Business Related Issues
Tax Opinions / Business Related Issues / Memorandum Opinions

Bridges v. Commissioner
T.C. Memo. 2020-51

On April 27, 2020, the Tax Court issued a Memorandum Opinion in the case of Bridges v. Commissioner (T.C. Memo. 2020-51). The issue before the court in Bridges v. Commissioner was whether the IRS appropriately relied on IRC § 6231(g)(2) in determining that TEFRA procedures did not apply to the petitioner’s LLC. TEFRA’s Application to Partnerships Appearing “Small” IRC § 6231(a)(1)(A) generally applies the TEFRA provisions to any entity that is required to file a partnership return. Under IRC § 6231(a)(1)(B)(i), however, TEFRA provisions do not apply to small partnerships, which include any partnership having 10 or fewer partners each of whom is an individual (other than a nonresident alien), a C corporation, or an estate of a deceased partner. TEFRA provisions do apply, however, if any partner in the partnership is a “pass-thru partner.” Treas. Reg. § 301.6231(a)(1)-1(a)(2). A “pass-thru partner” is a “partnership, estate, trust, S corporation, nominee,…

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April 27, 2020
Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

Collins v. Commissioner
T.C. Memo. 2020-50

On April 23, 2020, the Tax Court issued a Memorandum Opinion in the case of Collins v. Commissioner (T.C. Memo. 2020-50). The issues before the court in Collins v. Commissioner were (1) whether petitioners were entitled to numerous categories of deductions and whether they provided substantiation to prove entitlement; (2) whether the petitioners are liable for additions to tax for failing to timely file their returns; and whether petitioner-husband is liable for the civil fraud penalty of IRC § 6663(a). Intro Note to Collins v. Commissioner There is a lot packed into Judge Ashford’s 57-page opinion. Ultimately, the court found for the IRS on every issue, including the civil fraud penalty, but it was not without substantial work that Judge Ashford reached his conclusions. The arguments on the part of the petitioners are thoroughly impressive considering that they represented themselves. They were not frivolous, and they certainly made the IRS…

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April 23, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Etoty v. Commissioner
T.C. Memo. 2020-49

On April 20, 2020, the Tax Court issued a Memorandum Opinion in the case of Etoty v. Commissioner (T.C. Memo. 2020-49). The issue before the court in Etoty v. Commissioner was whether the levy on the petitioner’s New York State tax refund should not [sic] be sustained. A Lesson in Etoty v. Commissioner to Judge Lauber on When “Less is More” Should be Ignored Petitioner filed a timely Federal income tax return for 2008. Because of insufficient withholding, her return showed a balance due, which she failed to pay. Ugh, another easy CDP case to summarize. I’m on my fifth one this evening. Then Judge Lauber just drops the following sentence into the opinion without another thought: “Petitioner was incarcerated from 2009-2015; upon her release her poor health prevented her from resuming her previous work as a docketing clerk.” Wait. What? Judge Lauber packs so much into that sentence, and…

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April 20, 2020
Read more about the article Hewitt v. Commissioner <section> T.C. Memo. 2020-89 </section>
Tax Opinions / Charitable Issues / Memorandum Opinions

Hewitt v. Commissioner
T.C. Memo. 2020-89

On June 17, 2020, the Tax Court issued a Memorandum Opinion in the case of Hewitt v. Commissioner (T.C. Memo. 2020-89). The primary issue before the court in Hewitt v. Commissioner was whether the petitioners are entitled to carryover of the charitable contribution deduction for the donation of a conservation easement, which, not unsurprisingly, depends on whether the conservation easement satisfies the perpetuity requirement in IRC § 170(h)(5) and accompanying Treasury Regulations. Background to Hewitt v. Commissioner In 2012, the petitioner-husband (PH) granted a conservation easement over 257 acres of his family farm in Alabama. Prior to granting the easement, PH consulted with an accounting firm that PH believed was “well respected in the tax community” and possessed significant “experience with the donation of conservation easements.” PH also met with the CEO of a nature conservancy, which was a qualified organization under IRC § 170(h)(3). The conservancy drafted the deed…

3 Comments
April 17, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Williams v. Commissioner
T.C. Memo. 2020-48

On April 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Williams v. Commissioner (T.C. Memo. 2020-48). The primary issue before the court in Williams v. Commissioner was whether the petitioners were entitled to deductions on Schedule C (Profit or Loss from Business) for the expenses of the petitioner-husband’s new business venture as he grew it and prior to the business’ actual operation. The Basic Nature of Deductions in Williams v. Commissioner As a starting point, taxpayers generally bear the burden of proving that they have met all requirements to be entitled to any deductions claimed. See Tax Court Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers must maintain sufficient records to enable the IRS to determine their correct tax liability. IRC § 6001. The determination of whether an expenditure satisfies…

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April 14, 2020
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Patrick’s Payroll Services Inc. v. Commissioner
T.C. Memo. 2020-47

On April 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Patrick's Payroll Services Inc. v. Commissioner (T.C. Memo. 2020-47). The issue properly before the court in Patrick's Payroll Services Inc. v. Commissioner was whether the petitioner is barred from challenging its underlying liabilities at trial. Background to Patrick's Payroll Services Inc. v. Commissioner The petitioner was an employee leasing company providing payroll services in 2010 and 2011 with one client, a private security company for whom the owner of the petitioner worked as a security guard. The petitioner, however, treated the security company’s workers “as its own” in all respects, except for one minor respect, with which the IRS took issue – it failed to file the required Federal employment tax returns (Form 940 and Form 941) and, likewise, did not pay over any Federal employment taxes. Like any good payroll company would do, the petitioner…

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April 14, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Hakkak v. Commissioner
T.C. Memo. 2020-46

On April 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Hakkak v. Commissioner (T.C. Memo. 2020-45). The issue properly before the court in Hakkak v. Commissioner was whether petitioners are entitled to treat as nonpassive certain rental real estate losses they previously treated as passive under IRC § 469 on their Schedules E (Supplemental Income and Loss) for the years at issue. The 2011 and 2012 Returns in Hakkak v. Commissioner The petitioners filed a 2011 joint return timely. The return reported (1) “W-2” wages of $100,000 for petitioner-husband (PH) from his law firm, a wholly owned corporation; (2) a business loss of $5,500 (on Schedule C); and (3) net income from rental real estate of $135,000 (on a Schedule E and a Form 8582 (Passive Activity Loss)). PH also reported gross receipts and expenses attributable to PH’s non-personal injury litigation fees, which expenses were…

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April 13, 2020