Module 2 Discussion Thread
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University of Miami *
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MISC
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Law
Date
Feb 20, 2024
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docx
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Uploaded by kareemgay
Kareem Gay
Module 2 Discussion Thread
Schneer v. Commissioner
Schneer v. Commissioner is a 1991 case heard in the United States Tax Court that involves a crucial controversy regarding assignment of income principles. It is a case that examines whether
a taxpayer can assign a portion of his income to a corporation he controls, challenging established tax law.
Facts: Schneer, the taxpayer in question, wanted to allocate part of his income to a corporation he controlled. In his argument, he argued that the assignment was a legitimate tax strategy to shift the tax burden from himself to the corporation. IRS objected to this arrangement, claiming that Mr. Schneer was the individual who earned the income.
Issue: An important question in this case is whether the taxpayer's attempt to assign income to a controlled corporation is a valid tax strategy. There is a controversy over the assignment of income principle and whether income can be legitimately attributed to a non-individual entity.
Decision: U.S. Tax Court ruled against Mr. Schneer, claiming that assigning income to a corporation was not a valid tax strategy. It was held that income should be taxed to the individual who earned it, and that attempts to assign income to another entity to reduce personal tax liability are not permitted.
Reasoning: In its decision, the court referred to the assignment of income principle, which is a fundamental principle in tax law. A taxpayer who earns income cannot evade tax liability by transferring the right to receive that income to another entity. The court found that Mr. Schneer was the individual who earned the income, and that attributing it to his corporation violated established tax principles.
Conclusion: Schneer v. Commissioner affirms the assignment of income principle and limits taxpayers' ability
to shift income to entities they control to avoid taxes. The case highlights the importance of accurately attributing income to the individual who earned it, preventing attempts to manipulate tax liability by assigning it to related entities.
The Schneer v. Commissioner case solidifies the income assignment principle in tax law. Taxpayers cannot avoid taxes by allocating income to related entities, and the IRS retains its power to assess taxes based on the true source of income. In essence, this case reinforces the importance of maintaining fair and equitable tax systems through the application of tax principles.
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