Nontax rules often require that those performing certain services (such as selling investment products) be licensed to do so.  Quite often that license is held in the name of an individual.  In the case of Fleischer v. Commissioner, TC Memo 2016-238 a person in just such a position wanted to form an S corporation in which to conduct his investment advisory business in order to reduce his exposure to self-employment taxes.

When he did so he did not attempt to have the corporation he formed become licensed to perform the services in question.  He already had entered into an agreement with Linsco/Private Ledger Financial Services (LPL) as a representative prior to forming the corporation.  He did not have his contract with LPL revised to recognize his S corporation, Fleischer Wealth Plan (FWP), although he began treating the income he received from LPL as corporate income.

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We revisit a situation with an employee of the International Monetary Fund and self-employment taxes in the case of Sisson v. Commissioner, TC Memo 2016-143—but in this case the employee is not facing confirmation of a nomination for U.S. Treasury Secretary.

Mr. Sission, like former Treasury Secretary Timothy Geither, was an employee of the International Monetary Fund—and even though he is an employee, his payments for services as subject to self-employment tax rather than FICA and Medicare tax. 

A taxpayer’s liability for self-employment tax related to income from working interests in oil and gas wells was the issue in the case of Methvin v. Commissioner, T.C. Memo 2015-81, affd CA10, Case No. 15-9005, AFTR 2d ¶2016-809.

This is a case we first visited back in April of 2015 when the taxpayer lost in Tax Court. But now we have the results of the taxpayer’s appeal to the Tenth Circuit.

Thomas Ryther’s wholly owned corporation, Knight Steel, failed in 2004.  Knight Steel had been in the business of fabricating steel frames and in the process of doing so generated scrap steel which it simply piled up.  When Knight Steel passed through Chapter 7 on its way to the grave, the bankruptcy trustee abandoned that scrap steel because it appeared to be worthless.

Tom, however, who was financially challenged at this point, decided that since he had a large pile of scrap steel and needed money he’d look at whether he could get something for it.  And Tom discovered that, far from being worthless, there was a ready market for the scrap steel.  From 2004 to 2010 Tom sold various amounts of the steel to provide himself with cash.

Tom reported the amounts as ordinary income, but the IRS asserted that Tom should also pay self-employment tax on the amounts in question.  The Tax Court, in the case of Ryther v. Commissioner, TC Memo 2016-56, took up the question of whether Tom owed self-employment tax on this income.