IRS Introduces New Challenge to Tax-Related Insurance: From Easements to Elsewhere.




The IRS has argued that the existence of Tax Result Insurance might deprive an entity of partnership status, taxpayers cannot claim deductions for premiums paid, and purchasing coverage supposedly demonstrates that taxpayers lack reasonable cause for their positions, such that penalties apply.

The IRS has focused these arguments on partnerships donating easements, but these extreme positions should concern all insurers and taxpayers for several reasons. First, the IRS is now taking stances that directly contradict those that it adopted earlier in regulations and Revenue Procedures. Second, the use of Tax Result Insurance is increasing in many areas. Finally, if the IRS were to convince the courts to accept any of three positions that it is currently advocating in the easement field, it likely would attempt to apply them to the detriment of taxpayers in many other situations, too.

This article, which is the third in a series, explains why certain taxpayers are acquiring insurance, two major types of coverage, several challenges the IRS is now raising, and why incipient IRS actions should concern all companies offering tax-related insurance and all taxpayers obtaining policies, not just those in the easement realm.

Read the full article here.

About Hale E. Sheppard
HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

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