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

Christensen v. Commissioner (T.C. Memo. 2020-14)

On January 15, 2020, the Tax Court issued a Memorandum Opinion in the case of Christensen v. Commissioner (T.C. Memo. 2020-14). The sole issue presented in Christensen v. Commissioner was whether employee expenses for travel to and from home and work were deductible under IRC § 162(a). Deductibility of Expenses in General as explained by Christensen v. Commissioner Because deductions are a “matter of legislative grace,” taxpayers bear the burden of establishing their entitlement thereto. Tax Court Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The taxpayer’s burden is met by substantiating the amount and purpose of each expense that the taxpayer claims as a deduction. Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir. 1976). As a part of satisfying this burden, taxpayers must maintain sufficient records. IRC § 6001; Treas. Reg. § 1.6001-1(a). No records, no substantiation. Generally,…

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January 15, 2020
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Purvis v. Commissioner
T.C. Memo. 2020-13

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Purvis v. Commissioner (T.C. Memo. 2020-13). The issue presented in Purvis v. Commissioner was whether the IRS overcame their burden of proof to establish the petitioners’ liability for the taxes and the fraud penalty under IRC § 6663(a).  What a crazy case... The Quick and Dirty Background of One of the Craziest Cases I’ve Ever Read (Purvis v. Commissioner) This case is a morality tale. The facts are just about as insane as the petitioner-husband whose world the Tax Court had to live in for a brief moment in January 2020. Purvis is a long opinion. The court spends a surprisingly large number of pages carefully documenting each new absurdity and boondoggle that took Mr. Purvis soaring ever higher and higher over the Cuckoo’s Nest before the wax melted, and it all came (predictably) crashing…

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January 14, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions / Procedural Issues

Aviles v. Commissioner
T.C. Memo. 2020-12

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Aviles v. Commissioner (T.C. Memo. 2020-12). The issue presented in Aviles v. Commissioner was whether the Tax Court should revisit its holding in Giamelli v. Commissioner, 129 T.C. 107 (2007), thereby permitting a petitioner, who failed to challenge his underlying tax liability at a CDP hearing, to raise the challenge for the first time in Tax Court. Challenging Underlying Tax Liabilities at CDP Hearing in Aviles v. Commissioner A taxpayer may challenge the existence or amount of his underlying liability in a CDP proceeding only under two conditions.  First, the taxpayer may challenge the liability if it did not receive a statutory notice of deficiency (SNOD) in regard to the tax liability.   Second, if the taxpayer or did not “otherwise have an opportunity” to dispute its liability, then it would be a violation of its…

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January 14, 2020
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Mei Productions v. Commissioner
T.C. Memo. 2020-11

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Mei Productions v. Commissioner (T.C. Memo. 2020-11). The issue presented in Mei Productions v. Commissioner was whether the petitioner was liable for the failure to pay under IRC § 6651(a)(3) (failure to timely pay tax assessed as an amendment to an original return). Background to Mei Productions v. Commissioner The petitioner is a California corporation, which admitted that it erroneously claimed an approximately $200,000 deduction for expenses due to a change in its accounting method under IRC § 481A (adjustments required by changes in method of accounting). The IRS disallowed the deduction and asserted the accuracy related penalty under IRC § 6662(a). The petitioner submitted an amended return, correcting the error, but did not remit payment with the amended return. Thereafter, the IRS assessed the IRC § 6651(a)(3) failure to pay penalty. The petitioner filed a…

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January 14, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Near v. Commissioner
T.C. Memo. 2020-10

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Near v. Commissioner (T.C. Memo. 2020-10). The issue presented in Near v. Commissioner was whether the petitioner, an attorney for a public utility in California, could deduct unreimbursed employee business expenses incurred while travelling for work when the employee had a right to seek reimbursement from his employer. Ordinary and Necessary Business Expenses under IRC § 162 in Near v. Commissioner A taxpayer may deduct all ordinary and necessary expenses paid in carrying on a trade or business. IRC § 162(a). An ordinary expense is one that commonly or frequently occurs in the taxpayer’s business, and a necessary expense is one that is appropriate and helpful in carrying on the taxpayer’s business. See Deputy v. du Pont, 308 U.S. 488, 495 (1940) (ordinary expenses), Commissioner v. Heininger, 320 U.S. 467, 471 (1943) (necessary expense); see…

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January 14, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions

Cuthbertson v. Commissioner
T.C. Memo. 2020-9

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Cuthbertson v. Commissioner (T.C. Memo. 2020-9). The issues presented in Cuthbertson v. Commissioner were (1) whether the petitioners were entitled to loss deductions arising from the sale or abandonment of golf course improvements, and (2) whether the installment method of accounting was an appropriate method of accounting to report the transfer of property between two companies, both wholly owned by the petitioners. Burden of Proof – Statutory Notice of Deficiency (SNOD) in Cuthbertson v. Commissioner A statutory notice of deficiency (SNOD) must describe the basis for the tax due. IRC § 7522(a). In general, the SNOD is presumed correct, and the petitioner bears the burden of proving otherwise. Welch v. Helvering, 290 U.S. 111, 115 (1933); see also Tax Court Rule 142(a). If, however, the IRS raises new matters in litigation not raised in the…

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January 14, 2020
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Alta V Limited Partnership v. Commissioner
T.C. Memo. 2020-8

On January 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Alta V Limited Partnership v. Commissioner (T.C. Memo. 2020-8). The issue presented in Alta V Limited Partnership v. Commissioner was whether the petitioners were liable as transferees for their portion of the unpaid, determined, and assessed deficiency, penalties, and additions to tax with respect to the transferor’s corporate income tax. Transferee Liability Under the Code – IRC § 6901(a) - Alta V Limited Partnership v. Commissioner The liability of a transferee of the property of a taxpayer who owes Federal income tax is assessed, paid, and collected in the same manner and subject to the same provisions as the underlying taxes. IRC § 6901(a). For purposes of IRC § 6901, the term “transferee” includes, inter alia, a donee, heir, legatee, devisee, distributee, and shareholder of a dissolved corporation. See IRC § 6901(h); Treas. Reg. § 301.6901-1(b).…

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January 13, 2020