That’s the conclusion at which Judge Mark V. (“Vittorio Emanuele”) Holmes arrives in Robertino Presta and Antonella Presta, T. C. Memo. 2025-83, filed 8/4/25. After all, Rob was president of CFM Insurance, Inc., the microcaptive of the grocery empire into which he came by marrying the boss’ daughter (his prom date), except he testified he didn’t know he was president, T. C. Memo. 2025-83, at p. 62.

“He testified at trial that he knew little of the operations—he even forgot that he had appointed himself as CFM’s president. We don’t think that outsourcing the operation of a captive undercuts in all cases the characterization of a company as an insurance company, but when the president of the company doesn’t even know that he is the president, something is off.”

There’s a lot more about defining insurance and generally-accepted insurance company operations, with a detour around the McCarran-Ferguson Act, 15 U.S.C. § 1012. And Judge Holmes allows that CFM may be different from most of the microcaptives I’ve blogged before, T. C. Memo. 2025-83, at p. 4.

Alas, at close of play, it’s another failure of execution, even though onshore-incorporated and UT-law compliant. despite IRS trial miscues.

“We find that CFM engaged in adequate due diligence in creating the captive. But we also do find that the ambiguities and inconsistencies in the policies are quite problematic. Overall, we think that CFM was organized and regulated as an insurance company and was adequately capitalized. On the basis of the extremely unusual battle of the experts in which the Commissioner’s did not take up arms on the issue, we also find that CFM charged reasonable premiums. But these factors don’t outweigh the other facts that show CFM failed to operate as an insurance company normally would. It did not regularly issue valid and binding policies or collect premiums in a timely way for most of the years and policies at issue. The haphazard handling of the few claims that CFM received is a particularly strong sign that it did not operate the way an insurer would.

“It’s a much closer call than is usual in microcaptive cases, but in the end we find by a preponderance of the evidence that CFM was not offering something that would be commonly accepted as insurance.” T. C. Memo. 2025-83, at p. 63.

OK, no premium deduction for Rob and Antonella. But what about CFM?

The contribution-to-capital argument fails on want of proof of any intent to capitalize CFM beyond statutory minimum, which was already met. As for setting up a nondeductible loss reserve out of income, all the evidence points to tax motivation above all. “There is no evidence in the record to indicate that the Prestas structured the payments as captive insurance instead of a loss reserve for any reason other than the additional tax benefits that a captive would have provided. H’s testimony makes it more likely than not that the Prestas were at a minimum informed that choosing to create a captive-insurance company instead of a loss reserve was a better option specifically because of the greater tax benefits it provided.” T. C. Memo. 2025-83, at p. 65. (Name omitted).

The good news. Rob, “…a man of humble beginnings—having worked at the Elmwood Park store from the age of thirteen—and has received no classroom education beyond high school. Other than dutifully paying his taxes and buying insurance coverage, he has no experience in the tax or insurance industries,…” T. C., Memo. 2025-83, at p. 69,  relied on his trusty CPA, who did all reasonably required.

No chops.

And no disrespected partitive genitives, either.