Tax Facts

8176 / Are there any safe harbors that can be used in a captive to ensure that an insurance arrangement will be found to exist?

Yes. Because of the uncertainty of the IRS’ facts and circumstances inquiry, the IRS released Revenue Rulings 2002-89 and 2002-90, which provide safe harbor methods for determining whether a captive arrangement will constitute insurance.

In Revenue Ruling 2002-89, the IRS found that, in a parent-subsidiary relationship, a captive will qualify as insurance if at least 50 percent of the p...

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