Rousku v. Commissioner
United States Tax Court
56 T.C. 548 (1971)
- Written by Alex Ruskell, JD
Facts
George Rousku (plaintiff) was a United States citizen who operated an automobile-body-repair shop in Canada. Rousku owned the building the shop was in, and the shop contained tools and inventory. The tax commissioner (defendant) sent Rousku a notice of tax deficiency. Specifically, the notice stated that, under the § 911 tax exclusion in the Bankruptcy Code, which allows taxpayers to exclude certain foreign income when determining United States taxes, only 30 percent of Rousku’s income from the business could be excluded because both personal services and capital were material income-producing factors. Rousku sued, arguing that fixing cars was primarily a personal service and capital was not a material income-producing part of the business. Under § 911, capital was not a material income-producing factor if the gross income of the enterprise consisted mainly of fees or other compensation for personal services. Capital was a material income-producing factor if the operation of the business required substantial inventories or substantial investments in plants or other equipment.
Rule of Law
Issue
Holding and Reasoning (Featherstone, J.)
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