends, interest, rent, royalties, and annuities.

·      The Stock Ownership Test states that at any time during the last half of the tax year, 5 or fewer individuals must directly or indirectly own more than 50% in value of the corporation’s outstanding stock.[34]

If the related operating company to the former captive is closely-held, there’s an odds-on chance that the stock ownership test would be met. Likewise, if the former captive’s investment portfolio is the only asset on the C Corporation’s balance sheet, the income test would likely be met. To avoid paying the PHC tax, the former captive would need to change its investment mix and/or develop different sources of income. That said, if the former captive sold assets to get its investment income below the 60% threshold and subsequently made a distribution to shareholders, two levels of tax would be generated, one at the C corporation level and a second when the proceeds are distributed to its shareholders.[35]

Some shareholders may consider paying themselves a W-2 salary from the C corporation. If the shareholder is an employee and can justify being paid compensation, as opposed to a dividend, this could be an avenue to consider because the corporation can deduct reasonable salary paid to shareholder-employees and the shareholder-employees would pay personal income taxes on that salary. In the event the shareholder is in a relatively low marginal income tax rate, this may be an appealing option to avoid the double tax issue with dividends. However, in the event the shareholder is not a bona fide employee of the corporation, or the salary is deemed unreasonable, the IRS could reclassify the salary as a dividend, so care should be taken with this strategy, especially considering the former captive may essentially be a dormant corporation now with no operations.

To summarize, the do-nothing strategy doesn’t help clients looking for creative ideas to access the surplus on a tax-advantaged basis, and should be a flashing red signal to advisors that doing nothing could generate another audit.

2)   Liquidate the C Corporation and Transfer Its Assets to Shareholder(s). Dissolving the C corporation will avoid the imposition of the AET and PHC taxes, but it doesn’t come without complications. In this regard, advisors are likely to encounter three ownership fact patterns: 1) the captive is owned by the operating business, 2) the captive is owned by the owners of the operating business and/or family members, or 3) the captive is owned by a trust.


Captive owned by the operating business: A tax-free consolidation as described in Section 368(a)(1)(A) is straightforward, as the subsidiary C corporation is simply absorbed into its parent. A parent-subsidiary merger (aka a “short-form”merger) does not require approval of the stockholders of the subsidiary, and the requirements are governed by state statute.[36]


If a C corporation owned by another corporation liquidates and transfers its assets to its 80%-or-more corporate shareholder, the receiving corporation doesn’t recognize a gain or loss on the distributed property under Section 332. Instead, the parent takes a carry-over basis in the former subsidiary’s assets.[37] A later sale by the parent of the underlying assets would trigger the corporate tax, so liquidation doesn’t avoid the tax but simply defers it.[38]


If the C corporation’s parent is an S corporation, the “BIG” tax in Section 1374 will trigger a built-in gains tax on assets acquired by the S corporation from its dissolved C corporation subsidiary, requiring the parent S corporation to pay an additional corporate-level tax on any former captive assets it disposed of over the next 5 years.[39] The “BIG” tax results in double taxation because if an S corporation sells “BIG” property within 5 years of conversion and recognizes a built-in gain that existed as of the date of conversion, the S corporation pays “BIG” tax at the C corporation tax rate and the shareholders also recognize their pro rata share of a net gain (built-in gain minus corporate taxes). The result is the same if an S corporation attempts to circumvent this double taxation by distributing a “BIG” asset to a shareholder because the distribution will require the S corporation to recognize gain. Once gain is recognized, it will be taxable at the S corporation level and at the shareholder level.

If the S corporation can wait 5 years after the C Corp liquidation to sell the property, the “BIG” tax won’t apply. Practically speaking, waiting 5 years means that any gains on the sale of the former captive’s assets would be taxed only once to the shareholders, and after that tax is paid they could then be distributed by the S Corporation tax-free to its shareholders to the extent of their stock basis.

Other than waiting 5 years, S corporations with unrealized “BIG” may have some additional options to avoid paying “BIG” tax. The S corporation can sell assets with unrealized built-in losses, so that it would realize a net built-in loss, or at least a lower net realized “BIG .

The S corporation could also give “BIG” property to charity. A charitable donation may make sense if the shareholders are charitably inclined. Generally, the unrealized appreciation on assets contributed to charity is not taxable, so the S corporation can give “BIG” property to charity and the shareholders would be eligible for a charitable deduction on their individual income tax returns (the amount of the deduction depends on the type of property donated and the individual shareholders’ adjusted gross income). The charitable donation of “BIG” property turns a double taxable event into a charitable income tax deduction.

An alternative to an outright charitable donation is to contribute “BIG” property to a Charitable Remainder Trust (CRT). The contribution of “BIG” property to a CRT does not trigger “BIG” tax and provides the shareholders with a charitable income tax deduction equal to the present value of the charity’s remainder interest. The CRT would provide the S corporation with an income stream for up to 20 years. The shareholders avoid tax on the property transferred to the CRT, but an ordering rule determines the tax character of CRT distributions received – first ordinary income, then capital gains, then any other income and finally principal. Thus, the CRT spreads out the taxable gain over several years, but more importantly avoids the “BIG” tax.

Captive owned by a trust: If the former captive was owned by a trust, the parent-subsidiary liquidation rules in Sections 331-346 wouldn’t apply, and there are two possible outcomes:

1)   the former captive makes a direct sale of its assets and distributes

cash to the trust generating one level of tax to the C Corporation and a second when the proceeds are distributed to the trust; or

2)   the former captive distributes its assets directly to the trust,

recognizing gain or loss as if it sold the assets to the shareholders at fair market value, with the shareholders recognizing gain or loss to the extent that the fair market value of the assets received exceeds the adjusted basis of their stock.

