TaxProf Blog – Bryan Camp: Lesson From The Tax Court: S Corp Payments To Sole Shareholder Were Wages (March 22, 2021)

Bryan Camp has published an article on the TaxProf Blog, titled “Lesson From The Tax Court: S Corp Payments To Sole Shareholder Were Wages,” which discusses the outcomes of Lateesa Ward and Ward & Ward Company v. Commissioner, T.C. Memo. 2021-32 (Mar. 15, 2021) (Judge Holmes) as they pertain to owners of S corporations. The article begins as follows:

I think of corporations as a type of vessel that sails the seas of commerce.  Like real ships, corporations are commanded by officers.  All crew, including officers, are compensated for their services.  At the end of the commercial voyage, however, an end marked either by time or transaction, profits earned are distributed to the owners of the ship.  When the officers are also the owners it becomes difficult to distinguish payments that represent wages for their services in commanding the ship from payments that represent distribution of profits.  Yet for both employment and income tax reasons, such distinction must be made.

In Lateesa Ward and Ward & Ward Company v. Commissioner, T.C. Memo. 2021-32 (Mar. 15, 2021) (Judge Holmes), we learn why payments from the taxpayer’s S corporation to the taxpayer were wages and not distributions of profit.  The case teaches a basic employment tax lesson for S Corps and a basic income tax lesson for sole shareholders.  Details below the fold.

To download the full opinion, click here: Lateesa Ward and Ward & Ward Company v. Commissioner, T.C. Memo. 2021-32 (Mar. 15, 2021) (Judge Holmes)

To view the full article, click here: “Lesson From The Tax Court: S Corp Payments To Sole Shareholder Were Wages”