James Halpern

This case involved a whistleblower who applied for an IRS award under I.R.C. § 7623(b), claiming his information about a taxpayer's alleged manipulation of LIFO inventory accounting led to additional tax collections after the taxpayer switched to FIFO and ceased the practices. The IRS investigated but could not substantiate the claims and collected no proceeds from the taxpayer as a result. The Tax Court granted the Commissioner's motion for summary judgment, holding that the whistleblower was ineligible for an award because no proceeds were collected based on the provided information. The court followed its precedent in Lewis v. Commissioner that self-reported taxes paid on original returns do not qualify as 'collected proceeds' under the statute, rendering the whistleblower's allegations immaterial even if true. It also denied the whistleblower's motions to supplement the record or admit additional evidence, as they would not alter the outcome.

taxes

This U.S. Tax Court case involved consolidated proceedings for two petitioners who engaged in various business activities but did not file federal income tax returns for 2010-2013 and 2015; the IRS prepared substitutes for returns and issued notices of deficiency asserting substantial tax liabilities plus additions to tax. The court addressed whether the petitioners could substantiate claimed Schedule C and E business expense deductions and net operating loss carryovers, and whether they were liable for failure-to-file, failure-to-pay, and estimated-tax additions. The petitioners relied primarily on cash disbursements journals and account registers, with limited bank statements, but offered no further evidence of actual payments, citing the volume of records or their involvement in other litigation. The court held that the journals and registers did not prove payment, declined to apply the Cohan doctrine to estimate expenses because adequate recordkeeping was feasible, disallowed the NOL deductions for lack of supporting documentation, and sustained the additions to tax under sections 6651(a)(1) and (2) and 6654 because the petitioners did not challenge them. The decisions were entered under Rule 155 after concessions on filing status and certain additions.

taxesbusiness & regulatory

This U.S. Tax Court case involved YA Global Investments, LP, a partnership that provided funding to portfolio companies through stocks, convertible debentures, promissory notes, and warrants, and the IRS's adjustments to its 2009 tax reporting via final partnership administrative adjustments. The court held that the partnership was engaged in a U.S. trade or business, requiring it under I.R.C. § 475 to recognize gain or loss on securities held at year-end as if sold at fair market value, and that the partnership had not shown any portion of reported values was attributable to non-securities. It further ruled that foreign special purpose vehicles holding participation interests were partners in the partnership under I.R.C. § 704(e)(1), so withholding tax under § 1446 applied to their allocable share of income, and that the partnership had not established a lack of reasonable expectation of collecting accrued interest later written off, meaning the full interest income must be recognized.

taxesbusiness & regulatory

This U.S. Tax Court case involved petitioners Carol A. Wright and Steve M. Wright and Tami A. Wright, who challenged IRS deficiency notices for tax years 2014-2016 asserting additional income tax liabilities after disallowing claimed deductions. The disputes centered on whether the petitioners could deduct flowthrough business expenses from an S corporation on Schedule E and various Schedule C expenses for a restaurant and construction business. After concessions on penalties, the court placed the burden of proof on the petitioners and examined their substantiation for the expenses. The court held that the petitioners were not entitled to the disputed deductions, finding that much of the supporting documentation for meal and entertainment expenses was inconsistent, lacked credibility, or appeared fabricated, and thus insufficient to meet substantiation requirements beyond amounts the IRS had already allowed.

taxesbusiness & regulatory

This Tax Court case involved petitioner Stephen J. Major challenging the IRS's determination of income tax deficiencies for tax years 2017 and 2018, along with an accuracy-related penalty under I.R.C. section 6662(a) for 2017. The deficiencies stemmed from disallowed deductions for unreimbursed employee business expenses, including vehicle mileage and other costs, which the petitioner claimed on his returns. Following a trial, the court issued oral findings sustaining the deficiencies in full, concluding that the petitioner failed to adequately substantiate the expenses through proper records or documentation as required. The court entered a decision for the respondent on the deficiencies but declined to sustain the accuracy-related penalty for 2017.