Captive owned by the owners of the operating business and/or family members: Same as directly above.

3)   Convert to S Corporation or LLC Status. Converting the former C Corporation to an S Corporation, or converting an LLC taxed as a C Corporation to partnership/S Corporation status, will also avoid the imposition of the AET and PHC taxes, but a conversion can be complicated. Converting a C corporation to an LLC can take one of four forms:[40]


1)   ”Assets Up” where the C corporation is liquidated and its assets are transferred to shareholders who transfer them to the LLC;

2)   ”Interests Over” where C corporation stock is transferred to the LLC followed by the liquidation of the C corporation, with its assets being distributed to the LLC;

3)   ”Assets Over” where the C corporation transfers its assets to the LLC in exchange for all the interests in the LLC, followed by a liquidation of the C corporation that distributes membership interests to its shareholder; and

4)   Merger/conversion of the C corporation under state law into an LLC. [41]


Converting the C corporation into an LLC taxed as a partnership is treated as a complete liquidation of the corporation, resulting in a tax to the corporation on the distribution of assets under Section 336 and another tax to the shareholders under Section 331. Thus, C corporations that have a lot of appreciated property may not like the idea of this double tax.

Limitations on the number and identity of shareholders may make the conversion to S status unfeasible for some former captives, particularly where the captive is trust-owned. Since passive income making up more than 25% of an S corporation’s income is subject to tax when there are C corporation earnings and profits,[42] and S corporations with more than 25% of their gross income as passive income for three consecutive tax years may have their S corporation status terminated when there are C corporation earnings and profits,[43] a former captive making an S election would likely have to change its investment mix and/or develop different sources of income.


4)   Have the C Corporation Purchase Life Insurance: Key-Person Coverage, COLI Informally-Funding Deferred Compensation Plans, Split Dollar and/or Buy-Sell Coverage


The enactment of the Tax Cuts and Jobs Act in 2017 re-incentivized C Corporations to shelter earnings, and there is evidence that the IRS has stepped up accumulated earnings tax audits:

In periods where corporate tax rates were significantly lower than individual tax rates, an obvious incentive existed for corporations to allow earnings to accumulate instead of paying dividends to their shareholders. While that particular disparity no longer exists, the law known as the Tax Cuts and Jobs Act of 2017, P.L. 115-97, lowered corporate-level tax rates significantly from 35% to 21%. As a result, the IRS could view this decrease in corporate-level tax rates as an incentive for companies to retain their earnings (or place them in unrelated investments) instead of paying dividends to shareholders. Recent petitions before the U.S. Tax Court, as well as the authors’ own observations, suggest the IRS is indeed stepping up its enforcement efforts with respect to the accumulated earnings tax.[44]

Despite this fact, when computing the amount of income that could be subject to the accumulated earnings tax, a credit is allowed for accumulations to meet reasonable current and anticipated business needs. Fortunately for clients and their advisors, there have been a surprisingly large number of favorable decisions where the tax was not imposed on earnings retained for the purchase of life insurance used to solve a variety of business insurance needs, including:

·                Key person coverage.[45]

·                Loan regime split dollar used to fund buy-sell agreements.[46]

·                COLI used to informally fund deferred compensation agreements.[47]

·                Life insurance used to fund business continuation agreements.[48]

As noted above, the Accumulated Earnings Tax is intent-based, which requires the Service to demonstrate an intent to accumulate earnings beyond the reasonable needs of the business. If a former captive’s surplus is going to be used to purchase life insurance, the advisor would do well to document the need for the coverage in the entity’s minutes. This is especially important given the former captive’s dormant status with no ongoing operations. Additionally, some advisors may want to consider converting to LLC status to use the captive’s surplus to fund an Insurance-Only buy-sell arrangement even though the conversion may be a taxable event.[49]


If the C Corporation is a member of a controlled group, the group is limited to a single $250,000 amount ($150,000 if any member of the group is a service organization in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting), in order to compute the accumulated earnings credit, and this amount must be divided equally among the members of the controlled group.[50]


Advisors should keep in mind that many insurance carriers will no longer issue life insurance to captives because of the IRS scrutiny on captives.[51]  Additionally, if the former captive is now essentially a dormant company with no key employees earning a salary, obtaining key person life insurance may be problematic. A lack of key employees who have salaries may also be an issue if trying to establish a nonqualified deferred compensation plan. Further, while a corporate owned life insurance policy may provide tax-deferred cash value growth and a tax-free death benefit, getting the money out of the C corporation to its shareholders may be a taxable event, such as being treated as a dividend. Entering into a loan regime split-dollar arrangement where the corporation pays the premiums via loans and the policy is owned by the insured or a trust may be the most appealing option, although the cumulative loan balance still remains an asset of the corporation and interest on the loans would have to be paid to the corporation or deemed distributed to the shareholder.


If the C corporation was converted to an S corporation, there is an earnings and profits trap, which may cause insurance proceeds that are distributed out of the S corporation to be taxed as a dividend. While distributions from an S corporation to its shareholders are generally not taxable to the extent of the shareholders’ stock basis, distributions may be taxable dividends if they exceed the S corporation’s Accumulated Adjustments Account (AAA) and the S corporation has accumulated earnings and profits from its former C corporation years. S corporation shareholders’ stock basis is increased by the income tax-free life insurance proceeds, but the insurance proceeds have no impact on its AAA. If an S corporation has accumulated earnings and profits, the distribution of insurance proceeds will be income tax-free to the extent of AAA, but any excess will be taxed as a dividend to extent of earnings and profits.


