Employer's losses on sale of employees' residences are deductible

In Amdahl Corporation v. Commissioner, a case of rst impression, the Tax Court recently ruled that payments a corporation made to relocating employees for losses on the sale of their residences were deductible business expenses. The IRS had argued that the employees had sold the residences to their employer, who had capital losses on their resale.

Sec. 1211(a) allows corporations to deduct capital losses only to the extent of capital gains; whereas Sec. 162(a) business expenses are fully deductible when paid or incurred. Case law has established that a sale occurs for Federal tax purposes when the benefits and burdens of ownership are transferred. The following factors are relevant: whether legal title passes, how the parties treat the transaction, whether the contract creates a present obligation to exchange a completed deed for payments, whether the purchaser has the right of possession, which party pays the property taxes, which party has the risk of loss, and which party receives the profits from the property. Rev. Rul. 82-204, 1982-2 C.B. 192 held that residences sold by employees to their employer...