Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
The Week of September 12 – September 18, 2020
Deckard v. Comm’r, 155 T.C. No. 8 | September 17, 2020 | Thornton, J. | Dkt. No. 11859-17
Short Summary: Waterfront Fashion Week, Inc. (Waterfront) was organized under Kentucky law as a nonstock, nonprofit corporation in 2012. Mr. Deckard was Waterfront’s president and one of its three directors. Waterfront never applied for recognition of tax-exempt status with the IRS.
On October 28, 2014, Waterfront mailed to the IRS Form 2553, Election by a Small Business Corporation. In the Form 2553, Waterfront sought to elect to be an S corporation retroactively as of the date of its incorporation in 2012. Mr. Deckard signed the Form 2553 in his capacity as Waterfront’s president. In addition, Mr. Deckard signed the Form 2553 shareholder’s consent statement, indicating that he owned 100% of Waterfront.
In 2015, Waterfront filed Forms 1120S, U.S. Income Tax Return for an S Corporation, for its taxable years 2012 and 2013, reporting operating losses. Mr. Deckard reported these flow-through losses on his 2012 and 2013 returns.
The IRS disallowed the losses on the ground that Waterfront filed to make a valid S corporation election and alternatively that Mr. Deckard was not a shareholder of Waterfront. Mr. Deckard filed a timely petition with the United States Tax Court.
Key Issue: Whether Mr. Deckard can claim the losses from Waterfront on his 2012 and 2013 tax returns?