“Wrap It” Utilizing Offshore Private Placement Life Insurance: Private Placement Life Insurance (PPLI) has been promoted as a planning technique to avoid tax on the contemplated sale of closely held businesses by some offshore life insurance carriers,[52] and certain captive managers are offering offshore PPLI as an exit strategy after one of their captives is dissolved. Instead of the PPLI premiums being paid in cash, the entity itself would be contributed as an “in kind” PPLI policy premium. Alternatively, after the PPLI policy is established, some have said that the entity could be acquired by the PPLI policy, but that would appear to be a realization event for the entity’s owners.[53] Finally, if a C Corporation is transferred to a NING trust, the trust’s beneficial interests could theoretically be utilized as a non-cash premium payment.


While the owners of the former captive must be accredited investors to qualify for this strategy,[54] most advisors who have reviewed the transaction are concerned that the investor control rules in Section 817(h)[55] make the strategy off limits because of the heightened audit risk. That said, there appear to be offshore carriers that will allow clients to contribute closely-held business interests if certain requirements are met,[56] but this strategy is aggressive and there appear to be no domestic insurance carriers that are willing to participate.

On August 15, 2022, Senate Finance Committee Chair Ron Wyden launched an investigation into the use of PPLI for tax avoidance purposes. Wyden began the investigation with a letter to Lombard International, a subsidiary of the private equity firm Blackstone. Although there is no evidence that Lombard has or will take non-cash PPLI premiums, the Wyden investigation shined a bright light on this specialized corner of the financial services industry.

So, for clients that are willing to disregard these risks and take the plunge, the purported advantages from the PPLI wrapper strategy have been described to be as follows:

Life insurance provides significant tax advantages relative to other ownership structures. These benefits include: (1) the deferral of investment gains (dividends, interest and capital gain); (2) the ability to withdraw and borrow from the policy cash value free of income tax; and (3) the transfer of policy proceeds to the beneficiaries after the insured’s death on an income tax-free basis, eliminating all deferred gains.[57]

Using offshore PPLI provides additional tax advantages:

Premium payments to non-U.S. life insurance companies generally are not subject to U.S. state premium taxes, which can range from 1-3% of premium. In addition, the U.S. “DAC” tax (approximately another 1% to 1.5% with domestic carriers) is sometimes lower offshore. Although many offshore carriers elect to be taxed as a U.S. corporation, a U.S. federal excise tax of 1% is imposed on policy premiums on U.S. lives that are paid to foreign life insurance companies that are not taxed as U.S. corporations.[58]

Some promoters say the transfer of the entity to the PPLI carrier[59] as a non-cash policy premium shouldn’t be a taxable event because the transfer is simply an in-kind premium payment by whomever owns the entity, be it a trust, the operating business or the owners of the operating business.[60] However, the transfer of the entity into the PPLI as a premium payment is likely to be viewed by the Service as the disposition of the entity that triggers gain recognition under Section 1001.[61]

Determining the fair market value of the entity being transferred is critical for three issues because:

·              Basis is the yardstick that determines tax on policy withdrawals, and basis in this case would be driven by the policy’s premium. For basis creation purposes, there’s an incentive to have a high valuation, which runs contrary to established estate planning principles which typically look for valuation discounts when transferring business interests.

·              The size of the premium relative to the policy’s face amount will impact the policy’s Modified Endowment Contract testing,  and to avoid MEC status, tranches of equity may need to be transferred over time. [62]

·              The policy must have a minimum amount of mortality risk to meet the definition of “life insurance” for Section 7702 purposes.[63]

Once inside the PPLI contract, the normal Section 72 tax principles should theoretically apply to policy withdrawals and loans, and the entity’s income should theoretically be sheltered from current income taxation.

What are the risks with the PPLI strategy not working as planned? The Webber case is instructive on how the Service could attack the strategy using the investor control issue.[64] In Webber, the policy owner rather than the insurance company was deemed for tax purposes to be the owner of insurance dedicated funds in the PPLI policies at issue, and therefore was liable for tax on any income earned. If this were to happen with an offshore PPLI policy wrapping an operating business, income generated by the business would be taxable to the owner of the PPLI policy. If the policy were held inside a NING trust, state income tax could be avoided. Other risks include the strategy being deemed a listed transaction by the IRS, Congress changing the definition of life insurance or tightening the investor control rules in 817(h).

On February 21, 2024, the Senate Finance Committee issued a report on calling for PPLI (and private placement annuity contracts) to no longer be treated as life insurance or annuity contracts under federal tax laws, with the resulting effect being that all earnings of the contract would be taxed currently instead of accumulating tax-free. The proposed legislation would apply not only to new policies issued after the date of enactment but to existing policies already in force on the effective date.[65]

5)   Establish “NewCo” to Qualify for Section 1202 Qualified Small Business Stock Treatment


An attractive option for utilizing a former captive’s assets is to have the former captive create a new entity (NewCo) whose stock will qualify for Qualified Small Business Stock (QSBS) treatment. Under Section 1202, a taxpayer selling QSBS may exclude from capital gains the greater of $10 million or ten times the cost basis in the stock.


Under this strategy, the former captive/C Corporation could elect S status and then form and be the 100% owner of a new C Corporation (NewCo). The S Corporation would contribute cash to NewCo in exchange for NewCo stock in a tax-free incorporation transaction qualifying under Section 351. If the S corporation does not have cash and sells appreciated assets for liquidity to form NewCo, the gain on the sale of the assets would be taxable and subject to the “BIG” tax if sold post conversion to the S corporation. The S Corporation would liquidate NewCo after Section 1202’s five-year holding period requirement is met. If done properly, the liquidation should qualify for QSBS treatment and gain would flow-through to the S Corporation’s income tax return and be excluded there.

If appreciated property instead of cash is contributed to the new QSBS C corporation, the contribution is tax-free under Section 351, so the “BIG” tax should not be triggered.[66] Section 1202 applies to the “sale or exchange” of QSBS. If the C corporation’s assets are sold instead of its stock, the corporation must realize corporate level gain, but if the corporation subsequently liquidates by distributing the sale proceeds to its S corporation shareholder, the S corporation should be able to use Section 1202 to exclude the gain upon the stock liquidation.[67]

If the captive wasn’t initially trust-owned, the C Corporation shares could be transferred to a NING trust after the captive’s insurance license was surrendered for asset protection and state income tax minimization purposes. Since Section 1202’s $10 million limitation is on a per-corporation and per-shareholder basis, each shareholder has a separate limitation for each corporation in which they invest. To maximize the limitations, stacking with multiple trust transfers is an option to explore.


Section 1202 contains a number of technical requirements that need to be carefully monitored, and to qualify as QSBS, the stock must be:


·      Issued by a domestic C corporation with no more than $50 million of gross assets at the time of issuance;

·      Issued by a corporation that uses at least 80% of its assets (by value) in an active trade or business, other than in certain personal services and types of businesses described in more detail below;

·      Held by a non corporate taxpayer (meaning any taxpayer other than a C corporation);[68]

·      Acquired by the taxpayer on original issuance (there are exceptions to this rule); and

·      Held for more than six months to be eligible for a tax-free rollover under Sec. 1045 and more than five years to qualify for gain exclusion.[69]

There are important limitations on how NewCo can utilize its assets:

·       The corporation also generally cannot own (1) real property that is not used in the active conduct of a qualified trade or business with a value exceeding 10% of its total assets; or (2) portfolio stock or securities with a value exceeding 10% of its total assets in excess of liabilities.

·      At least 80% (by value) of the corporation’s assets (including intangible assets) must be used by the corporation in the active conduct of a qualified trade or business.

·      A qualified trade or business is any trade or business other than those involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any other trade or business where the principal asset of the trade or business is the reputation or skill of one or more of its employees. The term also excludes any banking, insurance, leasing, financing, investing, or similar business; any farming business (including the business of raising or harvesting trees); any business involving the production or extraction of products of a character for which percentage depletion is allowable; or any business of operating a hotel, motel, restaurant, or similar business.

·      If in connection with any future trade or business, a corporation uses assets in certain startup activities, research and experimental activities, or in-house research activities, the corporation is treated as using such assets in the active conduct of a qualified trade or business.

·      Assets that are held to meet reasonable working capital needs of the corporation, or are held for investment and are reasonably expected to be used within two years to finance future research and experimentation, are treated as used in the active conduct of a trade or business.

·      If a corporation has been in existence for at least two years, only 50% of these working capital assets will qualify as used in the active conduct of a qualified trade or business. In addition, certain rights to computer software are treated as assets used in the active conduct of a trade or business. [70]


If NewCo meets all the requirements under Section 1202 and runs a qualified business, the QSBS strategy may be something worth considering. Clients who run qualified businesses through their operating companies may be able to run an existing or new division through the C corporation to meet the QSBS qualified business requirement. The S corporation’s shareholders would benefit from Section 1202 gain exclusion on a pro rata basis.


If appreciated property instead of cash is contributed to the new QSBS C corporation, Section 1202(i)(B) provides the basis of the QSBS issued in exchange for the contributed property is no less than the fair market value of the property exchanged. This means the basis in the QSBS for purposes of Section 1202 is equal to the fair market value of the property at the time of the contribution and the appreciation at the time of the contribution does not qualify for Section 1202’s gain exclusion. However, the fair market value of the contributed property would be the applicable basis for purposes of determining the ten-times basis cap. Further, as previously mentioned, for purposes of the Section 1374 “BIG” tax, if the S corporation contributes appreciated property to its new C corporation subsidiary in a tax-free transaction, “BIG” tax may be avoided.[71]

If earnings are distributed out of the NewCo C corporation, dividends or interest payments received by the S corporation will be treated as passive income, which could trigger the termination of the S status under Section 1362(d)(3) and the payment of a 25% additional tax on the excess net passive income under Section 1375 if the S corporation has any accumulated earnings and profits.



Clients who have shut down their 831(b) micro-captives may want some strategies to access the capital in the now former captive that is a C corporation. The “Captive Rescue” punch list includes several options may be called upon to discuss with clients:


1.    Doing nothing may be an option, but that comes at the risk of AET and PHC tax issues;

2.    Liquidating the corporation and distributing its assets to its shareholders will generally be taxable;

3.    Converting the C corporation to an S corporation or LLC may also result in a taxable event;

4.    If feasible, the C corporation’s assets may be used to purchase life insurance. However, life insurance owned inside a C corporation comes with its own tax issues, such as how to get the death benefit out of the C corporation without incurring a tax to the shareholders;

5.    Contributing the C corporation to a PPLI policy seems to be a very risky transaction filled with potential tax issues;

6.    If the client can run a qualified business under Section 1202, establishing a new company to qualify for QSBS treatment may be an option, but there are complexities with that as well.




CITES AS: LISI Employee Benefits & Retirement Planning Newsletter #670 (March 16, 2017) at, Copyright 2017 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

[1] How to Dismantle an Atomic Bomb is the eleventh studio album by U2. It was released on November 22, 2004 in the United Kingdom by Island Records and a day later in the United States by Interscope Records. How to Dismantle an Atomic Bomb reached number one in 30 countries, including the US, where first-week sales of 840,000 copies. The album and its singles won all eight Grammy Awards for which they were nominated. It was also the fourth-highest-selling album of 2004, with almost ten million copies sold, and was included on Rolling Stone’s list of the “100 Best Albums of the Decade” at number 68.

