- 11 - without published opinion 747 F.2d 1463 (5th Cir. 1984). Accordingly, “Apart from certain situations permitting the lifting of the corporate veil, the corporate entity and the legal consequences flowing therefrom are controlling.” Amorient, Inc. v. Commissioner, 103 T.C. 161, 169 (1994). In view of these fundamental principles, courts have consistently required shareholders to treat income received as passthroughs from their S corporations as distinct from income the same shareholders received for providing personal services to their corporations. This requirement applies even though the shareholders, and not their corporations, are liable for their pro rata shares of corporate income on their individual income tax returns. See, e.g., Durando v. United States, supra (passthrough income from an S corporation is not net earnings from self-employment for purpose of computing Keogh plan deductions); Crook v. Commissioner, supra (passthrough income of S corporation is dividend income, not wages or salary, to its shareholders for purposes of investment interest deductions); Ding v. Commissioner, T.C. Memo. 1997-435 (for purposes of self- employment tax, passthrough losses from an S corporation cannot be used to reduce shareholder's self-employment income paid by the corporation). As the Court of Appeals for the Ninth Circuit has explained, it is improper to treat income earned by a corporation through its trade or business as though it were earned directly byPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
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