Court Cases - Research

[Nashville]

I've got the Tax Book and Code and Regs and Pubs. How is the best way to research (by topic) to see if there are court cases?

Specifically, I'm looking for whether the furnishing of goods (in lieu of cash) is deductible as compensation. There is no question it is taxable to the recipient, but the question is whether it is deductible to the payer.

[kathyc2]

Not a court case, but from Pub535:



Property


If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property.

You can claim the deduction only for the tax year in which your employee includes the property's value in income. Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner.

You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer.

These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income.

[Roland Slugg]

If you want to look for court cases on point but don't have acces to the books or CDs, try a Google search. Those often result in excellent hits.

Regarding your Q, though, you don't need to look for court cases. Since you have the Regs, just check out §1.61-2(d).

Btw, just because a payment (in cash or in kind) is taxable income to the recipient, that doesn't mean it's deductible by the payer. To be deductible it must be paid in connection with a trade or business.