Irss insurance verification#
In the PLR, the IRS concluded that “brokerage services” firms included only businesses that operated as “mere intermediar facilitating transaction between two parties.” The IRS held that the insurance brokerage firm involved in the PLR was able to distinguish itself from this classification by also performing “administrative services” such as reporting incidents, claims and suits, keeping records of transactions and correspondence, and tracking the examination, inspection, verification and audit of accounts. The decision made clear that the IRSs definition of “brokerage services” that were prohibited from utilizing Section 1202 was unexpectedly quite narrow. In PLR 202114002, the IRS determined that an insurance brokerage firm was not operating in the “brokerage services” field for purposes of Section 1202 and could therefore qualify for the Section 1202 exemption. Included in this statutory list are “brokerage services firms.” One could be forgiven for assuming, based solely on linguistic equivalence, that an insurance brokerage would be a “brokerage service firm.” Not so. A “qualified trade or business” means any business outside a specific list of enumerated industries. Section 1202 defines a qualified trade or business through exclusion rather than a traditional statutory definition. To qualify, small business stock must be issued by a C-corporation after August 10, 1993 and have been issued by a company with less than $50 million in assets, at least 80 percent which are used to conduct a qualified business.
Irss insurance code#
In PLR 202114002, the IRS held that an insurance brokerage firm was not in the field of “brokerage services” and that it therefore qualified as a small business for purposes of the Code Section 1202 exemption.įor those not familiar with Section 1202 of the Internal Revenue Code (the Code), Section 1202 exempts from taxable income gains from the sale of certain small business stock. According to a recent Private Letter Ruling (PLR) released by the IRS, the answer might surprise you.
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