Monthly Archives: November 2025

The recent Tax Court decision in Patel and McAnally Patel v. Commissioner (TCM 2024-34) delivers a decisive blow to aggressive microcaptive insurance tax planning. In this case, Dr. Sunil Patel and Laurie McAnally-Patel created two microcaptives and paid millions in premiums, claiming large deductions under IRC § 831(b).

What Went Wrong?

·         Premiums Set for Tax Advantage: The premiums paid to the captives far exceeded those for comparable commercial insurance and were calculated specifically to maximize deductions allowed under § 831(b)—not based on actuarial science or true risk.

·         Duplicative Insurance and Circular Flow: Despite setting up captives, Dr. Patel maintained ordinary commercial insurance and paid both sets of premiums, leading the court to find the captive arrangement had no meaningful economic effect aside from tax reduction.

·         Failed Economic Substance Tests: The arrangement failed both the objective and subjective prongs of the economic substance test. Objectively, there was no substantial change in the taxpayers’ economic position. Subjectively, emails and documents revealed a primary motive to reduce taxes rather than manage risk.

IRS Penalties Upheld

The IRS disallowed all deductions and imposed accuracy-related penalties. The court highlighted that the Patels did not have substantial authority for their treatment and could not defend their position by relying on promoters and advisors with a financial stake in the transactions.

Practice Takeaways

·         Tax-Favored Doesn’t Mean Safe: Even transactions explicitly incentivized by Congress (like microcaptives under § 831(b)) can be struck down if they lack economic substance.

·         Substance Over Form Prevails: Deductions for insurance premiums must reflect legitimate risk management, not simply an effort to lower income taxes.

·         Penalties Are Real: The IRS and courts will impose harsh penalties for arrangements they consider “too good to be true” and improperly disclosed on returns.

This decision should serve as a cautionary tale for taxpayers and advisors considering microcaptive insurance structures. Rigorous compliance with both tax law and the economic substance doctrine is the only way to ensure legitimate tax benefits.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.       https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner        

2.      https://www.lw.com/admin/upload/SiteAttachments/Tax-Court-to-Consider-Relevancy-Threshold-for-Economic-Substance-Doctrine-Under-Section-7701o.pdf   

3.      https://www.westerncpe.com/tax-cases-you-should-know/sunil-s-patel-and-laurie-mcanally-patel-v-comm-tcm-2024-34/  

4.      https://www.carltonfields.com/api/pdf?url=https%3A%2F%2Fwww.carltonfields.com%2Finsights%2Fblogs%2Freinsurance-focus%2Fmigrated%2Ftax-court-upholds-irs-decision-that-premiums-paid-to-microcaptive-insurance-companies-did-not-qualif&fileName=Tax_Court_Upholds_IRS_Decision_That_Premiums_Paid_to_Microcaptive_Insurance_Companies_Did_Not_Qualify_for_Tax_Deductions.pdf 

5.       https://www.jdsupra.com/legalnews/tax-court-upholds-irs-decision-that-4663424/

6.      https://case-law.vlex.com/vid/patel-v-comm-r-1028486785  

7.       https://www.velaw.com/insights/planning-for-irs-audits-in-an-era-of-uncertainty/

8.      https://www.irs.gov/pub/irs-aod/AOD-2012-05.pdf 

9.      https://www.actconline.org/wp-content/uploads/2024/09/20240906_Amicus_Brief_Patel_v_Commissioner.pdf 

10.   https://www.ntu.org/foundation/detail/ntuf-urges-tax-court-to-limit-economic-substance-doctrine-on-captive-insurance-companies 

11.    https://documents.nam.org/law/amicusbriefs/2024/Patel_v_Commissioner_TaxCourt_082324.pdf

12.   https://taxlawcenter.org/files/FINAL-Amicus-Brief-of-The-Tax-Law-Center.pdf

13.   https://www.law360.com/tax-authority/articles/1873218/chamber-backs-doctor-in-tax-court-economic-substance-suit

14.   https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner     

15.    https://www.forbes.com/sites/jayadkisson/2024/04/06/another-taxpayer-microcaptive-blowout-loss-in-patel/    

16.   https://www.ntu.org/foundation/detail/ntuf-urges-tax-court-to-limit-economic-substance-doctrine-on-captive-insurance-companies 

17.    https://ams.law/micro-captive-insurance/

18.   https://www.velaw.com/insights/planning-for-irs-audits-in-an-era-of-uncertainty/

