Several IRS Tax Court Rulings Dentists Should be Aware of… (if for no other reason than to dispel the myth that the IRS is humorless).

A Bike Sharing Program Isn’t Mass Transit

Employee Benefits—Bike Sharing: Expenses an employee incurs by participating in a
“bike share program” do not qualify for the favorable tax treatment
provided for qualified transportation fringe benefits. According to IRC Sec.
132(a)(5), employers that provide their employees with transportation benefits
can exclude those benefits from employees’ gross incomes if the benefits are
qualified transportation fringes as defined in IRC Sec. 132(f)(1) . A qualified transportation fringe includes
any transit pass that entitles a person to transportation on mass transit
facilities. A bike share program is not a mass transit facility. Information
Letter 2013-0032. 

You Would Imagine They Could Have Thought of a Better Business Purpose…

Travel Expenses for Good Night’s Rest: A self-employed tax return preparer that operated out
of her home was denied a deduction for travel expenses that were necessary
“just to get rest” from the stress of her neighborhood and harassment
by clients that called her home at any hour. The Tax Court said that a
taxpayer’s choice of where to live is personal and her travel to get a good
night’s rest was a personal, not a business, expense. Meals and entertainment
expenses claimed for meals with clients and a catered client party were denied
as a business purpose was not established. Joyce
, TC Memo 2013-219 (Tax Ct.).

Bad News for an Independent Contractor Deemed by IRS to be an Employee

Income Tax—SEP Contribution Disallowed: The taxpayer signed a letter of appointment with the
British Consulate General (BCG) to serve a three-year term as a trade officer.
He was referred to as “self-employed for tax purposes” in the letter
and so filed a Schedule C reporting his income and related expenses and took a
deduction for a SEP contribution based on his BCG earnings. After finding that
the taxpayer was a common law employee of BCG and not self-employed, the Tax
Court disallowed his SEP contribution and imposed a 6% excise tax on the excess
contribution. On review of that decision, the 9th Circuit agreed that taxpayer
was a common law employee. As such, he was not an employer under IRC Sec.
401(c)(4) with respect to his BCG earnings and could not contribute to a SEP
and deduct his contributions based on those earnings. Rosenfeld v. Comm. , 112
AFTR 2d 2013-5638 (9th Cir.).