Attorney Had No Basis in His Labor

The taxpayer, an attorney, conducted his law practice through a wholly-owned S corporation. During the years at issue, the taxpayer didn't file a personal federal income tax return because he believed he wasn't required to pay any income tax. Among other things, he argued that IRC Secs. 83 , 1001, and 1012 entitle taxpayers to take into account their "basis in labor" (measured by fair market value) when computing tax liability for income from personal services. The Tax Court quickly dismissed this argument, noting that it's well established that the federal income tax applies to income for personal services and taxpayers have no basis in their labor. Nothing in IRC Sec. 83, 1001 , or 1012 provides otherwise. Therefore, the Court upheld the IRS's notice of deficiency and related penalties. Michael C. Worsham , TC Memo 2019-132 (Tax Ct.).

Source: Thomson Reuters