Joseph and Louise Speizio v. Comm., TCM 2024-64
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
It’s Not About the NOL (Joseph and Louise Speizio v. Comm., TCM 2024-64)
Joseph and Louise Speizio claimed expenses in 2017 that generated a net operating loss based on pension liabilities acquired in a business taken over by the taxpayer but not paid until 2018 or later. The taxpayer took over a sanitation business that had outstanding pension liabilities due to the local union. Through litigation and bankruptcy, the taxpayer became liable for the debt and was later relieved of the liability. In a bankruptcy proceeding, the pension liabilities were eventually settled and paid in 2019.
In general, §404(a)(1)(A) allows a deduction for a pension expense only if paid by the end of the taxable year. However, §404(a)(6) provides that a payment will be deemed made on the last day of the preceding year when (1) the payment is on account of the preceding year, and (2) the payment is made no later than the extended due date for filing a return for the preceding year.
The court disallowed the deduction. Without the deduction for the pension liabilities, the taxpayers did not have a net operating loss. It really was not about the NOL, but see the video It’s Not About the Nail (very funny).