The U.S. Tax Court in Ismail v. Commissioner of Internal Revenue held that two individuals did not have ownership in a foreign corporation and so were not entitled to deduct business expenses from their tax liabilities. The court held that the taxpayers had failed to establish ownership interest in the corporation and so could not deduct meal, entertainment, and travel expenses from their taxes.
Additionally, the corporation in question was organized under Malaysian law as a Sendirian Berhad (a private limited liability company) but was held to be a foreign corporation rather than a sole proprietorship as the taxpayers contended. This meant that the the corporation’s losses did not pass through to the taxpayers, again denying their ability to deduct business expenses form their taxes.
See Ismail v. Commissioner of Internal Revenue
Posted by Benjamin Sapozhnikov, Associate Editor, Wealth Strategies Journal.