Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Chancellor v. Commissioner
T.C. Memo. 2021-50

On May 4, 2021, the Tax Court issued a Memorandum Opinion in the case of Chancellor v. Commissioner (T.C. Memo. 2021-50). The primary issue presented in Chancellor v. Commissioner was whether the IRS erred in disallowing deductions the petitioner claimed for certain business expenses, charitable contributions, and state and local tax. Brief Background to Chancellor v. Commissioner Ms. Viola Chancellor, of Nevada, is a notary and a paralegal.  In 2015, she received $400 from her duties as such.  She reported a whopping $252 in tax due, determined on the basis of a $40,000 pension, itemized deductions of $14,000, and a business loss of $19,000.  These latter two categories caused a bit of a disagreement between the petitioner and the IRS. The Deductions The petitioner claimed deductions for, inter alia, charitable contributions of $6,000 in cash contributions and $500 in noncash contributions, as well as a state and local tax deduction…

0 Comments
May 4, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Barnes v. Commissioner
T.C. Memo. 2021-49

On May 4, 2021, the Tax Court issued a Memorandum Opinion in the case of Barnes v. Commissioner (T.C. Memo. 2021-49). The primary issues presented in Barnes v. Commissioner were whether the statute of limitations on collections had run with respect to the petitioners 2003 liability, whether their 2003 tax liability had been discharged in bankruptcy, whether the IRS abused its discretion in sustaining a Notice of Federal Tax Lien as to the 2003 liability. Background to Barnes v. Commissioner The petitioners’ trials and tribulations with the IRS began when they jointly filed an untimely Federal income tax return for 2003 reporting a tax liability of $31,000. The IRS sent them a timely notice of deficiency determining a tax deficiency of $55,000, an accuracy-related penalty of $11,000, and a late-filing addition to tax of $6,000.  They had their day in court in 2010, and a month after their Tax Court…

0 Comments
May 4, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Estate of Jackson v. Commissioner
T.C. Memo. 2021-48

On May 3, 2021, the Tax Court issued a Memorandum Opinion in the case of Estate of Jackson v. Commissioner (T.C. Memo. 2021-48). Two primary issues were dealt with in this gargantuan (271 pages) opinion by Judge Holmes. The primary issue in Estate of Jackson v. Commissioner was the valuation of three contested assets, Michael Jackson’s image and likeness, and the estate’s interest in two trusts through which the estate held an interest in Sony/ATV Publishing and an interest in Mijac Music, a music publishing catalog that owned the copyrights to compositions that Jackson wrote or cowrote, as well as compositions by other songwriters.  The secondary issue was whether, due to the huge discrepancy (hundreds of millions) in valuations, the estate was liable for a $200 million penalty. Judge Holmes’ Magnum Opus If you have read Briefly Taxing with any regularity, you will know two things.  I have a judge…

4 Comments
May 3, 2021
Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Peacock v. Commissioner
T.C. Memo. 2020-63

On May 19, 2020, the Tax Court issued a Memorandum Opinion in the case of Peacock v. Commissioner (T.C. Memo. 2020-63). The issue before the court in Peacock v. Commissioner was whether a remittance that petitioners made to the IRS before the mailing of the notice of deficiency deprives the Tax Court of jurisdiction, which question turns on whether the remittance was in the nature of a payment or a deposit. Background to Peacock v. Commissioner The petitioners were issued a notice of deficiency regarding certain “fraud loss” deductions that were disallowed in full by the IRS. The day after the notice of deficiency was issued, petitioner-husband (PH) hand delivered a check payable to the U.S. Treasury. The memo line of the check contained two lines, one containing the PH’s Social Security number and the word “payment,” and the next contained the words “2013 Federal Income Tax.” Critically, the Tax…

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April 30, 2021
International Issues
Tax Articles / All Articles / International Issues

A Primer on FIRPTA Withholding

At its most basic, any disposition of a U.S. real property interest by a foreign person (as transferor) is subject to the Foreign Investment in Real Property Act of 1980, more commonly known as FIRPTA.[1] So, when a foreign person or entity sells, transfers, or otherwise disposes of a piece of U.S. real property, the transferee will likely have to withhold a certain percentage of the sales price.[2] Defining Disposition The term disposition as used in FIRPTA is not limited to the sale of property.  A FIRPTA disposition is any exchange, liquidation, gift, transfer, redemption, etc. of real property or an interest in such property.[3]  The term is very broadly defined,[4] and so when in doubt, it is best to treat a transaction or transfer with a foreign transferor and with respect to real property as a FIRPTA disposition. Defining U.S. Real Property Interest A U.S. real property interest under…

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April 30, 2021
Procedural Issues
Tax Articles / All Articles / Penalties Under the Code / Procedural Issues

Current Developments on Prior Written Supervisory Approval under IRC § 6751(b)(1)

The Statute No penalty under the Code[1] may be assessed unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual/agent making such determination (or another appropriate higher-level official).[2] This approval requirement, introduced in 1998, was the subject of only three substantial decisions prior to 2020. This year, however, was a boon for taxpayers, and the full opinions of the Tax Court defined the metes and bounds of the prior written supervisory approval requirement of IRC § 6751(b)(1). History of Statute IRC § 6751 was added to the code in 1998,[3] but it did not really hit its stride until 2017 and the two decisions in Chai v. Commissioner[4] and Graev v. Commissioner (Graev III).[5] In Chai, the Second Circuit held that IRC § 6751(b)(1) requires written approval of the “initial penalty determination” no later than the date that the IRS issues…

5 Comments
April 30, 2021
Income Tax Issues
Tax Articles / All Articles / Income Tax Issues

Understanding the Doctrine of Constructive Receipt

Uncle Bill Sells the Buick Your dear Uncle Bill calls you all in a tizzy asking for some (free) legal advice from his “favorite” nephew. You want to remind him that you are (a) the only lawyer in the family, and (b) the only one of his nephews who not currently in the hoosegow, but you think better of it and indulge him. Bill and Aunt Ethel, who apparently are back together after the Thanksgiving turkey-leg-fisticuffs, sold their old trusty Buick on December 30th two years ago for $1,500 to Ethel’s step-nephew Jim-Bob for bail money. (You don’t ask questions at this point.) Ol’ Jim-Bob gave Bill a check, but Bill had been day-drinking on New Years Eve, and he was in no shape to visit the bank until a few days after the ball dropped and Bill’s blood alcohol content followed suit in the days afterwards. Bill included the…

2 Comments
April 30, 2021