Over the past twenty years, several little businesses have begun to insure their own risks through a product referred to as "Captive Insurance." little captives (also called single-parent captives) area unit insurance corporations established by the homeowners of closely control businesses wanting to insure risks that area unit either too pricey or too troublesome to insure through the standard insurance marketplace. Brad Barros, AN professional within the field of captive insurance, explains however "all captives area unit treated as companies and should be managed in an exceedingly methodology in keeping with rules established with each the bureau and therefore the applicable insurance regulator."
According to Barros, usually single parent captives area unit closely-held by a trust, partnership or alternative structure established by the premium money handler or his family. once properly designed and administered, a business will build tax-deductible premium payments to their related-party insurance underwriter. counting on circumstances, underwriting profits, if any, may be paid bent the homeowners as dividends, and profits from liquidation of the corporate is also taxed at capital gains.
Premium payers and their captives might garner tax advantages only if the captive operates as a true insurance underwriter. instead, advisers and business homeowners World Health Organization use captives as estate designing tools, plus protection vehicles, tax deferral or alternative advantages not associated with verity business purpose of AN insurance underwriter might face grave regulative and tax consequences.
Many captive insurance corporations area unit usually shaped by US businesses in jurisdictions outside of the us. the explanation for this can be that foreign jurisdictions supply lower prices and bigger flexibility than their US counterparts. As a rule, US businesses will use foreign-based insurance corporations see you later because the jurisdiction meets the insurance regulative standards needed by the inner Revenue Service (IRS).
There area unit many notable foreign jurisdictions whose insurance rules area unit recognized as safe and effective. These embody Bermudas and St. Lucia. Bermuda, whereas dearer than alternative jurisdictions, is home to several of the most important insurance corporations within the world. St. Lucia, a additional affordable location for smaller captives, is noteworthy for statutes that area unit each progressive and compliant. St. Lucia is additionally acclaimed for recently passing "Incorporated Cell" legislation, sculpturesque once similar statutes in Washington, DC.
Common Captive Insurance Abuses; whereas captives stay extremely helpful to several businesses, some trade professionals have begun to improperly market and misuse these structures for functions apart from those meant by Congress. The abuses embody the following:
1. Improper risk shifting and risk distribution, aka "Bogus Risk Pools"
2. High deductibles in captive-pooled arrangements; Re insuring captives through personal placement variable insurance schemes
3. Improper promoting
4. Inappropriate insurance integration
Meeting the high standards obligatory by the bureau and native insurance regulators may be a posh and valuable proposition and will solely be through with the help of competent and full-fledged counsel. The ramifications of failing to be AN insurance underwriter may be devastating and should embody the subsequent penalties:
1. Loss of all deductions on premiums received by the insurance underwriter
2. Loss of all deductions from the premium money handler
3. Forced distribution or liquidation of all assets from the insurance underwriter effectuating further taxes for capital gains or dividends
4. Potential adverse tax treatment as a Controlled Foreign Corporation
5. Potential adverse tax treatment as a private Foreign company (PFHC)
6. Potential regulative penalties obligatory by the insuring jurisdiction
7. Potential penalties and interest obligatory by the bureau.
All in all, the tax consequences is also bigger than 100% of the premiums paid to the captive. additionally, attorneys, CPA's wealth advisors and their purchasers is also treated as diminution promoters by the bureau, inflicting fines as nice as $100,000 or additional per dealings.
Clearly, establishing a captive insurance underwriter isn't one thing that ought to be taken gently. it's vital that companies seeking to ascertain a captive work with competent attorneys and accountants World Health Organization have the requisite data and skill necessary to avoid the pitfalls related to abusive or poorly designed insurance structures. A general rule of thumb is that a captive insurance product ought to have a official document covering the essential components of the program. it's well recognized that the opinion ought to be provided by AN freelance, regional or national firm.
Risk Shifting and Risk Distribution Abuses; 2 key components of insurance area unit those of shifting risk from the insured party to others (risk shifting) and afterwards allocating risk amongst an outsized pool of insured's (risk distribution). once a few years of proceeding, in 2005 the bureau discharged a Revenue Ruling (2005-40) describing the essential components needed so as to satisfy risk shifting and distribution necessities.
For those that area unit self-insured, the employment of the captive structure approved in Rev. Ruling 2005-40 has 2 blessings. First, the parent doesn't have to be compelled to share risks with the other parties. In Ruling 2005-40, the bureau proclaimed that the risks may be shared inside an equivalent economic family as long because the separate subsidiary corporations ( a minimum of seven area unit required) area unit shaped for non-tax business reasons, which the separateness of those subsidiaries conjointly encompasses a business reason. moreover, "risk distribution" is afforded see you later as no insured subsidiary has provided quite 15 August 1945 or but five-hitter of the premiums control by the captive. Second, the special provisions of insurance law permitting captives to require a current deduction for AN estimate of future losses, and in some circumstances shelter the financial gain earned on the investment of the reserves, reduces the income required to fund future claims from regarding twenty fifth to just about five hundredth. In alternative words, a well-designed captive that meets the wants of 2005-40 will motivate a price savings of twenty fifth or additional.
