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November 16, 2020

Tax Court holds physician actively participated in numerous restaurant businesses, substantial losses could offset nonpassive income

In Gurpreet S. Padda, et ux. v. Commissioner, the Tax Court held that a physician materially participated in five restaurants and a brewery in which he held a 50% interest, so annual losses totaling approximately $1 million could offset nonpassive income. The Court also held that the physician received a constructive dividend from his wholly owned medical corporation that had paid $82,828 of his expenses in 2010 and was liable for failure-to-file and accuracy-related penalties for certain tax years at issue. A Tax Alert on the opinion is forthcoming.