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

San Jose Wellness v. Commissioner
156 T.C. No. 4

On February 17, 2021, the Tax Court issued its opinion in San Jose Wellness v. Commissioner (156 T.C. No. 4). The underlying issue presented in San Jose Wellness v. Commissioner was whether the petitioner, a marijuana dispensary, was prohibited from claiming deductions for depreciation and charitable contributions under IRC § 280E. Background to San Jose Wellness v. Commissioner The petitioner operated a medical marijuana dispensary pursuant to California law from 2010 to 2015. It sold marijuana to individuals who held a valid doctor’s recommendation to use the drug. It also sold T-shirts, pipes, and batteries; and it offered acupuncture, chiropractic, and “holistic” services.  (One questions the illegality of this, as well, but here we are.)  The petitioner did not charge a separate fee for membership, acupuncture, chiropractic services, or any other services. In each year at issue, the petitioner had gross receipts of $5 million to nearly $7 million, $3,000 to…

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January 17, 2021
Procedural Issues
Full Tax Court Opinions / Procedural Issues / Tax Opinions

Ramey v. Commissioner
156 T.C. No. 1

On January 14, 2021, the Tax Court issued its opinion in Ramey v. Commissioner (156 T.C. No. 1). The underlying issue presented in Ramey v. Commissioner was whether notice sent to last known address, shared by multiple businesses, and not left with anyone authorized to receive the petitioner’s mail, started the CDP Appeal clock in IRC § 6330(a)(2) and (3). Legal Background to Ramey v. Commissioner The IRS may not make a levy unless the IRS notifies the taxpayer in writing of the right to a hearing before the levy is made. IRC § 6330(a); IRC § 6330(b). The IRS must provide the required notice not less than 30 days before the day of the first levy. IRC § 6330(a)(2). The Code enumerates three acceptable ways of providing the notice. The notice may be (A) given in person; (B) left at the dwelling or usual place of business of such…

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January 14, 2021
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

James v. Commissioner (T.C. Memo. 2021-7)

On January 13, 2021, the Tax Court issued a Memorandum Opinion in the case of James v. Commissioner (T.C. Memo. 2021-7). The issue presented in James v. Commissioner was whether the petitioner was entitled to innocent spouse relief under IRC § 6015(e)(1). A Tangled Marital Web in James v. Commissioner The petitioner was married to her husband from 2003 until 2006. Nevertheless, the petitioner lived with her husband in 2010, when the petitioner went through a serious illness. During that time the petitioner’s husband was primarily responsible for the household’s finances. Although they had been divorced for several years at that point, the petitioner’s husband “worked with his accountant to file a joint Federal income tax return” for 2010.  Trusting her husband, the petitioner did not review the return before signing it. The IRS issued a refund of $11,000, which was deposited into the petitioner’s husband’s bank account. The IRS…

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January 13, 2021
Business Related Issues
Tax Opinions / Business Related Issues / Memorandum Opinions

Filler v. Commissioner
T.C. Memo. 2021-6

On January 13, 2021, the Tax Court issued a Memorandum Opinion in the case of Filler v. Commissioner (T.C. Memo. 2021-6). The issues presented in Filler v. Commissioner were whether the petitioner (1) properly reported $100,000 in income received as capital gain rather than ordinary income; (2) is liable for self-employment tax; (3) is entitled to deduct a net operating loss carryover originating in tax year 2012; and (4) is liable for penalty under IRC § 6662(a). Background to Filler v. Commissioner The petitioner is no idiot. He is, quite literally, a brain surgeon - a board-certified one at that. Nevertheless, he represented himself pro se, and so he might as well be a brain plumber in my estimation…not that there is anything wrong with plumbers, just the pro-se-dingbat-cheapskate-brain-plumber in question. It should come as no surprise the good doctor organized, owned, and/or provided services to at least five corporations…

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January 13, 2021
Business Related Issues
Tax Opinions / Business Related Issues / Memorandum Opinions

Hohl et al. v. Commissioner
T.C. Memo. 2021-5

On January 13, 2021, the Tax Court issued a Memorandum Opinion in the case of Hohl et al. v. Commissioner (T.C. Memo. 2021-5). The issue presented in Hohl et al. v. Commissioner was whether failure to repay loans provided to a partnership by a partner, which the partnership treated as contributions upon dissolution, resulted in cancellation of indebtedness income. Background to Hohl et al. v. Commissioner Hohl, Blake, and Bowles were partners in a partnership from which they reported guaranteed payments. ¼ partner, Rodriguez, regularly infused money into the partnership, which the partnership and the partners generally treated as loans. When the partnership ceased operation in 2012, however, the partners treated Rodriguez’s loans as contributions, and the partners were not called on to repay their respective shares of the loans.  The IRS issued notices of deficiency to the partners determining COD income for 2012, on account of the funds provided…

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January 13, 2021
Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Boettcher v. Commissioner
T.C. Memo. 2021-4

On January 12, 2021, the Tax Court issued a Memorandum Opinion in the case of Boettcher v. Commissioner (T.C. Memo. 2021-3). The issue presented in Boettcher v. Commissioner was whether the settlement officer failed to properly consider the installment agreement requested by the petitioners. Background to Boettcher v. Commissioner Petitioner-husband was a news-correspondent-turned-college-professor and petitioner-wife was an attorney (likely not a tax attorney, as you’ll see).  The petitioners delinquently filed their tax returns, but, apparently, they accurately reported the amount of tax due on each return.  The trouble was, however, the petitioners’ income tax withholdings covered only a fraction of their reported liabilities.  The IRS assessed a failure to file penalty under IRC § 6651(a)(1), failure to timely pay tax penalty under IRC § 6651(a)(2) and a failure to timely pay estimated tax under IRC § 6654. The IRS issued the petitioners a notice of intent to levy for the…

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January 12, 2021
Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Kennedy v. Commissioner (T.C. Memo. 2021-3)

On January 12, 2021, the Tax Court issued a Memorandum Opinion in the case of Kennedy v. Commissioner (T.C. Memo. 2021-3). The issue presented in Kelley was whether the IRS’s whistleblower office abused its discretion in denying the petitioner’s claims. Background The petitioner claimed that three subsidiaries of a taxpayer owed a middling $150m in unpaid excise taxes, penalties, and interest to Uncle Sam.  The IRS Whistleblower Office (WBO) reviewed the claim, and to everyone’s surprise did not laugh it off and put it in the vertical filing cabinet next to browning apple cores and soggy cups-of-noodles.  Instead, the WBO forwarded it onto the Large Business & International (LB&I) division. The claim involved tax-exempt voluntary employees’ beneficiary association (VEBA) trusts, and that LB&I CTM did not have anyone who could evaluate excise tax claims involving a VEBA; thus, the claim was transferred to the Exempt Organizations (TEGE-EO) division.  However, because…

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January 12, 2021