While some businesses will meet the wants of 2005-40 inside their own pool of connected entities, most in private control corporations cannot. Therefore, it's common for captives to get "third party risk" from alternative insurance corporations, usually defrayal four-dimensional to eight annually on the quantity of coverage necessary to satisfy the bureau necessities.
One of the essential components of the purchased risk is that there's an affordable chance of loss. attributable to this exposure, some promoters have tried to avoid the intention of Revenue Ruling 2005-40 by leading their purchasers into "bogus risk pools." during this somewhat common state of affairs, AN professional or alternative promoter can have ten or additional of their clients' captives enter into a collective risk-sharing agreement. enclosed within the agreement may be a written or unwritten agreement to not build claims on the pool. The purchasers like this arrangement as a result of they get all of the tax advantages of owning a captive insurance underwriter while not the chance related to insurance. sadly for these businesses, the bureau views these styles of arrangements as one thing apart from insurance.
Risk sharing agreements like these area unit thought-about while not advantage and will be avoided in the slightest degree prices. They quantity to zilch quite a authorized pretax bank account. If it may be shown that a risk pool is imitative, the protecting tax standing of the captive may be denied and therefore the severe tax ramifications delineated on top of are going to be enforced .
It is renowned that the bureau appearance at arrangements between homeowners of captives with nice suspicion. The gold customary within the trade is to get third party risk from AN insurance underwriter. something less opens the door to doubtless harmful consequences.
Abusively High Deductibles; Some promoters sell captives, then have their captives participate in an exceedingly massive risk pool with a high deductible. Most losses fall inside the deductible and area unit paid by the captive, not the chance pool.
These promoters might advise their purchasers that since the deductible is thus high, there's no real chance of third party claims. the matter with {this type|this thusrt|this kind} of arrangement is that the deductible is so high that the captive fails to satisfy the standards set forth by the bureau. The captive appearance additional sort of a subtle pre tax savings account: not AN insurance underwriter.
A separate concern is that the purchasers is also suggested that they will deduct all their premiums paid into the chance pool. within the case wherever the chance pool has few or no claims (compared to the losses preserved by the collaborating captives employing a high deductible), the premiums allotted to the chance pool area unit just too high. If claims do not occur, then premiums ought to be reduced. during this state of affairs, if challenged, the bureau can veto the deduction created by the captive for supererogatory premiums ceded to the chance pool. The bureau may additionally treat the captive as one thing apart from AN insurance underwriter as a result of it didn't meet the standards set forth in 2005-40 and former connected rulings.
Private Placement Variable Life insurance Schemes; Over the years promoters have tried to form captive solutions designed to produce abusive tax free advantages or "exit strategies" from captives. one in every of the additional common schemes is wherever a business establishes or works with a captive insurance underwriter, then remits to a insurance Company that portion of the premium commensurate with the portion of the chance re-insured.
Typically, the insurance Company is wholly-owned by an overseas insurance company. The legal owner of the insurance cell may be a foreign property and casualty insurance underwriter that's not subject to U.S. financial gain taxation. much, possession of the insurance Company may be copied to the money price of a insurance policy an overseas insurance company issued to the principal owner of the Business, or a connected party, and that insures the principle owner or a connected party.
1. The bureau might apply the sham-transaction belief.
2. The bureau might challenge the employment of a insurance agreement as AN improper decide to divert financial gain from a rateable entity to a nontaxable entity and can apportion financial gain.
3. The insurance policy issued to the corporate might not qualify as insurance for U.S. Federal tax functions as a result of it violates the capitalist management restrictions.
Investor Control; The bureau has reiterated in its revealed revenue rulings, its personal letter rulings, and its alternative body pronouncements, that the owner of a insurance policy are going to be thought-about the tax owner of the assets wrongfully closely-held by the insurance policy if the policy owner possesses "incidents of ownership" in those assets. Generally, so as for the insurance company to be thought-about the owner of the assets in an exceedingly separate account, management over individual investment selections should not be within the hands of the policy owner.
The bureau prohibits the policy owner, or a celebration associated with the policy holder, from having any right, either directly or indirectly, to need the insurance underwriter, or the separate account, to amass any specific plus with the funds within the separate account. In effect, the policy owner cannot tell the insurance company what specific assets to take a position in. And, the bureau has proclaimed that there can not be any planned set up or oral understanding on what specific assets may be endowed in by the separate account (commonly brought up as "indirect capitalist control"). And, in an exceedingly continued series of personal letter rulings, the bureau systematically applies a look-through approach with relation to investments created by separate accounts of insurance policies to search out indirect capitalist management. Recently, the bureau issued revealed tips on once the capitalist management restriction is profaned. This steerage discusses affordable and unreasonable levels of policy owner participation, thereby establishing safe harbors and impermissible levels of capitalist management.
