Question

Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole shareholder of the corporation is Willy Wonka. Wonka’s only business since its incorporation in 2015 has been land-surveying services. In Wonka’s state of incorporation, only a licensed surveyor can perform land surveying. Willy, Wonka’s only employee, is a licensed surveyor but he is not a licensed engineer. Upon audit of Wonka’s 2015 and 2016 tax returns, the IRS assessed tax deficiencies stemming from its conclusion that the corporation was a personal service corporation subject to the flat tax rate of 35%. Willy believes that the IRS’s determination is incorrect, and he has asked you for advice on how to proceed. Evaluate the IRS’s position regarding the treatment of Wonka Corporation as a personal service corporation, and prepare a memo for the client files describing the results of your research.

Answer 1

Answer :-

An enterprise will be considered as an individual administration partnership if the underneath conditions are satisfied.

• The matter of the company is considerably performed by the proprietor of the business.
• The business can be in any of the fields - well being, law, engineering(Including looking over), design, bookkeeping, actuarial science, performing expressions, or counseling .
• In the event that the proprietor of the business plays out most of the business assignments than this first condition is met.
• The supply of the partnership in esteem is held by a person for a base level of 95%.
• This lion's share of offer can be specifically or by implication held by the

1. A resigned worker who has played out the administrations referenced in point 1.

2.A representative who is at present playing out the administrations

3.Any bequest of representative or retiree

Thus on account of Wonka, IRS held that the organization ought to be exhausted as Personal administrations enterprise as both of the above conditions are met.

• all offers are with the Wily wonks
• A generous piece of administrations is performed by Willy Wonka.
• Thus this C company must be saddled at a rate of 35%.
• IRS considers such companies as PSC in that capacity partnerships are commonly made to take the tax cuts that are permitted to the enterprises as it were.
• Consequently IRS has made this exceptional class of PSC to keep a beware of such enterprises.

Reminder

Dear Willy Wonka,

We have investigated your organization position and legitimate structure and we likewise achieved the discoveries that IRS discoveries are right and your partnership will be burdened at 35%

For your situation, your C organization meets every one of the conditions that are sufficient to get to any partnership as PSC.

Since over 95% of offers of the organization are with you and you play out the significant work of business without anyone else's input subsequently the company is PSC.