[2] Life insurance products are issued by Equitable Financial Life Insurance Company (NY, NY); or Equitable Financial Life Insurance Company of America (EFLOA) an Arizona stock corporation. EFLOA is not licensed to conduct business in New York and Puerto Rico. Variable life insurance products are co-distributed by affiliates Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI & TN) and Equitable Distributors, LLC.

The Guardian Life Insurance Company and Equitable Financial Life Insurance Company are not affiliated companies. Jim Magner is not affiliated with Equitable Financial Life Insurance Company.

© 2024 Equitable Holdings, Inc. All rights reserved.

Financial professional use only. Not for use with, or distribution to, the general public.

GE-6402987.1 (02/24) (Exp. 02/26)

[3] Portions of this newsletter were written by a third party. It is provided for informational and educational purposes only. The views and opinions expressed herein may not be those of Guardian Life Insurance Company of America (Guardian) or any of its subsidiaries or affiliates.

Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Not practicing for Guardian or any subsidiaries or affiliates thereof. Equitable are not affiliates or subsidiaries of PAS or Guardian and opinions stated are their own. 2024-169512 (Exp. 2/15/2026).

Fixed life insurance is co-distributed by affiliates Equitable Distributors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California in CA; Equitable Network Insurance Agency of Utah in UT; and Equitable Network of Puerto Rico, Inc. in PR).

References to Equitable in this article represent both Equitable Financial Life Insurance Company (NY, NY) and Equitable Financial Life Insurance Company of America, which are affiliated companies. Overall, Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (NY, NY); Equitable Financial Life Insurance Company of America, an AZ stock company; and Equitable Distributors, LLC. Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI & TN).

Equitable Financial, its affiliates and distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your own independent advisor as to any tax, accounting or legal statements made herein.


[5] Catherine R. Duffy, Held Captive: A History of International Insurance in Bermuda, p. 38.



[8] The following list is from the NAIC’s website:

·      Pure Captive: Any company that insures risks of its parent and affiliated companies or controlled unaffiliated business.

·      Group Captive: Any domestic insurance company licensed under the provisions of this article for the purpose of making insurance and reinsurance, including any company organized under the federal Liability Risk Retention Act of 1986, as amended, 15 U.S.C. §3901-3905. Such insurance and reinsurance shall be limited to the risks, hazards and liabilities of its group members and employee benefits coverages.

·      Association Captives: Any company that insures risks of the member organizations of the association, and their affiliated companies.

·      Industrial Captives: Any company that insures risks of the industrial insured that comprise the industrial insured group, and their affiliated companies.

·      Branch Captives: Any alien captive licensed by the commissioner to transact the business of insurance through a business with its principal place of business in the District.

·      Rental Captives: A captive insurer formed to enter into contractual agreements with policyholders or associations to offer some or all of the benefits of a program of captive insurance and that only insures risks of the policyholders or associations.

·      Protected Cell Captives: Also known as segregated cell captives. Protected Cell Captives are similar to rental captives except that the assets of each user are protected from one another by law. 

·      Micro Captives: A micro captive is a captive insurance company that has an annual written premium of less than $2.8 million (2024 inflation indexed amount). These can succor smaller entities who would normally struggle to create a captive.

·      Risk Retention Groups: Captive insurer organized under 15 U.S.C. §§3901-02, as a stock or mutual corporation, a reciprocal or other limited liability entity.


[10] Jeffrey Simpson and Andrew Rennick, The Series LLC and Captives  A Brief History, March 2, 2017.







[17] Captive International, Time to Exit Your 831(b) Captive? March 27, 2020.

[18] The authors thank Wes C. ChappelleDirector of Client Services at Oxford Research Group for his insights here.

[19] Kimberly S. Bunting, J. Scot Kirkpatrick, And Karen S. Kurtz, Possibilities and Pitfalls With Captive Insurance Companies, Estate Planning, August 2011.

[20] It has been noted that To the extent a concern exists that one or more insureds may pay greater than 20% of the total premiums of the risk pool, the microcaptive may have to participate in multiple risk reinsurance pools, each with different participating insured businesses. Alternatively, the risk pool could limit premium payments by all participants to 20% of total premiums. It will be incumbent on the closely-held business owner to discuss the risk reinsurance pool arrangement with the captive insurance company manager that runs the risk pool to assess the impact upon the risk diversification test. Claudio A. De Vellis, Planning with Micro-Captive Insurance Companies After the PATH Act, Journal of Taxation, October, 2016, p. 158.

[21] David M. Grant, Who Should Own the Captive Insurance Company, April 26, 2023. The PATH Act imposed two new tests (risk diversification test and ownership diversification test), one of which a captive must meet to qualify under Code § 831(b).

[22] In the construction space, it’s common for the parent-operating business to own the captive to help with bonding requirements.

[23] The Consolidated Appropriations Act of 2018 clarified the diversification requirements created by the PATH Act of 2015. Before these changes, the tests were as follows:

·      No more than 20 percent of the net written premiums (direct written if greater) of a company could be attributed to any one policyholder, or

·      No person who is a specified holder owns a direct or indirect interest in the insurance company that exceeds more than a de minimis percentage of the percentage of interest in the insured(s).

If a captive failed the first diversification test, it can still qualify under the second test, which says that a specified holder cannot own an interest in the captive greater than 2% of their ownership in insured business. The Consolidated Appropriations Act altered this test by removing the spouse of the owner/shareholder from the definition of specified holder; Filing under IRC §831(b)? Diversification Criteria Elucidated

[24] However, in National Small Business United v. Yellen, Case No. 5:22-cv-1448-LCB (3/1/2024), the U.S. District Court for the Northern District of Alabama held that the Corporate Transparency Act is unconstitutional. The Memorandum Opinion can be found at ruling does not immediately invalidate the CTA but it does bar the U.S. Treasury from enforcing the CTA against the Plaintiffs 


[26] Corporations classified as personal holding companies are exempt from the accumulated earnings tax imposed under section 531 per Reg. Section 1-541-1.

