Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Battat v. Commissioner
T.C. Memo. 2021-57

On May 11, 2021, the Tax Court issued a Memorandum Opinion in the case of Battat v. Commissioner (T.C. Memo. 2021-57). The primary issue presented in Battat v. Commissioner was whether the IRS received prior supervisory approval of an initial determination of a penalty under IRC § 6751(b)(1). Same Issue, New Wrinkle in Battat v. Commissioner The IRC § 6751(b)(1) prior supervisory approval rule has been litigated with substantial regularity over the last year and a half.  Some smart guy (your fearless editor) even wrote a great article on it in Tax Notes Today, if you care to check it out.  The discrete question in Battat was whether the Form 4549 (Income Tax Examination Changes), more commonly known as a revenue agent report (RAR), that the petitioner received with a Letter 4121 (Agreed Examination Report Transmittal), was an “initial determination” by an “individual” to impose a penalty for purposes of…

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May 11, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

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 v. Commissioner was whether the petitioner was entitled to deduct business expenses for 2016 and 2017 (the years in issue). Adler v. Commissioner 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.…

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May 10, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

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 v. Commissioner 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 to Bailey v. Commissioner 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…

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May 10, 2021
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

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 v. Commissioner was whether the IRS has proven fraud, and the amount of unreported income for the consolidated petitioners. Just a Head’s Up re: Jenkins v. Commissioner 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…

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May 10, 2021
Read more about the article Tikar Inc. v. Commissioner <section> T.C. Memo. 2021-53 </section>
Charitable Issues / Memorandum Opinions / Tax Opinions

Tikar Inc. v. Commissioner
T.C. Memo. 2021-53

On May 6, 2021, the Tax Court issued a Memorandum Opinion in the case of Tikar Inc. v. Commissioner (T.C. Memo. 2021-53). The primary issue presented in Tikar Inc. v. Commissioner was whether Tikar (organized to present exposition of African art owned by a corporation and to promote African art, generally) was operated exclusively for one or more exempt purposes pursuant to IRC § 501(c)(3). The Blessed Rains Down in Africa in Tikar Inc. v. Commissioner In 1993, Dr. Seghers, developed a keen interest in the culture of the Tikar tribe after a short stay in Cameroon, in particular with Tikar artifacts, especially bronze ones.  He imported a number of such artifacts, and others were shipped from Cameroon to Belgium (purportedly) for the good doctor.  Seghers engaged a Cameroonian attorney, but the attorney he chose took a liking to the artifacts and refused to part with them.  In 2005, Seghers “reclaimed”…

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May 6, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Berry v. Commissioner
T.C. Memo. 2021-52

On May 5, 2021, the Tax Court issued a Memorandum Opinion in the case of Berry v. Commissioner (T.C. Memo. 2021-52). The primary issues presented in Berry v. Commissioner were whether certain amounts characterized as gross receipts of a company should actually be other income to the petitioners, whether the company is entitled to deduct racecar expenses, and whether or not the petitioners substantiated COGS or a depreciation deduction under IRC § 167(a). Background to Berry v. Commissioner You may remember our friends, the Berrys, from Berry v. Commissioner, T.C. Memo. 2021-42.  As you will recall, in 2013, Ronald Berry and his son, Andrew, owned and operated Phoenix Construction & Remodeling, Inc., which built houses and developed real estate.  Andrew, however, was a racecar driver at heart.  He wanted to go fast.  In 2014 and 2015 he earned $8,700 and $1,200, respectively, from winning drag racing tournaments. He assigned these winnings…

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May 5, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Jacobs v. Commissioner
T.C. Memo. 2021-51

On May 5, 2021, the Tax Court issued a Memorandum Opinion in the case of Jacobs v. Commissioner (T.C. Memo. 2021-51). The primary issue presented in Jacobs v. Commissioner was whether the petitioner was entitled to reasonable litigation and administrative costs pursuant to IRC § 7430 and Tax Court Rule 231. A Lawyer, Scholar, and Author in Jacobs v. Commissioner The petitioner was a trial lawyer with the Department of Justice for 20 years before he became a full-time professor at American University.  During 2014 and 2015, the petitioner lived in Washington, D.C., and also taught as an adjunct at George Washington University.  For three months during the summer of 2014, the petitioner was a “Visiting Scholar” at UCLA (a non-compensated position).  During this time, the petitioner researched and drafted a book on the 2010 BP oil spill, which was published in 2016. Having gotten a taste for the West…

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May 5, 2021