Judge rules doctor’s captive insurance setup had no real purpose

Patel, et al. v. Commissioner of Internal Revenue, 165 T.C. No. 10, November 12, 2025.

The Tax Court held that the Patels’ microcaptive arrangements lacked economic substance, triggering accuracy-related penalties and the 40% increased rate for non-disclosed transactions.

Holding

The court held that the Patels’ captive insurance transactions lacked economic substance under §7701(o).

As a result, the claimed premium deductions were disallowe…