[27]  IRC Section 532(b)((1).

[28] IRC 535(c)

[29] The Tax Cuts and Jobs Act of 2017 changed Section 535(c) to limit the accumulated earnings tax credit available to members of a controlled group of corporations to $250,000, and $150,000 if any member of the group is a service organization in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting. The bill also modified Section 1561 to require the credit to be divided equally among the members of the controlled group. The American Taxpayer Relief Act of 2012 increased the accumulated earnings tax rate to 20 percent.

[30] Internal Revenue Manual 4.10.13

[31] Gilpin/Givhan, The Post-Captive World: The Hidden Pitfalls of Unwinding a Captive Insurance Company, August 1, 2019.

[32] Internal Revenue Manual 4.10.13.

[33]  IRC Section 541.


[35] Gilpin/Givhan, The Post-Captive World: The Hidden Pitfalls of Unwinding a Captive Insurance Company, August 1, 2019.

[36] Chris Capelle, Understanding Successful Short-Form Mergers, December 8, 2023.

[37] Jonathan Drysdale & Matthew Coscia, Summary of Tax Rules for Liquidating Corporations, The Tax Adviser, October 1, 2020.

[38] Gilpin/Givhan, The Post-Captive World: The Hidden Pitfalls of Unwinding a Captive Insurance Company, August 1, 2019.

[39] Gilpin/Givhan, The Post-Captive World: The Hidden Pitfalls of Unwinding a Captive Insurance Company, August 1, 2019.

[40] Michael F. Lynch, David B. Casten, and David Beausejour, Now Is the Time: Converting a C Corporation to an S Corporation or LLC, The Tax Adviser, August 1, 2012.

[41] Jonathan Drysdale & Matthew Coscia, Summary of Tax Rules for Liquidating Corporations, The Tax Adviser, October 1, 2020.


[43] Section 1362(d)(3).

[44]  Eric D. Brauer, and Mark A. Schneider, A Resurgence of the Accumulated Earnings Tax?, The Tax Adviser April 1, 2022.

[45] Harry A. Koch Co. v. Vinal, 228 F. Supp. 782, 13 AFTR 2d 1241 (D. Neb. 1964), nonacq. 1965-1 CB 246; Vuono-Lione, Inc. v. Comm., TC Memo 1965-96; Emeloid Co. v. Comm., 189 F.2d 230 (3d Cir. 1951); Novelart Mfg. Co. v. Comm 52 TC 794 (1969), aff’d, 434 F2d 1011, 26 AFTR 2d 70-5837 (6th Cir. 1970); Motor Fuel Carriers, Inc. v. Comm., 77-2 USTC ¶ 9661 (5th Cir. 1977).

[46] Peterson Brothers Steel Erection Co. v. Commissioner, T.C. Memo. 1988-381,55 T.C.M. (CCH) 1605,T.C.M. (RIA) 88, 381.

[47] John P. Scripps Newspapers v. Comm., 44 TC 453 (1965); Okla. Press Pub. Co. v. U.S., 35 AFTR 2d 1383 (10th Cir. 1971), on remand, 28 AFTR 2d 5722 (E.D. Okla. 1971); Treas. Reg. § 1.537-2(b)(3); Prunier v. Comm., 248 F.2d 818 (1st Cir. 1957).

[48] Mountain State Steel Foundries, Inc. v. Comm., 284 F.2d 737, 6 AFTR 2d 5910 (4th Cir. 1960); Oman Construction Co. v. Comm., TC Memo 1965-325; John B. Lambert & Assoc. v. U.S., 76-2 USTC ¶ 9776 (Ct. Cl. 1976).

[49] Paul Vecchione and Jim Magner, Insurance-Only LLCs & Business Continuation Planning, Business Entities Newsletter #130, May 22, 2012.

[50] IRC Section 1561.

[51] If an insurance carrier determines that the C corporation was formerly a captive, the carrier may not issue life insurance to the corporation or issue life insurance outside the corporation that is paid for with the corporation’s assets.

[52]  Lauren LoricchioSarah PaezKiarra M. Strocko and Chandra WallaceOffshore Life Insurance: Wrapped in Controversy Amid Senate Probe Tax Notes, August 31, 2023.

[53] Steven Horowitz, Gerald Nowotny and Bradley Barros, Planning Using In-Kind Premiums, Wealth Management, December 14, 2020.

 [54] Net worth more than $1 million, excluding their primary residence; or annual income of over $200,000 (or $300,000 for couples) See 17 CFR § 230.501; trusts can qualify as an accredited investor if the trust: (1) wasn’t formed for the specific purpose of acquiring the securities offered, (2) holds assets exceeding $5 million, and (3) has a “sophisticated person” making investment decisions for the trust (that is, an investment trustee or investment advisor); See 17 C.F.R. Section 230.501(a)(7).

[55] Gary Rand, The Investor Control Doctrine: When “Hands Off” Really Means “Hands Off, The Tax Adviser, November 1, 2015.


[57] Brian Balduzzi and Bryan Bloom, Using Private Placement Life Insurance Policies as a Tax Minimization and Wealth Transfer Strategy, September 2, 2022.

[58] Elizabeth Morgan & Associates, Q&A ~ Private Placement Life Insurance, 2018.

