Benenson v. Commissioner: First Circuit Allows DISC to Avoid Roth IRA Contribution Limits

In Benenston v. Commissioner (First Circuit), the IRS lost a second appeal of its attempt to reclassify transactions between a DISC (domestic international sales corporation) and Roth IRAs.

The opinion begins as follows:


Clement Benenson (“Clement”) and James Benenson III (“James III”) appeal from the Tax Court’s ruling that they owe an excise tax for contributions made to their Roth individual retirement accounts (“Roth IRAs”) in violation of contribution limits. Using the common-law substance over form doctrine, the Commissioner of Internal Revenue recharacterized a transaction Clement and James III entered into to reduce their federal taxes, and the Tax Court affirmed. Summa Holdings, Inc. v. Comm’r, 109 T.C.M. (CCH) 1612 (2015). After careful consideration, we find the transaction violates neither the letter nor purpose of the relevant statutory provisions and therefore reverse the Tax Court’s decision.

See full opinion in Benenson v. Commissioner by clicking here.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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