On March 24, 2021, the Tax Court issued a Memorandum Opinion in the case of Martin v. Commissioner (T.C. Memo. 2021-35). The primary issues presented in Martin v. Commissioner were whether the IRS abused its discretion in disallowing substantial (old and large) deductions and whether the petitioners were liable for penalties for filing (very) late and for being (very) negligent and for (very) substantially understating their liabilities. Background to NOLs in Martin v. Commissioner The petitioner-husband was a racecar driver and mechanic.  His racing team lost $1.7 million when a sponsor “fell through.”  This loss drove (Judge Holmes strikes again) the petitioners into Chapter 7 bankruptcy.  They were discharged in the late 1990s, but the petitioners “remembered” these large NOLs and carried them into the years at issue (2009 and 2010). The Returns The petitioners disagree over who prepared their tax returns for the years at issue. Petitioner-husband claims that…