[59] The term “entity” is used because it could be the initial C Corporation from captive status, or, it could be an LLC if there was a conversion from C Corporation status. A PPLI policy is not likely a permissible “shareholder” of an S Corporation under Section 1361.

[60] If the entity were first transferred to a NING trust, query whether the  trust’s beneficial interests could be transferred to/wrapped by the offshore carrier?

[61] Treas. Reg. § 1.1001-1(a) (“the gain or loss realized from the conversion of property into cash, or from the exchange of property for other property differing materially either in kind or in extent, is treated as income or as loss sustained.”). Note that none of the tax-deferred exchange provisions under Sections 1031 to 1045 apply.

[62] Section 7702A.

[63] Section 7702.

[64]  144 T.C. No. 17 (2015).

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Article 4

Neal Nusholtz: How to Add Two Paragraphs to Your General Powers of Attorney So You Can Cure Defects in Your Form 2848 and Represent Clients Before the Internal Revenue Service


Written By: Neal Nusholtz


Because the Treasury regulation allows an attorney in fact to cure an existing Form 2848, at the outset of a case, it would be recommended for an estate attorney to obtain both  a “starter” Form 2848 ( e.g. covering Form 1040 for the current year and one year prior) and to obtain a general power of attorney with the required paragraphs authorizing the attorney for the estate to handle tax matters.  Any deficiencies in the starter Form 2848 can then be corrected by the attorney for the estate by following the procedures outlined in 26 CFR §601.503 to avoid a situation where a government agent advises the estate attorney “Sorry, You cannot represent your client, Bye!”


Neal Nusholtz provides members with commentary that examines drafting changes practitioners should consider making to their general powers of appointment.


Neal Nusholtz is a shareholder in the Kemp Klein Law Firm in Troy Michigan.  He is a tax attorney specializing in tax controversies, including estate and income tax audits, IRS administrative appeals, tax litigation in federal district courts, the U.S. Tax Court, and the 6th Circuit Court of Appeals. Neal is a graduate of Oberlin College and Cooley Law School.  He is a contributor to the Journal of the American Revolution website and two of his articles were published in the 2017 Annual Volume.  Neal was selected by Corp Magazine in June of 1999 as one of the Top Ten Business Attorneys in Southeastern Michigan.   

Here is his commentary:



Tax return information has been private at least as far back as April 5, 1870, when IRS Commissioner Columbus Delano ordered tax assessors not to publish taxpayer information. A few months later, in July, Congress passed a revenue act that prevented publishing income tax return information except for general statistical purposes.[1]


Under  IRC §6103(a), no federal or state employee who acquires federal  tax return information  “shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section.” “For purposes of this subsection, the term “officer or employee” includes a former officer or employee”.  Disclosures may be made to a designee of the taxpayer[2] or to an attorney in fact authorized in writing.[3] 26 CFR § 601.502 defines a “recognized representative as someone who can receive copies of notices sent to the taxpayer and the delivery of a check drawn on the United States Treasury.  Failure to send a notice to the recognized representative will not affect the validity of the notice.[4]


An IRS Form 2848 authorizes an individual to represent a taxpayer.

According to the IRS instructions for Form 2848, Form 2848 is used to authorize a representative to perform all acts that a taxpayer  can perform with respect to matters described in the power of attorney (that is, to sign agreements, consents, waivers, or to sign other documents). Treas. Reg. 601.503 specifies the requirements of a Form 2848, such as requiring:   the taxpayer”s name, address, social security number, the federal tax form number at issue and the specific years involved. 


Adding Two Paragraphs to Your General Power of Attorney


If a power of attorney lacks the required information, according to a “special provision” of 26 CFR 601.503, the deficiency can be cured by an attorney in fact with a general power of attorney that contains two paragraphs ((i) and (ii) as follows:


(3) Special provision. The Internal Revenue Service will not accept a power of attorney which fails to include the information required by §§ 601.503(a)(1) through (5). If a power of attorney fails to include some or all of the information required by such section, the attorney-in-fact can cure this defect by executing a Form 2848 (on behalf of the taxpayer) which includes the missing information. Attaching a Form 2848 to a copy of the original power of attorney will validate the original power of attorney (and will be treated in all circumstances as one signed and filed by the taxpayer) provided the following conditions are satisfied


(i) The original power of attorney contemplates authorization to handle, among other things, Federal tax matters, (e.g., the power of attorney includes language to the effect that the attorney-in-fact has the authority to perform any and all acts).


(ii) The attorney-in-fact attaches a statement (signed under penalty of perjury) to the Form 2848 which states that the original power of attorney is valid under the laws of the governing jurisdiction.


Being able to access taxpayer information for a decedent is invaluable when a practitioner is handling an estate. Current IRS wage and income transcripts can provide leads to assets.  Tax return transcripts can indicate whether unfiled returns need to be prepared based on the income shown on wage and income transcripts. 

Making a “Starter” Form 2848


Because the Treasury regulation allows an attorney in fact to cure an existing Form 2848, at the outset of a case, it would be recommended for an estate attorney  to obtain both  a “starter” Form 2848 ( e.g. covering Form 1040 for the current year and one year prior) and to obtain a general power of attorney with the required paragraphs authorizing the attorney for the estate to handle tax matters.  Any deficiencies in the starter Form 2848 can then be corrected by the attorney for the estate by following the procedures outlined in 26 CFR §601.503 to avoid a situation where a government agent advises the estate attorney “Sorry, You cannot represent your client, Bye”!





