Compensation to Law Firm Shareholder-Employees Disallowed by Tax Court

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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