Rodriguez v. Commissioner
United States Court of Appeals for the Fifth Circuit
722 F.3d 306 (2013)
- Written by David Bloom, JD
Facts
Osvaldo and Ana Rodriguez (the taxpayers) (plaintiffs) were married citizens of Mexico and permanent United States residents. The taxpayers were the sole shareholders of Editora Paso del Norte, S.A. de C.V. (Editora), a controlled foreign corporation incorporated in Mexico. The taxpayers received gross income from Editora’s earnings. In lieu of receiving gross income through the taxpayers’ ownership in Editora, the taxpayers could have had Editora pay a dividend, but the taxpayers chose not to do so. The taxpayers filed tax returns, reporting gross income received from Editora’s earnings as qualified dividend income taxable at a rate of 15 percent. The Internal Revenue Service (IRS) (defendant) issued a deficiency notice, classifying the taxpayers’ gross income as ordinary income taxable at a rate of 30 percent. The taxpayers filed suit, seeking judicial review of the deficiency notice. The tax court ruled in favor of the IRS, and the taxpayers appealed.
Rule of Law
Issue
Holding and Reasoning (Prado, J.)
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