19.   https://taxlawcenter.org/blog/an-important-tool-to-fight-aggressive-tax-planning-is-under-review-at-the-tax-court-7fca500b4186

20.  https://www.millerchevalier.com/publication/tax-court-requests-amicus-briefs-esd-patel

21.   https://documents.nam.org/law/amicusbriefs/2024/Patel_v_Commissioner_TaxCourt_082324.pdf

22.   https://lawquill.com/how-to-write-the-best-blog-titles-for-seo/

23.   https://www.forbes.com/sites/jayadkisson/2024/04/06/another-taxpayer-microcaptive-blowout-loss-in-patel/

24.  https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner

25.   https://www.taxcontroversy360.com/2021/12/types-of-tax-court-opinions-and-their-precedential-effect-updated/

26.  https://forwardpush.com/blog/25-content-ideas-for-tax-attorneys/

27.   https://www.matheranderson.com/blog/btl

28.  https://www.twrblog.com/category/court-cases/

29.  https://wagnertaxlaw.com/blog

30.  https://www.chamberlainlaw.com/tax-blawg/tag/tax-court

31.   https://taxschool.illinois.edu/style-guide/

Read more at: Tax Times blog

The IRS has issued Revenue Procedure 2025-31, delivering long-awaited clarity for investment and grantor trusts seeking to stake digital assets, such as cryptocurrencies, without jeopardizing their tax classification.

What Does Revenue Procedure 2025-31 Do?

This new guidance establishes a safe harbor for investment and grantor trusts under Treasury Regulation § 301.7701-4(c) and IRC Sections 671-679. Trusts that comply with a detailed 14-point test can now participate in staking activities—earning passive rewards from validating transactions on blockchain networks—while maintaining their favorable “pass-through” tax status.

Who Benefits?

Trusts, crypto ETFs, and similar financial entities gain the ability to stake digital assets without being reclassified as businesses or losing their grantor/investment trust status—risking adverse tax consequences or complex compliance. Importantly, the safe harbor requires that each trust stake only a single type of cryptocurrency and meet all procedural restrictions related to operations, reporting, and regulatory compliance.

Key Features

·         Safe harbor test: Trusts must meet 14 specific requirements, including asset limitations and operational guidelines.

·         Effective date: Applies to tax years ending on or after November 10, 2025.

·         Grace period: Trusts created before November 10, 2025 may amend their governing documents within a nine-month window to qualify.

·         Industry impact: Opens the door for regulated crypto investment products (such as ETFs and ETPs) to offer staking rewards while remaining tax-compliant.

Why Does This Matter for Crypto Investors and Trustees?

Prior IRS guidance left many questions unanswered on whether staking could result in “variable investments” or be considered a trade or business—both fatal to investment trust status. Revenue Procedure 2025-31 now allows for modern digital asset management strategies within trusts, so long as IRS criteria are met.

If your trust or investment fund is considering crypto staking, review your structure, operations, and trust document provisions to ensure compliance with the new safe harbor rules.

For more details on how Revenue Procedure 2025-31 may affect your entity or clients, consult your tax advisor or visit the IRS website for the latest updates.

 Have a Crypto Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.       https://www.fenwick.com/insights/publications/irs-releases-revenue-procedure-2025-31-to-provide-a-safe-harbor-for-staking-in-certain-trust-vehicles        

2.      https://kpmg.com/us/en/taxnewsflash/news/2025/11/tnf-rev-proc-2025-31-safe-harbor-for-investment-and-grantor-trusts-to-stake-digital-assets.html          

3.      https://www.irs.gov/pub/irs-drop/rp-25-31.pdf

4.      https://taxnews.ey.com/news/2025-2265-irs-establishes-safe-harbor-for-investment-and-grantor-trusts-to-stake-digital-assets   

5.       https://en.cryptonomist.ch/2025/11/11/staking-etfs-guidance/  

6.      https://www.currentfederaltaxdevelopments.com 

7.       https://www.currentfederaltaxdevelopments.com/blog/2025/11/10/ensuring-investment-trust-status-for-digital-asset-staking-entities 

8.      https://finance.yahoo.com/news/irs-opens-door-staking-crypto-030533608.html

9.      https://www.onesafe.io/blog/new-irs-rules-crypto-landscape

10.   https://www.law360.com/articles/2409644/irs-sets-safe-harbor-for-trusts-staking-digital-assets

Read more at: Tax Times blog

A major change is coming to Florida’s commercial real estate market—and it’s great news for both tenants and landlords. Starting October 1, 2025, businesses leasing commercial space in Florida will no longer have to pay state or local sales tax on their rent. This long-awaited move, signed into law by Governor DeSantis on June 30, 2025, is set to bring significant savings and simplify leasing for everyone involved.