The ultimate factual determination is straight-forward. Any court can raise whether or not there was AN understanding, be it orally communicated or tacitly understood, that the separate account of the insurance policy can invest its funds in an exceedingly insurance company that issued insurance for a property and casualty policy that insured the risks of a business wherever the insurance policy owner and therefore the person insured below the insurance policy area unit associated with or area unit an equivalent person because the owner of the business deducting the payment of the property and casualty insurance premiums?
If this will be answered within the affirmative, then the bureau ought to be able to with success convert the Tax Court that the capitalist management restriction is profaned. It then follows that the financial gain earned by the insurance policy is rateable to the insurance policy owner because it is earned .
The capitalist management restriction is profaned within the structure delineated on top of as these schemes usually offer that the insurance Company are going to be closely-held by the segregated account of a insurance policy insuring the lifetime of the owner of the Business of an individual associated with the owner of the Business. If one attracts a circle, all of the monies paid as premiums by the Business cannot become out there for unrelated, third-parties. Therefore, any court watching this structure might simply conclude that every step within the structure was planned, which the capitalist management restriction is profaned.
Suffice it to mention that the bureau proclaimed in Notice 2002-70, 2002-2 C.B. 765, that it might apply each the sham dealings belief and §§ 482 or 845 to apportion financial gain from a non-taxable entity to a rateable entity to things involving property and casualty insurance arrangements almost like the delineated insurance structure.
Even if the property and casualty premiums area unit affordable and satisfy the chance sharing and risk distribution necessities so the payment of those premiums is deductible fully for U.S. tax functions, the flexibility of the Business to presently deduct its premium payments on its U.S. tax returns is entirely break free the question of whether or not the insurance policy qualifies as insurance for U.S. tax functions.
Inappropriate Marketing; one in every of the ways that within which captives area unit sold is thru aggressive promoting designed to focus on advantages apart from real business purpose. Captives area unit companies. As such, they will supply valuable designing opportunities to shareholders. However, any potential advantages, together with plus protection, estate designing, tax privileged finance, etc., should be secondary to the $64000 business purpose of the insurance underwriter.
Recently, an outsized regional bank began giving "business and estate designing captives" to customers of their trust department. Again, a rule of thumb with captives is that they have to operate as real insurance corporations. Real insurance corporations sell insurance, not "estate planning" advantages. The bureau might use abusive commercial materials from a promoter to deny the compliance and succeeding deductions associated with a captive. Given the substantial risks related to improper promotion, a secure bet is to solely work with captive promoters whose sales materials concentrate on captive insurance underwriter ownership; not estate, plus protection and investment designing advantages. higher still would be for a promoter to possess an outsized and freelance regional or national firm review their materials for compliance and ensure in writing that the materials meet the standards set forth by the bureau.
The bureau will recall many years to abusive materials, then suspecting that a promoter is promoting AN abusive diminution, begin a pricey and doubtless devastating examination of the insured's and marketers.
Abusive insurance Arrangements; A recent concern is that the integration of little captives with insurance policies. little captives treated below section 831(b) haven't any statutory authority to deduct life premiums. Also, if alittle captive uses insurance as AN investment, the money price of the life policy may be rateable to the captive, then be rateable once more once distributed to the final word helpful owner. The consequence of this double taxation is to devastate the effectivity of the insurance and, it extends serious levels of liability to any comptroller recommends the set up or perhaps signs the return of the business that pays premiums to the captive.
The bureau is aware that many massive insurance corporations area unit promoting their insurance policies as investments with little captives. the result appearance spookily like that of the thousands of 419 and 412(I) plans that area unit presently below audit.
All in all Captive insurance arrangements may be enormously helpful. not like within the past, there area unit currently clear rules and case histories shaping what constitutes a properly designed, marketed and managed insurance underwriter. sadly, some promoters abuse, bend and twist the foundations so as to sell additional captives. Often, the business owner World Health Organization is getting a captive is unaware of the big risk he or she faces as a result of the promoter acted improperly. Sadly, it's the insured and therefore the helpful owner of the captive World Health Organization face painful consequences once their insurance underwriter is deemed to be abusive or non-compliant. The captive trade has complete professionals providing compliant services. higher to use AN professional supported by a serious firm than a slick promoter World Health Organization sells one thing that sounds too smart to be true.
