Procedural Issues
Full Tax Court Opinions / Procedural Issues / Tax Opinions

Rowen v. Commissioner
156 T.C. No. 8

On March 30, 2021, the Tax Court issued its opinion in Rowen v. Commissioner, 156 T.C. No. 8. The underlying issue presented in Rowen v. Commissionerwas whether the IRS’s certification of the petitioner’s tax debt as “seriously delinquent” violated the Fifth Amendment and his basic human rights, because it infringed on his right to international travel. Background to Rowen v. Commissioner For more than two decades the petitioner avoided paying his taxes.  The opinion notes that the petitioner “failed” to pay his Federal taxes, but I believe “avoid” is a bit more indicative of the petitioner’s success in not paying his taxes. In 2018, when the petitioner’s outstanding tax balance was close to $500,000, the IRS “turn to a new tool in its collection toolbox” – IRC § 7345, which permits the IRS to certify that an individual has a “seriously delinquent tax debt.” This certification is then sent to…

1 Comment
March 30, 2021
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Walton v. Commissioner
T.C. Memo. 2021-40

On March 30, 2021, the Tax Court issued a Memorandum Opinion in the case of Walton v. Commissioner (T.C. Memo. 2021-40). The primary issue presented in Walton was whether the petitioner qualified for the reasonable cause exception to the imposition of an accuracy-related penalty. Background to Walton v. Commissioner The petitioner was a New Yorker,[1] who failed to report $170,000 in nonemployee compensation in 2015. Strike one and two. The petitioner was terminated from her employment, and negotiated a settlement with the employer that included severance and a bonus payment for 2015.  She launched a sole proprietorship the same year. The petitioner engaged a CPA with 30 years of experience to prepare her 2015 return. The petitioner “reported” her income to the CPA in an email, stating “I am sure I need to pay taxes. If I did the math right, I earned about $525k in 1099 pay.” The petitioner…

1 Comment
March 30, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Max v. Commissioner
T.C. Memo. 2021-37

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Max v. Commissioner (T.C. Memo. 2021-37). The primary issue presented in Max was whether drawing fashion sketches qualify as “qualified research” under IRC § 41. General Observations in Max v. Commissioner Who knew Judge Buch was such a fashionista? If you don't believe me, read the first 21 pages of the opinion.  The editor of Teen Vogue better watch out.  Judge Buch knows his stuff about garmentry and tax, in (seemingly) equal measure. His praise of the petitioner’s clothing is effusive.  His praise of his tax strategies, not so much. The Whole Nine Yards – Product Development First comes the concept.  Then comes the “mood board.” Then comes the design concept and sketch. Then comes the patternmakers and a “blueprint” of the garment’s components.  Then comes the pattern cutting. Then comes the first sample. Then comes…

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March 29, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Crandall v. Commissioner
T.C. Memo. 2021-39

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Crandall v. Commissioner (T.C. Memo. 2021-39). The primary issue presented in Crandall v. Commissioner was whether the parties’ closing agreement precluded the determined deficiency and penalty. Background to Determination in Crandall v. Commissioner During taxable years 2003 through 2011 the petitioners received foreign-source pension income, interest income, and ordinary dividends. For each of those years they paid Italian income tax.  For none of those years they reported said income to the U.S. government.  The petitioners entered into the IRS’s Offshore Voluntary Disclosure Program (OVDP) in 2012. The petitioners included with their written submission a Form 1040X (Amended U.S. Individual Income Tax Return) for each of those years. The petitioners also submitted nine separate check payments covering additional tax and interest for each amended return year.  The IRS reviewed the OVDP filings, but it did not…

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March 29, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Purple Heart Patient Center Inc. v. Commissioner
T.C. Memo. 2021-38

On March 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Purple Heart Patient Center Inc. v. Commissioner (T.C. Memo. 2021-38). The primary issues presented in Purple Heart Patient Center Inc. v. Commissioner were whether the petitioner (1) was entitled to offset its gross receipts with any cost of goods sold (COGS), (2) underreported its gross income, and (3) is liable for the accuracy-related penalty pursuant to IRC § 6662(a). Background to Purple Heart Patient Center Inc. v. Commissioner Purple Heart is a California nonprofit mutual benefit corporation with members, rather than shareholders, which is treated as a C corporation for Federal tax purposes. Keith Stephenson organized Purple Heart in 2006 and obtained a license from the City of Oakland to operate a medical cannabis retail dispensary under California law. During the years in issue, he served as Purple Heart’s sole director and received wages that he reported…

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March 29, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

American Limousines Inc. v. Commissioner
T.C. Memo. 2021-36

On March 24, 2021, the Tax Court issued a Memorandum Opinion in the case of American Limousines Inc. v. Commissioner (T.C. Memo. 2021-36). The primary issues presented in American Limousines Inc. v. Commissioner were whether the IRS abused its discretion in rejecting an installment agreement (that the petitioner could not fund) and whether the IRS abused its discretion in refusing to classify the petitioner’s account as currently not collectible. Background to American Limousines Inc. v. Commissioner The petitioner is liable for unpaid employment taxes exceeding $1 million for numerous periods. The IRS notified the petitioner of its intent to levy to collect the unpaid taxes. The petitioner requested as a collection alternative an installment agreement, and Appeals determined that the petitioner’s reasonable collection potential (RCP) allowed for monthly installment payments of approximately $23,000. In calculating its RCP, Appeals gave the petitioner no credit for principal payments the petitioner made on vehicle…

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March 24, 2021
Procedural Issues
Memorandum Opinions / Procedural Issues / Tax Opinions

Siebert v. Commissioner
T.C. Memo. 2021-34

On March 15, 2021, the Tax Court issued a Memorandum Opinion in the case of Siebert v. Commissioner (T.C. Memo. 2021-34). The primary issue presented in Siebert v. Commissioner was whether the settlement officer abused her discretion in sustaining the proposed collection action A Note on Petitioner’s Appeal in Siebert v. Commissioner I am a big believer in karma.  The petitioners may or may not have had this decision coming.  Here’s a brief summary of why Appeals denied their request for an installment agreement: This decision was based on: (1) petitioners’ “egregious compliance history”; (2) petitioners’ high income and commensurate lifestyle; combined with (3) petitioners’ failure to turn over funds that would have been available to pay delinquent tax. Appeals repeated the observation that petitioners’ noncompliance spanned 15 years, including the last 8 consecutive years in which they had not paid Federal income tax. Appeals also noted that petitioners’ outstanding tax…

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March 15, 2021