Ronald Lee Buch

The case involved Barrett Business Services, Inc., a professional employer organization that claimed Work Opportunity Tax Credits and Empowerment Zone Employment Credits on its tax returns for worksite employees hired by its clients during 2017 through 2020. The IRS disallowed the credits, determining that only common law employers qualify. Barrett argued it was eligible either as a statutory employer under section 3401(d)(1) or as an agent of the common law employer. The Tax Court granted summary judgment to the IRS, holding that the credits are available only to common law employers under the text of sections 51 and 1396 and supporting legislative history, and that statutory employers or agents do not qualify.

taxesbusiness & regulatory

Mission Organic Center, Inc., a state-legal marijuana dispensary, faced IRS collection actions for unpaid income taxes from 2016 to 2020 and submitted an offer-in-compromise to settle the liabilities. The IRS rejected the offer after calculating the taxpayer's reasonable collection potential while excluding business expenses that are nondeductible under I.R.C. § 280E, which disallows deductions or credits for trades or businesses involving controlled substances. The Tax Court held that the IRS settlement officer did not abuse discretion by applying the Internal Revenue Manual provisions that require disregarding such expenses, and that the Commissioner has authority under section 7122(d) to adopt this policy for evaluating offers-in-compromise.

taxesbusiness & regulatory

The case involved a notice partner filing a petition in the U.S. Tax Court to challenge a Notice of Final Partnership Administrative Adjustment (FPAA) issued to a partnership under the TEFRA rules, but the filing occurred 168 days after the FPAA was mailed to the tax matters partner. The court granted the Commissioner's motion to dismiss the petition for lack of jurisdiction, holding that the statutory deadlines in I.R.C. § 6226(a) and (b)—90 days for the tax matters partner and an additional 60 days for notice partners—are jurisdictional limits. The core reasoning rested on the statutory text placing the deadlines within the jurisdictional grant, the unworkability of the TEFRA scheme if tolling were allowed, and decades of consistent judicial and congressional treatment treating the periods as jurisdictional. The court further concluded that equitable tolling does not apply to these deadlines even apart from the jurisdictional analysis.

taxesprocedure

The case concerned the timeliness of a Notice of Final Partnership Adjustment issued by the IRS to JM Assets, LP, a partnership subject to the Bipartisan Budget Act of 2015 audit procedures. After the IRS notified the partnership of a proposed imputed underpayment in June 2022, the partnership submitted all required materials for a modification request in February 2023; the IRS then issued its final adjustment in December 2023. The court held that the adjustment was untimely under I.R.C. § 6235(a)(2) because it occurred more than 270 days after the partnership's submission. It reasoned that Treas. Reg. § 301.6235-1(b)(2)(A), which sought to extend the period until after the close of the modification request window, conflicts with the plain language of the statute. The court further held that an extended six-year limitations period under § 6235(c)(2) did not apply because the partnership had adequately disclosed the relevant income items.

taxesbusiness & regulatoryprocedure

Soroban Capital Partners LP, a limited partnership that managed investments, calculated its net earnings from self-employment for 2016 and 2017 by excluding the limited partners' shares of partnership income under section 1402(a)(13) while including only guaranteed payments made to them. The Commissioner of Internal Revenue issued Notices of Final Partnership Administrative Adjustment that increased the reported net earnings from self-employment. The Tax Court applied a functional analysis to assess whether the limited partners were acting in that capacity, finding that they were essential to generating the firm's income, exercised day-to-day managerial control, worked full time for the business, and contributed little capital relative to their income shares. The court therefore held that the limited partners' distributive shares were not excludable and constituted net earnings from self-employment.

taxesbusiness & regulatory

This case involved Dealers Auto Auction of Southwest LLC, which receives cash payments exceeding $10,000 in its auto auction business and is required under IRC section 6050I to file and furnish Forms 8300 reporting such transactions. After failing to file all required returns for 2016, the IRS assessed penalties under sections 6721 and 6722 and pursued collection; the company challenged the penalties in Tax Court, claiming reasonable cause based on its use of specialized software intended to handle the filings. The court held that Dealers Auto did not establish reasonable cause, as the record failed to show either a software malfunction or that the company had adequate controls, training, or monitoring in place to ensure compliance. It noted prior similar failures in 2014 and a drop in filings that should have alerted the company to issues, but no explanation or proof of diligent efforts was provided. The court therefore sustained the penalties and decided in favor of the Commissioner.

