Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

Chan v. Commissioner
T.C. Memo. 2021-136

On December 1, 2021, the Tax Court issued a Memorandum Opinion in the case of Chan v. Commissioner (T.C. Memo. 2021-136). The primary issue presented in Chan was whether the entity in question (which filed a Form 2553, Election by a Small Business Corporation, by which it elected to be treated as an S corporation) was an S corporation or a C corporation. Background to Chan v. Commissioner The petitioners operated a restaurant in California by the name of Younique Café Inc. ("YCI"). The restaurant was incorporated in 2010. The petitioner-husband filed articles of incorporation for YCI in August 2010 and subsequently decided to convert it to an S corporation. In March 2011, he filed on YCI’s behalf a Form 2553, electing that the restaurant be treated as an S corporation for Federal income tax purposes. He signed the form as the president of YCI and requested that the conversion…

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April 22, 2022
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

FAB Holdings LLC v. Commissioner
T.C. Memo. 2021-135

On November 30, 2021, the Tax Court issued a Memorandum Opinion in the case of FAB Holdings LLC v. Commissioner (T.C. Memo. 2021-135). The primary issue presented in FAB Holdings was whether the statutory notices of deficiency (SNODs) were timely sent based upon a cockamamy argument that the petitioners’ CPA was a “promoter” because the petitioners paid for his services. Held: The Tax Court was “not persuaded” by such argument. Background to FAB Holdings LLC Frank and Dana Berritto resided in New York during the years at issue, with Dana passing away in 2015. Mr. Berritto worked in the financial industry—specifically, for Merrill Lynch beginning in 2010. The couple hired a CPA firm to to prepare an integrated tax plan (ITP). The ITP included the formation of two entities: a C corporation (FAB) and a partnership (Berritto Enterprises, LLC). FAB was organized and Enterprises was formed in Delaware on November…

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April 21, 2022
Income Tax Issues
Full Tax Court Opinions / Income Tax Issues / Tax Opinions

Coggin v. Commissioner
157 T.C. No. 12

On December 8, 2021, the Tax Court issued its opinion in Coggin v. Commissioner, 157 T.C. No. 12. The primary issue presented in Coggin was whether the Tax Court lacked jurisdiction in a refund suit for years in which the District Court had previously acquired jurisdiction. Background The petitioner filed amended returns for tax years 2001 through 2009, claiming refunds for 2001 through 2007. The IRS rejected the refund requests for 2003, 2004, and 2007. The petitioner subsequently filed a complaint in the U.S. District Court seeking refunds for years 2001-2007. The Government, as defendant, filed a counterclaim against the petitioner seeking to reduce the petitioner’s remaining balances due for years 2002-09 to judgment. The District Court granted summary judgment in favor of the IRS, dismissing the petitioner’s refund claims; however, the District Court retained jurisdiction over the IRS’s counterclaim. As a defense to the counterclaim, the petitioner sought innocent…

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April 20, 2022
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

O’Donnell v. Commissioner
T.C. Memo. 2021-134

On November 30, 2021, the Tax Court issued a Memorandum Opinion in the case of O’Donnell v. Commissioner (T.C. Memo. 2021-134). The primary issue presented in O’Donnell was whether the settlement officer abused his discretion in sustaining the collection action against a taxpayer who had a “blatant disregard for voluntary compliance.” Background to O’Donnell v. Commissioner Let me begin by saying that James O’Donnell is not a paragon of tax compliance. According to Judge Lauber, he “failed to comply with his Federal income tax obligations for a very long time.” For two decades (if not longer) he failed to file returns and failed to pay the tax shown on substitutes for return (SFRs) that the IRS prepared for him, including in 2006, 2010, 2011, 2013, and 2014. The IRS for those years assessed deficiencies, additions to tax, and interest totaling more than $430,000. His outstanding liabilities for all open years…

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April 20, 2022
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Plateau Holdings LLC v. Commissioner
T.C. Memo. 2021-133

On November 30, 2021, the Tax Court issued a Memorandum Opinion in the case of Plateau Holdings LLC v. Commissioner (T.C. Memo. 2021-133). The primary issue presented in Plateau Holdings LLC was whether the 20% accuracy-related penalty applied to the portion of the underpayment not attributable to a valuation misstatement, that is, to the portion of the underpayment resulting from the Tax Court’s conclusion that the petitioner was not entitled to a charitable contribution deduction corresponding to the correct value of the easements. Procedural Background to Plateau Holdings LLC This case involves a charitable contribution deduction claimed by Plateau Holdings, LLC (Plateau), for conservation easements. On its 2012 Federal income tax return Plateau claimed a deduction of $25,449,000 for the donation of the easements. On June 23, 2020, the Tax Court issued an opinion, Plateau Holdings, LLC v. Commissioner (Plateau I), T.C. Memo. 2020-93, disallowing the deduction in full because…

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April 19, 2022
Penalties Under the Code
Full Tax Court Opinions / Penalties Under the Code / Tax Opinions

Sand Investment Co. v. Commissioner
157 T.C. No. 11

On November 23, 2021, the Tax Court issued its opinion in Sand Investment Co. v. Commissioner, 157 T.C. No. 11. The primary issue presented in Sand Investment Co. was whether the IRS obtained prior written supervisory approval pursuant to IRC § 6751(b)(1) insofar as whether the individual who made the initial determination received approval from its immediate supervisor. Held: Yeah…no dice, petitioner. Dueling Determinations The RA’s case and issue manager, Mr. Burris, signed the form on November 20, 2018, and the RA’s new team leader, Mr. Wilson, signed the form on November 23, 2018. The definite decision to assert penalties was communicated to Sand Investment Co. more than two months later, in the Final Partnership Audit Adjustment dated February 8, 2019. The IRS, thus, contends that timely approval of these penalties was secured.[1] The petitioner contends that supervisory approval came too late, and its argument has two essential steps. First,…

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April 19, 2022