Mark V. Holmes

This case involved two Georgia LLCs that purchased vacant land parcels near Atlanta for a total of roughly $700,000 and claimed charitable contribution deductions for conservation easements valued at nearly $30 million combined. The Tax Court resolved the dispute over the properties' fair market values by adopting before values of $470,000 and $700,000 from the Commissioner's expert appraisal and after values of $40,000 and $90,000 from the taxpayers' expert, resulting in allowable deductions of $430,000 and $610,000. The court upheld the 40% gross valuation misstatement penalties under section 6662(h) because the claimed values were more than double the correct amounts and the Commissioner had complied with supervisory approval requirements.

taxesproperty

This U.S. Tax Court case involved Peter Clinco and his wife, who filed a late 2015 joint return reporting income and losses from Clinco's law practice, a family restaurant operated as MedCafe, and two rental properties. The IRS determined that the Clincos underreported gross receipts from the restaurant and disallowed claimed depreciation deductions on the rental properties for lack of substantiation. After a bank-deposits analysis, the court upheld the IRS's finding of additional taxable income from the restaurant, subject to a minor adjustment for verified capital contributions, and rejected the depreciation claims because the taxpayers provided no evidence of the properties' bases or dates placed in service. The court held that taxpayers bear the burden of proving the accuracy of their returns and entitlement to deductions under sections 167 and 6001. It ruled for the Commissioner on the primary issues, with the final deficiency to be computed under Rule 155.

taxesbusiness & regulatory

The case involved Mission Organic Center, Inc., a California marijuana dispensary, challenging the IRS's collection actions for its 2021 tax liability of $331,517 after the company submitted an offer-in-compromise to settle debts from 2016-2021. The Tax Court reviewed the Appeals officer's notice of determination sustaining a levy, which denied the OIC and other collection alternatives. The court held that the officer abused discretion by misinterpreting the taxpayer's arguments as challenging underlying liability under section 280E rather than seeking collection alternatives, by failing to properly consider the financial information already provided to the IRS, and by not addressing the actual issues raised in the CDP hearing. It remanded the case for a supplemental hearing. The topics are taxes and business & regulatory.

taxesbusiness & regulatory

This U.S. Tax Court case involved petitioner Jodell Sample, who sought innocent spouse relief under IRC section 6015 from joint federal income tax liabilities exceeding $300,000 for tax years 2011-2014, 2017, and 2018. The liabilities arose from her husband Joseph Schara's underreporting of income from his dental practice, where Sample worked as office manager, and the couple's failure to pay taxes due on joint returns that she signed without review. The court granted equitable relief for 2011-2013, finding Sample reasonably ignorant of the underpayments before an IRS visit in 2015, but denied relief for 2014, 2017, and 2018 because she had actual knowledge of the substantial understatements by then and continued to file jointly. Key factors in the analysis included marital status, knowledge of the tax issues, compliance with tax laws after separation, and lack of significant benefit from the unpaid taxes, with the decision turning on when Sample should have disentangled herself financially.

taxesfamily law

The case involved the IRS's audit of Lakeview Hospice Care, Inc., a California C corporation providing hospice services, and its owners, the Garibyan brothers, for the 2015 and 2016 tax years. The Commissioner used bank deposit analyses to determine that the company had underreported gross income by more than $200,000 and disallowed over $450,000 in deductions, while also asserting accuracy-related penalties under section 6662 for negligence or substantial understatement. The petitioners contested these adjustments, attributing discrepancies to their accrual-method accounting system, passthrough billing practices in the hospice industry, and reliance on professional bookkeepers. The court found that Lakeview's unreliable ledger entries resulted from advice by its accountants and the complexities of its business, but concluded by a preponderance of the evidence that the company had reasonable cause and acted in good faith, avoiding the penalties, with the overall outcome on income and deductions described as mixed and requiring Rule 155 computations.

taxesbusiness & regulatoryhealthcare

This U.S. Tax Court case concerned whether premiums paid by the Prestas' grocery and real-estate businesses to their wholly owned captive insurer, CFM Insurance, qualified as deductible insurance expenses under the Internal Revenue Code. The court held that CFM did not qualify as an insurance company under section 831 because its operations failed to meet the requirements of risk distribution and common acceptance as insurance, rendering the premium payments nondeductible and includible in CFM's income. The Prestas' businesses therefore could not exclude the payments from income, and the tax consequences flowed through to the Prestas. The court further ruled that the Prestas were not liable for accuracy-related penalties because they reasonably relied on competent tax professionals and the microcaptive issue was one of first impression at the time.