taxesbusiness & regulatory

This case involved taxpayers Robert and Kegan Donlan who electronically filed a petition in the U.S. Tax Court using the court's online petition generator in response to a notice of deficiency for tax year 2024. The Commissioner moved to dismiss for lack of jurisdiction, arguing that the petition was invalid because it lacked handwritten signatures and instead only had typewritten names in a signature block. The Tax Court denied the motion, ruling that it had jurisdiction over the petition. The court reasoned that Tax Court Rule 23(a)(3) provides that a person's name on a signature block of a document authorized to be filed electronically constitutes the person's signature, and the online generator produced petitions meeting this standard.

taxesprocedure

The case concerned whether the IRS could assess tax deficiencies, additions to tax, and civil fraud penalties against Dennis Simpson and Scenic Trust for 2012 and 2013 from a direct-mail subscription business, after the normal three-year statute of limitations had expired, by relying on the fraud exception. The Tax Court ruled that the Commissioner failed to prove fraud by clear and convincing evidence for the 2012 returns of Simpson and Scenic Trust or for Scenic Trust's 2013 return, so those determinations were time-barred. For Simpson's 2013 year, the court found the filed return invalid (keeping the period open), established the deficiency amount, and imposed the standard addition to tax for failure to file but not the increased rate for fraudulent failure to file.

taxes

The case involved Jeffrey and Lori Hoyal and Crater Lake Trust challenging IRS notices of deficiency for tax years 2012 and 2013, arguing that the assessments were barred by the three-year statute of limitations under section 6501. The Tax Court examined whether the petitioners had filed false or fraudulent returns with intent to evade tax, which would extend the limitations period indefinitely. After reviewing various badges of fraud, such as underreporting income, lack of credibility in testimony, and presentation of altered documents, the court found that the Commissioner failed to prove fraudulent intent by clear and convincing evidence. Therefore, the court held that the statute of limitations barred the IRS's determinations, entering decisions in favor of the petitioners.

taxesprocedure

The case involved Catherine L. LaRosa challenging the IRS's denial of her request for innocent spouse relief under I.R.C. § 6015(f) after the agency sought to collect an erroneous refund of statutory interest (but no tax) issued for 1981 and 1982. The Tax Court held that it had jurisdiction because a timely petition was filed, but ruled that Mrs. LaRosa was ineligible for relief. The core reasoning was that section 6015(f) authorizes equitable relief only for unpaid taxes or deficiencies, the couple's tax liabilities had been fully paid, and an erroneous refund consisting solely of interest (not involving any recalculation of tax) did not revive or create an unpaid tax or deficiency.

taxes

This case involved a partnership, SN Worthington Holdings LLC, that elected into the Bipartisan Budget Act (BBA) partnership audit and litigation procedures for its 2016 return rather than remaining under the prior TEFRA rules. The IRS examined the return, determined the election invalid based on doubts about the partnership's assets to pay any imputed underpayment, and issued a notice of final partnership administrative adjustment (FPAA) under TEFRA procedures. The tax matters partner moved to dismiss the Tax Court proceeding for lack of jurisdiction, arguing the FPAA was invalid. The court held that the election was valid because the partnership complied with the plain requirements of Treas. Reg. § 301.9100-22(b)(2) by submitting the required statement, rendering the TEFRA FPAA invalid and depriving the court of jurisdiction. The court further held that equitable estoppel did not apply to bar the partnership's position because the IRS had all relevant facts and the dispute concerned application of law to those facts.

taxesprocedurebusiness & regulatory

This case involved Angela M. Hammock challenging IRS collection actions including a notice of federal tax lien and intent to levy related to unpaid employment taxes and section 6672 penalties from Scorpion Performance, Inc., a company she inherited after her parents' death. The Tax Court addressed whether the Commissioner abused discretion in a collection due process hearing under sections 6320 and 6330 by sustaining those notices. The court decided for the respondent and sustained the notice of determination. Core reasoning was that Hammock did not timely challenge the underlying liability, the settlement officer verified all administrative steps, and no collection alternatives were offered.

taxesbusiness & regulatory

In this U.S. Tax Court case, Tribune Media contributed the Chicago Cubs and related assets to a newly formed partnership (CBH) with the Ricketts family in exchange for cash, resulting in a disguised sale under tax rules. The Commissioner challenged the tax treatment, arguing that debt funded by the Ricketts family was not bona fide and that Tribune's guarantee on commercial debt was too remote to qualify for debt-financed distribution treatment, making the transaction taxable. The court held that the Ricketts-funded debt was equity and disregarded for tax purposes, but Tribune's guarantee of the senior commercial debt was bona fide, allowing a nontaxable debt-financed portion of the distribution; it also ruled that certain expenses paid to facilitate the deal must be capitalized rather than deducted as abandoned transaction losses.

