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Archive for the ‘Audits’ Category

Tax Court Finds Compensation Paid to Shareholder-Employees Reasonable

Published: July 28th, 2016

By: Stephen R. Looney

In Johnson, Inc.,[1] the Tax Court held that the amounts paid to the shareholder-employees of a C corporation constituted reasonable compensation deductible under Section 162 and that amounts paid by the taxpayer-corporation to an entity controlled by two of its shareholders was deductible as an ordinary and necessary business expense under Section 162. Facts of […]

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Posted in Articles, Tax Law Blog, Audits, Asset Sales and Purchases, Internal Revenue Service, Partnerships and LLCs, S Corporations, C Corporations, Income Taxes, Corporate

Bipartisan Budget Act of 2015

Published: June 29th, 2016

Charlie Egerton, shareholder in Dean Mead’s Tax Department, discusses the revolutionary audit rules that are a part of the Bipartisan Budget Act of 2015 and how they affect entities treated as partnerships for tax purposes. Bipartisan Budget Act of 2015

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Posted in Articles, Tax Law Blog, Audits, Internal Revenue Service, CPAs, Partnerships and LLCs, Tax Planning

Compensation to Law Firm Shareholder-Employees Disallowed by Tax Court

Published: March 17th, 2016

By: Stephen R. Looney

In Brinks,[1] the Tax Court once again applied the independent investor test to recharacterize compensation paid by a professional corporation, a law firm, to its shareholder-employees as nondeductible dividend distributions, and held the corporation liable for accuracy-related penalties for mischaracterizing the dividends as deductible compensation. This case should serve as a warning for many mid-size […]

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Posted in Articles, Tax Law Blog, Tax Controversies, Audits, Asset Sales and Purchases, Internal Revenue Service, Federal Taxation, CPAs, S Corporations, C Corporations, Tax Planning, Income Taxes, Corporate

Eighth Circuit Denies Like-Kind Exchange Treatment to Taxpayer Attempting to Avoid Related Party Rules of Section 1031(f)

Published: March 30th, 2015

By: Stephen R. Looney

In North Central Rental & Leasing, LLC,[1] the Eighth Circuit Court of Appeals determined that the taxpayer, North Central Rental & Leasing, LLC (“North Central”) had improperly claimed non-recognition treatment under Section 1031 with respect to gains from certain property exchanges. Butler Machinery Company (“Butler Machinery”) sold agricultural, mining and construction equipment for manufacturers, primarily […]

Posted in Articles, Tax Law Blog, Audits, Tax-Free 1031 Exchanges, Like-Kind Exchanges, Internal Revenue Service, Federal Taxation, CPAs, Tax Planning, Income Taxes, Corporate

IRS Rules That Members of LLC Are Not “Limited Partners” for Purposes of Avoiding Self-Employment Tax

Published: September 24th, 2014

By: Stephen R. Looney

  In ILM 201436049 (9/5/2014), the IRS found that members of a management company LLC (“Management Company”) were not “limited partners” within the meaning of Section 1402(a)(13) and therefore were subject to the self-employment tax on their distributive shares of income of the Management Company.   Under the facts of the ruling, a limited liability […]

Posted in Articles, Events, Tax Law Blog, Tax Controversies, Audits, Internal Revenue Service, Federal Taxation, CPAs, Partnerships and LLCs, S Corporations, Tax Planning, Income Taxes, Limited liability companies, Corporate

Can a Partner of a Partnership or a Member of a LLC Be treated as an Employee?

Published: August 21st, 2014

By: Stephen R. Looney

  On 6/13/2014, Curtis Wilson, IRS Associate Chief Counsel (Passthroughs and Special Industries) stated that he is concerned about the rumored use of a disregarded entity to enable a partner to be treated as an employee for withholding purposes.[1]  Under the purported structure, a partnership creates a wholly-owned entity that is disregarded for federal income […]

Posted in Articles, Tax Law Blog, Tax Controversies, Audits, Internal Revenue Service, Federal Taxation, Partnerships and LLCs, Tax Planning, Income Taxes, IRS Appeals Office, Limited liability companies