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Miami Developer Denied Large Loss Due To S Corporation Basis Issues

Miami Developer Denied Large Loss Due To S Corporation Basis Issues

Being an accountant, I think that Mr. Meruelo really did get a raw deal here. If Merco had been an LLC taxed as a partnership instead of an S corporation, it likely would have worked out.  Of course there might have been medicare tax then if the project had been a winner instead of a loser, but maybe not.  The other thing that might have saved him was more meticulous bookkeeping among the various entities, rather than a lot of “due to” “due from” transactions to be sorted out by the accountant preparing the tax returns. This case is a good illustration of Reilly’s Fourth Law of Tax Planning – Execution isn’t everything but it is a lot.

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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.