Penalties Under the Code
Full Tax Court Opinions / Penalties Under the Code / Tax Opinions

Grajales v. Commissioner (156 T.C. No. 3)

On January 25, 2021, the Tax Court issued its opinion in Grajales v. Commissioner, 156 T.C. No. 3. The underlying issue presented in Grajales was whether prior written supervisory approval under IRC § 6751(b)(1) was required to assert the 10% IRC § 72(t) “exaction” for early distributions from a qualified retirement plan. Labels are for Cans Abraham Lincoln is credited for saying “How many legs does a dog have if you call his tail a leg? Four. Saying that a tail is a leg doesn't make it a leg.”  Similarly, calling a tax a penalty or a penalty a tax does not make it so.  We have seen the IRS argue in previous cases argue that the IRC § 6751(b)(1) approval requirement does not apply certain penalties, because even though it’s called a “penalty” it is collected like a tax.  Circle back to Laidlaw’s Harley Davidson and Chadwick to name…

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January 25, 2021
International Issues
Full Tax Court Opinions / Income Tax Issues / International Issues / Tax Opinions

Adams Challenge UK Limited v. Commissioner
156 T.C. No. 3

On January 25, 2021, the Tax Court issued its opinion in Adams Challenge UK Limited v. Commissioner (156 T.C. No. 3). The underlying issue presented in Adams Challenge UK Limited v. Commissioner was whether the IRS erred in disallowing the petitioner’s deductions and credits and whether the IRS’s action violated the business profits and the nondiscrimination articles of the bilateral income tax treaty between the United States and the U.K. Background to Adams Challenge UK Limited v. Commissioner The petitioner is a U.K. corporation whose sole income-producing asset for the years at issue was a multipurpose support vessel. The vessel was chartered by a U.S. firm to assist in decommissioning oil and gas wells and removing debris on portions of the U.S. Outer Continental Shelf in the Gulf of Mexico. During 2009 and 2010 P derived from the charter gross income of about $32 million, which was effectively connected with the…

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January 25, 2021
Business Related Issues
Tax Opinions / Business Related Issues / Memorandum Opinions

Costello v. Commissioner
T.C. Memo. 2021-9

On January 25, 2021, the Tax Court issued a Memorandum Opinion in the case of Costello v. Commissioner (T.C. Memo. 2021-9). The primary issues presented in Costello v. Commissioner was whether the would-be-chicken-farmers (petitioners) were entitled to deductions for losses from farming activities, or whether the losses were startup expenses for which IRC § 195 prohibits a current deduction. Author’s Note Schadënfreude is German for happiness at the misfortune of others.  The Greek ἐπιχαιρεκακία is a similar thought, as is delectatio morosa in Latin.  Call it what you want, the utter ineptitude of petitioner-wife’s farming “activities” is funny as hell. I like to garden. I am not a farmer. The petitioner-wife is not a farmer either. For at least seven years, and I quote, “her serial attempts at raising chickens, growing vegetables, and raising cattle were all unsuccessful.” This woman was a livestock murderer from all accounts. Did she forget…

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January 25, 2021