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Tax Court clarifies who qualifies for economic hardship

Tax law is a difficult area of law for many reasons. The law is often changing and, as highlighted in a recent decision by the Tax Court; unexpected interpretations of the law are not uncommon.

Take the Citizens United case from 2010. Essentially, this case involved a question as to what protections are available for corporations. Ultimately, the court decided that the corporation had a number of protections similar to those afforded to individuals. More specifically, the Supreme Court of the United States held that corporations are allowed to spend money to support political candidates because corporations are granted the protection to speak freely. 

This seems to support the contention that businesses faced with a tax issue receive the same protections as individuals. However, a recent case that attempted to test this presumption proves the law in this area is even murkier than once thought.

The case involves a nursing home that attempted to seek protection under undue hardship if it was required to submit to a levy placed on the nursing home by the Internal Revenue Service (IRS). The nursing home made a convincing argument, stating that the language of the tax code provides that the protections afforded for “undue hardship” are available to taxpayers, defined as “any person subject to any internal revenue tax.” The argument continues, noting that “person” is defined to include corporations. As such, the nursing home contends it should be able to receive undue hardship protections.

Ultimately, the court disagreed stating such protections are not available for corporations. Thus it appears the nursing home will have to follow the levy issued by the IRS.

This case provides a valuable lesson for those attempting to navigate tax issues. These issues are extremely complicated. Just when you think you have a handle on how the law is designed to work, it changes. The court interprets the definition of a single word in an unexpected manner and the impact of the law changes. This is just one small example of the complexities of tax law. As a result, those who are dealing with tax issues are wise to seek legal counsel. An experienced attorney can mitigate the risk of such surprises and better ensure your tax issue is resolved in a manner that preserves your interests. 

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