Gregory v. Commissioner
T.C. Memo. 2021-115

On September 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Gregory v. Commissioner (T.C. Memo. 2021-115). The primary issue presented in Gregory v. Commissioner was whether the claimed deductions permitted under IRC § 183(b) for activities not engaged in for profit are not subject to the 2% floor on miscellaneous itemized deductions set forth in IRC § 67(a). Background to Gregory v. Comissioner During the years at issue, 2014 and 2015, the petitioners operated CLC Ventures, Ltd. (CLC), which generated income and incurred expenses from boat chartering activities. CLC was incorporated in the Cayman Islands and elected to be treated as a disregarded entity in 2012. The petitioners jointly filed tax returns for the years at issue and reported the income and expenses from their CLC activity on Schedules C (Profit or Loss From Business). The IRS audited the petitioners’ 2014 and 2015 returns and issued a…

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A Primer on Employment Tax Withholding

When the IRS is involved, monetary transactions are never as simple as they appear on the surface. The late, great comedian Mitch Hedberg once told a story about being given a receipt after buying a doughnut. I bought a doughnut, and they gave me a receipt for the doughnut. I don’t need a receipt for the doughnut. I’ll just give you the money, and you give me the doughnut, end of transaction. We don’t need to bring ink and paper into this. I just can’t imagine a scenario where I would have to prove that I bought a doughnut. Some skeptical friend: “Don’t even act like I didn’t get that doughnut! I got the documentation right here…oh, wait it’s at home…in the file…under “D.” When it comes to the payment of wages, ink and paper are always required. Think of the IRS as Mitch’s skeptical friend. The IRS will zealously…

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