1. Sean Moon is president, secretary, treasurer, sole director, and sole shareholder of Streetz, an S

corporation real estate company. He manages all aspects of the company's operations, and he is the

only person working at the company that holds a real estate broker's license. Sean works 12-hour

days and takes few days off. Streetz's gross receipts and net income figures were reported as

follows.

Year

Gross Receipts

Net Income

2015

$376,453

$122,605

2016

405,244

161,660

2017

518,189

231,454

2. Sean and his wife, Kim, filed joint Federal income tax returns, but they did not report any wages

or salaries on line 7 of their returns. During 2017, Moon transferred $240,000 from the S

corporation to his personal account.

3. You are an expert witness for the IRS. Identify the items you would present to the U.S. Tax Court

with respect to the amount of Moon's compensation that is subject to employment taxes and any

other taxes due for the year 2017 (especially the Medicare net investment income tax).

Hint:

This

is a reasonable compensation issue.

4. The format of your answer should be as follows:

Issue:

Facts:

Authority

Analysis and discussion

List of Aids: Sean McAlary, Ltd, Inc., TC Summary Opinion 2013-62.