In a recent Tax Court case, a taxpayer was denied a contribution deduction for income paid into a sole proprietorship profit-sharing plan when the Court determined that such income had not been derived from the trade or business with respect to which the plan was established.[1] Rather, the income was paid to the taxpayer under…
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A recent Tax Court opinion[1] highlights one of the risks of serving as executor or administrator of an estate, potential liability for a decedent’s tax obligations. The case involves application of the federal priority statute[2] applicable to fiduciaries.[3] That statute provides, in relevant part, that “a representative of a person or an estate (except a…
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Last week, Charles Allen wrote about Blossom Day Care Centers, Inc. (“Blossom”) and its owners regarding their employment tax case.[1] Frequently, we write articles intending to remind readers of the importance of substantiation, especially in the income tax world. In reviewing Charles Allen’s article, I kept finding myself wondering about the income tax implications of…
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In a recent Tax Court case, the Court determined that corporate officers were indeed employees of the corporation entitled to reasonable compensation, and as such, the corporation is liable for employment taxes on reasonable compensation imputed to the corporate officers.[1] Mr. and Mrs. Hacker, who owned 51% and 49% of Blossom Day Care Centers (“Blossom”)…
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Owners of legal entities typically establish those entities to achieve certain planning goals, be them tax, asset protection, contract management, or other reasons. Key to accomplishing those goals is that courts respect the entity planning structure that is established. In the recent Tax Court opinion of Berry v. Commissioner[1], we see a taxpayer who intended…
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In a recent case involving taxpayers Ronnie S. Baum and Teresa K. Baum, the IRS disallowed many deductions, including deductions for theft losses and worthless securities.[1] This case is a quick and helpful reminder of some common deduction rules. Fact Summary This case relates to events occurring between years 2010 and 2019. The tax years…
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In the recent Complex Media[1] case, the Tax Court addressed a taxpayer’s ability to recast the form of a transaction under the “substance over form” doctrine. Since taxpayers typically control the form their transactions take, tax decisions routinely stick taxpayers with the consequences of that form. Some courts have precluded taxpayers from even raising substance…
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As it turns out, fashion design will not usually constitute qualified research for the purposes of qualifying for the research credit under Section 41 of the Internal Revenue Code. In a recent case from the Tax Court, taxpayer, Leon Max, failed to convince a sympathetic court that expenses related to his fashion design process should…
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