#14: Millions & Mistresses, A Tale of S-Corp Rental Gone Wrong

Real Estate Is Taxing

When Renting Real Estate to your S-Corp leads to a deficiency $500,000+

The Gregory and Laura Schnackel Tax Court Saga: A Tale of Extravagance and Deception

Taxnotes Case Review:
https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/no-deductions-28000-month-condo-no-business-purpose/7kjhl

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In this episode, we delve into the dramatic and intriguing tax court case of Gregory and Laura Shackle as detailed in Tax Court Memo 2024-76. Gregory, the owner of an engineering and design S-Corp, purchases a lavish $3 million New York City condo, furnishes it with $300,000 worth of high-end items, and tries to pass off much of these costs as business expenses. Amidst extramarital affairs and questionable spending, Gregory fails to maintain proper records, resulting in significant penalties and tax deficiencies. Laura, with minimal involvement in the business, successfully applies for innocent spouse relief, while the courts determine the substantial amounts owed. This tale is a striking example of the potential fallout from attempting to misuse business write-offs, and the responsibilities that come with tax reporting, even when using a tax professional. The episode concludes with the fallout from Gregory and Laura’s divorce and the consequential financial and personal unraveling.

00:00 Introduction to the Case
00:27 Background of Gregory and Laura
00:38 Gregory's Business Ventures
02:57 The New York Condo Purchase
05:32 Questionable Business Practices
09:02 Luxury Furnishings and Personal Use
12:49 The Range Rover Purchase
15:41 The Affair and Financial Misconduct
17:56 Innocent Spouse Relief
19:07 IRS Penalties and Court Rulings
25:46 Lessons and Final Thoughts