Question

Provide facts and outcome on the Fleisher versus Commissioner of internal revenue court case pertaining to refund claims.

Answer 1

Mr. Fleischer is a certified financial planner who owns numerous insurance licenses and securities, inclusive of the Series 6, 7, 24, 63 and 65. In his individual capacity, on February 2, 2006 he entered into an independent contractor representative agreement with LPL Financial Services. He set up an S-Corp known as Fleischer Wealth Plan on February 7, 2006; and he himself was the sole owner and officer. He entered into an employment agreement with FWP, under which FWP on February 28, 2006; and paid himself a salary in his capacity as a financial adviser. But it was noted by the court that the Employment Agreement did not include a provision which needed him to remit any fees or commission from LPL to FWP. In his individual capacity on March 13, 2008 he entered into a broker contract with MassMutual Financial Group wherein he was an independent contractor, and in that broker contract there was no mention of FWP. Both MassMutual and LPL reported on Form 1099s payments made to Fleischer, the individual. He having transferred those payments to FWP, thus lead those payments to be reflected on the FWP's corporate tax returns, and filed his own personal returns showing that he was not responsible for any self-employment taxes. The Internal Revenue Service upon review took the decision that Mr. Fleischer was responsible for deficiencies in self-employment tax based on the logic that the income from Mass Mutual and LPL was earned by him, and not FWP.

The tax court decision included the following findings:

-- FWP holds no contractual relationship with MassMutual or LPL;

-- The revenue was attributable to contracts among Mr. Fleischer (not FWP) and third parties;

-- The Employment Agreement does not required him to remit revenues Fleischer received to FWP;

-- There was lack of indication that either MassMutual or LPLwere updated that Mr. Fleischer was employed by FWP