Here’s what you need to know about this new law and how it will affect your lease, payments, and responsibilities.

What’s Changing?

Florida has been the only state in the nation to tax commercial lease payments. With the passage of House Bill 7031, that’s finally ending. Effective October 1, 2025, all state and local sales tax on commercial rent will be eliminated. This applies to office, retail, and industrial leases across the state.

What Tenants Should Know

Immediate Savings:
If you’re renting commercial space, your monthly rent just got less expensive. For example, a business paying $5,000 a month in rent and previously paying a 2% state sales tax (plus any local surtax) will save at least $100 a month, or $1,200 a year. In some counties, the savings will be even greater.

Lease Agreements:
Review your lease. Any clauses that refe%rence “applicable sales tax” on rent will no longer apply after October 1, 2025. If you have automated payments set up, make sure you update them to remove the tax portion for rent due after that date.

Subleases:
If you sublease your space, let your subtenants know that sales tax will no longer be added to their rent payments after the change goes into effect.

What Landlords and Property Managers Should Do

Update Invoices and Billing:
Remove sales tax from rent invoices for occupancy periods starting October 1, 2025. Update your billing systems and templates to prevent accidental overcharging.

Remit Pre-Repeal Taxes:
Sales tax is still due for rent covering periods through September 30, 2025—even if tenants pay late. Make sure you remit all taxes collected for those periods.

Communicate with Tenants:
Let your tenants know about the change so there’s no confusion. Clear communication will help ensure a smooth transition.

Sales Tax Accounts:
After you’ve remitted all required taxes, you can close your sales tax account with the Florida Department of Revenue if you don’t have other taxable activities.

What’s Not Changing

Not all leases are covered by this repeal. The following will still be subject to sales tax in Florida:

·         Short-term residential rentals (leases under six months)

·         Parking facilities

·         Boat slips and docking

·         Self-storage units and aircraft hangars

Also, if you receive late payments for periods before October 1, 2025, those payments are still taxable—even if paid after the repeal date.

The Bottom Line

This repeal is a big win for Florida’s business community. Tenants will see real savings, and landlords will enjoy simpler billing and compliance. Both should review their leases, update their systems, and communicate with each other as the October 1, 2025, effective date approaches.

Florida’s commercial leasing landscape is about to get a lot more business-friendly. Get ready to take advantage of the change!

    

Marini & Associates, P.A. 

 

 

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

Sources:

1.       https://www.gunster.com/newsroom/publications/florida-repeals-sales-tax-on-commercial-leases 

2.      https://www.bilzin.com/insights/publications/2025/07/fl-eliminates-state-sales-tax-on-commercial-rent      

3.      https://kaufmanrossin.com/blog/florida-bill-eliminates-sales-tax-on-commercial-rent-what-tenants-and-landlords-need-to-know/               

4.      https://www.deanmead.com/a-win-for-florida-businesses-property-owners-florida-ends-sales-tax-on-commercial-leases/ 

5.       https://roireal.estate/florida-commercial-rent-tax-repeal-2025/ 

6.      https://www.handfirm.com/blog/florida-to-eliminate-sales-tax-on-commercial-leases-what-property-owners-and-tenants-need-to-know/ 

7.       https://www.siegfriedrivera.com/blog/florida-eliminates-sales-tax-on-commercial-real-estate-leases/    

8.      https://www.gtlaw.com/en/insights/2025/6/florida-legislature-repeals-sales-tax-on-commercial-leases     

9.      https://www.gulatilaw.com/florida-repeals-sales-tax-on-commercial-leases-what-property-owners-and-tenants-need-to-know/

10. https://www.kbgrp.com/individual-and-business-tax-consulting/sales-tax-on-commercial-rents-eliminated-under-new-florida-law-update-for-landlords-and-tenants.html

Read more at: Tax Times blog

A major shift is coming to how U.S. taxpayers send and receive money from the IRS. Starting with 2025 tax returns, the IRS will phase out most paper checks—and both individuals and businesses need to adapt. The IRS Taxpayer Advocate Service (TAS) has released tips to help taxpayers transition to electronic options for making payments and receiving tax refunds following the agency's decision to largely stop issuing paper check refunds after September 30, 2025, in accordance with Executive Order 14247, "Modernizing Payments to and From America's Bank Account.

