Two partners operated several car-for-hire businesses through numerous C corporations. According to the IRS, one of the partners didn’t report constructive dividends from the businesses on his joint tax returns. The IRS audited the married taxpayers after the husband pleaded guilty to healthcare fraud in connection with the businesses. The tax agency found the couple failed to report more than $1.4 million in income. The couple didn’t provide any business books or records, so the IRS uncovered the income through an analysis of their bank deposits. The U.S. Tax Court agreed with the IRS’s determination and ruled the taxpayers were liable for civil fraud penalties. (TC Memo 2024-36)
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