Tax News

CCH (cch.taxgroup.com) reports:

  Compensation paid to the chairman of an Indian tribe out of the tribe's trust funds was taxable income. The individual's argument that the compensation paid to him was exempt from income tax because it furthered the development of the tribe and was a programming expenditure was rejected. The individual's compensation for overseeing the day-to-day operations of the tribe could not be considered development, and the salary paid to him to fulfill his long-standing and long-defined position of tribal chairman could not be considered as expenditure for an evolutionary process toward the economic, social or governmental progress of the tribe. Moreover, the individual failed to cite any authority or statute that expressly exempted his compensation from federal income taxes.

  Further, the accuracy-related penalty was properly imposed because the individual did not establish reasonable cause for the underpayment of taxes. Despite being confronted with legal authority supporting the theory that compensation is normally taxed, the individual failed to seek professional advice and continued to rely on his own incorrect interpretation of revenue regulations and tribal treaties. His determination of his tax status was not reasonable in light of his experience, knowledge and education.

  Affirming a DC Okla. decision, 2007-2 USTC ¶50,837.

J.A. Barrett, Jr., CA-10, 2009-1 USTC ¶50,329

Other References:

 
Code Sec. 61

  CCH Reference - 2009FED ¶5507.2994

 
Code Sec. 6662

  CCH Reference - 2009FED ¶39,651G.305

 
Code Sec. 6664

  CCH Reference - 2009FED ¶39,661.65

  Tax Research Consultant

  CCH Reference - TRC PENALTY: 3,106.10
CCH Reference - TRC FILEIND: 15,208
CCH Reference -
TRC IRS: 33,150