Rocco v. Commissioner
United States Tax Court
Rocco and Carletta were shareholder-employees of small business corporations. Relying upon sec. 1375(c), I.R.C. 1954, respondent determined that the salaries which they received from such corporations did not reflect the values of the services which they rendered, and reallocated to them portions of the dividends received by the other shareholders. Held: On the facts, the reallocations were improper.
Read the full summary
Rocco and Carletta were shareholder-employees of small business corporations. Relying upon sec. 1375(c), I.R.C. 1954, respondent determined that the salaries which they received from such corporations did not reflect the values of the services which they rendered, and reallocated to them portions of the dividends received by the other shareholders. Held: On the facts, the reallocations were improper. There was no correlation between the amounts determined by respondent to constitute reasonable compensation and the values of the services performed by Rocco and Carletta.
1Opinion of the Court
Featheeston, Judge:
Respondent determined deficiencies in petitioners’ Federal income taxes for 1966 as follows:
Docket No. Petitioners ' Deficiencies
620-69_Charles Rocco aná Elizabeth Rocco_$4, 606
621-69_Ralph Carletta and Mae Carletta_11, 809
The issue for decision is whether respondent, pursuant to section 1375(c),1 properly reallocated to petitioners the dividends received by members of their families from two corporations which had each elected to be treated for Federal income tax purposes as a “small business corporation” pursuant to subchapter S of chapter 1 of the Internal Revenue Code…
2Cases cited5 opinions
- Mayson Mfg. Co. v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1949
- Grenada Industries, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1953
- Asiatic Petroleum Co. v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1935
- Asiatic Petroleum Co. v. CommissionerUnited States Board of Tax Appeals · 1935
- Dahlem Foundation, Inc. v. CommissionerUnited States Tax Court · 1970
3Cited by3 opinions
- Davis v. CommissionerUnited States Tax Court · 1975
- Davis v. CommissionerUnited States Tax Court · 1975
- Rocco v. CommissionerUnited States Tax Court · 1972