U.S. Tax Court, Judge Mark V. Holmes denied Avrahamis' motion of reconsideration on November 14, 2017.
The Avrahamis' first argument was that Feedback, their captive, hired qualified professionals to be sure it operated within the regulatory requirements therefore it must have been operated like an insurance company. The court didn't agree with this argument, stating that:
"The question of whether an arrangement looks like insurance doesn't depend on whether those appearances flowed from professional advice but what actually happened. Here, some of the key facts were the extreme illiquidity of Feedback's investment portfolio -- so skewed toward flowing funds back to the Avrahamis that it had no other significant investments -- and the very telling pattern of receiving claims only after the IRS started an audit. Petitioners cite to no law that says there's a reasonable-reliance defense on the natural consequence of such activities -- namely, a more-likely-than-not finding that this was less insurance as that term is commonly understood and more a way of generating tax-deductible financing for the Avrahamis' other investments."
The second argument made by the Avrahamis was that "there should be no reasonable dispute the policies at issue were claims made policies, not occurrence polici es." The court pointed out that one policy was so "ill-drafted" that it was both a claims-made and an occurrence policy, as noted:
"That was an illustration of a couple more general points -- sloppy drafting of policy language and actuarial calculations that did not reflect in all cases the actual policy language -- that then buttressed the finding of fact that Feedback was not operating like an insurance company.
The court then denied the motion for reconsideration made by the Avrahamis.
Some have suggested that the motion for reconsideration may have been drafted in a manner to help future malpractice litigation by the Avrahamis against their captive promoter, by eliciting detailed rulings from the judge that the captive was set up in a defective manner. See Avrahamis' Motion For Reconsideration Rolls Snake-Eyes In U.S. Tax Court. Forbes Magazine, 17 Nov. 2017, Adkisson, Jay.