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Joseph Radtke, SC v. United States Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A law firm, structured as an S-corporation, paid its sole attorney-employee only in “dividends” with a $0 salary. The court recharacterized the payments as wages subject to employment taxes, applying the substance-over-form doctrine.
Legal Significance: Establishes that courts will apply the substance-over-form doctrine to recharacterize “dividends” as “wages” for employment tax purposes when a shareholder-employee of a closely held corporation performs substantial services without receiving a reasonable salary.
Joseph Radtke, SC v. United States Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
Plaintiff, Joseph Radtke, S.C., is a subchapter S corporation providing legal services. Joseph Radtke is the corporation’s sole shareholder, director, and only full-time employee. Pursuant to an employment contract, Radtke’s annual salary was set at $0. In 1982, Radtke performed substantial and exclusive legal services for the corporation. Throughout the year, the corporation paid Radtke $18,225, characterizing the payments as “dividends.” These payments were made from corporate profits whenever Radtke required funds. The corporation did not withhold or pay Federal Insurance Contributions Act (FICA) or Federal Unemployment Tax Act (FUTA) taxes on these payments, contending they were distributions of profit, not wages. The Internal Revenue Service (IRS) determined the payments were wages for services rendered and assessed tax deficiencies, interest, and penalties. The corporation paid a portion of the assessment and filed suit in federal district court for a refund.
Court Holding & Legal Precedent
Issue: Must payments designated as “dividends” by a subchapter S corporation to its sole shareholder be treated as “wages” subject to FICA and FUTA taxes where the shareholder performs substantial services for the corporation but receives no other form of compensation?
Yes. The payments labeled as “dividends” were, in substance, remuneration for the Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor
IRAC Legal Analysis
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Legal Issue
Must payments designated as “dividends” by a subchapter S corporation to its sole shareholder be treated as “wages” subject to FICA and FUTA taxes where the shareholder performs substantial services for the corporation but receives no other form of compensation?
Conclusion
This case serves as a key precedent for the application of the Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo c
Legal Rule
Under the substance-over-form doctrine, payments from a corporation to a shareholder-employee constitute Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute i
Legal Analysis
The court's analysis centered on the well-established tax principle of substance over Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur s
Flash-to-Full Case Opinions
Flash Summary
- Payments labeled “dividends” to a sole shareholder-employee who performs substantial services