Tax avoidance is perfectly legal and encouraged by the IRS,
but tax evasion is against the law.
– Internal Revenue Service Website
Business owners across America mailed checks to the IRS last week. Parting with hard earned profits certainly isn’t easy. Which begs the question, to what lengths should business owners and professionals go to reduce their taxes and keep more of their hard earned money?
Last week, we noted that the Internal Revenue Service suffered another defeat on January 14, 2014 as the U.S. Tax Court handed down its ruling which upheld that payments by Rent-A-Center to its Bermuda-domiciled captive insurance company, Legacy Insurance Co. Ltd., were deductible as an insurance expense.
This ruling is particularly informative to captive owners and captive managers as Rent-A-Center and its captive insurance company, Legacy, employed some practices that many in the industry have traditionally regarded as “aggressive.” In losing this case, the I.R.S. (The Service) “lost some ground” in a manner of speaking.
We’ve seen this movie before.
Tax Man, The IRS Loses Its Challenge Against A Captive.
Tax Man 2 – The Sequel – The IRS Loses Again In A Captive Challenge.
Tax Man 3, The IRS Strikes Back… And Loses Again.
Tax Man 4, This Time It’s For Keeps But The Captive Owner Wins Yet Again.
You have probably heard the story about legendary New York Yankees slugger, Babe Ruth, pointing to the center field wall. It was the fifth inning of Game 3 of the 1932 World Series at Wrigley Field in Chicago. As it was late in his career, the Home Run King had lost some of his punch. In his usual form, he was down in the count with two strikes. At this point, he stepped back and pointed his bat at the center field wall. After calling his shot, Ruth put the next pitch high over the center field wall for a home run.
Governor Bill Haslam of Tennessee called his shot and hit a home run of his own in 2013.