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A multipreneur was paid $200,000 for consulting services provided to one of the entities. He reported the income on Schedule C of his 1040 and took a deduction for $200,000 of commissions reportedly owed to another entity that he owned but that had gone out of business 20 years earlier.

The defunct firm had loss carryforwards intended to offset the income hit. But, not surprisingly, the tax laws don’t permit the shifting of income he attempted to do here.  These losses from the related-party transactions were suspect, which lead to IRS scrutiny.

I have no idea what this guy was thinking, if he is running multiple companies, he knows that this was not feasible.

Frey, TC Memo. 2019-62

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