Pierce Gierloff
Fall 2020
Research Assignment #3
FACTS:
In 2018, Lightspeed Corp. a C-corp wholly owned by Mark Knolls the active CEO was paid a
salary of $200,000 as well as was reimbursed $25,000 for business-related travel during the
year. Upon audit of Lightspeed Corp, the IRS disallowed the expense amount of $25,000
pointing to a lack of documentation to allow for travel expenses. Further, the IRS is categorizing
the amount as a constructive dividend thus making the amount includable in gross income and
taxable to Mark’s personal return. Lightspeed Corp. properly accounted for travel expenses,
however, are aware that they did not have documentation to support the claim of $25,000 in
travel expense.
ISSUES:
When considering the Lightspeed Corp. position, and the IRS agent’s claim to recategorize
travel deduction as a constructive dividend to Mark. Tax law sets forth very specific criteria that
must be met to qualify travel and entertainment as deductible expenses in the corporate return.
The case looks at Mark’s ability to not include the reimbursement of expense in his personal
