(Congratulations to
Professional Alliance member Warren L. Baker for his recent publication
in the Journal of Accountancy!)
On October 29, 2013, the Tax Court held that the receipt of
compensation by the taxpayer from a Limited Liability Company (“LLC”) that was
almost entirely owned by the taxpayer’s individual retirement account (“IRA”)
resulted in several types of self-dealing prohibited transactions. Thus, the
IRA-owned LLC (“IRA/LLC”) automatically terminated as of the first day of the
taxable year in which the prohibited transaction occurred (2005), resulting in
income tax on the $320k constructive IRA withdrawal, plus a 10% early
distribution penalty and a 20% accuracy related penalty.
Courtesy of Warren L. Baker, J.D., LL.M, as published in the
Journal of Accountancy.
