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Cerissa Rene Fortune-Paladino
United States Tax Court · 2025-10-02
The case involved Cerissa Rene Fortune-Paladino, who received a $135,000 settlement in 2019 from her former employer to resolve claims of sexual harassment and discrimination but did not report the amount as income on her tax return. The IRS issued a notice of deficiency treating the full settlement as taxable gross income and asserting an income tax deficiency plus a penalty. After concessions, the Tax Court addressed whether the payment qualified for exclusion from gross income under Internal Revenue Code section 104(a)(2). The court held that the settlement was taxable because the settlement agreement and underlying complaint made clear that the payment compensated for emotional distress rather than any physical injury or sickness, and section 104(a)(2) excludes only damages received on account of personal physical injuries or physical sickness.
taxeslabor & employmentcivil rights
Bobby G. Glaser & Cathleen A. Glaser
United States Tax Court · 2025-06-23
The case involved taxpayers Bobby G. Glaser and Cathleen A. Glaser challenging the IRS's filing of a Notice of Federal Tax Lien to secure unpaid income taxes for 2015 and 2021, despite an existing installment agreement. They sought review in the Tax Court after the IRS Office of Appeals denied their request to withdraw the lien. The court upheld the IRS determination, finding that the Appeals officer properly balanced the government's interest in collection with the taxpayers' concerns, that the lien was not more intrusive than necessary, and that the taxpayers provided no information warranting withdrawal.
taxes
John Joseph Bauche
United States Tax Court · 2025-05-20
This Tax Court case involved petitioner John Joseph Bauche, who had unpaid income tax liabilities for 2014 and 2015 after filing late returns showing balances due; the IRS filed a Notice of Federal Tax Lien to collect them, prompting Bauche to request a collection due process hearing and submit an offer-in-compromise under effective tax administration grounds, including economic hardship and non-economic hardship (public policy/equity). The court addressed the IRS's motion for summary judgment seeking to sustain the lien filing, which Bauche opposed on grounds that his offer should be deemed accepted under section 7122(f) or that the IRS had inadequately considered it. The court granted the motion in part, holding that the offer was not deemed accepted under section 7122(f), but denied it in part because the administrative record showed incomplete consideration of the offer on economic hardship grounds and no consideration on non-economic hardship grounds requested by Bauche's representatives. It therefore remanded the case to the IRS Independent Office of Appeals for a supplemental hearing to properly evaluate the offer-in-compromise. The decision rested on review of the administrative record, IRS procedures under the Internal Revenue Manual, and requirements for balancing collection needs with taxpayer concerns under section 6330.
taxesprocedure
Yosef Sehati A.K.A. Joseph Sehati and Lilly Kohanim-Sehati
United States Tax Court · 2025-01-15
This U.S. Tax Court case consolidated petitions from several related individuals and their companies regarding IRS audits of their 2012-2016 tax returns. The petitioners, who operated two jewelry businesses and real estate investment entities, disputed determinations of unreported income from undisclosed bank accounts, disallowed net operating loss carryforward deductions, and associated penalties. The court upheld the Commissioner's findings of substantial unreported income based on bank records and canceled checks, rejected the NOL claims due to lack of substantiation and inadequate records, and sustained fraud penalties for 2012-2014 against some petitioners as well as accuracy-related penalties for 2015-2016 on grounds of negligence and substantial understatement. Core reasoning centered on petitioners' failure to provide credible evidence or documentation rebutting the IRS reconstructions of income and their admissions of sloppy bookkeeping practices.
taxesbusiness & regulatory
Terry L. Wright & Cheryl A. Wright
United States Tax Court · 2024-10-30
This case involves taxpayers Terry and Cheryl Wright who claimed a large short-term capital loss for their 2002 tax year from a foreign currency option transaction conducted through their wholly owned LLC, which they assigned to charity and treated as qualifying for mark-to-market treatment under IRC section 1256. The IRS disallowed the loss and determined a deficiency, which the Tax Court initially upheld before the Sixth Circuit reversed and remanded. On remand, the Tax Court again ruled for the Commissioner, holding that the loss was not allowable because the transactions were tax-motivated and fell outside the congressional intent of section 1256, which was enacted to align tax treatment with economic realities in commodity futures rather than permit avoidance, as well as the profit-seeking requirement of section 165(c)(2). The court therefore upheld the deficiency but, per the IRS concession, did not sustain the accuracy-related penalty.
taxes
Gayle Gaston
United States Tax Court · 2021-09-02
The case involved Gayle Gaston, a former Mary Kay national sales director, who challenged IRS determinations of tax deficiencies for 2013 and 2014 stemming from disallowed deductions for acting expenses, jewelry sales losses through her S corporation, and contributions to a sole proprietor profit-sharing plan funded by her Mary Kay Family Security Program retirement distributions. After concessions, the Tax Court addressed whether she was engaged in qualifying trades or businesses and entitled to the claimed deductions, particularly under sections 401 and 404 for the retirement plan. The court held that she could not deduct the plan contributions because the plan was not established with respect to any trade or business generating the FSP income, as the plan document and testimony confirmed it was not tied to her prior Mary Kay activity or any other specific business, and her acting activity produced no taxable income. It sustained the disallowance of the retirement deductions while noting the limited scope of her other post-retirement activities.
taxesbusiness & regulatory