By: Derek Hawkins//February 2, 2016//
7th Circuit Court of Appeals
Case Name: Estate of Harold Stuller v. United States of America
Case No.: 15-1545
Officials: ROVNER and WILLIAMS, Circuit Judges, and SHAH, District Judge
Practice Area: Trusts and Estates – Tax Refund
Court properly denies request to refund taxes paid by entity.
“The point here is that LSA, an S corp, is a different entity than the Stullers, its shareholders. “[W]hile a taxpayer is free to organize [her] affairs as [she] chooses, nevertheless, once having done so, [she] must accept the tax consequences of her choice, whether contemplated or not, and may not enjoy the benefit of some other route [she] might have chosen to follow but did not.” Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 149 (1974) (citations omitted). Denial of the Stullers’ corporate-level deduction for LSA’s losses did not change the fact that the Stullers annually received lease income from LSA, which was reported on their returns. Because denial of the corporate deduction does not change the “fundamental principle that an S corporation is a separate entity from its shareholders,” the denial of a corporate-level deduction for an S corp’s shareholder does not entitle the taxpayer to remove rental income from an individual tax return. Catalano, 240 F.3d at 843–44. Similarly, the Stullers cannot now “look through the forms they chose themselves in order to improve their tax treatment with the benefit of hindsight.” United States v. Fletcher, 562 F.3d 839, 842 (7th Cir. 2009).”
Affirmed