News & Articles

FEDERAL COURT FINDS PREPARE PLAN TO BE SUBSTANTIALLY SIMILAR TO NOTICE 95-34

05 / 21 / 2015

Vee's Marketing v. United States, Western District of Wisconsin

May 21, 2015

After granting the Government's motion for partial summary judgment in 2014, the Federal Court has now ruled in favor of the Government and rejects the taxpayer's claim for refund lawsuit.  At issue was whether the marketed "Prepare Plan" is a listed transaction (i.e., the same as, or is substantially similar to the transactions described in Notice 95-34, in conjunction with IRS Notice 2000-15). The plan at issue is the Affiliated Employers Health & Welfare Trust Plan, purporting to be a multiple employer welfare benefit plan under 26 USC Section 419A(f)(6)(B), whereby 10 or more small employers can come together and purchase insurance for employees.  CJA and Associates is the insurance marketing company.  The Court found that there was no true pooling of risk with regard to the plan; that instead, there were efforts to segregate and account as to each employer making contributions to the plan.

In the case, the IRS had assessed a IRC 6707A penalty, of $10,000 per year in 2004, 2005, 2006, and 2007 against Vee' Marketing, Inc., a S corporation wholly owned by Mr. Vee.  No Form 8886 was filed by the company in the years 2004, 2005, 2006, and 2007, with respect to years in which contributions were made to the trust, and deductions taken by the company for retirement expenses.  A Form 8886 was attached to the 2011 and 2012 tax year returns.  The company paid the penalty, in full, and then filed a claim for refund of the same.  The IRS relied on Mr. Charles DeWeese, as an actuarial expert in the case.  He has testified in as many as 7-8 cases.