Back to Basics
As we mark the “end” of the tax season (it never really ends), it may be helpful to remind folks that not every expense incurred by a business may be claimed as a deduction in determining the taxable income of the business.
While that may seem obvious, tax practitioners are forever encountering
Own your own business, decide your own salary… right?
Wrong.
The Tax Court recently upheld corporate tax deficiencies and accuracy-related penalties assessed by the IRS after it disallowed as a business expense deduction half of $2 million in bonuses paid by an eye care center (the “Center”) to its sole shareholder. The sole shareholder, who
Two of our recent posts considered the IRS’s recent successes in applying the transferee liability rule to collect the federal income tax liability owing by the corporation from the sale of its assets from a corporation’s shareholders. In both cases, the shareholders had employed sham transactions in an attempt to avoid the corporate tax liability.
Last week’s posts described a situation in which the IRS was able to collect a deficiency in corporate income tax from a minority shareholder of the taxpayer-corporation on the basis of transferee liability under state law. Recently, another decision addressed the question of transferee liability, this time in the instance of a dissolved corporation’s unpaid
See yesterday’s post for the background on the liability of the minority shareholders discussed today.
Transferee Liability
Taxpayers argued that the IRS’s installment agreement with Corp cut off their transferee liability, and that the IRS’s failure to exhaust its collection options against Corp precluded the IRS from seeking to recover from them as transferees. They
In prior posts, we have considered the “plight” of minority shareholders in various contexts. We have reviewed their inability to influence corporate decisions, to compel a dividend distribution or a redemption of their shares.
In spite of these shareholders’ non-controlling status, we have seen situations in which the taxing authorities have, nonetheless, held them
In yesterday’s post, we provided an overview of captive insurance entities. Today, we will consider the specific facts of two different so-called captives, and whether or not they qualified as such according to the Tax Court and the IRS, respectively.
The Captive Arrangement in the Tax Court
In Rent-a-Center v. Commissioner, the Court
The IRS recently considered whether an arrangement between members of a corporate group and its affiliated insurance company, involving foreign currency fluctuations, constituted insurance for Federal tax purposes. For reasons that we will describe, the IRS concluded that the arrangement did not constitute insurance. 
Before getting into the details of the IRS’s holding, however,
A recent decision touched upon a theme that has been considered in several of our blogs: the “substance over form” doctrine, under which the legal form of a transaction – that would otherwise result in a beneficial tax result for a taxpayer – will be disregarded in order to give effect to its “true”
Here We Go Again
It is a common theme of these posts that a transaction has to make sense from a business perspective, that it should not be undertaken primarily for tax purposes, and that the goal of tax planning should be to maximize the economic benefit of the transaction by reducing the resulting tax