Elizabeth Ann Copeland

The case involved Keith and Rhonda Schumacher, who operated Schumacher Quarter Horses as a sole proprietorship breeding and training show horses. The IRS examined their 2017-2019 tax returns and disallowed deductions for these activities under section 183, determining they were not engaged in for profit, leading to tax deficiencies and accuracy-related penalties. The Tax Court held that the Schumachers' horse activities lacked a profit motive based on an evaluation of facts and circumstances, including their lack of profitability over years and other factors, thus disallowing the business expense deductions. However, the court found that the Schumachers had reasonable cause and good faith due to reliance on professional tax advice, so they were not liable for the penalties.

taxesbusiness & regulatory

This U.S. Tax Court case involved Jonathan D. Sawyer, who owned a family printing business and held a life insurance policy on himself. After taking loans against the policy to support the business, the policy terminated automatically in 2015 when the loan balances exceeded its cash surrender value, leading the IRS to issue a notice of deficiency for unreported income and additions to tax for failing to file and pay on time. The court held that Sawyer constructively received $160,900 in taxable income upon termination because the loans triggered cancellation under the policy terms, creating income without cash distribution. It allowed a partial deduction for investment interest paid on the loans up to the amount of net investment income but found him liable for the failure-to-file addition due to lack of reasonable cause, while excusing the failure-to-pay addition based on demonstrated inability to pay despite ordinary business care. The decision turned on application of tax rules for life insurance policy terminations and additions to tax under sections 6651(a)(1) and (a)(2).

taxes

The case concerned whether Thermal Circuits, Inc., a C corporation that manufactures foil heating components, had to include in its gross income approximately $4.3 million that NVT provided in 2017 and 2018 to fund an expansion of Thermal's leased manufacturing facility. Thermal did not report any of the payments on its 2017 or 2018 corporate tax returns, leading the IRS to issue notices of deficiency asserting income inclusions and accuracy-related penalties. The Tax Court held that Thermal must include the entire amount in income because it received the funds and obtained possession and use of the resulting leasehold improvements. The court reasoned that the payments constituted taxable income under general principles of federal income taxation, though it found Thermal had reasonable cause for its position and therefore was not liable for the accuracy-related penalty.

taxesbusiness & regulatory

The case involved Daniel Isaiah Thody, who operated businesses selling airplane parts to the U.S. Government from 2006 to 2010 but did not report or pay tax on the income from those contracts. Following his criminal conviction for tax evasion under section 7201, the IRS conducted a civil examination and issued a notice of deficiency asserting income tax liabilities plus additions to tax under section 6651(a)(1) and (f) for fraudulent failure to file returns. The Tax Court upheld the deficiencies, holding that Thody's unreported business income was taxable and that the Commissioner’s determinations were presumed correct in the absence of contrary evidence. The court also sustained the section 6651(f) additions to tax, relying on the criminal conviction and records showing no returns were filed, while declining to impose a section 6673 penalty for Thody’s frivolous arguments in this first proceeding.

taxescriminal law

The case concerned Tibor Gyarmati's 2015 federal income tax deficiency of $860,547 and additions to tax totaling over $424,000, arising primarily from the sales of rental property in Michigan and a Florida condominium. After multiple concessions by the parties, the Tax Court examined Gyarmati's claims to increase his adjusted basis in the Florida condo for additional capital improvements or to reduce the amount realized by allocating part of the sale price to furnishings, as well as his liability for the additions to tax. The court found that Gyarmati did not substantiate any further basis adjustments or allocations beyond those conceded and offered no evidence of reasonable cause for failing to timely file, pay, or make estimated payments, resulting in a determination of $1,208,073 in taxable gain and liability for the additions under sections 6651(a)(1), (a)(2), and 6654.

taxes

This consolidated U.S. Tax Court case involves collection due process proceedings for tax year 2015, where petitioners Muhammad and Shazia Zulfiqar challenged the IRS Commissioner's proposed levy to collect assessed taxes and additions to tax. The parties filed cross-motions for summary judgment, disputing the impact of a prior Stipulated Decision from Docket No. 14881-20 on the petitioners' remaining 2015 liabilities, including whether it resolved or omitted certain section 6651(a)(1), (a)(2), and 6654 additions to tax that had been assessed earlier. The court held a hearing and reviewed the record, including account transcripts and settlement documents, but found that material facts remain genuinely disputed, such as the parties' intent and the precise scope of the prior decision. Accordingly, the court denied both motions for summary judgment and allowed the cases to proceed.

taxesprocedure

This case concerned whether Broadvox, an S corporation, properly treated approximately $3.16 million in payments made by its disregarded subsidiary to acquire substantially all assets of a related bankrupt entity (Infotelecom) as deductible cost of goods sold on its 2012 tax return, which flowed through to the petitioning shareholders. The Tax Court upheld the IRS's disallowance of the deductions and resulting deficiencies against the shareholders. The court reasoned that the payments to Verizon and AT&T were made to satisfy conditions of the asset purchase agreement and bankruptcy reorganization, directly related to the acquisition of assets including goodwill, and therefore required capitalization under IRC section 263 rather than deduction under section 162. It further held that section 263 takes precedence even if some liabilities might otherwise have been deductible.

