In Uncategorized on 08/08/2016 at 22:27

A strong entry in the Taishoff Best Excuse sweepstakes comes from Little Mountain Corporation, 2016 T. C. Memo. 147, filed 8/8/16.

When Judge Kerrigan is confronted with a $896K deduction for “consulting expenses,” paid by a corporation with no employees (so no W-2s), and which issued no 1099s, and which paid no dividends, she naturally asks “whassup wit’ that?” Especially since the corporation had over $1 million in gross profits.

So she gets minutes of a special meeting of directors (all family members), whereat it is agreed that another family member is to be paid as a consultant on a “by-the-job” basis, and to receive a bonus based upon stated gross income.

None of the invoices for the “consulting expenses” itemize what services were performed, nor could either the officer who made the payments nor the family member who received them testify with specificity what was done.

All the invoices for consulting fees requested checks in payment be written for less than $10K each. And be payable to “cash.” And were cashed by various individuals who had no apparent relationship to the corporation.

Would it surprise you to learn that the consultant didn’t bother to file a tax return for the years at issue because he “wouldn’t call it compensation.” 2016 T. C. Memo.147, at p. 9. (Name omitted.) (Footnote omitted, but it’s too good to skip, so here it is: “Mr. S’ testimony concerning his failure to have filed Federal income tax returns for the relevant periods is certainly consistent with the position he has taken on this point.” 2016 T. C. Memo. 147, at p. 9, footnote 3).(Name omitted).

You can see where this is going, so you might well wonder why I’m blogging this after a day of driving through the White Mountains, at peace with the world.

Well, I’m blogging this because of the title, derived from the testimony of the family member who wrote those checks.

“Petitioner provided no consulting fee schedule, hourly rate, or specific breakdown of Mr. S’ tasks. No written contract existed between petitioner and AFC or Mr. S. Mrs. S testified that there was only an oral agreement because ‘that’s how it’s done a lot of times in the South’.” 2016 T. C. Memo. 147, at p. 5. (Names omitted).

In the North, too. Sometimes.

  1. […] Taishoff, “THAT’S HOW IT’S DONE A LOT OF TIMES IN THE SOUTH”. “A strong entry in the Taishoff Best Excuse sweepstakes comes from Little Mountain […]


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