We briefly discuss below two recent Tax Court memorandum decisions relating to S corporations (that is, a corporation with respect to which an election has been made for pass-through tax treatment under subchapter S of Chapter 1 of the Internal Revenue Code), and a recent change in IRS policy regarding private letter rulings on common S corporation issues. In each of the Tax Court decisions, the individual taxpayer was seeking a result that, at least on the facts set forth, might have been achievable with proper documentation indicating respect for and maintenance of the corporate entity, but the government nonetheless prevailed in sustaining the tax deficiencies at issue.
‘Brown v. Commissioner’
In Brown (TC Memo 2017-18), two individuals (husband and wife, and hereinafter Brown) owned all of the stock of a corporation incorporated in 1996 (INC) and all of the membership interest in a limited liability company (LLC). Each of the entities had elected to be an S corporation. The husband was involved in the telecommunications industry.