taxesbusiness & regulatory

This U.S. Tax Court case involved Remus and Naomi Beleiu, who underreported income from their IT and consulting businesses on joint tax returns for 2012-2014, leading the IRS to assess deficiencies that the couple conceded. The sole remaining issue was whether Mrs. Beleiu, who prepared the returns and managed business records, was liable for civil fraud penalties under section 6663 for those years. After examining multiple badges of fraud, including her lack of credibility at trial, filing of false returns, extensive unexplained cash deposits, and failure to maintain proper records, the court held that the Commissioner proved fraudulent intent by clear and convincing evidence. It therefore sustained the fraud penalties against Mrs. Beleiu for 2012-2014 while noting the Commissioner's concession that Mr. Beleiu was not liable and that alternative accuracy-related penalties applied only if fraud penalties did not.

taxesprocedurebusiness & regulatory

The case involved Norwich Commercial Group, a mortgage originator, which overreported more than $7 million in income on its 2007–2013 tax returns due to accounting errors in its warehouse lending operations with banks Liberty and Farmington. Norwich claimed a deduction in 2014 under the claim of right doctrine for the overreported amounts after discovering the errors and agreeing to repay the banks, but the IRS disallowed the deduction and related net operating loss carryovers. The Tax Court held that Norwich was entitled to deduct $6,954,117 in 2014 for the Liberty-related overstatements because the income had been included under a claim of right and the repayment obligation arose that year, while upholding only a $383,728 income reduction for 2012 related to Farmington. The court required corresponding adjustments to net operating losses for the years at issue.

taxesbusiness & regulatory

The case involved petitioner Douglas E. Hampton, who pleaded guilty in 2013 to bribery, fraud, and money laundering and was ordered to forfeit about $2.2 million in proceeds. In 2016, U.S. Marshals seized funds from accounts belonging to Hampton and his wholly owned S corporation, Hampton Capital Management, Inc. (HCM). Hampton claimed a passthrough loss deduction on his 2016 tax return for HCM's share of the seized funds, but the Commissioner disallowed it. The Tax Court sustained the disallowance, holding that the deduction was barred on public policy grounds because the forfeiture arose directly from Hampton's criminal conduct and HCM functioned as an extension of Hampton rather than an independent entity.

taxescriminal law

In this consolidated U.S. Tax Court case, petitioners Heather and Stewart Weston challenged IRS determinations of tax deficiencies for 2017 totaling over $379,000, plus additions to tax, stemming from the disallowance of a claimed $2.1 million loss deduction related to Mr. Weston's capital investments in two Indiana businesses (a home renovation venture and a demolition/excavation company) operated with a partner. The court held that the Westons were not entitled to the loss deduction for tax year 2017 and upheld the additions to tax under sections 6651 and 6654. The core reasoning was that the Westons failed to present sufficient evidence establishing that any loss had been sustained by year-end 2017, as their contributions were capital investments without proof of divestment, worthlessness, or other realization events in that year; the court also found the Commissioner met the burden of production for the additions to tax and that no statutory exceptions applied. The decisions were entered under Tax Court Rule 155.

taxesbusiness & regulatory

The case concerns IQ Holdings, Inc., a C corporation, which challenged an IRS notice of deficiency for its 2014 tax year that disallowed deductions for damaged inventory writeoffs, charitable contributions to a related nonprofit, and net operating loss carryforwards, resulting in a $2.87 million deficiency plus a section 6662 accuracy-related penalty. The Tax Court addressed the Commissioner's motion for summary judgment on these issues. The court granted the motion in part, upholding the disallowance of charitable contributions for lack of proper substantiation and some NOL adjustments due to expired carryback periods and statutes of limitations. It denied the motion in part on the inventory deductions and remaining NOL issues, finding genuine disputes of material fact, and on the penalty because the taxpayer's reasonable cause defense required factual development at trial.

taxesbusiness & regulatoryprocedure

The case concerns the federal estate tax treatment of assets transferred by Bryan Milner, acting under a durable power of attorney for his great-aunt Anne Milner Fields, into a newly formed Texas limited partnership (AM Fields, LP) approximately one month before her death in 2016. Milner contributed roughly $17 million of Fields’s assets to the partnership in exchange for a 99.9941% limited-partner interest that the estate later reported on the estate-tax return at a discounted value of about $10.8 million. The IRS determined that the full undiscounted value of the transferred assets must be included in the gross estate under I.R.C. § 2036(a), alternatively asserted a higher valuation, and sought an accuracy-related penalty. The Tax Court held that § 2036(a) applies because the transfer was not a bona fide sale for adequate consideration and Fields retained enjoyment of the assets, requiring inclusion of the full date-of-death value; it also imposed the § 6662(a) and (b)(1) penalty for negligence after finding the estate lacked reasonable cause.

