Tier Three: Promoted — the Risk Is the Product

Each of these has a legitimate core buried under an industry selling the abusive version, and each sits on an IRS enforcement list. The mitigation is not better documentation; it is declining the pitch unless you are the rare legitimate case and can prove it.

Micro-captive insurance

(section “Retirement Plans for the Self-Employed”) Real for a genuine, otherwise-uninsurable risk with actuarial pricing and actual claims; a listed or reportable transaction for the version sold at conferences. Compute the loss-ratio and financing factors from your own records before any promoter meeting.

The Puerto Rico move

(section “Qualified Small Business Stock”) Real for a life genuinely relocated before the gains accrue; worthless for gain already earned, which stays US-source under IRC §937. Move for the future, not for the past.

Syndicated conservation easements

(section “Business Income Deductions”) The family-farm easement survives; the four-to-one promoted version is a listed transaction the IRS wins in court. Decline.

The pattern across all three tiers: the provisions reward operators who document as they go and punish buyers of packaged outcomes. If a strategy arrives as a product — a promoter, a slide deck, an opinion letter — it belongs in Tier Three no matter what tier the underlying section sits in.