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Hardy v. Commissioner

TC Memo 2017-16 (2017)

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Hardy v. Commissioner

United States Tax Court

TC Memo 2017-16 (2017)

Facts

Dr. Stephen P. Hardy (plaintiff) was a plastic surgeon. Hardy held a minority interest in Missoula Bone & Joint Surgery Center, LLC (the Center), a surgery center that rented its facilities. Patients were charged a facility fee to use the Center. The Center distributed its revenue from its facility fees to its shareholders. Hardy occasionally performed surgeries at the Center but was paid directly by patients, not by the Center, and had no management responsibilities or decision-making powers. In 2008 Hardy began reporting his income from the Center as passive after previously classifying it as nonpassive. Despite the earlier classification, Hardy had never grouped his activity at the Center with his activity as a plastic surgeon. The Commissioner of Internal Revenue (the Commissioner) (defendant) determined a deficiency in Hardy’s taxes after reclassifying his income from the Center as nonpassive. The Commissioner also argued that under § 469 of the Internal Revenue Code, Hardy’s activity at the Center should have been grouped with his activity as a plastic surgeon to form one economic unit. Hardy petitioned the United States Tax Court for a redetermination.

Rule of Law

Issue

Holding and Reasoning (Buch, J.)

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