On April 12, 2021, the Tax Court issued its opinion in De Los Santos v. Commissioner, 156 T.C. No. 9. The underlying issue presented in De Los Santos v. Commissioner was whether the benefits (a split-dollar life insurance arrangement) received by the petitioners were received in their capacity as employees or shareholders, and, in turn, whether such economic benefits or taxable to the petitioner’s as ordinary compensation income or as a distribution under IRC § 301. The Petitioners’ (Unavailing) Argument in De Los Santos v. Commissioner The petitioners contend that economic benefits received by a shareholder pursuant to a split-dollar life insurance arrangement constitute a distribution under IRC § 301 regardless of whether the taxpayer receives the benefits in his capacity as an employee or as a shareholder. The IRS’s (Legitimate) Argument Because the compensatory split-dollar life insurance arrangement afforded benefits to the petitioner-husband in his capacity as an employee of…