LISI Estate Planning Newsletter #3107 (March 7, 2024) at http://www.leimbergservices.comCopyright 2024 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission. Our agreement with you does not allow you to use or upload content from LISI into any hardware, software, bot, or external application, including any use(s) for artificial intelligence technologies such as large language models, generative AI, machine learning or AI system. This newsletter is designed to provide accurate and authoritative information regarding the subject matter covered. It is provided with the understanding that LISI is not engaged in rendering legal, accounting, or other professional advice or services. If such advice is required, the services of a competent professional should be sought. Statements of fact or opinion are the responsibility of the authors and do not represent an opinion on the part of the officers or staff of LISI.



[1] IRS history Timeline, p. 10

[2] IRC §6103 (c)

[3] IRC.6103(e)6)

[4] 26 CFR § 601.506(a)(3)

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Forbes Corner

Your CPA’s Guide to the New ERC Crisis

Written By: Alan Gassman, JD, LL.M, AEP (Distinguished)

The expansion and strong marketing tactics of good-for-nothing “accounting advisors” who encouraged taxpayers to qualify for the Employee Retention Credit (“ERC”) when… Continue Reading on Forbes. 

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For Finkel’s Followers

3 Tips to Save Time When Delegating Tasks

Written By: David Finkel; Author, CEO, and Business Coach


The goal of doing this is to minimize the number of meetings and back and forth questions.

Having a great assistant is a game changer. They can take so many things off your plate, allowing you to focus on the few items that can drive the most value to your business. They can monitor your email box, schedule your appointments, keep track of your projects, circle back with key team members to make sure that deadlines are met and so much more. Finding and training a good assistant is absolutely worth it, but learning how to delegate tasks can be rather time consuming if you don’t have a lot of experience. And while there are some great third party programs out there to help keep you all organized, that too takes time and energy to learn and train a new team member on. So today I want to share three tips on how to save time when delegating tasks to your assistant or another team member, all within Excel or Google Sheets.


Create a master project list.

If everyone on your team has separate to-do lists, it can be difficult to get everyone on the same page. It’s easy to forget key items, and everyone will have a different way of prioritizing importance. Having a master project list where everyone’s tasks reside is an easy and quick way to get everyone on the same page. Let your assistant own the project list and have them put everything that they do on the list. And while it may seem a bit silly at first to include the small tasks like checking the mail or paying the light bill, you will be happy to have the list should your assistant go on vacation or have to take time off when sick. So, err on the side of too much information when creating the master project list.


Break it down into sublists.

If you have a lot of things going on at once, create tabs or sublists to keep it all straight. This could look like active projects, archived projects, on-going/recurring projects, third party vendor projects etc. Within each of those tabs you will have the project/task name, date assigned, date due, other people involved (team members/third party vendors) and I like to break down each list even further by giving each one a priority rating. Number one items are the most important tasks on the list, number two items should be done only once number one items are complete, and number three items are as time allows. And lastly, a notes column to keep any and all notes that pertain to the project. At any given time, you should be able to look up a task and see where we stand and the action taken. The goal of doing this is to minimize the number of meetings and back and forth questions surrounding the various tasks you have in progress at any given time.


Color code it.

Use color to highlight new updates within your master list. You could have your assistant write all their updates in red or highlight new updates. When you review the sheet, you know to look at only the new items. Once you have read the new updates, you can change the color back to black and white so that the next time you go into the project list you only see new updates from your assistant. If you need to communicate via the sheet you can write your notes in a designated color, so that your assistant knows that you left a response. When they are done reading the update, they can change the color back to black and white as well.


With these three tips you should be able to streamline delegating tasks and get more done with less back and forth. Good luck!

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Upcoming Webinar

Mathematics of Estate Tax Planning

Date: Monday, March 25, 2024

Time: 1:00 PM to 2:30 PM EST

Presented by:  Alan Gassman, JD, LL.M, AEP (Distinguished)





Click this link to be auto-registered for all upcoming free webinars from our firm (Non-CPE Credit only).


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YouTube Library

Visit Alan Gassman’s YouTube Channel for complimentary webinars and more!

The PowerPoint materials can be found in the description box located at the bottom of the YouTube recording.

Click here or on the image of the playlists below to go to Alan Gassman’s YouTube Library.

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 EstateView: Where Laughter Meets Legacy

In the world of estates, where planning’s is not a breeze,
There’s a software that brings us much joy and ease.
EstateView it’s called, a tool quite divine,
For crafting scenarios, it’s simply sublime!

With a click and a tap, and a sprinkle of wit,
You can conjure up estates, oh, isn’t that neat?
No more headaches or worries, just laughter and cheer,
As you play with your assets, year after year.

Imagine a mansion, with gardens so grand,
Filled with unicorns and a marching band.
Or perhaps a pirate ship, sailing the sea,
With chests full of gold, for you and for me!

But wait, there’s more, it’s not just for fun,
Estate planning’s serious, when all’s said and done.
With EstateView, you can ensure all is right,
For your loved ones, when you’re out of sight.

So here’s to EstateView, our trusty friend,
For making estate planning a joy to no end.
With scenarios galore, and features so fine,
It’s the laughter we need in this planning grind!


Jokes to Brighten Your Day!

1. Why did the estate planner go to therapy? Because they couldn’t stop talking about their assets and liabilities!

2. What’s an estate planner’s favorite kind of music?, of course!

3. Why did the estate planner bring a ladder to work? Because they heard the market was going up!

4. Why don’t estate planners ever get lost? Because they always follow the “will”!

5. How do estate planners like their coffee? With a lot of “estate-ate”! 

6. What did the estate planner say to the procrastinator? “Stop putting off your will!”

7. Why did the estate planner bring a map to the meeting? Because they were navigating the “wealth” of information!

8. How does an estate planner say goodbye? “I’ll bequeath you later!”

9. Why did the estate planner become an actor? Because they loved drafting wills and “testa-acting”!

10. Why did the estate planner refuse to play poker? Because they always fold under “estate”!



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