Yahoo Finance Are There Different Meanings of ‘Income’ When It Comes to Your Tax Code?
Making its way up to the Supreme Court, Moore v. United States is a case that could potentially upend the current federal tax code. Business owners, educators and lawmakers are keeping a close eye on this case as it hits the highest court in the country.
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So what is this case, and why is it significant to tax payers today?
Moore v. United States
American couple Charles and Kathleen Moore are suing the United States government, stating that their income, earned from an overseas company that they invested in, should not be taxed.
Because they reinvested their shares in the company based out of India, they did not physically see this money and did not receive the income in a traditional way — they were given stock options.
“[The Moores are] arguing they cannot owe a tax on an investment they watched grow from afar — an investment in a company based in India — because they never actually received ‘income’,” said Tax Policy Center in an article.
If the Moores were to win the case, this could potentially open the floodgates for future lawsuits that could poke holes in our current tax code.
What This Could Mean For You
The Moore v. United States case would have the most impact on business owners, high-earners and small businesses alike.
“In Moore, the government essentially argues that [no] partnership income would be taxable, which is hard on federal revenues but easier on small businesses,” said Professor Sloan Speck from University of Colorado, Boulder in an article. “Another possibility, however, is that these partnerships could become taxable like corporations, where there would be two levels of tax paid by the partnership and then the partners.”
The main changes that may happen will be gradual, not instantaneous. As of now, it is uncertain who will be primarily affected — but Speck says there could be a shift to stricter taxation on middle-income earners, moving away taxation on the upper class.
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“Even if the decision itself is not destabilizing, it will affect what Congress and the Treasury Department do because they know they will need to defend rules on [the basis of the Moore’s case] going forward,” Speck said.
This article originally appeared on GOBankingRates.com: Are There Different Meanings of ‘Income’ When It Comes to Your Tax Code?
