Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Max v. Commissioner
T.C. Memo. 2021-37

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Max v. Commissioner (T.C. Memo. 2021-37). The primary issue presented in Max was whether drawing fashion sketches qualify as “qualified research” under IRC § 41. General Observations in Max v. Commissioner Who knew Judge Buch was such a fashionista? If you don't believe me, read the first 21 pages of the opinion.  The editor of Teen Vogue better watch out.  Judge Buch knows his stuff about garmentry and tax, in (seemingly) equal measure. His praise of the petitioner’s clothing is effusive.  His praise of his tax strategies, not so much. The Whole Nine Yards – Product Development First comes the concept.  Then comes the “mood board.” Then comes the design concept and sketch. Then comes the patternmakers and a “blueprint” of the garment’s components.  Then comes the pattern cutting. Then comes the first sample. Then comes…

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March 29, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Crandall v. Commissioner
T.C. Memo. 2021-39

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Crandall v. Commissioner (T.C. Memo. 2021-39). The primary issue presented in Crandall v. Commissioner was whether the parties’ closing agreement precluded the determined deficiency and penalty. Background to Determination in Crandall v. Commissioner During taxable years 2003 through 2011 the petitioners received foreign-source pension income, interest income, and ordinary dividends. For each of those years they paid Italian income tax.  For none of those years they reported said income to the U.S. government.  The petitioners entered into the IRS’s Offshore Voluntary Disclosure Program (OVDP) in 2012. The petitioners included with their written submission a Form 1040X (Amended U.S. Individual Income Tax Return) for each of those years. The petitioners also submitted nine separate check payments covering additional tax and interest for each amended return year.  The IRS reviewed the OVDP filings, but it did not…

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March 29, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Purple Heart Patient Center Inc. v. Commissioner
T.C. Memo. 2021-38

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Purple Heart Patient Center Inc. v. Commissioner (T.C. Memo. 2021-38). The primary issues presented in Purple Heart Patient Center Inc. v. Commissioner were whether the petitioner (1) was entitled to offset its gross receipts with any cost of goods sold (COGS), (2) underreported its gross income, and (3) is liable for the accuracy-related penalty pursuant to IRC § 6662(a). Background to Purple Heart Patient Center Inc. v. Commissioner Purple Heart is a California nonprofit mutual benefit corporation with members, rather than shareholders, which is treated as a C corporation for Federal tax purposes. Keith Stephenson organized Purple Heart in 2006 and obtained a license from the City of Oakland to operate a medical cannabis retail dispensary under California law. During the years in issue, he served as Purple Heart’s sole director and received wages that he reported…

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March 29, 2021