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Faisal Ahmed
United States Tax Court · 2021-12-28
This case is a collection review proceeding in which taxpayer Faisal Ahmed petitioned the Tax Court to challenge an IRS notice of determination that sustained the filing of a notice of federal tax lien covering income tax liabilities for 2013-2016 and trust fund recovery penalties for 2016 quarters. After the income tax liabilities were paid and dismissed, the remaining dispute concerned the penalties; the taxpayer sent the IRS a $625,000 remittance designated as a cash bond deposit, but the IRS posted it as payment, fully satisfying the liabilities and releasing the lien. The court granted the IRS's motion to dismiss the case as moot, holding that complete payment of the tax liabilities left no unpaid amounts on which further collection action could be based and that verification or other challenges under section 6330 were therefore moot. The court distinguished precedent involving abatement of penalties rather than full payment and noted that refund claims would have to be pursued in district court or the Court of Federal Claims.
taxesprocedure
Louis P. Smaldino
United States Tax Court · 2021-11-10
Louis P. Smaldino owned and operated rental properties placed in an LLC that he controlled through a revocable trust. In 2013 he transferred about 8% of the LLC class B interests directly to an irrevocable dynasty trust benefiting his children and grandchildren and reported that transfer on his gift tax return; he also purportedly transferred 41% more to his wife, who immediately retransferred them to the same trust. The IRS determined that the wife’s involvement was ineffective for gift tax purposes and that Smaldino had made a taxable gift of 49% of the interests, resulting in a $1,154,000 deficiency after revaluation. The Tax Court agreed, holding that the indirect route through the wife did not alter the gift-tax characterization and valuing the 49% gift at $7,820,008 after subtracting the value of retained interests and applying a 36% combined discount to the LLC’s net asset value.
taxesbusiness & regulatoryproperty
Brian E. Harriss
United States Tax Court · 2021-03-11
The case involved Brian E. Harriss challenging IRS notices of deficiency for unreported income from wages and an early retirement distribution for tax years 2012-2014, along with penalties. The court found that the notice for 2012 was invalid due to the expired limitations period, but upheld the determinations for 2013 and 2014, ruling that Harriss had unreported gross income from his employers and was subject to the 10% additional tax under section 72(t) for the 2013 distribution. The reasoning was that Harriss received the payments as shown on W-2s and 1099-R but provided no valid basis to exclude them from gross income under section 61, and failed to show any exception to the additional tax.
taxes
Brian E. Harriss
United States Tax Court · 2021-03-11
This U.S. Tax Court case involved petitioner Brian E. Harriss, who filed 2012-2014 returns reporting zero wages despite receiving W-2 income from employers CH2M Hill Alaska and Anvil plus a 2013 retirement distribution from Fidelity, and who disputed the taxability of these amounts as arising from private arrangements outside federal authority. After the IRS issued notices of deficiency for unreported gross income and accuracy-related penalties (later conceding the 2012 limitations period and all penalties), the court addressed the validity of the notices, the unreported income determinations for 2013 and 2014, and liability for the section 72(t) 10% additional tax on the early retirement distribution. The court sustained the deficiencies, holding that Harriss received the reported amounts but failed to meet his burden of showing they were nontaxable under section 61, and imposed the additional tax because he provided no evidence of any statutory exception under section 72(t)(2).
taxes
Dana Ray Reynolds
United States Tax Court · 2021-01-26
This Tax Court case involved a collection due process proceeding in which petitioner Dana Ray Reynolds challenged IRS efforts to collect restitution-based assessments stemming from his 2010 criminal conviction for filing false tax returns. The assessments, totaling $193,812 plus interest for tax years 2000-2003, arose from a federal district court order requiring payment of criminal restitution. The court upheld the filing of a notice of federal tax lien and a proposed levy, sustaining the IRS actions except for conceded interest and penalties that the agency agreed to abate and correct. It reasoned that section 6201(a)(4) grants the IRS independent authority to assess and administratively collect such restitution, consistent with prior precedent in Carpenter v. Commissioner, and found no abuse of discretion in the underlying determinations.
taxescriminal lawprocedurefederal power
Kirgizia I. Grajales
United States Tax Court · 2021-01-25
The case involved a taxpayer who received early distributions from a qualified retirement plan in 2015 and did not report them as income on her tax return. The IRS determined she owed income tax on a portion of the distributions plus a 10% exaction under IRC section 72(t), but the taxpayer argued this exaction required written supervisory approval under section 6751(b)(1) as a penalty or additional amount. The Tax Court held that the section 72(t) exaction is a tax rather than a penalty, addition to tax, or additional amount, so the approval requirement does not apply. The court relied on its prior decisions characterizing the exaction as a tax for purposes of the Internal Revenue Code and concluded the taxpayer was liable for the $90.86 amount on the taxable early distributions. The decision was based on the statutory language, captions in section 72(t), and distinctions from bankruptcy contexts where it might be treated differently.
taxes