Law School Case Briefs
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Joseph Radtke, SC v. United States
District Court, E.D. Wisconsin (1989) | 712 F. Supp. 143; 63 A.F.T.R.2d (RIA) 1469; 1989 U.S. Dist. LEXIS 5408; 1989 WL 50909
TL;DR: A law firm, structured as an S-corporation, paid its sole attorney-employee only in "dividends" with a $0 salary. The court recharacterized the payments as wages subject to employment taxes, applying the substance-over-form doctrine.
Legal Significance: Establishes that courts will apply the substance-over-form doctrine to recharacterize "dividends" as "wages" for employment tax purposes when a shareholder-employee of a closely held corporation performs substantial services without receiving a reasonable salary.