Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

McCrory v. Commissioner
T.C. Memo. 2021-116

On October 4, 2021, the Tax Court issued a Memorandum Opinion in the case of McCrory v. Commissioner (T.C. Memo. 2021-116). The primary issue presented in McCrory v. Commissioner was whether the IRS Whistleblower Office’s rejections of the petitioner’s claims were unsupported by the administrative record and were arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Background to Whistleblower Claims in McCrory v. Commissioner The petitioner submitted six Forms 211 (Application for Award for Original Information), on April 5, 2018, in which she alleged that certain individuals (target taxpayers) may not have reported taxable income from settlements or jury awards. The IRS received these forms and assigned a claim number to each of them. The petitioner then submitted thirteen additional Forms 211, most of which were dated April 22, 2018. On these forms, the petitioner made the same allegations that she had made in the…

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October 20, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Gregory v. Commissioner
T.C. Memo. 2021-115

On September 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Gregory v. Commissioner (T.C. Memo. 2021-115). The primary issue presented in Gregory v. Commissioner was whether the claimed deductions permitted under IRC § 183(b) for activities not engaged in for profit are not subject to the 2% floor on miscellaneous itemized deductions set forth in IRC § 67(a). Background to Gregory v. Comissioner During the years at issue, 2014 and 2015, the petitioners operated CLC Ventures, Ltd. (CLC), which generated income and incurred expenses from boat chartering activities. CLC was incorporated in the Cayman Islands and elected to be treated as a disregarded entity in 2012. The petitioners jointly filed tax returns for the years at issue and reported the income and expenses from their CLC activity on Schedules C (Profit or Loss From Business). The IRS audited the petitioners’ 2014 and 2015 returns and issued a…

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October 18, 2021
Business Related Issues
All Articles / Business Related Issues / Tax Articles

A Primer on Employment Tax Withholding

When the IRS is involved, monetary transactions are never as simple as they appear on the surface. The late, great comedian Mitch Hedberg once told a story about being given a receipt after buying a doughnut. I bought a doughnut, and they gave me a receipt for the doughnut. I don’t need a receipt for the doughnut. I’ll just give you the money, and you give me the doughnut, end of transaction. We don’t need to bring ink and paper into this. I just can’t imagine a scenario where I would have to prove that I bought a doughnut. Some skeptical friend: “Don’t even act like I didn’t get that doughnut! I got the documentation right here…oh, wait it’s at home…in the file…under “D.” When it comes to the payment of wages, ink and paper are always required. Think of the IRS as Mitch’s skeptical friend. The IRS will zealously…

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October 18, 2021
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Clark v. Commissioner
T.C. Memo. 2021-114

On September 28, 2021, the Tax Court issued a Memorandum Opinion in the case of Clark v. Commissioner (T.C. Memo. 2021-114). The primary issue presented in Clark v. Commissioner  was whether the petitioner fraudulently underreported his income. Held:  Oh, dear God.  The fraud! The Tax Court’s Summary of the Issue in Clark v. Commissioner And I quote: In 2011 through 2014, the years at issue, Robert S. Clark owned an auto body shop, rental properties, a large home, and numerous trucks, automobiles, and utility vehicles. His ability to acquire these assets is a remarkable feat given that, according to his tax returns, he had taxable income of $114, $0, $0, and $0, respectively, during those years. Or he fraudulently underreported his income. This doesn't appear like it will turn out well for the petitioner, but just for giggles, let's read on, dear readers. The Meat of the Issue (i.e., We…

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October 14, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Whistleblower 1437716W v. Commissioner
T.C. Memo. 2021-113

On September 27, 2021, the Tax Court issued a Memorandum Opinion in the case of Whistleblower 1437716W v. Commissioner (T.C. Memo. 2021-113). The primary issues presented in Whistleblower 1437716W v. Commissioner were whether the whistleblower could proceed anonymously, and whether the WBO abused its discretion in denying the whistleblower-petitioner an award. Held: Nope on both counts. Background to “Old 77” Whistleblower and Whistleblower 1437716W Peter J. Reilly, a Forbes tax contributor, nicknamed the whistleblower in Whistleblower 1437716W v. Commissioner “Old 77” in an article that came out in August 2019 written after the D.C. Circuit remanded a prior whistleblower case brought by Old 77, telling the Tax Court to keep Old 77’s actual identity off the books.  See Whistleblower 14377-16W v. Commissioner, 148 T.C. 510 (2017), remanded sub nom. In re Sealed Case, 931 F.3d 92 (D.C. Cir. 2019). Reilly observed Whistleblower 14377-16W is my new hero.  Old 77 as I have nicknamed…

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October 12, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Brown v. Commissioner
T.C. Memo. 2021-112

On September 23, 2021, the Tax Court issued a Memorandum Opinion in the case of Brown v. Commissioner (T.C. Memo. 2021-112). The sole issue presented in Brown v. Commissioner was whether the Tax Court has jurisdiction to order the refund of a TIPRA payment. What is a TIPRA Payment? The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), Pub. L. No. 109-222, § 509(a), enacted new IRC § 7122(c), effective for offers-in-compromise (OICs) submitted on or after July 16, 2006. IRC § 7122(c)(1)(A)(i) requires that the submission of any lump-sum OIC “be accompanied by the payment of 20% percent of the amount of such offer.” See also IRS Notice 2006-68. Background to Brown v. Commissioner The petitioner was issued two notices of federal tax lien, and he timely requested a CDP hearing.  Ultimately, the liens were upheld and notices of determination were issued in August 2017.  Petitioner timely requested a…

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October 11, 2021
Income Tax Issues
Full Tax Court Opinions / Income Tax Issues / Tax Opinions

Leyh v. Commissioner
157 T.C. No. 7

On October 4, 2021, the Tax Court issued its opinion in Leyh v. Commissioner (157 T.C. No. 7). The primary issue presented in Leyh v. Commissioner was whether the petitioner was entitled to deduct, as alimony, an amount equal to the premiums paid to provide health insurance coverage for his then spouse Held:  Yes, sir. Background to Leyh v. Commissioner In 2012, the petitioner in Leyh v. Commissioner, Mr. Leyh, filed for divorce from his then wife, Ms. Leyh. The petitioner and Ms. Leyh filed and signed an agreement in 2014 incident to their divorce proceeding, in which agreement the petitioner agreed to pay Ms. Leyh alimony pendente lite until the final divorce decree was granted.[1] As part of the agreement, the petitioner further agreed to pay for Ms. Leyh's health and vision insurance. In 2015, the petitioner paid (as alimony) $10,683 for Ms. Leyh's health insurance premiums as pretax payroll reductions…

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October 10, 2021