taxesbusiness & regulatory

This U.S. Tax Court case involved Mark and Natalie Feathers, majority shareholders in an S corporation (SBCC) that managed two LLC investment funds. The IRS determined that the Featherses had underreported taxable income by excluding substantial transfers from the funds to SBCC and from SBCC to Mark Feathers on their 2009 and 2010 returns, treating the transfers instead as nontaxable loans or consulting fees. The court held for the Commissioner, concluding that the Featherses failed to report Mr. Feathers’s share of SBCC’s underreported income and the consulting income received from SBCC. It reasoned that the taxpayers provided no credible evidence or documentation to support their characterizations of the transfers, that S corporation passthrough rules required reporting the income, and that the Featherses were deemed to have admitted liability for the accuracy-related penalty and late-filing additions to tax.

taxesbusiness & regulatory

This Tax Court case involved Karen Veeraswamy's challenge to the IRS Commissioner's determination that she owed taxes on income from Ashand Enterprises, an S corporation she and her then-husband formed in 2000. The company sold its main asset in 2014 after emerging from bankruptcy with a surplus, and the Commissioner attributed half the resulting capital gain and rental income to Karen as a 50% shareholder. Karen argued that equitable and collateral estoppel barred the Commissioner from treating her as an owner because her husband had claimed sole ownership in the bankruptcy proceedings. The court rejected the estoppel claims, found based on incorporation documents, board records, and tax returns that Karen held 50% ownership, and held that she must include her pro rata share of the S corporation's 2014 income in her taxable income under IRC section 1366 even without receiving a distribution; it also sustained additions to tax for late filing and payment.

taxesbusiness & regulatory

This case involved taxpayers James J. Maggard and Szu-Yi Chang, who disputed the IRS's determination that they owed taxes on their share of income from Schricker Engineering Group, an S corporation, even though co-owners had made unauthorized disproportionate distributions. The Tax Court held that Schricker retained its S corporation status for the years at issue, requiring the petitioners to include their proportionate share of the corporation's income on their returns. The core reasoning was that under Treasury Regulation § 1.1361-1(l)(2) and relevant precedent, disproportionate distributions alone do not terminate S corporation status absent formal amendments to the articles of incorporation or bylaws that create a second class of stock with differing rights. The court found no such formal corporate action had occurred here despite the misconduct by the other shareholders.

taxesbusiness & regulatory

This case involved the Tax Court's review of tax deficiencies and penalties asserted by the IRS against Ernest S. Ryder, his law firm Ryder & Associates, and related entities including First Counsel Capital, Inc., stemming from unreported income and improper deductions related to tax products and ranch investments. The court decided that Ryder and the entities had significant unreported income from legal services and tax avoidance products, that various deductions were unsubstantiated or improperly allocated, and that fraud penalties applied due to intentional evasion through complex entity structures and failure to file returns. The core reasoning was that Ryder assigned income to controlled entities like blocker corporations for ranches to conceal taxable income, created sham transactions to mislead the IRS, and explicitly chose not to file returns to avoid tax obligations, supported by evidence of cash flows and nonfiling history.

taxesbusiness & regulatory

This case involves consolidated Tax Court petitions by Ernest S. Ryder, Patricia A. Ryder, and related entities such as Ernest S. Ryder & Associates, Inc., challenging IRS determinations of tax deficiencies and penalties. The disputes centered on unreported income from the promotion of tax products, assignment of income through multiple corporate and ranch entities, disallowed deductions for expenses and losses, and fraud penalties for repeated understatements and failures to file returns. The court ruled for the Commissioner, holding that the petitioners had substantial unreported gross income and that various transactions were shams designed to conceal taxable amounts. The reasoning relied on detailed cash-flow tracing showing income attributable to Ryder personally, evidence of intent to mislead from the creation and use of avoidance schemes, and the deliberate choice not to file returns in multiple years.

taxesbusiness & regulatory

This consolidated Tax Court case involved Ernest S. Ryder, his law firm Ernest S. Ryder & Associates, Inc., APLC, his wife, and various related entities including ranching LLCs and blocker corporations. The IRS determined deficiencies in income taxes for multiple years, asserting that Ryder had unreported income from tax-avoidance products and services funneled through the entities, that certain deductions were unsubstantiated or improper, and that the Ryders and the firm had committed fraud by failing to file returns and concealing income through complex structures. The court held for the Commissioner, applying the assignment-of-income doctrine to attribute income to Ryder and the firm, recharacterizing transfers as dividends, disallowing losses and deductions, and upholding fraud penalties under sections 6663 and 6651(f) based on repeated understatements, sham transactions, and deliberate nonfiling with intent to evade tax.