"Here’s what you need to know, plus steps to make sure you and your clients are ready for mandatory electronic payments and refunds.

IRS To Phase Out Paper Checks: What Taxpayers Need to Know

The IRS is modernizing payments with the goal of moving all refunds and payments to electronic methods. Beginning with 2025 tax returns, most taxpayers will no longer receive refunds by paper check. Instead, direct deposit will become the default, offering faster and more secure processing. However, paper checks will still be available in some limited situations—for example, for those qualifying for an exception, but the process will take longer.

How Refunds Will Work

Taxpayers will need to provide their direct deposit information (account and routing numbers) when filing 2025 and later returns.   Refunds can be deposited into checking, savings, mutual fund, IRA accounts, prepaid debit cards, or eligible mobile apps.

The IRS allows splitting a refund into as many as three different accounts using Form 8888. If you don’t provide direct deposit details, expect to receive a request from the IRS to update your information. If not provided, a paper check will be issued after about six weeks, delaying your refund.

Electronic Payment Options

·         IRS Direct Pay: Simple, secure, and no login needed for paying directly from a bank account.

·         Debit/credit card or digital wallet: Accepted with a possible processing fee. Not valid for payroll taxes.

·         IRS Online Account: Individuals and businesses can make payments on outstanding balances online.

·         EFTPS: The Electronic Federal Tax Payment System allows payments direct from bank accounts.

·         Electronic Funds Withdrawal: Available when e-filing through tax software or a tax professional.

Foreign Taxpayers and Taxpayers Living Abroad

The guidance acknowledged that groups such as unbanked individuals, taxpayers living abroad, and those with specific religious beliefs may encounter difficulties with the transition. TAS advised unbanked taxpayers to explore low-cost banking options at FDIC.gov/GetBanked or seek assistance through the Veterans Benefits Banking Program.

Meanwhile, taxpayers living overseas were encouraged to seek international banking solutions that accept U.S. government payments, consult a tax professional, or contact the IRS if their bank cannot receive U.S. Treasury deposits.

Exceptions: Who Can Still Get Paper Checks?

The unbanked, those living overseas, or with certain religious exemptions may qualify for limited exceptions. The IRS will provide guidance before the next filing season on how to apply for an exception.

Action Steps for Taxpayers and Advisors

·         Review and update direct deposit banking details before filing 2025 returns.

·         Educate clients about this critical change—especially those who are unbanked or living abroad.

·         For those needing a bank account, programs like the FDIC’s GetBanked initiative offer low-cost solutions.

·         Watch for additional announcements from the IRS on exception processing and new requirements.

Get ready now because electronic payments are on the way to becoming the new IRS standard.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.       https://www.taxpayeradvocate.irs.gov/news/tax-tips/tips-on-electronic-payment-options-available-to-taxpayers-as-the-irs-phases-out-paper-checks/2025/10/       

2.      https://www.taxpayeradvocate.irs.gov/news/tax-tips/tips-on-electronic-payment-options-available-to-taxpayers-as-the-irs-phases-out-paper-checks/2025/10/     

3.      https://www.duanemorris.com/alerts/irs_shifts_electronic_methods_tax_refunds_payments_0925.html

4.      https://www.taxpayeradvocate.irs.gov/news/tax-tips/tips-on-electronic-payment-options-available-to-taxpayers-as-the-irs-phases-out-paper-checks/2025/10/    

5.       https://bmf.cpa/2025/09/29/executive-order-14247-what-you-need-to-know-about-mandatory-electronic-irs-payments/

6.      https://horne.com/irs-electronic-payments-transition/

7.       https://www.wolterskluwer.com/en/expert-insights/modernizing-payments-the-shift-from-paper-checks-to-digital

8.      https://www.taxpayeradvocate.irs.gov/news/nta-blog/as-the-irs-phases-out-paper-checks-vulnerable-taxpayers-must-not-be-left-behind/2025/10/

9.      https://dsb-rockisland.com/news-connections/heads-up-the-irs-is-going-paperless-for-tax-payments/

10.   https://www.taxpayeradvocate.irs.gov/news/tax-tips/tips-on-electronic-payment-options-available-to-taxpayers-as-the-irs-phases-out-paper-checks/2025/10/

11.    https://tax.thomsonreuters.com/news/irs-director-elaborates-on-transition-from-paper-checks/

12.   https://www.brinkersimpson.com/blog/what-you-need-to-know-about-mandatory-electronic-irs-payments

13.   https://www.irs.gov/newsroom

Read more at: Tax Times blog