Saturday, November 12, 2005
PPLI-FVUL/Private Annuity Transaction Under ScrutinyThere is an aggressive tax strategy currently being marketedy whereby a private annuity is used to sell a part of the client's business to a foreign life insurance policy, thus allowing the business to distribute income and taxable consequences to a tax-free entity. I have warned for a couple of years now that this transaction is abusive and that Treasury would eventually come after it. Alabama attorney Richard Duke reports that is now the case. ~ JayAn IRS lawyer in the Chief Counsel's Office, International Division, advised me that he is in charge of "directing" a Tax Court case involving the use of a private annuity arrangement with a separate segregated account of anoffshore variable life insurance policy. He said that three other cases are filed with the same private annuity arrangement. The IRS will try each of the cases in court and will not settle. The IRS will then go after at least four promoters. He stated that the IRS will not settle these cases because they want to make sure the law is settled (in favor of the IRS). He also said the IRS is about to attack the placement of businesses in one of the separate segregated accounts of an offshore variable life insurance policy.
~ Richard Duke
J. Richard Duke
Duke Law Firm, P.C.
400 Vestavia Parkway, Suite 100
Birmingham, Alabama 35216-3750
Telephone: (205) 823-3900
Fax: (205) 823-2630
Firm:
http://www.assetlaw.comSt. Thomas University School of Law:
http://www.llmprogram.org/faculty.htm
posted by Jay
@ 11/12/2005 09:08:00 AM
FinCen issues a PLR stating that the cash surrender value of a foreign life insurance policy must be reported annually via the Form TD 90-22.1This is in response to your question emailed to Kevin Brown on November 3d
respecting foreign insurance policies as accounts requiring the filing of a
Report of Foreign Bank and Financial Accounts.
The position of the
Department of the Treasury is that premium payments for insurance policies with
cash surrender value or other investment features constitute "deposits" within
the meaning of Form 90-22.1. Therefore, if a life insurance policy is a "whole
life" or other type of policy with investment value, then it is an "other
financial account" subject to reporting.
A U.S. person must file Form
90-22.1 for years where the aggregate cash surrender value (not face amount) of
any foreign life insurance policy held by the U.S. person, together with any
other foreign bank accounts so held, exceeds $10,000.
It is a foreign
account if the policy is located abroad. It is not the nationality of the policy
issuer that determines the location of the account. It is the actual location of
the account itself. Thus simply because a foreign company issues a policy does
not mean that it is located in a foreign country.
Elizabeth B. Witzgall
SE:S:F/BSA:PO:P Senior Bank Secrecy Act Analyst National Headquarters SBSE (202)
283-2227
posted by Jay
@ 11/12/2005 09:05:00 AM
Ron Adkisson's Book on A/R Financing Now Availablehttp://www.amazon.com/exec/obidos/tg/detail/-/0595370446Book DescriptionAccounts receivable financing is one of today's hottest marketed business strategies. It involves borrowing against your receivables on an interest-only basis and then investing the proceeds in a tax-deferred annuity or life insurance product. The first goal is to successfully arbitrage the simple interest you pay on the loan against the compounded growth within the annuity or life insurance product to increase your retirement funding. The second goal is to remove the value of the accounts receivable away from the reach of business creditors and place it into an asset protected environment. But are these goals really met? Yes or No, depending on how the program is structured. Not all accounts receivable financing programs are alike and, as you may find out too late, nobody looks out for your interests in these transactions. Financing Accounts Receivable for Retirement and Asset Protection presents a candid look at the subject, including the mechanics of such programs, economic underpinnings, asset protection and tax issues. An overview of the types of annuities and life insurance products used in accounts receivable financing is included, plus information on alternative programs, factoring and finding the right program for you.
About the AuthorRonald J. Adkisson is a licensed life insurance agent and business consultant who is regularly involved with the evaluation, implementation and planning of complex business strategies, including those involving accounts receivable financing, retirement and asset protection.
To learn more, Ron's website on accounts receivable financing is at http://www.farbook.com and Ron will be contributing an article on A/R financing to each of our Developments newsletters.
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