Corporation Denied Deduction Where Compensation Paid to Officer Was Unreasonably High

Reasonable compensation has been a relatively hot topic this year. Charles Allen previously discussed the Blossom case in which the taxpayers were penalized for understating the compensation of the two owners/officers of an S corporation.[1] While Charles’s discussion focused on employment taxation, Josh Sage followed up with an article on the resulting income taxation consequences…
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Goodbye Notice 2017-10

In a recent full Tax Court opinion[1], the Tax Court set aside Notice 2017-10, holding IRC § 6662A penalties are not to be imposed upon the taxpayer.[2] The Court’s reasoning was that the IRS failed to properly follow the notice-and-comment procedure, required under the Administrative Procedure Act. On December 23, 2016, the IRS issued Notice…
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Taxpayer Loses Royalty Tax Case Appeal

In a recent appellate decision from the Ninth Circuit, a taxpayer/attorney/neurosurgeon/corporate shareholder who helped develop a patented imaging technology was held liable for ordinary income assessments with respect to annual royalty payments related to patent royalty income. Facts Dr. Aaron Filler, a licensed attorney and neurosurgeon, contributed to the development of a certain Diffusion Tensor…
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Private Jet Charitable Deduction Fails for Lack of Substantiation

In Izen v. Comm’r, the Fifth Circuit Court of Appeals recently affirmed a Tax Court decision to deny a taxpayer’s charitable contribution deduction where the taxpayer failed to meet the statutory documentation requirements for the charitable contribution.[1] The key documentation that the taxpayer lacked was a contemporaneous written acknowledgement that included his taxpayer identification number.…
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Change your Facts, Same Tax

Generally speaking, tax follows the facts. One can of course change those facts, but when done so merely superficially, intended results may not follow. Some may be more familiar with the phrase “putting lipstick on a pig.” Well, that seems to be more or less the case in the recent opinion released in the Eighth…
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Once Again, the “Tax Plan” Fails

On February 2, 2022, the Tax Court issued a memorandum opinion in the case of John M. Larson (“Larson”).[1] This case involves a dispute going back more than 20 years. Mr. Larson was an attorney and CPA. He and two other men, Robert A. Plaff and David Amir Makov, promoted a fraudulent tax shelter transaction…
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Court Says No to IRS Attempt to Aggregate Gifts for Discount Purposes

In a recent case out of the United States District Court for the District of Connecticut, the Court denied the IRS’ motion for summary judgment and refused to aggregate the gift of partial interests in real estate together for purposes of valuing the gifts and thus determining appropriate discounts.[1] The IRS alleged that no discount…
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