IRS Targets Florida Captive

United States v. Travis Prince, a petition, was served to Mr. Prince, the only shareholder of Prince PA, and as partnership representative for PrincEquity, an entity composed almost entirely of him. It was part of the IRS’s investigation of the two entities’ involvement in a captive insurance transaction. Tax years 2014 to 2020 saw Prince PA and PrincEquity involved with the captive insurance company Series Protected Cell 107 of Oxford Insurance Co. PrincEquity owned 100 percent of Cell 107’s shares. Travis Prince owned 95 percent of PrincEquity. The IRS alleges that Cell 107 offered a net loss policy to insure both Prince PA and PrincEquity against risks, including defense cost reimbursement, D&O and reputational risk. In tax years 2019 and 2020 both entities took deductions for the premium payments paid to Cell 107 under the captive insurance agreement, which materially lowered their reported taxable income. According to the IRS’s petition: “Although captive insurance arrangements are recognized under federal tax law, the IRS has designated certain arrangements as potentially abusive because these transactions have the potential for tax avoidance and evasion.”