Horse Breeders V IRS: Even The Losers Win
But litigated cases are a bad sample. Most cases settle. Unfortunately, any information on that is anecdotal, unlike the decided cases which are there for all to see. The word on the street is that cases settle for 50% (or sometimes over 80% in favor of the taxpayer) in appeals. And it is back to claiming the losses after that. But the really interesting thing is that in many of the litigated cases where taxpayers lose, they are actually winners if you take a broader view.
S Corporation Might Have Been Better Plan For Writer Karin Slaughter
The S corporation as a vehicle for authors like Slaughter is supercharged by Section 199A which allows a 20% income tax deduction for the flow through income, provided the W-2 is sufficient. Writing is not one of the specified fields like health or performing arts that is excluded from 199A for high-income people.
Assuming she does not have a team of minions writing for her she would need an S corporation so she can pay herself W-2 wages. I discuss the optimal amount here. You would absolutely not want to make the argument that she is getting paid for the brand rather than the writing since that might fall under one of the dreaded SSTB categories that don’t qualify for the deduction. The example in the regs is not a writer, but you should be able to get the ideas.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.