A US district court has partly struck down Internal Revenue Service (IRS) regulations in relation to captives making the 831(b) tax election.
In Drake Plastics Ltd. Co. v Internal Revenue Service, the US District Court for the Southern District of Texas found that while the IRS appropriately designated micro captives as “transactions of interest” it failed to justify, based on the administrative record, that these transactions are presumptively tax avoidance transactions.
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