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

Bell Capital Management Inc. v. Commissioner
T.C. Memo. 2021-74

Bell Capital Management, Inc. v. Commissioner (T.C. Memo. 2021-74) On June 14, 2021, the Tax Court issued a Memorandum Opinion in the case of Bell Capital Management, Inc.v. Commissioner (T.C. Memo. 2021-74). The primary issues presented in Bell Capital Management, Inc. were whether (1) petitioner is collaterally estopped from denying that it was responsible for paying the employment taxes; (2) whether the IRS properly determined that Ron H. Bell should be legally classified as petitioner's employee for all tax periods in issue; (3) whether petitioner is liable for the employment taxes; (4) whether petitioner is liable for fraud penalties; and (5) whether the periods of limitations for assessing and collecting the employment taxes and penalties have expired. Background to Bell Capital Management, Inc. v. Commissioner – Bad Mr. Bell When the petition was filed, the petitioner's principal place of business was in Georgia. The Tax Court took judicial notice of…

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June 21, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Whistleblower 1008416W v. Commissioner
T.C. Memo. 2021-73

On June 9, 2021, the Tax Court issued a Memorandum Opinion in the case of Whistleblower 1008416W v. Commissioner (T.C. Memo. 2021-73). The primary issue presented in Whistleblower 1008416W v. Commissioner was whether the IRS abused its discretion in denying petitioner's claim for a whistleblower award. Background to Whistleblower 1008416W v. Commissioner In June 2010, the petitioner provided whistleblower information about the target taxpayer (target) to an attorney with respondent's Office of Chief Counsel and delivered the information by hand to an IRS special agent. The whistleblower information related to the target's amortization of customer lists and deferral of tax on approximately $500 million of income earned on money market deposit accounts (MMDA).  Three days later, the petitioner submitted a Form 211 (Application for Award for Original Information) to the IRS’s Whistleblower Office (WBO), asserting the amortization and MMDA issues. Four days after that, the WBO sent a letter to the…

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June 21, 2021
International Issues
International Issues / Memorandum Opinions / Tax Opinions

Landrau v. Commissioner
T.C. Memo. 2021-72

On June 8, 2021, the Tax Court issued a Memorandum Opinion in the case of Landrau v. Commissioner (T.C. Memo. 2021-72). The primary issue presented in Landrau was whether the IRS correctly computed their allowable foreign tax credit for 2012. Background to Landrau v. Commissioner During 2014 petitioner-husband received wages of $74,680 for services performed in Puerto Rico for the U.S. Air Force. Petitioner-wife received a pension distribution of $10,380 and U.S. Social Security benefits of $14,698. The petitioners timely filed a joint Federal income tax return reporting the first two items of income as taxable but treating the Social Security benefits as nontaxable. They included with their return Form 1116, Foreign Tax Credit, reporting that they had paid income tax of $11,322 to Puerto Rico, of which they were bona fide residents during 2014. See IRC § 901(b)(2). Litigation ensued, and although the IRS timely filed its brief, the pro…

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June 21, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Lufkin v. Commissioner
T.C. Memo. 2021-71

On June 8, 2021, the Tax Court issued a Memorandum Opinion in the case of Lufkin v. Commissioner (T.C. Memo. 2021-71). The primary issue presented in Lufkin v. Commissioner was whether the pro se petitioner was liable for certain Form 941 liabilities. Background to Lufkin v. Commissioner The IRS assessed the Form 941 liabilities, which arose in connection with the petitioner's law practice, for the periods at issue in December 1998 and June 1999, respectively. After the petitioner underwent multiple chapter 7 bankruptcy proceedings between 2000 and 2011, the IRS issued petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (CDP notice) in October 2014, in an effort to collect the Form 941 liabilities. In response to the CDP notice the petitioner timely submitted Form 12153 (Request for a Collection Due Process or Equivalent Hearing). The petitioner asserted that he was not liable for the…

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June 21, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Verghese v. Commissioner
T.C. Memo. 2021-70

On June 7, 2021, the Tax Court issued a Memorandum Opinion in the case of Verghese v. Commissioner (T.C. Memo. 2021-70). The primary issues presented in Verghese v. Commissioner were (1) whether, under IRC § 6404(a) the petitioners are entitled to abatement on the basis of principles of fairness, and (2) whether under IRC § 6404(e) the IRS engaged in ministerial or managerial acts that constituted unreasonable delay for which the petitioners’ abatement request should be granted. Held: Not so much. Background to Verghese v. Commissioner The petitioners filed joint returns for tax years 1997 and 1998, on which they claimed charitable contribution deductions from their investments in the certain partnerships. As of June 30, 2000, the IRS had commenced civil audits of the returns of all three of the petitioners’ partnerships.  The petitioners did not file a cash bond, nor does it appear that they were informed that they…

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June 21, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Holliday v. Commissioner
T.C. Memo. 2021-69

On June 7, 2021, the Tax Court issued a Memorandum Opinion in the case of Holliday v. Commissioner (T.C. Memo. 2021-69). The primary issue presented in Holliday v. Commissioner was whether settlement proceeds petitioner received in 2014 constitute taxable income. Background to Holliday v. Commissioner Two lawsuits are central to this case. The first is petitioner's divorce proceeding, in which she was represented by J. Beverly and his law firm (divorce attorney and malpractice defendants, respectively). The second is petitioner's malpractice lawsuit against her divorce attorney, in which she was represented by Lance Kassab (malpractice attorney). In March 2010, the petitioner's former spouse filed for divorce. As part of the divorce proceedings, the petitioner and her divorce attorney participated in mediation. It resulted in petitioner's executing a mediated settlement agreement. Petitioner objected to the mediated settlement agreement, but her objections were not sustained by the divorce court. In April 2012,…

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June 21, 2021
Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

ES NPA HOLDING LLC v. Commissioner
T.C. Memo. 2021-68

On June 3, 2021, the Tax Court issued a Memorandum Opinion in the case of ES NPA HOLDING LLC v. Commissioner (T.C. Memo. 2021-68). The primary issue presented in ES NPA HOLDING LLC v. Commissioner was whether the adjustment to ES NPA's 2011 ordinary income originates at the level of another limited liability company, IDS, in which the petitioner held an interest, which is to say that the adjustment is a partnership item of IDS and not a partnership item of the petitioner. Background to ES NPA HOLDING LLC v. Commissioner In 2011 Joshua Landy owned all the shares in NPA, Inc., an S corporation. On September 12, 2011, NPA Holding was formed, and on September 27, 2011, NPA, Inc., formed two LLCs: IDS and NPA, LLC. On October 14, 2011, NPA Holding exercised a call option granted by NPA, Inc., and pursuant thereto acquired all of the IDS class C units. …

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June 21, 2021