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
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Shepherd v. Commissioner
T.C. Memo. 2020-45

On April 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Shepherd v. Commissioner (T.C. Memo. 2020-45). The issue properly before the court in Shepherd v. Commissioner was whether Appeals correctly determined that the petitioner was barred from challenging his liability for the TFRPs even though he did not receive a notice of deficiency, because he had a prior opportunity to challenge his liability but failed to do so during his first administrative hearing on the notice of intent to levy. Background to TFRP in Shepherd v. Commissioner Although petitioner’s company filed Forms 941 (Employer’s Quarterly Federal Tax Return), it failed to remit the full amount of employment taxes due with those returns. Exam issued a Letter 1153 (TFRP Letter) to petitioner, a “responsible person,” after receiving supervisory approval to assess the TFRP against the petitioner. The Letter 1153 provided notice that the petitioner could request…

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April 13, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Pinkston v. Commissioner
T.C. Memo. 2020-44

On April 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Pinkston v. Commissioner (T.C. Memo. 2020-44). The issue properly before the court in Pinkston v. Commissioner was whether the IRS appropriately “recaptured” depreciation deductions that the petitioners claimed on rental properties prior to the years at issue, as to which years the limitation period had expired. Background to Pinkston v. Commissioner In 2003 and 2010, the petitioners acquired two rental properties in Hawaii (a beach-front home and a condo), for which they claimed depreciation deductions under the Modified Accelerated Cost Recovery System (MACRS) established by IRC § 168. The IRS examined the petitioners’ returns and adjusted the depreciation deductions downward by reallocating a larger portion of petitioners’ cost basis to non-depreciable land (for the property purchased in 2003) and by reclassifying most of the petitioners cost basis into a MACRS class with a much longer…

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April 13, 2020
Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Kansky v. Commissioner
T.C. Memo. 2020-43

On April 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Kansky v. Commissioner (T.C. Memo. 2020-43). The issue properly before the court in Kansky v. Commissioner was whether the Whistleblower Office of the IRS abused its discretion in rejecting the petitioner’s claim on the basis that it was speculative and did not provide specific or credible information regarding a violation of the Federal tax laws. Background to the Claim in Kansky v. Commissioner In May 2018, the petitioner filed a Form 211 (Application for Award for Original Information) with the Whistleblower Office of the IRS (WBO) identifying two target taxpayers: (1) a corporation that connects workers with medical offices to provide temporary services and (2) the president of that corporation. Petitioner asserted that the target taxpayers had misclassified their employees as independent contractors and had erroneously sent them Forms 1099-MISC, Miscellaneous Income. Petitioner indicated that…

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April 13, 2020