taxesbusiness & regulatory

In this U.S. Tax Court case, Tribune Media Company contributed the Chicago Cubs and related assets to a newly formed partnership, Chicago Baseball Holdings, LLC, alongside cash from the Ricketts family, followed by a cash distribution back to Tribune, which the parties agreed constituted a disguised sale under tax rules. The Commissioner challenged the tax treatment, arguing that certain debt (sub debt funded by the Ricketts family) was not bona fide and that Tribune's guarantee on senior debt should be disregarded due to low risk of enforcement, while also disputing capitalization of certain expenses. The court held that the sub debt was equity rather than bona fide debt and thus could not reduce Tribune's taxable gain from the disguised sale, but the senior debt guarantee was bona fide, making the associated distribution nontaxable as debt-financed; it further ruled that $2.5 million in expenses related to an alternative buyer group must be capitalized into the transaction under section 263 rather than deducted as an abandonment loss.

taxesbusiness & regulatory

This U.S. Tax Court case involved Robert S. Clark, who owned an auto body shop, rental properties, vehicles, and a large home but reported taxable income of only $114 or $0 for tax years 2011-2014. The Commissioner determined deficiencies and asserted civil fraud penalties under section 6663, alleging Clark had fraudulently underreported income. The court found the Commissioner proved fraud by clear and convincing evidence, based on Clark's lifestyle and asset acquisitions inconsistent with reported income, false statements to IRS agents, failure to maintain or provide records, and attempts to conceal finances. It upheld the deficiencies and penalties after finding the supervisor approval requirements were met. The court also addressed characterization of certain deposits as rental income rather than business receipts.

taxesprocedure

The case involved Robert S. Clark, who owned an auto body shop, rental properties, a home, and multiple vehicles, but reported taxable income of $114, $0, $0, and $0 for tax years 2011 through 2014. The IRS determined that Clark had substantially underreported his income and imposed civil fraud penalties under section 6663. The Tax Court held that the Commissioner proved by clear and convincing evidence that Clark fraudulently underreported his income, based on the mismatch between his reported income and his assets and expenditures, his lack of records, misleading statements to the revenue agent, and other indicia of fraud. The court also upheld the fraud penalties after confirming proper supervisory approval.

taxes

The case concerned petitioners Wai-Cheung Wilson Chow and Deanne Chow, who submitted a whistleblower claim to the IRS alleging that their former landlord underreported rental income by collecting cash payments from multiple properties. The Whistleblower Office rejected the claim after an IRS classifier reviewed agency databases and found the allegations not credible, as records showed the target owned and reported income from only one property. The Chows petitioned the Tax Court for review of the denial. Relying on the administrative record and applying an abuse-of-discretion standard under the Administrative Procedure Act, the court sustained the rejection, holding that the determination was neither arbitrary nor capricious and that the IRS had no obligation to conduct further investigation or contact the claimants before rejecting a non-credible claim.

taxesprocedure

Nilda Vera sought innocent spouse relief from joint federal income tax liabilities for 2010 and 2013 after the IRS assessed deficiencies and underpayments. The Commissioner first denied relief for 2013 on the merits, but Vera's petition from that denial was untimely and dismissed for lack of jurisdiction; she later resubmitted a request covering both years, prompting a second final determination that again denied relief on the merits for 2010 and 2013. Vera timely petitioned the Tax Court from the second determination, and the Commissioner moved to dismiss the 2013 portion for lack of jurisdiction. The court held that it has jurisdiction over both years because the March 2019 determination unambiguously denied relief on the merits as to each year and the petition was filed within the required period.

taxesprocedure

Leon Max, the founder and owner of a successful women's clothing company (LMI), claimed federal tax credits under Internal Revenue Code section 41 for increasing research activities based on expenses from the company's garment design process in tax years 2011 and 2012. The IRS disallowed the credits, and the Tax Court upheld that disallowance. The court found that LMI's nine-step design process, which involved sketching, patternmaking, sampling, and trend-influenced adjustments for various retail lines, did not qualify as research because it was not a process of experimentation in the scientific sense, was not based on hard sciences or high technology, and primarily addressed style, taste, and seasonal factors rather than qualifying purposes. The court also noted that the taxpayer failed to show that substantially all (at least 80%) of the claimed activities met the experimentation requirement.

taxesbusiness & regulatory

The case involved the estate of Miriam Warne challenging IRS notices of deficiency for gift and estate taxes related to transfers of interests in LLCs holding California real estate ground leases and a split charitable donation. The Tax Court valued the properties and determined appropriate discounts for lack of control and marketability based on expert testimony from both sides, making its own adjustments where analyses were flawed. It also held that a discount applies to the charitable contribution deduction for the split donation of an LLC interest to a church and family foundation, following precedent that the value to each recipient determines the deduction. Additionally, an addition to tax was imposed for late filing of the gift tax return.

taxespropertybusiness & regulatory