Masonry Magazine August 1972 Page. 14
Taxes
(Continued from page 13)
Remember, that if the primary purpose of the individual in making a trip or in going to a convention is for a vacation, the trip or convention is considered to be personal in nature and expenses incurred are not deductible. The IRS has explained that whether a trip or convention is primarily personal depends upon the facts in each case. One major test used to determine whether a trip or convention is primarily personal is by making a comparison of the time spent in business activities with the time spent in personal activities. I.R.S. News Release No. 1224.
PENSION PLAN REFORM
The Senate Labor and Public Welfare Committee is working on the Administration's proposal "to strengthen and improve private pension and other employee benefit plans."
Some of the proposals are: to allow individuals to deduct for personal savings for retirement and to raise the contribution limitations that currently apply to self-employed individuals and shareholder-employees of tax-option corporations under qualified plans.
Another major area of proposed change surrounds the standards for participation in pension plans. It is hoped that this new proposed legislation will insure a wider security to the nation's working citizens by establishing minimum standards for vesting of benefits in the employee.
TAX-OPTION CORPORATIONS
Briefly described, a tax-option corporation is a corporation which has elected not to pay any corporate income tax but rather to have its "income tax" paid directly by the shareholders. Whatever the portion of stock a shareholder holds will determine the amount of the corporate income for which he will have to pay taxes. These amounts can be compared to dividends but not regarded as such. While not taxed as a corporation, the corporation remains a corporation for all other purposes.
But like all of our tax laws this particular arrangement is a creature of legislation. The courts give only a literal interpretation to the application of such laws. In other words, if the tax laws specify three rules to be followed so that a particular deduction can be taken, then they must be strictly followed. Complying with two of the rules and attempting to follow the third will not suffice.
This maxim of tax law that a taxpayer must prove strict compliance with the laws to obtain a legislatively granted tax benefit was recently emphasized in a case before the Tax Court. The taxpayers (husband and wife) owned a cocktail lounge. Their accountant advised them to elect tax-option status for their corporation. The husband signed a letter directed to the District Director of Internal Revenue Service to the effect that the corporation was electing to file its tax return under the provisions of the code that pertain to small business (tax-option) corporations. The husband left the letter with his accountant to be mailed. He could never prove that it was mailed and received by the IRS because his accountant died before