By Keith A. Wood

This is the last of three installments of this article.

I. Bookkeeper Falls Victim to Section 6672 Trust Fund Recovery Penalty; Kazmi, TC Memo 2022-13.

In Kazmi, a bookkeeper was found liable for the Section 6672 trust fund recovery penalty. The facts of this case are particularly sad.

The bookkeeper, Mr. Kazmi, worked part-time at an hourly rate for an urgent care medical practice. He had no ownership interest in the practice, nor was he an officer or director. Mr. Kazmi was not listed as an authorized signatory on any of his employer’s bank accounts. He did not have any check signing authority nor any authority to direct payments to the employer’s creditors. Unfortunately, Mr. Kazmi did handle all payroll functions. Because he transmitted payroll tax returns and made federal tax deposits for his employer when he was aware withheld taxes had not been remitted to the IRS, he was responsible for the trust fund recovery penalty.

Read more

By Keith A. Wood

This is the second of three installments of this article. 

I. Contemporaneous Written Acknowledgment Rules for Charitable Contributions of Aircraft and Vehicles; Izen vs. Commissioner (5th Cir. 2022).

Mr. Izen donated a 50% interest in an aircraft to a charitable organization. The Fifth Circuit Court of Appeals upheld the earlier decision of the Tax Court denying any charitable contribution deduction because the purported contemporaneous written acknowledgment (“CWA”) letter failed the strict requirements of Section 170(f)(8)(B). There are specific substantiation requirements when the subject of the gift is a vehicle or an airplane with a value in excess of $500. Under Section 170(f)(12)(B), the CWA from the donee organization must include the name and taxpayer identification number of the donor.

Read more

By John G. Hodnette

In general, operating a business through an entity can provide limited liability in the event the entity is insolvent or goes out of business. Limited liability applies even to business taxes owed by an entity such as a C corporation. Some taxpayers have attempted to take advantage of that by causing a corporation to transfer to its shareholders assets that should be used to pay taxes. Such shareholders liquidate the corporation and ignore IRS attempts to collect. Absent Section 6901, the IRS might have no ability to collect the corporate taxes from the owners of the corporation.  However, Section 6901 imposes transferee liability on the owners of the business who received such assets. Read more

By John G. Hodnette

A person who is both an employee and a partner in a partnership is not treated as an employee for tax purposes. Rev. Rul. 69-184 states “bona fide members of a partnership are not employees of the partnership [for employment tax purposes because a partner is] a self-employed individual.” An employee will generally be treated as a partner if he or she (a) receives a profits interest, (b) receives a vested capital interest, or (c) makes a Section 83(b) election. Read more

By John G. Hodnette

An interest charge domestic international sales corporation (“IC-DISC”) is a special tax exempted domestic corporation that qualifies under Sections 991 through 994. The IC-DISC incentivizes (from a federal income tax perspective) exporting U.S. manufactured property. An IC-DISC is not the operating exporter but rather is a separate entity that receives a tax-free commission from the operating entity in an amount limited by the Code. This tax-free commission can produce valuable tax savings and deferral of income for qualifying exporters. Read more