Michael D. Brown
United States Tax Court · 2025-12-04
This U.S. Tax Court case involved petitioner Michael D. Brown challenging a Notice of Determination from the IRS Independent Office of Appeals that sustained proposed levies to collect income taxes for 2009, 2011, and 2014, plus penalties for several earlier years. The sole disputed issue was whether Brown's April 2018 offer-in-compromise had been deemed accepted by operation of Internal Revenue Code section 7122(f) because the IRS had not formally rejected it within 24 months. The court held that its prior reviewed opinion in a related case, Brown v. Commissioner, 158 T.C. 187 (2022), which found the same offer had been rejected in November 2018, was binding precedent and therefore the offer was not deemed accepted. On that basis, the court denied Brown's motion for summary judgment, awarded summary judgment to the Commissioner under Tax Court Rule 121(g), and sustained the Notice of Determination while withholding entry of decision pending further proceedings on Brown's state of residence at the time the petition was filed.
taxesprocedure
Anaheim Arena Management, LLC, H&S Investments I, LP, a Partner Other Than the Tax Matters Partner
United States Tax Court · 2025-07-08
This case involved Anaheim Arena Management, LLC (AAM), which claimed a large bad-debt deduction on its 2015 tax return for advances it made to fund operations at the Honda Center arena. The IRS issued a final partnership administrative adjustment disallowing the $51 million deduction and asserting an accuracy-related penalty. The Tax Court sustained the disallowance, holding that the advances did not qualify as bona fide debts under the multi-factor test because they lacked a fixed maturity date, enforceable repayment rights, and other debt characteristics, and were instead more like equity contributions. However, the court rejected the penalty, finding that AAM had reasonable cause and acted in good faith by relying on advice from tax professionals who had analyzed the deductibility of the advances.
taxesbusiness & regulatory
Anaheim Arena Management, LLC, H&S Investments I, LP, a Partner Other Than the Tax Matters Partner
United States Tax Court · 2025-06-30
This United States Tax Court case involved a TEFRA partnership-level proceeding in which H&S Investments I, LP challenged an IRS Final Partnership Administrative Adjustment that disallowed a $51,465,228 bad-debt deduction claimed by Anaheim Arena Management, LLC (AAM) for advances it made to fund the Honda Center’s operations in 2015 and that also asserted an accuracy-related penalty. The court sustained the disallowance of the deduction, holding that the advances did not qualify as bona fide debts under the multi-factor analysis of factors such as the instruments’ names, maturity dates, repayment sources, enforcement rights, management participation, creditor status, parties’ intent, capitalization, identity of interest, and ability to obtain outside financing. The court rejected the accuracy-related penalty, however, because AAM had reasonable cause and acted in good faith by relying on the advice of tax professionals who had concluded the deduction was allowable.
taxesbusiness & regulatory
Kirk Stevens & Shannon Stevens
United States Tax Court · 2025-06-24
This Tax Court case concerned whether Kirk and Shannon Stevens could claim interest deductions on their 2014, 2015, and 2016 federal income tax returns based on two promissory notes issued in 2014 and 2016. The court held that the notes did not constitute true indebtedness, disallowing over $34 million in claimed interest deductions across the years and upholding negligence penalties under section 6662. The core reasoning was that the notes were structured with accompanying option agreements in a way that eliminated any realistic duration-gap scenario where the debt would remain outstanding independently, rendering the arrangements economically equivalent to equity rather than debt. The court also found that the penalties had been properly approved in writing by a supervisor before the notices of deficiency were issued.
taxes
Kirk Stevens & Shannon Stevens
United States Tax Court · 2025-05-15
The case involved petitioners Kirk and Shannon Stevens challenging IRS notices of deficiency that disallowed large interest deductions claimed on their joint income tax returns for 2014, 2015, and 2016, along with related accuracy-related penalties. The Tax Court held that the 2014 and 2016 notes did not qualify as true indebtedness, so the claimed interest deductions were properly disallowed. The court reasoned that potential duration-gap scenarios were nonexistent, that analogies to instruments like Formosa bonds or interest-rate caps were unpersuasive, and that the notes lacked the characteristics of genuine debt. The court also upheld the penalties, concluding that petitioners were negligent without reasonable cause and that supervisor approval of the penalties was timely under applicable Ninth Circuit precedent.
taxes
Karl W. Leo & Fay L. Leo
United States Tax Court · 2025-01-29
The case involved the valuation of the Bankhead Property, consisting of 136.4 acres and buildings in Mississippi, which the Leos contributed to charity in 2013 and for which they claimed a charitable contribution deduction carried over to 2016 and 2017. The Leos valued the property at $12,425,000 (with $15,800,000 reported on the return), while the Commissioner determined a value of $4,050,000, resulting in tax deficiencies and a 40% gross valuation misstatement penalty. The Tax Court held that the correct value was $4,050,000, based on the persuasive expert testimony supporting that figure over the petitioners' experts, thereby sustaining the deficiencies. The court also upheld the penalty because the claimed value exceeded 200% of the determined value, with no reasonable cause exception available for gross valuation misstatements.
taxes