The Fairbank case demonstrates the power of IRC § 6501(c)(8) to provide the IRS the ability to assess taxpayers many years after the normal statute of limitations is closed if the taxpayer fails to file all required IRS international information reporting forms. In Fairbank v Commissioner, T.C. Memo. 2023-19, the IRS argued that, despite the…
Aspro, Inc. v. Commissioner, T.C. Memo 2021-8 (January 2021) is a cautionary tale for C corporations that look to zero out taxable income through post hoc management fees. In total the three shareholders received management fees in excess of a $1 million dollars a year for the years at issue (2012-2014). Although the management…
In Grajales v Commissioner, 156 T.C. No. 3 (2021), the Tax Court held the 10% tax in section 72(t) applicable to early distributions from qualified retirement plans is not subject to § 6751(b)(1). As a result, the § 72(t) 10% tax is not subject to the written supervisory approval requirement before being asserted against the…
Overview In Reflectxion Resources, Inc. v. Commissioner, T.C. Memo. 2020-114 (August 3, 2020)(link), the U.S. Tax Court held that a Notice of Determination of Worker Classification (“NDWC”) was not in and of itself sufficient to provide the Tax Court with jurisdiction for all payroll tax periods raised in Reflectxion Resources, Inc.’s (“Taxpayer”) petition. In order…
The issue before the court was whether the taxpayer received a taxable, deemed distribution in 2014 from an account that was treated and consistently reported by the Taxpayer as an IRA even though the account entered into a number of prohibited transactions beginning in 2011. In a designated order on January 31, 2019 , Judge…
Flume v. Commissioner (here) revolved around one noteworthy issue: did the taxpayer’s reliance on the advice of his tax return preparer spare the taxpayer from $110,000 in penalties for the taxpayer’s failure to report foreign investments on Form 5471? The taxpayer argued that he relied on the expertise of his tax return preparer to guide…
In Namen v. Commissioner[1], the taxpayer was a podiatrist in private practice. He was one of 6 members of an LLC that operated a surgical center, which closed in 2009. For federal income tax purposes, the LLC was treated as a partnership. The taxpayer claimed a loss on his personal 2009 income tax return from…
Takeaway: While S corporations can be an effective means to reduce FICA taxes, the form of the arrangement must be consistent with the taxpayer’s intended reporting position(s). The S corporation, not the S corporation’s employee-shareholder, must be in control of the receipt of income in order shift income from the shareholder’s personal income tax return…
Overview How can a corporation have a loss for tax purposes if it does not have any bank accounts, credits cards, or other lines of credit and it does not keep any books or records? The taxpayers in Rochlani v Commissioner found out the hard way.[1] Business Formation and Operations In 2006, Mr. Rochlani (the…
Overview In Leyh v. Commissioner[1], the Tax Court held that the taxpayer’s time incurred while traveling from her home to rental properties to perform a variety of tasks with respect to 12 rental activities counted towards the test of whether the taxpayer was a real estate professional.[2] As a result, the taxpayer was considered a…
