Masonry Magazine January 1972 Page.32
Taxes
(Continued from page 23) sought to deduct as compensation a portion of the amount that it had distributed as dividends when it thought it was a tax-option corporation.
The Tax Court ruled against the construction company. Even though the taxpayer may have treated its business affairs differently had it been aware of the loss of the sub-chapter S status, it was the ruling of the Court that the intent at the time of the distributions was controlling. The evidence showed that both the company and the shareholders had treated the distributions as dividends and the payments were in proportion to the number of shares held and not the amount of services performed. Paula Construction Co. v. Commissioner, 58 TC No. 102.
UNION DUES
The IRS has restated an earlier ruling with regard to the deductibility of labor union dues. Involved in the ruling were monthly dues, international assessment and local assessment. It seems that payment of all of the dues and assessments by a member is necessary to avoid suspension from the union.
An employee is considered to be carrying on a trade or business and any ordinary and necessary expenses incurred in connection therewith are deductible. Are union dues a deductible employee business expense? The IRS has held that union dues are deductible if their payment is a condition of initial or continued membership in the union, and no portion of the payment serves to defray an expense of a personal nature.
Providing funds for the payment of death benefits is considered to be a personal expense. Therefore, the IRS has ruled that the monthly union dues, the international assessment and the portion of the local assessment used for out-of-work benefits are deductible as ordinary and necessary business expenses. However, the portion of the local assessment used to provide death benefits is a non-deductible personal expense. Rev. Rul. 72-463.
SHORT FORM
Just when taxpayers have fully come to realize its absence, the individual's short Form 1040A has been brought back by the IRS. This form will be used by the many taxpayers who do not itemize deductions and who do not receive more than $200 in dividends or interest.
EMPLOYEE?
Whether a truck driver was an employee and his employer obligated to pay employment taxes on his salary was determined by the IRS. The truck driver worked on a contract basis and transported jet engines and various other items for an airline to and from a number of places in the United States. The company provided the truck. The amount of work the driver did for the company averaged about 15 days a month. The driver was not eligible for pensions, bonuses, paid vacations, etc., and in his employment contract he was referred to as an "independent contractor."
The IRS ruled that it was immaterial that the employment contract described the relationship as that of an (Continued on page 36)