Inactive Corp. could not deduct officer's salary

Article Abstract:

The Tax Court has affirmed the position of the IRS in a case involving transferee liability. The case centered on a taxpayer who had sold all the assets of a business of which he was the sole shareholder and then tranferred to himself part of the sales proceeds. The taxpayer, who thereafter filed a return describing part of the proceeds tranferred as a loan from his company and the remainder as executive compensation, later claimed an NOL for the years when the company was inactive. The IRS, arguing that a corporation could not claim a deduction for executive compensation in years when it was inactive, proceeded to act to collect tax due on the proceeds through the transfer liability method. The court, after hearing the taxpayer's arguments, rejected the claim that the loan constituted a receivable that proved that the company was not inactive and ruled in favor of the IRS.

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When will payments made by a shareholder be deductible expenses for production of income?

Article Abstract:

In some cases, when a stockholder pays expenses on behalf of the corporation, the stockholder is entitled to a deduction on his tax return, although this is not always the case. Expenses paid for the benefit of the company must be shown to be related to the company's production or collection of income (or the management of income-producing properties) and be deemed to be part of the company's 'ordinary and necessary' operating expenses, if the shareholder's tax deduction is to be allowed. The effects of this rule on shareholder expenses, investor expenses, expenses related to shareholders' rights, advising and consulting corporations invested in, and proxy contests are detailed. Court cases are cited as precedents to the interpretation of the rule.

United States, Stockholders, Tax administration and procedure, Tax administration

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The deductibility of travel expenses: practical applications of the rules

Article Abstract:

Business-related travel and entertainment expenses are deductible if the expenses meet three tests, established by the Supreme Court in the Flowers case: (1) the expense must be reasonable and necessary, (2) the expense must have been incurred while the spender was away from home, and (3) the expense must relate to the pursuit of a trade or business. These deductibility tests are discussed in detail. In addition, business expenses must be properly documented; for example, travel expense records should include the dates of departure and return, the number of days spent, the amounts spent related to travel, meals, lodging, etc., the destination of the business trip, and the business purpose of the trip.

Compensation and benefits, Executives, Executive compensation, Tax deductions, Business entertaining, Travel costs

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