Home | Chamberlain Hrdlicka

Reasonable Compensation: Tax Court Again Affirms Higher Scrutiny For Family-Member Employees

Preston O. Eagan, Jasen Hanson, Jonathan M. Stasney — Tue, 21 Jul 2026 09:00:01 -0400

The Internal Revenue Code permits businesses to deduct their ordinary and necessary businesses expenses, including “a reasonable allowance for salaries or other compensation for personal services actually rendered.” I.R.C. § 162(a)(1). The compensation must be “reasonable” and “purely for services.” Treas. Reg. § 1.162-7(a). For C-corporation shareholders, especially those in closely held businesses, the double-layer of taxation, effective income tax rates, preferential dividend rates, and other considerations create tension between whether to treat ...

Update: The Tax Court’s Decision Farhy v. Commissioner Just Took Another Punch

Preston O. Eagan, Jasen Hanson, Jonathan M. Stasney — Tue, 21 Jul 2026 09:00:02 -0400

As discussed in-depth in a previous post, there is an ongoing fight between the Tax Court and the IRS over whether the penalties imposed under IRC § 6038 for failing to comply with international reporting requirements relating to foreign assets actually have any real teeth. Essentially, the dispute centers on whether these penalties are “immediately assessable” – i.e. whether the IRS can assess the penalty without first having to obtain a court judgment. That assessment, in turn, records a taxpayer’s liability and triggers the broad collection powers of the IRS, raising ...

Relevant? The Tenth Circuit Broadens the Application of the Economic Substance Doctrine in Liberty Global

Andrew Mullendore, Connor Schlacks — Wed, 03 Jun 2026 09:00:03 -0400

On April 21, 2026, a divided panel of the Tenth Circuit issued the first appellate decision regarding the "relevance" threshold in the codified economic substance doctrine under Section 7701(o). In Liberty Global v. United States, the Court affirmed the U.S. District Court for the District of Colorado’s ruling that the codified economic substance doctrine was relevant to the transactions at issue (Project Soy) and that the transactions lack economic substance because they served no substantial nontax purpose despite the transactions complying with the mechanics of the ...

The Research Development Credit: What It Is and How Taxpayers Can Prepare for IRS Scrutiny

Thu, 30 Apr 2026 09:00:04 -0400

Under section 41 of the Internal Revenue Code, certain taxpayers are eligible to claim a credit for expenses incurred for the performance of qualified research and development activities. Although the research credit is not limited to specific industries or types of taxpayers, taxpayers in manufacturing, information technology, and professional, scientific, and technical services are often the main beneficiaries of this credit.

US-based taxpayers who meet the following four-part test may be eligible for the credit. First, the business component test requires that the ...

IRS Issues Beginning of Construction Guidance To Avoid Circumvention of OBBBA Termination of Clean Electricity Credits

Andrew Mullendore — Wed, 27 Aug 2025 09:00:05 -0400

In the One, Big, Beautiful Bill Act (“OBBBA”), Congress accelerated the termination of the clean electricity production credit provided in Section 45Y and the clean electricity investment credit under Section 48E. On July 7, 2025, President Trump issued Executive Order 14315 in which he instructed the Secretary of the Treasury to issue guidance related to the termination of the clean electricity credits to prevent the artificial acceleration or manipulation of the eligibility requirements and restrict the use of safe harbors to only situations in which a substantial ...

New Reporting Requirements Regarding Micro-Captive Insurance Companies

J. Scot Kirkpatrick, Steven M. Wyatt, Emily A. Dabney — Mon, 14 Jul 2025 09:00:06 -0400

Effective January 14, 2025, the Treasury Department issued final regulations requiring disclosures by certain taxpayers and material advisors involved in a micro-captive listed transaction or transaction of interest. The original due date for making initial disclosures was April 14, 2025, but the IRS provided relief from penalties if such initial disclosures are filed by July 31, 2025. However, such taxpayers and material advisors may have to disclose the transaction if the statute of limitations for an original or amended tax return did not end on or before January 14, 2025.

Members of Tax Controversy & Litigation Practice File Comments on Proposed Employee Retention Credits Regulations

Mon, 19 Aug 2024 09:00:07 -0400

Members of our Tax Controversy & Litigation practice filed comments last week on the proposed regulations published July 2, 2024, regarding the Employee Retention Credits. They argued that these proposed regulations exceed the IRS and Treasury authority. They also urged these bodies to abandon the current proposed regulations as they relate to the ERC, and to reconsider the appropriateness of the final regulations treating excessive ERC refunds as underpayments of tax, particularly in light of the Supreme Court's recent decision in Loper Bright Enterprises v. Raimondo.

Read ...

IRS to Begin Paying Certain ERC Claims and Denying Others

Tom Cullinan, John W. Hackney, Charles Rettig — Fri, 21 Jun 2024 09:00:08 -0400

IRS ERC ANNOUNCEMENT (IR-2024-169, June 20, 2024) - Following a lengthy review of numerous Employee Retention Credit ("ERC") claims, the IRS has announced plans to deny tens of thousands of “improper high-risk ERC claims” (about 10-20% of total ERCs) while starting a new round of processing lower-risk claims to help eligible taxpayers. During the review period, the IRS processed 28,000 claims worth $2.2 billion and disallowed more than 14,000 claims worth more than $1 billion. Various estimates of total ERC claims have exceeded $240 billion.

The IRS' review involved months ...

Farhy v. Commissioner: It Ain't About How Hard You Hit; It's About How Hard You Can Get Hit and Keep Moving Forward.

Anuar Estefan — Fri, 31 May 2024 09:00:09 -0400

I think Rocky is a great film series; especially Part IV four where Rocky fights Ivan Drago. During the fight, we see Rocky taking some pretty impressive punches, falling to the ring hard. Yet, every time, Rocky gets back up and keeps fighting. Eventually, in the fifteenth round, Rocky lands a series of hard punches that knock Drago out, and Rocky wins the fight.

Imagine if Rocky had to fight Ivan Drago, Clubber Lang and Apollo Creed all at the same time in the same fight. It ain't about how hard you hit; it's about how hard you can get hit and keep moving forward, but let’s face it, it would be an ...

Social Media Tax Advice? The IRS Has Caught on to the Trend.

Andrew Mullendore — Wed, 29 May 2024 09:00:10 -0400

It should come as no surprise that for a significant segment of the population, social media is rapidly replacing traditional print and television media as the primary source of news and information. That trend is troubling enough because of questions about accuracy, objectivity and competency. But perhaps an even more troubling trend is the increasing reliance on social media for advice on matters of import, particularly those that delve into traditional fields of expertise that involve legal issues. Relying on, “advice” on federal income tax matters from so called “tax ...