Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Peak v. Commissioner
T.C. Memo. 2021-128

On November 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Peak v. Commissioner (T.C. Memo. 2021-128). The primary issue presented in Peak was whether the petitioner was required to report as taxable income the full amounts of distributions he received from certain pension or retirement plans. Held: You betcha. Background to Peak v. Commissioner The petitioner received distributions from three different pension or retirement plans totaling a smidge over $14,000. The petitioner received Forms 1099-R (Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) for each distribution. Each Form 1099-R reflected that (1) the entire distribution was taxable, (2) the distribution was a “normal distribution,” and (3) Federal income tax was withheld. The petitioner reported pensions and annuities of $14,000 on line 12a of his 2017 return. However, on line 12b, he reported only $1,698 as the “taxable amount” of such distributions.…

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April 1, 2022
Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

Smaldino v. Commissioner
T.C. Memo. 2021-127

On November 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Smaldino v. Commissioner (T.C. Memo. 2021-127). The primary issues presented in Smaldino were whether (1) the proper characterization for gift tax purposes of petitioner’s purported transfer of LLC class B member interests to Mrs. Smaldino followed by her purported retransfer of these same interests to the Dynasty Trust and (2) the fair market value of the LLC class B member interests that petitioner transferred, directly or indirectly, to the Dynasty Trust. Executive Summary of Smaldino v. Commissioner After practicing for a time as a certified public accountant and serving as the treasurer of a computer company, the petitioner Louis “Jumbo” Smaldino,[1] purchased his father’s liquor store business, which he then operated for over 35 years. He eventually expanded his business holdings to include apartment buildings, which he managed as a sole proprietor. By 2008 he…

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March 31, 2022
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Knox v. Commissioner
T.C. Memo. 2021-126

On November 9, 2021, the Tax Court issued a Memorandum Opinion in the case of Knox v. Commissioner (T.C. Memo. 2021-126). The primary issue presented in Knox was whether the petitioners are entitled to a premium tax credit (PTC) and, if they are not, whether they are required to repay advance premium tax credit (APTC) payments of the PTC. Held: Yup and yeppers. Background to Knox v. Commissioner The petitioners were (and perhaps still are) old Hoosiers. I’m not sure this ultimately matters, but Judge Jones thought it important enough to mention, so we faithfully report it here. For 2015 they reported $59,000 of Social Security benefits, of which $17,000 and $15,000 were attributable to lump-sum payments relating to 2013 and 2014, respectively. From March through December 2015, Mrs. Knox enrolled in two separate policies through the health insurance marketplace provided by All Savers Insurance Co. (All Savers). Mrs. Knox…

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March 30, 2022
Income Tax Issues
All Articles / Income Tax Issues / Tax Articles

Avoiding the Net Investment Income Tax with Significant Participation

Uncle Bill's Net Investment Income Tax Quandary Suffice it to say that Uncle Bill had a good year in 2021. As you may remember from this article, Bill and Ethel’s daughter Moon (neé Jaime) was one of the initial investors in a small online book retailer based out of Seattle that was founded by her friend Jeff. When the website took off, Moon made a pretty penny (or 304 billion pretty pennies). Bill invested a small amount of his Emu-based earnings in the company, and the hens came to roost in 2021. As a consequence, Bill’s investment income alone was above $250,000. Growing up on Ray Street in Biddeford (the dodgy end), Bill’s next-door neighbor was a chubby, freckled kid named Larry Baker-Cook. Despite four generations of Bakers running the Main Street Delicatessen, Larry became one of the seven police officers in the town, which was a smidge bigger than…

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March 29, 2022
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Excelsior Aggregates v. Commissioner
T.C. Memo. 2021-125

On November 4, 2021, the Tax Court issued a Memorandum Opinion in the case of Excelsior Aggregates v. Commissioner (T.C. Memo. 2021-125). The primary issue presented in Excelsior Aggregates was whether the IRS complied with the prior supervisory approval requirement of IRC § 6751(b)(1) with respect to the numerous penalties asserted against the petitioner (IRC § 6662A and IRC § 6662(a), (b)(1)-(3), (d), (e), and (h)). Held: Executive Summary from the Tax Court in Excelsior Aggregates v. Commissioner As we have discussed in a number of previous posts and articles (including this one I wrote for Tax Notes), IRC § 6751(b)(1) requires that the “initial determination” of a penalty assessment be personally approved (in writing) by the immediate supervisor of the person making that determination. In Excelsior Aggregates, the IRS argued that the “initial determination” of the penalties in question was communicated in the notice of final partnership administrative adjustment…

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March 29, 2022
Guest Article
All Articles / Business Related Issues / Tax Articles

Enjoy Tax Benefits When You Hire Freelancers for Your Business

Tax Benefits When You Hire Freelancers for Your Business Guest Writer:  Michael Longsdon of ElderFreedom.net* As a business owner, saving money and time is an important part of maintaining a successful operation. When looking for areas to cut back, your business tax obligations can be a good place to squeeze out some extra savings if you know what you're doing. One approach you may have overlooked is considering freelancers over hiring full-time employees. Depending on the type of work required, this move could result in a significant reduction in your time and effort when filing taxes, and it may leave you with a lowered bill. Freelancers Simplify Your Tax Obligations Freelancers work for themselves, leaving them entirely responsible for handling their tax obligations. Since they're not technically employed by your company, you avoid the need to remove any payroll taxes and are free to pay them the flat amount agreed…

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January 2, 2022
Income Tax Issues
All Articles / Income Tax Issues / Tax Articles

Briefly Taxing’s Guide to the Income Tax Refund Process for Individuals

It was a Tuesday in 2016, if memory serves, when your mother called you to let you know about the unfortunate events that had beset your Mainer family the week prior. After some brief research (thanks, Google), you discovered that the tornado was the first to hit York County, Maine in nearly a decade, and it was the first major tornado since October 10, 1966.[1] If a tornado were going to hit Biddeford, somehow Uncle Bill and Cousin Elmer would featured prominently in the story. Sure enough, it took little more than a quick look at the Portland Press Herald to see your relations staring back at you like does in the spotlight of Bill’s pickup truck. Through some modicum of divine intervention, it took Bill and Elmer nearly a year to ask you about the tax consequences of the tornado (though they had bothered you about any number of…

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November 22, 2021