Adler v. Commissioner (T.C. Memo. 2021-56)

On May 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Adler v. Commissioner (T.C. Memo. 2021-56). The primary issue presented in Adler was whether the petitioner was entitled to deduct business expenses for 2016 and 2017 (the years in issue). In Short The petitioner was a consultant for an entertainment company in Los Angeles.  He incurred business-related expenses, including travel expenses, and he reported these expenses on his Schedule C in 2017.  The trouble was that the entertainment company was in the habit of reimbursing the petitioner for his expenses, and the CFO testified that this was the company’s practice. The petitioner was not able to substantiate his travel expenses, and the Tax Court could not apply the Cohan Rule, as travel expenses fall under the IRC § 274 carveout of Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).  See Boyd v. Commissioner,…

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Bailey v. Commissioner (T.C. Memo. 2021-55)

On May 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Bailey v. Commissioner (T.C. Memo. 2021-55). The primary issue presented in Bailey was whether the petitioners should (or could) be relieved from the stipulation of facts that they voluntarily entered into with the IRS before trial. Background The petitioners’ personal income tax returns (and a related corporate return) were audited for a number of years (from 2008-2012), and the IRS made adjustments to all periods, especially with respect to the petitioners’ claimed deductions.  The petitioners filed petitions with respect to the two notices of deficiency, the cases were consolidated, and they were set for trial. In November 2019, the parties filed a stipulation of settled issues. The stipulation noted that two of the substantive issues had been resolved and that the remaining issues involve primarily substantiation of business expenses and itemized deductions, additions to tax,…

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Jenkins v. Commissioner (T.C. Memo. 2021-54)

On May 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Jenkins v. Commissioner (T.C. Memo. 2021-54). The primary issues presented in Jenkins was whether the IRS has proven fraud, and the amount of unreported income for the consolidated petitioners. Just a Head’s Up This opinion by Judge Holmes contains a “waddle” of penguins that speak in French, a forged Kerguelenois diplomatic passport, and a simile comparing the IRS to a pod of hungry leopard seals circling the aforementioned waddle.  The opinion is quite long (not Estate of Jackson v. Commissioner-long), but for Judge Holmes, there is a bit more chaff than normal.  We will cut through it to the true tax issues, after a quick trip to Desolation Island. Kerguelen’s Waddle How ordinary Federal judges would describe Kerguelen Island:[1] Kerguelen, a subantarctic island of volcanic origin, is located in the South Indian Ocean, approximately 3,300…

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