taxesprocedurebusiness & regulatory

In 2014, Ralph M. Ottuso operated Pine Lake Stoves & Fireplaces, a business selling and installing stoves and fireplaces, and disputed the IRS's determinations of his gross receipts and business expense deductions after the agency prepared a substitute return based on third-party information. The U.S. Tax Court considered the Commissioner's bank deposits analysis showing unreported business income of over $1.2 million, along with Ottuso's claims for depreciation deductions on a riding mower, tractor, and buggy, as well as gasoline expenses charged on credit. The court upheld most of the IRS's income and deduction adjustments due to lack of substantiation or eligibility under tax rules for the claimed items and imposed additions to tax under sections 6651(a)(1) and (2) for late filing and payment, finding no reasonable cause because Ottuso failed to prove reliance on an accountant's advice to delay filing.

taxesbusiness & regulatory

This case involved the estate of Anne Milner Fields, who had transferred most of her assets worth about $17 million to a newly formed limited partnership (AM Fields, LP) via her agent using a power of attorney about a month before her death in 2016. The executor reported the value of her 99.9941% limited partner interest at a discounted amount of roughly $10.8 million on the federal estate tax return, but the IRS determined under section 2036(a) that the full date-of-death value of the transferred assets must be included in the gross estate. The Tax Court agreed with the IRS, holding that section 2036(a) applied because the decedent had retained enjoyment and control of the assets through the arrangement, and it also imposed an accuracy-related penalty under section 6662(a) and (b)(1) for negligence. The core reasoning centered on the fact that the transactions were executed unilaterally by the agent on the eve of death with no meaningful change in the decedent's benefits or dominion over the property.

taxes

The case involved a U.S. taxpayer who owed approximately $200,000 in Canadian taxes for 1993 and 1994; after Canada requested collection assistance under the U.S.-Canada Income Tax Treaty, the IRS filed a notice of federal tax lien and denied the taxpayer's request for a collection due process hearing under I.R.C. §§ 6320 and 6330. The taxpayer petitioned the Tax Court for review of the denial. The court held that it lacked jurisdiction under I.R.C. § 6330(d)(1) because the Treaty provision required the United States to collect the accepted Canadian claim as it would a U.S. tax for which CDP rights had already lapsed or been exhausted, imposing no hearing obligations on the IRS. Consequently, the IRS's denial did not constitute a reviewable determination letter under the statute.

taxesprocedure

This U.S. Tax Court case involved petitioners Om P. Soni and Anjali Soni, who challenged a notice of deficiency for their 2004 federal income tax return asserting a $642,629 deficiency, a section 6651(a)(1) addition to tax for late filing, and a section 6662(a) accuracy-related penalty. After concessions, the court addressed whether the Sonis filed a valid joint return, whether the assessment period under section 6501 had expired, and whether they were liable for the addition to tax and penalty. The court held that the Sonis filed a valid joint return, the limitations period had not expired, and they were liable for both the addition to tax and the penalty. Its reasoning centered on the couple's financial practices, including Om Soni's delegation of tax and record-keeping responsibilities without providing complete information to preparers, the absence of documentation for claimed losses, and the resulting understatement of tax.

taxesprocedure

The case involved the Monroes challenging IRS deficiency determinations for tax years 2014 and 2015, which included increases to reported income from car sales commissions and incentives, recharacterization of Schedule C business expenses as miscellaneous itemized deductions subject to the 2% floor, inclusion of unreported dividend and capital gain income, and accuracy-related penalties under section 6662 for substantial understatements. The Tax Court addressed whether the taxpayers' gross receipts and expenses were properly reported on Schedules C, whether deductions were substantiated, and whether penalties were properly approved and applied. The court held that certain income must be recharacterized as other income (with a possible increase for 2014 based on third-party reports), expenses must be moved to Schedule A with partial substantiation allowed via mileage logs and records, unreported income items added, and penalties upheld except to the extent reasonable cause applied or the 2% limitation reduced the understatement. Core reasoning focused on the requirements of the Internal Revenue Code for business income characterization, deduction substantiation, procedural approval of penalties before formal notice, and evaluation of facts supporting reasonable cause defenses.

taxesbusiness & regulatory

Christian D. Silver petitioned the U.S. Tax Court challenging a notice of deficiency for tax year 2012 that determined $3,640 in unreported income tax liability after he filed a return reporting zero gross income. The case involved whether Silver received $28,155 in wages and $5,000 in other income from 12 businesses that he failed to report as taxable, instead attaching substitute forms and advancing arguments that the payments were not taxable. The court found the payments constituted taxable income under section 61(a), sustained the deficiency, and rejected the taxpayer's positions as frivolous while declining to impose a section 6673 penalty.

taxes

The case involves Paul and Marie Warque challenging IRS notices of deficiency for tax years 2015-2017, specifically disputing the disallowance of deductions for unreimbursed employee business expenses claimed by Mr. Warque, an IRS revenue agent. The Tax Court held that the Warques were not entitled to these deductions. The reasoning was that claimed expenses for clothing, dry cleaning, grooming, and personal items were personal in nature and nondeductible, while office supply expenses lacked sufficient substantiation and documentation regarding reimbursement eligibility from the employer.

taxeslabor & employment