FRESH COCONUT DREAM CAKE
Fresh creamy coconut filling, that still has a bit of crunch which adds a delightful texture. Coconut water syrup soaked cake layers. Tangy sweet cream cheese icing and a coating of coconut flakes. This cake is a labor of love, whether its for the love of coconut, love for someone who loves coconut or love for yourself this cake is the best of it's kind. It is worth every moment in the kitchen.
INGREDIENTS
- COCONUT FILLING:
- 2 cups minced coconut meat
- 1¼ cup heavy cream
- 1 stick butter (or 8 Tbsps)
- ¾ cup sugar
- ½ Tbsp cornstarch
- 2 tsp vanilla extract
- COCONUT WATER GLAZE:
- 1½ cup coconut water
- ⅓ cup sugar
- 2 tsp vanilla extract
- CAKE:
- 3 cups all purpose flour
- 1 Tbsp baking powder
- ½ tsp salt
- 2 cups sugar
- 4 large eggs
- 2½ sticks butter (or 1¼ cups)
- 1 cup evaporated milk
- 2 Tbsp vanilla extract
- CREAM CHEESE FROSTING:
- 1- 8 oz pkg Philadelphia cream cheese
- 1 stick unsalted butter
- 4 cups powdered sugar
- 2 tsp vanilla extract
- GARNISH:
- 2 cups coconut flakes (optional)
INSTRUCTIONS
- COCONUT FILLING:
- In sauce pan, heat together cream, sugar and butter over medium heat until boiling, stir often.
- Add minced coconut, stirring constantly, cook 15 minutes until mixture reduces.
- Remove from heat and stir in cornstarch. Place pan on high heat, bring to a boil, stir constantly.
- Add in vanilla, continue to cook and stir about 1 minute.
- Remove from heat, cool slightly, then chill in refrigerator until well chilled.
- Cover with plastic wrap, laying it on filling.
- *NOTE: Filling may decrease in volume as it cools.
- COCONUT WATER SIMPLE SYRUP:
- In sauce pan add coconut water, sugar and vanilla. Bring to a boil over high heat.
- Continue boiling until reduced to 1 cup, about 5 minutes.
- Remove from heat and cool.
- Refrigerate until ready to use.
- CAKE:
- Preheat oven to 350 degrees. Prepare 2- 7 inch cake pans.
- Oil pans, lay parchment in the bottom of each and oil and flour parchment and sides.
- *Note: standard 9 inch pans can be used but the cake will not be as tall, adjust baking time as needed.
- In medium bowl sift flour, baking powder and salt. Set aside.
- In large bowl of electric mixer combine sugar and eggs, beat on low speed until smooth. Scrape sides of bowl with spatula.
- Add butter, beat on low until mixture is creamy and light colored, about 3 minutes.
- Beat in milk and vanilla.
- Gradually add in the flour mixture, about 1 cup at a time, beating after each addition just until smooth and pushing sides down with spatula as needed.
- Beat on high speed one minute, scraping down the sides with spatula as needed.
- Pour evenly into prepared pans.
- Bake at 350 degrees for 55-60 minutes, until toothpick inserted in center comes out clean.
- CREAM CHEESE FROSTING:
- In large bowl of mixer mix together cream cheese, butter and vanilla until creamed and well blended, about 2 minutes.
- Gradually add in the powdered sugar ½ cup at a time and beat well after each addition. Once all the sugar is added blend for a minute to make sure all is mixed well.
- ASSEMBLY:
- If needed cut off any mounded cake tops. If cake browned on edges that can be cut off to.
- Take cakes and cut horizontally to yield a total of 4 cake layers.
- Poke each layer with a fork and with a pastry brush generously brush with the coconut syrup.
- Start by putting first/bottom layer on cake board or plate, coconut syrup side up.
- Spoon generous amount of coconut filling and spread evenly, keep a ¼ inch border free of filling as it will spread a little on its own when you add the next layers. Repeat with layers 2 &3.
- Add the fourth layer of cake, coconut syrup side down.
- Coat entire cake in cream cheese frosting, while frosting is still wet press in flaked coconut (optional).
- Let sit in cool place until ready to serve.
NOTES
* For extracting the coconut water, I took a drill with clean drill bit and drilled into two eyes of the coconut and poured over glass.
* To open coconut I bought the easy crack ones that are perforated and hit with hammer per instructions until it cracked.
*To extract the coconut meat I used a small paring knife (very carefully). I scored the meat and slid knife and separated from shell, I then took vegetable peeler to remove thin shell lining.
*To mince the meat you can cut finely by hand or use food processor.
*Cake - this cake recipe provides a firm cake which can handle the weight of the syrup and filling layers nicely.
* you can use 9 in pans but cake will not be as high, adjust baking time accordingly.
* Assembly can be messy but thats ok.
*This cake tastes great the second day if not better as the cake layers soften from the moisture of the syrup and coconut filling.
*Coconut filling will still be a bit runny, it will thicken when cooked but will not be very thick itself. This is normal.
