Thoma v. Commissioner (T.C. 2020) involves a dispute over income earned from accounting services. The petitioner claimed that the services were provided in his capacity as a partner of the accounting firm Thoma & Hjerpe or at a minimum, in his capacity as an independent contractor for the firm. Conversely, the Commissioner took the position that the petitioner’s income was in fact employment income from the firm. The Tax Court upheld the Commissioner’s recharacterization of income as employment income and found that the petitioner’s underpayment warranted an accuracy-related penalty.
Blue J correctly predicted that the Court would find that (1) Thoma & Hjerpe was not a valid partnership for federal tax purposes; (2) the petitioner provided services as an employee and not as an independent contractor; and (3) an accuracy-related penalty was warranted. The predictions were based on several factors, including that:
- The petitioner did not have any management authority over or operational responsibility for the affairs of Thoma & Hjerpe;
- The petitioner did not have any investment in Thoma & Hjerpe; and
- The petitioner was a certified public accountant with years of experience.
To learn how Blue J predicted all three of the outcomes in this case correctly, download the report below.