taxes

This Tax Court case concerned a petition filed by Gregory Miles Carmichael challenging the IRS Commissioner's determinations of federal income tax deficiencies and additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654 for the 2017 taxable year. After a trial session in Reno, Nevada, at which the petitioner did not appear despite notice, the court issued oral findings of fact and an opinion sustaining the Commissioner's positions on the deficiencies and most additions. The decision will be entered for the respondent except as to the section 6654 addition for 2017. The reasoning centered on the petitioner's failure to appear or present evidence, allowing the court to uphold the IRS determinations based on the existing record and applicable notice requirements.

taxes

In this U.S. Tax Court case, a partnership claimed a charitable deduction for donating a facade easement on a certified historic building to a qualified conservation organization, but the IRS disallowed the deduction in a final partnership administrative adjustment. The court ruled that the partnership was not entitled to the deduction because the easement failed to meet the requirement under IRC section 170(h)(5)(A) that the conservation purpose be protected in perpetuity. The deeds of trust on the building gave lenders priority rights to use insurance or condemnation proceeds to satisfy the debt in circumstances with a material chance of occurring, and those rights were not subordinated to the easement holder's enforcement rights as required by Treasury Regulation section 1.170A-14(g)(2). As a result, the gift did not qualify as a deductible conservation contribution under section 170(h), and the court entered decision for the Commissioner.

taxespropertyenvironment

This Tax Court case involved petitioner Herman J. Marino's claim for a whistleblower award under IRC section 7623(b) based on information he provided about alleged tax violations by a subchapter S corporation and its shareholders, including overstated deductions and insufficient stock basis limiting loss deductions. The IRS Whistleblower Office (WBO) denied the award after audits of related taxpayers reduced net operating losses but collected no proceeds, and it declined to investigate a supplemental claim about unpaid gift tax. The court granted the Commissioner's motion for summary judgment, holding that the WBO did not abuse its discretion in denying the award because additional documentation confirmed no proceeds were collected from the relevant years, that reliable evidence could support the WBO's determination even if hearsay-like, and that the court lacked jurisdiction to review the WBO's decision not to pursue further investigation of the supplemental claim.

taxesprocedure

This Tax Court case involved a whistleblower who submitted a Form 211 claim alleging tax underpayments by a target taxpayer and sought an award under IRC section 7623(b)(1); the IRS Whistleblower Office denied the claim because no proceeds had been collected based on the information provided. The petitioner sought review of that denial and moved to proceed anonymously under Tax Court Rule 345(a). On remand from the D.C. Circuit, the court considered the anonymity request without weighing the petitioner's status as a serial filer of public-information claims and held that he had not shown a sufficient fact-specific basis for anonymity. The court also granted the Commissioner's motion for summary judgment, finding that the administrative record supported the WBO's determination of no collected proceeds and that the petitioner had not justified expanding the record or shown an abuse of discretion. The core reasoning was that the absence of collected proceeds justified denying the award and that prior case law and the record did not support anonymity.

taxesprocedure

This case concerned a taxpayer's challenge to the IRS's certification under IRC section 7345 that he had a seriously delinquent tax debt based on unpaid assessments for tax years 2005 through 2010, which could affect his passport. The petitioner contended that the IRS had not mailed statutory notices of deficiency for five of those years, so the debt did not qualify as seriously delinquent, and that statutes permitting passport denial or revocation for tax debts violated a fundamental right to international travel. The Tax Court ruled that the petitioner was barred from contesting the mailing of the notices, upheld the certification as valid under section 7345(b), declined to reach the constitutionality of any passport-related actions by the Secretary of State, and ordered the petitioner to show cause regarding potential sanctions for advancing a groundless position.

