David Gustafson

The case involved Vitaly Nikolaevich Baturin, a Russian citizen on a J-1 visa working as a research scientist at a Department of Energy facility, who received payments in 2010 and 2011 that he reported on his tax returns but claimed were exempt from U.S. income tax under Article 18 of the U.S.-Russia tax treaty as a grant or similar payment. The IRS audited and determined a deficiency, asserting the income was taxable compensation; after an initial Tax Court ruling for Baturin was reversed and remanded by the Fourth Circuit, the Tax Court addressed whether the payments constituted a quid pro quo for services. On remand, the court granted the Commissioner's motion for summary judgment, finding no genuine dispute of material fact. The core reasoning was that the undisputed facts showed the payments were ordinary salary and benefits provided in exchange for Baturin's full-time work on specific projects under employment policies and supervision, rather than a nontaxable grant, as confirmed by comparisons to relevant revenue rulings and the treaty's terms.

taxes

The case involved Inga I. Kramarenko, a Russian citizen working as a post-doctoral researcher at the Medical University of South Carolina, who reported her salary as tax-exempt under Article 18 of the U.S.-Russia tax treaty on the grounds that it constituted a grant rather than wages. The IRS determined that the payments were taxable compensation for services performed and assessed accuracy-related penalties under I.R.C. § 6662. The Tax Court held that the salary was not exempt because it arose from an employer-employee relationship involving a substantial quid pro quo for labor, following the Fourth Circuit's decision in Baturin v. Commissioner, and that Kramarenko was liable for the penalties due to lack of reasonable cause or good faith. The court found that she had received W-2 forms reporting the income as wages and had made additional misrepresentations on her returns without seeking professional tax advice.

taxes

This U.S. Tax Court case involved petitioner Lawrence Leroy Henry, who with his wife operated businesses providing tax and financial services and failed to file federal income tax returns for 2011 through 2014. The IRS used bank deposit analysis to determine over $1.7 million in tax deficiencies plus additions to tax for failure to file, fraudulent failure to file, and failure to pay estimated taxes; Henry later submitted late returns, and the IRS accepted the reported income but disputed many deductions while asserting additional cancellation of indebtedness income. The court held that Henry was not liable for the cancellation of indebtedness income because the IRS failed to prove he was not insolvent, allowed slightly more business expense deductions than the IRS had conceded after substantiation, and found the IRS did not prove fraudulent intent by clear and convincing evidence so no section 6651(f) addition applied. However, the court sustained the non-fraudulent failure-to-file addition under section 6651(a)(1), the failure-to-pay addition under section 6651(a)(2), and the estimated tax addition under section 6654.

taxesbusiness & regulatoryprocedure

This case involved a Tax Court petition under Internal Revenue Code section 7623(b)(4) seeking review of the IRS Whistleblower Office's denial of an award claim filed by Joseph A. Insinga regarding multiple target taxpayers. After Insinga died in 2021 while the case was pending, his estate moved under Tax Court Rule 63(a) to substitute itself as petitioner and continue the litigation. The court held that its jurisdiction over the whistleblower award appeal survived the petitioner's death, the claim itself was not extinguished, and the estate had standing to proceed as the proper party. The reasoning drew on the absence of contrary language in section 7623, precedent from deficiency cases where death does not divest jurisdiction, and a related Treasury regulation permitting substitution in administrative whistleblower proceedings.

taxesprocedure

The case involved Today's Health Care II LLC, a Colorado company that grew, produced, and sold medical marijuana products. On its 2014 and 2015 tax returns as a C corporation, the company reduced gross receipts for costs of goods sold, claimed deductions for ordinary business expenses, and deducted net operating losses carried forward from prior years. The IRS allowed the costs of goods sold but disallowed the expense deductions and NOLs under IRC section 280E, which prohibits deductions for trades or businesses trafficking in controlled substances, and issued a notice of deficiency with resulting tax deficiencies and penalties. The company petitioned the Tax Court arguing that section 280E violates the Eighth and Sixteenth Amendments, but the court held that the provision does not violate those amendments, following its own prior precedent and that of the Tenth Circuit.

taxesbusiness & regulatorycriminal law

This case involved petitioners who claimed charitable contribution deductions based on their investments in partnerships later found to have reported fraudulent deductions; after TEFRA proceedings concluded in 2013 with stipulated decisions disallowing the deductions for 1997 and 1998, the IRS assessed additional tax and interest, prompting petitioners to seek abatement of nearly 13 years of interest due to alleged IRS delays. Petitioners requested abatement under sections 6404(a) and 6404(e) during a Collection Due Process hearing, but the IRS Office of Appeals denied the request, leading to this Tax Court petition. The court granted the Commissioner's motion for summary judgment in part, ruling that section 6404(b) bars any abatement claim under 6404(a) for income tax interest and that Appeals did not abuse its discretion in denying abatement under 6404(e) for most periods because no ministerial or managerial acts caused unreasonable delay. However, the court denied summary judgment as to one approximately five-month period in 2012-2013, finding that further proceedings were needed to determine whether delay in signing stipulated decisions constituted a qualifying act under 6404(e).

taxesprocedure