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Like for instance, if I made, let’s say
40,000 in a year, I only had to pay Social Security on
that 8,000 that I paid myself. But let’s say the other
balance of the 32,000, I had to pay income tax on, but
not Social Security tax. That was my understanding.
I guess what you’d say is for tax reasons.
Based on Richard Pelham’s testimony and the totality of the
evidence, we conclude that the primary purpose of establishing
the trust was to avoid employment tax. The trust lacked
independent economic substance. Richard Pelham was, in
substance, the grantor of the trust. Thus, the income and
expenses from the operations of Lake Lock & Key during the years
in issue are attributable to the Pelhams and not to the trust.
The Pelhams are liable for self-employment taxes on the net
income of Lake Lock & Key for the years in issue.
To reflect the foregoing and concessions of the parties,
Decisions will be entered
under Rule 155.
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Last modified: May 25, 2011