The Tax Court has ruled that a son’s work and aid in a business owned by his parents did not result in taxable compensation, but were instead construed to be a gift. The taxpayer in question worked and aided his parents in the operation of a business belonging to his parents. His parents gave him money. The IRS contended that the money was remuneration for work done in the family business and was therefore taxable wages. The taxpayer countered and won, contending the money was a gift as part of a larger estate plan.
Points of Interest
- It is human nature to desire the most wealth and security as possible for yourself and your family.
- Situations do exist where a business owner desires a low value to be attached to their business.
- Legitimate avenues do exist to accurately reflect the reduction of value of any given business when appropriate.
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors