Cary Douglas Pugh

The case involved taxpayers Alvie N. Paschall and Patricia C. Paschall challenging an IRS notice of deficiency for unreported income from cryptocurrency staking rewards in 2021. The Tax Court held that the $33,354 in staking rewards constituted taxable gross income under section 61. The court reasoned that the rewards represented an accession to wealth clearly realized over which the taxpayers had complete dominion, rejecting arguments that they were akin to a loan, return of capital, or self-created property. The distribution increased the supply of the cryptocurrency, and the taxpayers did not create the tokens themselves through their staking activities.

taxes

The case involved petitioners Stephen and Amanda Martin, who claimed a charitable contribution deduction under Internal Revenue Code section 170 for donating a 50% interest in Utah property to Highland City in 2018, which the IRS disallowed in a Notice of Deficiency. The Tax Court addressed the Commissioner's motion for summary judgment, which argued that the deduction failed because petitioners did not obtain a valid contemporaneous written acknowledgment (CWA) satisfying section 170(f)(8). The court examined the 2018 warranty deed, a joint letter from the donors, and the city council agenda report, finding that none of the documents (individually or together) included the required affirmative statement that the donee provided no goods or services in exchange or properly addressed any consideration. As a result, the court granted summary judgment to the Commissioner and disallowed the entire deduction related to the property.

taxes

The case involved petitioners Clint and Jenifer Martin challenging the IRS's disallowance of a charitable contribution deduction claimed on their 2018 return for a 50% interest in 13.33 acres of Utah property donated to Highland City. The Tax Court considered the Commissioner's motion for partial summary judgment, which argued that the donation failed to meet the contemporaneous written acknowledgment (CWA) requirements under section 170(f)(8). The court granted the motion, concluding that the 2018 warranty deed (which referenced $10 and other consideration) and joint letter did not affirmatively state that no consideration was provided or estimate the value of any consideration provided. As a result, the deduction was disallowed in full, with only the accuracy-related penalty issue remaining for trial.

taxespropertyprocedure

The case concerned a partnership's petition challenging an IRS Final Partnership Administrative Adjustment that disallowed a charitable contribution deduction claimed for the donation of a conservation easement, along with associated penalties. After the tax matters partner reached a settlement with the IRS, 40 other partners filed late motions seeking to participate in the Tax Court proceedings to reject the settlement terms. The court denied the motions, holding that the partners had not made the substantial showing required under Rule 248(b)(4) to justify participation out of time, given their failure to act earlier under Rules 245(b) or 245(c) and the lack of specific facts explaining their delay or the tax matters partner's alleged shortcomings.

taxesprocedure

The case involved petitioners Jabir Algarawi and Amira Hachim challenging IRS notices of deficiency for federal income taxes in 2020 and 2021, which attributed unreported discharge of indebtedness income of $5,615 in 2020, unreported business income from Algarawi's tax preparation sole proprietorship of $72,130 in 2020 and $93,614 in 2021, and related accuracy-related penalties under section 6662. The Tax Court held that the petitioners failed to meet their burden of proving the IRS determinations incorrect, as they provided no records or substantiation for the cash donations they claimed were nontaxable or for their business receipts, and the IRS's bank deposits analysis supported the underreporting findings. The court also upheld the penalties, finding that the IRS met its burden of production through supervisor approval and evidence of negligence or substantial understatements, while petitioners offered no reasonable cause defense despite Algarawi's experience as a tax preparer. An evidentiary issue regarding certain exhibits was resolved in favor of exclusion where they lacked foundation.

taxesbusiness & regulatory

In this consolidated U.S. Tax Court case, petitioners Mark and Jessica Chernomordikov challenged IRS notices of deficiency asserting large tax deficiencies and additions to tax under sections 6651 and 6654 for tax years 2012 through 2014, primarily based on unreported other income, business gross receipts from ONY Sales, Inc., and related penalties for failure to file and pay. After the parties resolved issues for 2014 and narrowed those for 2012 and 2013, the remaining disputes centered on Mr. Chernomordikov's liability for unreported income, eligibility for cost of goods sold reductions, petitioners' entitlement to married filing jointly status and community property treatment for 2013, and the computation of additions to tax. The court relied primarily on documentary evidence due to credibility concerns with witness testimony and concluded that petitioners qualified for married filing jointly status for 2013, that the required annual payment for the section 6654 penalty was based on 90% of the 2013 tax liability, and that Mrs. Chernomordikov was not separately liable for an estimated tax penalty. Decisions were directed to be entered under Rule 155 following these determinations.

taxesbusiness & regulatoryfamily law

This U.S. Tax Court case involved petitioners Andrew and Sara Berry challenging a Notice of Deficiency for their 2016 tax year, in which the IRS disallowed certain business expense deductions related to Merrill & Associates Real Estate and Castle Construction, determined unreported gross receipts from Castle, and increased their reported income from Phoenix Construction & Remodeling, Inc. (PCR), an S corporation. After various concessions by both parties, the remaining issues were whether Andrew Berry was a 50% shareholder of PCR and whether petitioners failed to report $77,195 of income attributable to that interest, along with their liability for an accuracy-related penalty under section 6662(a). The court found that Andrew Berry was a 50% owner of PCR based on ownership records, his work on its behalf, and his role as an authorized signer on its bank account, and that petitioners underreported the associated income; it also sustained the penalty because the understatement was substantial and petitioners failed to maintain adequate records or make reasonable efforts to comply with the tax code. The decision will be entered under Rule 155.

taxesbusiness & regulatory

The case concerned petitioners Craig K. Potts and Kristen H. Potts, who challenged an IRS determination of a $431,691 income tax deficiency and $86,338 accuracy-related penalty for 2014, stemming mainly from disallowance of a theft loss deduction under section 165 tied to their investments in Carib Gaming and a planned casino project in the Turks and Caicos Islands. After concessions by the parties, the Tax Court focused on whether the claimed theft loss was allowable and whether petitioners qualified for relief from the penalty. The court concluded that petitioners did not meet their burden to show reasonable cause and good faith, noting the absence of documentation that their tax preparer had received necessary information or opined on the deduction's validity. It therefore sustained the penalty and directed entry of decision under Rule 155.

taxesbusiness & regulatory

The case involved a partnership subject to TEFRA procedures that donated a conservation easement, claimed a charitable contribution deduction under I.R.C. § 170, and faced an IRS disallowance plus a civil fraud penalty under I.R.C. § 6663(a). The tax matters partner petitioned the Tax Court and moved for partial summary judgment, arguing that SEC v. Jarkesy barred the court from adjudicating the penalty because the Seventh Amendment guarantees a jury trial. The court denied the motion and held that the Seventh Amendment does not apply to suits against the sovereign, that Congress has not consented to jury trials in TEFRA actions, and that the public rights exception covers the statutory civil tax fraud penalty.

taxesprocedure

This U.S. Tax Court case involved petitioner Paul H. Christiansen, who received $55,142 in wages and $2,223 in annuity payments in 2020 but filed a Form 1040 reporting no wages or taxable income and claiming a refund of withholdings and credits. The IRS issued a notice of deficiency for $5,685 in tax plus a $1,137 accuracy-related penalty under section 6662(a), which the petitioner challenged by arguing that the tax system is voluntary, no statute imposes liability, and OMB approval was lacking for reporting requirements. The court held that the petitioner bore the burden of proof after the IRS linked him to the unreported income via Forms W-2 and 1099-R, rejected his positions as frivolous and previously addressed in similar cases, and sustained both the deficiency and penalty because the supervisor approval requirement under section 6751(b) was met. The court also imposed a $1,000 penalty under section 6673 for maintaining groundless arguments despite prior warnings.

taxesfederal power

In this U.S. Tax Court case, Facebook challenged IRS adjustments to its 2010 cost-sharing arrangement with its Irish subsidiary, which involved platform contribution transactions and cost-sharing payments for intangible assets like online platform technology and user data rights valued at $6.3 billion by the company versus $19.945 billion by the IRS expert. The court ruled that only Facebook made nonroutine platform contributions, allowing the income method for valuation, but found the IRS abused its discretion by using incorrect inputs for revenue projections, discount rates, and alternatives, requiring corrections to reach an arm's-length value. It upheld the validity of the relevant temporary regulations under I.R.C. § 482, confirmed the income method as best with reliable inputs, and held that the IRS did not abuse discretion in adjusting reasonably anticipated benefits shares for cost-sharing payments.

taxesbusiness & regulatory

In this U.S. Tax Court case, petitioner Charlie Campana challenged a Notice of Deficiency for tax year 2021 that determined $18,064 in unreported income tax, a 10% additional tax of $5,667 on an early retirement distribution, and a $3,238 accuracy-related penalty. The IRS asserted that Campana failed to report $99 of interest income and a $56,673 hardship withdrawal from his retirement account (taken before age 59½), and he did not report the distribution as subject to the additional tax. Campana conceded receiving both amounts but argued that a denied refund claim from 2017 should offset his 2021 liability; the court held it lacked jurisdiction over the 2017 claim. The court sustained the IRS determinations on all issues, finding that the burden of proof remained with the taxpayer after the IRS produced information returns, that no exceptions to the early-distribution tax applied, and that the taxpayer failed to show reasonable cause to avoid the accuracy penalty.

taxes

This Tax Court case involved petitioner Ruben T. Varela's challenge to an IRS determination upholding a proposed levy to collect a $5,000 section 6702(a) frivolous return penalty assessed for his 2017 tax year, after he filed a Form 1040EZ reporting zero income and wages along with substitute W-2 forms and claimed a refund of withheld taxes. The court granted the IRS's motion for summary judgment and denied the petitioner's competing motion and motion to restrain assessment, while declining to impose a section 6673 penalty. The core reasoning was that the administrative record demonstrated Appeals had properly verified compliance with applicable law (including the manager's signature on Form 8278 satisfying section 6751(b)(1)), considered the taxpayer's arguments, and balanced collection efficiency against intrusiveness under section 6330(c)(3), with no abuse of discretion; the court also noted its lack of jurisdiction over related refund claims from other years.

taxesprocedure

This case involves petitioners James E. Keith and Julie Keith challenging the IRS Independent Office of Appeals' decision to uphold a proposed levy to collect unpaid taxes for tax years 2010 and 2012-2016 after they requested collection alternatives including installment agreements. The petitioners disputed the IRS's calculation of their monthly ability to pay, which had included a $24,000 loan repayment as income, and provided documentation such as bank statements and tax returns, though some requested items like a Form 433-D and a legible 2021 return were missing. The Tax Court granted the petitioners' motion to remand and denied the IRS's motion for summary judgment. The court reasoned that shortcomings existed on both sides in the administrative process, with the IRS failing to carefully review submitted documents and the petitioners not providing all requested materials, making remand appropriate to reconsider ability to pay and allow final document submission, while confirming no proper challenge to underlying liability occurred.

taxesprocedure

This case involves petitioners Brett Stevan Jurries and Sherise Julie Bruce disputing a tax deficiency for 2016 after the IRS disallowed deductions for unreimbursed employee business expenses on their joint return. Mr. Jurries sought additional relief from joint and several liability under section 6015 beyond the proportionate relief already granted by the IRS under section 6015(c). The court decided that Mr. Jurries is not entitled to further relief, holding that he failed to establish fraud by Ms. Bruce as required for equitable relief under section 6015(f) and Rev. Proc. 2013-34. The reasoning centered on Mr. Jurries's knowledge of the vehicle expenses being nondeductible, his failure to review the return despite having the opportunity, and his receipt of part of the tax refund.

taxesfamily law

This case involved a taxpayer challenging the IRS's filing of a federal tax lien for unpaid income taxes from 2004 to 2012 after a collection due process hearing. The Tax Court examined whether the IRS Office of Appeals properly verified that all legal requirements, including the issuance of notices of deficiency, were met under section 6330(c)(1). The court found that the settlement officer relied only on computerized transcripts without examining underlying documents like the notices of deficiency or Forms 3877, despite the taxpayer's challenges to their existence and mailing. As a result, the court concluded that the verification requirement was not satisfied and that the IRS abused its discretion in sustaining the lien.

taxesprocedure

This U.S. Tax Court case involved petitioner Libia Higuita Wheeler, who filed a separate 2015 return after her divorce and omitted S corporation Schedule K-1 income and related estimated tax payments from Turner Investments, leading the IRS to issue a notice of deficiency for $12,059. She sought equitable relief from the resulting tax liability under section 66(c) based on provisions in the divorce decree allocating 2015 taxes and her prior joint filing history. The court held that she was not entitled to relief, reasoning that the omitted income was attributable to her directly as a shareholder under section 1366 rather than solely by community property law, she did not qualify for any enumerated exceptions such as nominal ownership or abuse, and the circumstances did not otherwise support equitable relief under Rev. Proc. 2013-34. The decision reviewed the denial de novo and upheld it.

taxesfamily law

The case concerned the Estate of Charles P. Morgan and Roxanna L. Morgan's challenge to a 2012 notice of deficiency that disallowed Schedule C and E deductions for expenses of Falcon, LLC and Falcon Legacy, LLC, disallowed an NOL carryover from prior years, and asserted a section 6662(a) accuracy-related penalty. After the Morgans' homebuilding entities entered receivership in 2009, a court-appointed receiver assumed sole control of their operations and assets, preventing the Morgans from incurring expenses or directing business activities. The Tax Court held that the Morgans were not carrying on a trade or business in 2012, so the claimed deductions and NOL were disallowed, but found they had reasonably relied in good faith on their long-time tax advisor's advice and therefore were not liable for the penalty.

taxesbusiness & regulatory

This U.S. Tax Court case involved petitioner Alexander Bernard Wathen, a bankruptcy lawyer, challenging IRS notices of deficiency for tax years 2010 and 2011 that assessed unreported gross receipts on Schedules C, unreported partnership income on Schedule E, disallowed deductions for travel and office expenses, additions to tax under section 6651(a)(1) for late filing, and accuracy-related penalties under section 6662(a) for substantial understatements. The court addressed whether a prior bankruptcy proceeding barred the deficiencies and penalties, and it considered the taxpayer's entitlement to deductions and defenses such as reasonable cause. It held that the bankruptcy proceeding did not preclude the IRS actions, sustained the deficiencies with limited concessions and partial allowance of office expense deductions for court filing fees and research services, and upheld the additions to tax and penalties because the taxpayer failed to maintain adequate records and could not establish reasonable cause. The reasoning centered on the taxpayer's lack of documentation for expenses and income reporting, along with timely supervisory approval for the penalties.

taxesbusiness & regulatory

The case involved whether Engen Robert Nurumbi properly reported his 2015 income from an Uber account that he controlled, under which multiple drivers operated, including unreported gross receipts of $542,420 and other income of $755, along with claimed Schedule C deductions and an addition to tax for late filing of his return. The Tax Court held that Nurumbi failed to report the specified Uber income, was limited to the Schedule C deductions already allowed by the IRS, and was liable for the section 6651(a)(1) addition to tax. The court reasoned that all fare proceeds constituted gross receipts reportable on his Schedule C, that he provided no adequate records or substantiation to support additional deductions for payments to drivers or other expenses, and that his mistaken belief about prior filing did not constitute reasonable cause for the untimely return filed over a year late.

taxesbusiness & regulatory