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

Ward v. Commissioner
T.C. Memo. 2021-32

On March 15, 2021, the Tax Court issued a Memorandum Opinion in the case of Ward v. Commissioner (T.C. Memo. 2021-32). The primary issues presented in Ward were whether the petitioner properly reported income, whether the petitioner was entitled to the insolvency exception to IRC § 108 to avoid income inclusion for discharge of indebtedness income, and whether the petitioner was just completely full of shit. She was. Personal Note I sympathize with the petitioner to a certain extent.  Attorneys of our generation have substantial debt. That is where my sympathy ends.  Outright fabrication of tax returns is not acceptable behavior, lady.  Get your ish together. Background to Ward v. Commissioner The petitioner is an attorney.  She went to law school.  Whilst there, she failed to attend the course on ethics. (I’m just spitballing here.) She practiced in a firm, and then deciding that it wasn’t for her, started her…

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March 15, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Martin v. Commissioner
T.C. Memo. 2021-35

On March 24, 2021, the Tax Court issued a Memorandum Opinion in the case of Martin v. Commissioner (T.C. Memo. 2021-35). The primary issues presented in Martin v. Commissioner were whether the IRS abused its discretion in disallowing substantial (old and large) deductions and whether the petitioners were liable for penalties for filing (very) late and for being (very) negligent and for (very) substantially understating their liabilities. Background to NOLs in Martin v. Commissioner The petitioner-husband was a racecar driver and mechanic.  His racing team lost $1.7 million when a sponsor “fell through.”  This loss drove (Judge Holmes strikes again) the petitioners into Chapter 7 bankruptcy.  They were discharged in the late 1990s, but the petitioners “remembered” these large NOLs and carried them into the years at issue (2009 and 2010). The Returns The petitioners disagree over who prepared their tax returns for the years at issue. Petitioner-husband claims that…

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March 14, 2021
Penalties Under the Code
Income Tax Issues / Memorandum Opinions / Tax Opinions

Harriss v. Commissioner
T.C. Memo. 2021-31

On March 11, 2021, the Tax Court issued a Memorandum Opinion in the case of Harriss v. Commissioner (T.C. Memo. 2021-31). The primary issues presented in Harriss v. Commissioner were whether the notices of deficiency issued to the petitioners were valid and whether the petitioner is liable under IRC § 72(t) for the early withdrawal penalty. Shenanigans in Harriss v. Commissioner The petitioner was paid, on average, $150,000 in 2012, 2013, and 2014.  Forms 1099 were issued.  Taxes were withheld. In 2013, the petitioner withdrew $37,000 from his retirement plan.  Nonetheless, the petitioner filed (untimely) his returns claiming ZERO income (wages) and claiming a refund for the entirety of the withheld taxes.  Accompanying said returns were “corrected” Forms W-2 and 1099, accompanying was a statement which read the following: My activities in 2012 involved entirely private arrangements and did not involve the exercise of any federal privilege or the receipt…

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March 11, 2021
Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

Caylor Land & Development v. Commissioner
T.C. Memo. 2021-30

On March 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Caylor Land & Development v. Commissioner (T.C. Memo. 2021-30). The primary issues presented in Caylor Land & Development v. Commissioner were whether consulting payments made between the petitioner and its microcaptive insurance company were ordinary and necessary business expenses or insurance expenses. Brief Background (to Lay a Foundation for Judge Holmes’ Puns) in Caylor Land & Development v. Commissioner The Caylors, Bob and Rob, founded and kept afloat, a thriving construction company for over 50 years.  The company needed insurance, and having found the traditional route too expensive, Bob and Rob decided to get into the microcaptive insurance industry.  Insurance cost the company $60,000 per year, but beginning in 2007, the company increased their insurance bill by taking out policies from a related microcaptive insurer at a cost of $1.2 million annually. At the same…

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March 10, 2021
Penalties Under the Code
Memorandum Opinions / Penalties Under the Code / Tax Opinions

Smith v. Commissioner
T.C. Memo. 2021-29

On March 10, 2021, the Tax Court issued a Memorandum Opinion in the case of Smith v. Commissioner (T.C. Memo. 2021-29). The primary issues presented in Smith v. Commissioner were whether a photocopy of an original purported return, for which the IRS has no record and on which the petitioner expects the IRS to act in making a refund, purports to be a return of income tax, and whether the petitioner was liable for the IRC § 6702(a) frivolous return penalty. The Purported Return Gambit in Smith v. Commissioner The IRS had no record of the petitioner’s husband’s tax return for 2008 and notified him of such in 2012.  The petitioner and her husband sent a letter to the IRS asserting that they had sent the return to the Fresno Service Center, and “as [the IRS] has lost or misplaced my return, please find enclosed copies of the original filing…

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March 10, 2021
Penalties Under the Code
Tax Opinions / Income Tax Issues / Memorandum Opinions / Penalties Under the Code

Mathews v. Commissioner
T.C. Memo. 2021-28

On March 9, 2021, the Tax Court issued a Memorandum Opinion in the case of Mathews v. Commissioner (T.C. Memo. 2021-28). The primary issue presented in Mathews was whether the petitioner was entitled to car and truck expenses which were incurred driving from his residence to the location of his employer, a trucking company. General Rule in Mathews v. Commissioner As a general rule, expenses for traveling between one’s home and one’s place of business or employment are commuting expenses and, consequently, nondeductible personal expenses. See IRC § 262(a); Fausner v. Commissioner, 413 U.S. 838 (1973); Commissioner v. Flowers, 326 U.S. 465 (1946); Feistman v. Commissioner, 63 T.C. 129, 134 (1974); Bogue v. Commissioner, T.C. Memo. 2011-164, *5. The petitioner testified that the reported mileage was for his commuting expenses…which begs the question, why has the court even bothered issuing a memorandum opinion in this case… I think that simply…

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March 9, 2021