- 5 - carrying on any trade or business”. Sec. 162(a). This includes expenditures for “a sickness, accident, hospitalization, medical expense, * * * or similar benefit plan * * * if they are ordinary and necessary expenses of the trade or business.” Sec. 1.162- 10(a), Income Tax Regs. An ordinary expense is one that relates to a transaction “of common or frequent occurrence in the type of business involved”, Deputy v. du Pont, 308 U.S. 488, 495 (1940), and a necessary expense is one that is “appropriate and helpful” for “the development of the petitioner’s business,” Welch v. Helvering, 290 U.S. 111, 113 (1933). We first address the question whether Ms. Poyda was an employee of her husband. Whether an individual is an employee is a question of fact. See Packard v. Commissioner, 63 T.C. 621, 629-630 (1975); Haeder v. Commissioner, T.C. Memo. 2001-7. To determine whether an employer-employee relationship exists, courts generally apply a common law agency test. See Matthews v. Commissioner, 92 T.C. 351, 360-361 (1989), affd. 907 F.2d 1173 (D.C. Cir. 1990). Where a family relationship is involved, close scrutiny is required to determine whether a bona fide employer- employee relationship existed, and whether payments were made on account of such a relationship or instead on account of the family relationship. See Haeder v. Commissioner, supra.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011