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Benefits Tied to Insurance Arrangement Taxed as Ordinary Income

April 12, 2021, 9:04 PM

The economic benefits received by the shareholder of an S corporation should be taxed as ordinary income because he was being compensated in his capacity as an employee, the U.S. Tax Court ruled.

The Monday win for the IRS came after years of litigation between a couple, Ruben and Martha De Los Santos, and the agency concerning an employee welfare benefit plan at an S corporation called Dr. Ruben De Los Santos MD, PA. Both husband and wife were employees at the corporation and Ruben De Los Santos was also a shareholder.

The Tax Court previously ruled that...

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