Kress v. United States – Federal court and the IRS approve tax affecting for S corporation

Description

Abstract: For decades, the IRS has taken the position that pass-through entities possess valuable tax advantages. And the U.S. Tax Court has agreed, routinely ruling that the earnings of pass-throughs should not be tax affected. This article summarizes a recent federal district court ruling that accepted a valuation report in which the earnings of an S corporation business were tax affected as if it were a regular C corporation. The court also rejected the application of an S corporation premium. Kress v. United States, 2019 WL 1352944, U.S. District Court, E.D. Wisconsin, Case No. 16-C-795, March 26, 2019