Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Galloway v. Commissioner
T.C. Memo. 2021-24

On February 24, 2021, the Tax Court issued a Memorandum Opinion in the case of Galloway v. Commissioner (T.C. Memo. 2021-24). The primary issue presented in Galloway v. Commissioner was whether, during his CDP hearing, the petitioner was “improperly barred from resuscitating an offer-in-compromise” that had been rejected prior to the NFTL filing. Background to Galloway v. Commissioner By the time his second offer was rejected, the petitioner owed $81,500 in tax for 2014.  In 2016, he submitted an OIC for $9,138, which was rejected on the grounds that he could pay the full amount due.  Rather than appealing that rejection to Appeals, the petitioner submitted a new Form 656, Offer in Compromise, in January 2017, proposing to settle for $8,900. The petitioner argued “exceptional circumstances” with respect to his 2017 offer, including being fired for drinking in 2012 and having a “sustained period of unemployment thereafter.” Ah, the old…

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February 24, 2021
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Anikeev v. Commissioner
T.C. Memo. 2021-23

On February 23, 2021, the Tax Court issued a Memorandum Opinion in the case of Anikeev v. Commissioner (T.C. Memo. 2021-23). The primary issue presented in Anikeev v. Commissioner was whether the “rewards” earned from the purchase of gift cards…a lot of gift cards…were income. Background to Anikeev v. Commissioner The petitioners were crafty Russians, who gamed the credit card reward system.  They joined a credit card rewards program and proceeded to purchase their credit limit worth of prepaid gift cards.  With the gift cards, they bought money orders, and with the money orders deposited in their bank accounts, they paid off the credit cards.  This process cost, on average, $6, whereas they could make anywhere from $5 to $25 on each purchase. In 2013, the petitioners charged $1,219,077 on their credit card, $1,208,376 of which was used to purchase gift cards.  In 2014, they spent $5,184,033 on gift cards. …

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February 23, 2021
Income Tax Issues
Tax Opinions / Income Tax Issues

Desert Organic Solutions v. Commissioner
T.C. Memo. 2021-22

On February 22, 2021, the Tax Court issued a Memorandum Opinion in the case of Desert Organic Solutions v. Commissioner (T.C. Memo. 2021-22). The primary issue presented in Desert Organic Solutions v. Commissioner was whether the petitioner, a marijuana-based California business, was liable for a deficiency on the grounds that its activities were illegal under federal law. Note on My Tax Court Hero This is the first of Judge Holmes’ decisions with which I was a bit disappointed.  On the one hand, I had four decisions to summarize this morning, and a three-page opinion was welcome.  On the other, it lacked Judge Holmes’ wit and wisdom.  Any opinion of his without a zinger is a lost opportunity in my opinion.  Further, the marijuana jokes practically write themselves.  Judge Holmes just let the potential for good puns go up in smoke... The Appeal of Patients Mutual Judge Holmes notes succinctly that “[w]e’ve…

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February 22, 2021
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Llanos v. Commissioner
T.C. Memo. 2021-21

On February 22, 2021, the Tax Court issued a Memorandum Opinion in the case of Llanos v. Commissioner (T.C. Memo. 2021-21). The primary issue presented in Llanos v. Commissioner was whether the petitioner was liable for penalties under IRC § 6702. The Letter Return in Llanos v. Commissioner On December 1, 2014, the petitioner sent the IRS a letter entitled “Request for Audit Reconsideration for 2010, 2011, and 2012”. The letter states: “I fully intend that the affidavit is my return if I am required to file one.” It further explains that the affidavit includes information to calculate a tax if any is due. The attachment for 2010 is entitled “Request for Determination and Statement/Return of Tax for 2010”, and it states: “I intend that this document is my return if I am required to file one.” He attached the same statement for 2011. The letter raises the question of…

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February 22, 2021
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Rogers v. Commissioner
T.C. Memo. 2021-20

On February 22, 2021, the Tax Court issued a Memorandum Opinion in the case of Rogers v. Commissioner (T.C. Memo. 2021-20). The primary issue presented in Rogers v. Commissioner was whether the petitioner was eligible for innocent spouse relief under IRC § 6015(b), (c), or (f). The Wisconsin Tent & Pony Show in Rogers v. Commissioner The petitioner and her erstwhile husband owned the top[1] tent rental company in Madison, Wisconsin.  The petitioner also solely owned to other businesses, one which rented jumping castles in the other which offered pony rides. As a high school graduate and having some banking experience (perhaps as a janitor, the opinion is not clear), the petitioner was the "brains" of the operation and was primarily responsible for maintaining the tent company’s books and records, hiring a payroll company, tracking billing, making loan payments, and making credit card payments.  The petitioner also had signature authority…

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February 22, 2021
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Friendship Creative Printers Inc. v. Commissioner
T.C. Memo. 2021-19

On February 22, 2021, the Tax Court issued a Memorandum Opinion in the case of Friendship Creative Printers Inc. v. Commissioner (T.C. Memo. 2021-19). The primary issue presented in Friendship Creative was whether the IRS abused its discretion in sustaining a proposed levy action in collection of over $200,000, arising out of the petitioner’s employment tax liabilities and associated penalties. Background to Friendship Creative Printers Inc. v. Commissioner In 2013, the petitioner did not timely file Forms 941, timely pay its employment taxes, or timely make the required deposits towards its employment taxes. The petitioner did, however, make partial payments and deposits throughout 2013 towards its employment tax liabilities for the 2013 quarters.  On February 10, 2016, pursuant to substitute-for-return procedures, the IRS made assessments of employment taxes, IRC § 6651(a) additions to tax, and IRC § 6656 penalties for the 2013 quarters as a result of the petitioner’s untimely…

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February 22, 2021
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Blum v. Commissioner
T.C. Memo. 2021-18

On February 18, 2021, the Tax Court issued a Memorandum Opinion in the case of Blum v. Commissioner (T.C. Memo. 2021-18). The primary issue presented in Blum v. Commissioner was whether the petitioner was entitled to exclude from her gross income the $125,000 settlement payment (from a suit against former attorneys who bungled a personal injury lawsuit on petitioner’s behalf) as damages received “on account of personal physical injuries or physical sickness” under IRC § 104(a)(2). Background to Blum v. Commissioner The petitioner went to hospital for knee replacement. She was told to sit in a wheelchair, which turned out to be broken. When the petitioner sat in a wheelchair, she fell, sustaining “significant injuries.” The petitioner hired an attorney who sued the hospital for negligence, and when he retired in the middle of her case, she retained another attorney from the same firm to continue the case. However, the…

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February 18, 2021