b'TABLE OF CONTENTSwere not established for a taxable year until aftertransactions as transactions of interest. 13On April 9, premiums had been paid and claims were paid on2021, the IRS announced that it had formed 12 audit the policies without the captive receiving requestedteams dedicated solely to challenging micro-information about the claims, and (b) the premiumscaptive transactions. 14This, combined with paid to the captive were far in excess of anysuccessful IRS litigation in the area, means that expected loss and were calculated by including anmicro-captive arrangements must be analyzed adjustment mechanism meant to reach the thenclosely when put together.$1.2 million cap under section 831(b) of the Code. This demonstrates the ever-important US tax concept that approaching transactions in an arms13Notice 2016-66, 2016-47 IRC 745 (2016). A transaction of length manner can be critical. interest is a reportable transaction, which generally requires all participants to the transaction (and their material advisers) to file forms with the IRS describing the transaction. A failure to Looking Ahead properly report a transaction of interest results in penalties of up to $10,000 for natural persons and $50,000 for all other The fundamental requirements for an arrangementtaxpayers. See Code section 6707A(b)(2)(B).to constitute insurance are important to keep in14See IRS News Release, IRS urges participants of abusive mind, even for major insurance industrymicro-captive insurance transactions arrangements to exit from participants. On micro-captives specifically, wearrangements (IR-2021-82) (Apr. 9, 2021).observe that the IRS has taken a dim view of small insurance company transactions in which the insurance company is related to the companies from which it has assumed risk. In Notice 2016-66, modified by Notice 2017-8, 2017-3 IRB 423, the IRS identified certain micro-captive insurance MAYER BROWN |153'