Judge Nega assumes the mantle of Judge Robert (“TNP = Take No Prisoners”)* Goeke in Genie R. Jones, et al., T. C. Memo. 2025-25, filed 3/25/25. It’s another microcaptive insurance pool case, with the usual dodges (sketchy actuarial analysis, shoddily-drafted policies, nonexistent underwriting, circular flow of premium money, made-as-instructed premiums). Topping it off is an unsecured loan to principal of the insured, which doesn’t get paid back until years after due date and after principal has sold the insured but kept the microcaptive alive.

There’s fifty (count ’em, fifty) pages wherein Judge Nega massacres the captive; all the usual suspects are cited (Rent-A-Center, Syzygy, Keating, Avrahami, Caylor Land, Reserve Mech.). Even the headline first above set forth at the head hereof (as my expensive colleagues would say) gets used. T. C. Memo. 2025-25, at p. 31, footnote 18.

But it’s a footnote that takes this case out of the “much of a muchness” class. IRS wants nondisclosed want-of-economic-substance enhanced chop.

“The Court has yet to decide whether the transactions in a microcaptive case lacked economic substance within the meaning of section 7701(o)(1). Nor has the Court addressed whether a taxpayer ‘adequately disclosed’ a microcaptive transaction. In the recent microcaptive cases where these questions were unavoidable, the Court deferred ruling on the matter to request and duly consider additional briefing on the applicability of section 7701(o). See Patel v. Commissioner, T.C. Memo. 2024-34, at *3 n.5; see also Royalty Mgmt. Ins. Co. v. Commissioner, T.C. Memo. 2024-87, at *54. We will, therefore, address respondent’s penalty determinations in a separate opinion.” T. C. Memo. 2025-25, at p. 5, footnote 4 (carryover from p. 4).

I hope that gets a full-dress T. C. because the statutory reconstruction of the economic substance doctrine is a puzzlement.

* https://taishofflaw.com/2018/12/27/not-so-judge-robert-tnp-goeke/