taxesprocedure

The case involved Complex Media, Inc., which acquired assets from a partnership and claimed increased tax basis and amortization deductions for intangible assets based on cash and deferred payments made in connection with the transaction. The IRS disallowed the additional amortization deductions. The Tax Court held that the share issuance and redemption lacked economic substance and should be disregarded under the step transaction doctrine, treating the payments as additional consideration (boot) in a Section 351 exchange. This caused the partnership to recognize gain, increasing the corporation's basis in the assets, with the gain allocated primarily to amortizable intangibles using the residual method under Section 1060, allowing partial amortization deductions.

taxesbusiness & regulatory

The case involved Complex Media, Inc., a corporation that acquired assets from a partnership (CMH) in exchange for stock, followed by an immediate partial redemption of that stock for cash and a deferred payment obligation. The IRS disallowed the corporation's amortization deductions under IRC section 197 based on an increased basis of $3 million in the acquired intangible assets. The Tax Court held that the stock issuance and redemption lacked economic substance and must be disregarded under the step transaction doctrine, recharacterizing the cash and deferred payment as additional boot consideration in a section 351 exchange. As a result, the partnership recognized gain on the boot, which increased the corporation's basis in the assets; applying the residual allocation method under section 1060, most of that gain was allocated to amortizable intangibles, entitling the corporation to partial additional amortization deductions beyond what the IRS had allowed.

taxesbusiness & regulatory

The case involved American Limousines, Inc., a limousine company liable for over $1 million in unpaid employment taxes, seeking to review the IRS Appeals Office's determination to proceed with a levy after rejecting the company's proposed collection alternatives. The company had requested an installment agreement with $2,000 monthly payments and alternatively sought currently not collectible status, but Appeals calculated a higher reasonable collection potential and found the proposal unfundable while noting liquidatable assets. The Tax Court held that Appeals did not abuse its discretion in rejecting the installment agreement, denying currently not collectible status, or sustaining the levy, as the company could not demonstrate ability to make payments and had assets available, while properly balancing efficient tax collection against intrusiveness concerns.

taxesbusiness & regulatory

The case involved Sheila Ann Smith challenging the IRS's assessment of six section 6702(a) frivolous return penalties for submissions reporting zero income and claiming refunds of withheld taxes, along with a notice of federal tax lien to collect unpaid penalties. The Tax Court held that three of the submissions (including a 2009 Form 1040X and 2010-2011 Forms 1040) qualified as purported returns because they requested refunds and were thus subject to the penalties, while photocopies of prior returns on which no action was sought did not. The court sustained the lien with respect to the three validly assessed penalties after finding the IRS met its burden and followed proper procedures, but rejected the penalties for the remaining submissions. It also imposed a $2,500 section 6673 penalty on Smith for advancing frivolous arguments in the proceeding, such as that wages are not taxable income.

taxes

The case involved Little Sandy Coal Company challenging the IRS disallowance of a claimed research tax credit under IRC sections 38 and 41 for vessel development expenses incurred by its shipbuilding subsidiary. The Tax Court ruled that none of the expenses qualified as research expenses because the taxpayer failed to show that substantially all of the subsidiary's research activities constituted elements of a process of experimentation. The court reasoned that the 80% threshold applies to activities rather than physical components of the vessels, that production employees providing support are not engaged in research, and that supply costs are not counted when measuring activities by costs.

taxesbusiness & regulatory

This U.S. Tax Court case involved petitioners William Bruce Costello and Maritza Legarcie, who claimed deductions for losses from a farming activity and rental real estate on their 2012 and 2013 joint returns, which the IRS disallowed, leading to tax deficiencies, a late-filing addition to tax, and accuracy-related penalties. The court sustained the disallowance of farming loss deductions, holding they were nondeductible startup expenses under I.R.C. section 195(a) rather than trade or business expenses, and upheld the disallowance for one rental property that was flooded and not held for rental. It also sustained the late-filing addition to tax under section 6651(a)(1) and the accuracy-related penalties under section 6662 due to negligence, but found that the IRS had erred in calculating the passive loss limitation for other rental properties by ignoring a substantial gain from property sales.

taxesbusiness & regulatory