taxesbusiness & regulatorycriminal law

This Tax Court case consolidated multiple petitions from Ernest S. Ryder, his law firm Ryder & Associates, and related ranch entities challenging IRS notices of deficiency for tax years including 2005-2009. The disputes centered on whether the petitioners had unreported income from tax products and services, properly substantiated deductions, correctly treated transfers among entities including blocker corporations and ranches, and were liable for accuracy-related or fraud penalties. The court applied the assignment-of-income doctrine to attribute earnings from Ryder's tax-avoidance schemes to him and his firm rather than other entities, disallowed various unsubstantiated deductions and losses, and sustained fraud penalties under sections 6663 and 6651(f) based on repeated nonfiling, understatements, and actions showing intent to conceal income. It rejected the petitioners' arguments on burden of proof, reasonable cause, and lack of fraudulent intent.

taxesbusiness & regulatory

The case involves Ernest S. Ryder, his wife, their law firm Ryder & Associates, and related entities challenging IRS notices of deficiency and penalties for multiple tax years. The Tax Court determined that the petitioners had unreported income from tax products and services that Ryder improperly assigned to other entities, that funds diverted to ranch operations and other uses were taxable dividends, and that various claimed deductions and losses lacked substantiation or were not allowable. The court reasoned that Ryder controlled the income-producing activities, the complex blocker entities and transactions were shams designed to conceal income, and the pattern of understatements, nonfilings, and misleading schemes supported civil fraud penalties under section 6663 as well as other accuracy-related and failure-to-file penalties.

taxesbusiness & regulatory

This U.S. Tax Court case involved consolidated petitions by Ernest S. Ryder, his law firm Ryder & Associates, APLC (R&A), Ryder Ranches, LLC, and related entities challenging IRS notices of deficiency and penalties for multiple tax years. The disputes centered on whether income from R&A's tax-product services had been properly reported or instead assigned to various ranching and blocker entities, whether deductions were substantiated, and whether civil fraud penalties applied for underreporting and nonfiling. The court held for the Commissioner, determining that Ryder and R&A had unreported income under the assignment-of-income doctrine, that many deductions lacked substantiation, and that the taxpayers had engaged in a pattern of sham transactions and deliberate nonfiling with intent to evade tax, supporting fraud penalties under sections 6663 and 6651(f).

taxesbusiness & regulatory

This case involves Ernest S. Ryder, his wife Patricia, their law firm Ernest S. Ryder & Associates, and related ranching entities challenging IRS determinations of tax deficiencies and penalties for multiple years. The Tax Court held that the petitioners had unreported income from tax avoidance products and services, that income was improperly assigned to other entities, certain deductions were unsubstantiated or disallowed, and that the Ryders and their firm were liable for fraud penalties due to intent to evade taxes. The court's reasoning centered on the assignment of income doctrine, evidence of cash flows showing personal benefits, failure to file returns indicating concealment, and lack of substantiation for claimed expenses and losses.

taxesbusiness & regulatory

The case concerns Ernest S. Ryder and his law firm (R&A) along with related entities challenging IRS notices of deficiency and fraud penalties for multiple tax years. The Tax Court ruled that the petitioners had unreported gross income from tax products and other services due to improper assignment of income, that numerous deductions and losses (including ranch-related items) were unsubstantiated or disallowed, and that section 6663 fraud penalties applied. Core reasoning included application of the assignment-of-income doctrine, examination of cash flows showing personal benefits treated as dividends, repeated understatements coupled with nonfiling of returns, and evidence of intent to mislead through complex tax-avoidance structures.

taxesbusiness & regulatorycriminal law

The case involved Victor and Katherine Mason, who owed over $155,000 in unpaid federal income taxes and trust fund recovery penalties from multiple years. They submitted an offer in compromise to settle the debt based on inability to pay, but the IRS Centralized Offer in Compromise Unit returned the offer without review, and an IRS Appeals officer sustained proposed collection actions after reviewing only whether that return decision was an abuse of discretion rather than evaluating the offer's merits. The Tax Court held that the Appeals officer abused her discretion by failing to independently consider the offer, as the full offer packet and supporting financial information were available during the collection due process hearing, along with details of the taxpayers' circumstances. The court reasoned that Appeals is required to consider collection alternatives like offers in compromise on their merits when properly presented, and the officer had the authority and information to do so without deferring entirely to the Centralized Unit.

taxesprocedure

The case involved taxpayers Victor and Katherine Mason who owed over $155,000 in back taxes and submitted an offer in compromise to settle the debt. The IRS Centralized Offer In Compromise Unit returned the offer without review, and during a subsequent Collection Due Process hearing, the Appeals Office reviewed only whether that return was an abuse of discretion rather than evaluating the offer's merits. The Tax Court held that the Appeals Office abused its discretion by failing to independently consider the offer and the taxpayers' financial information and special circumstances. The court reasoned that the Appeals officer had the offer packet available and should have reviewed it on the merits to ensure a fair consideration of collection alternatives as required by law.

taxesprocedure

The case involved taxpayers Victor and Katherine Mason who owed over $155,000 in unpaid federal income taxes and trust fund recovery penalties from multiple years and who submitted an offer in compromise to settle the debt. After the IRS's Centralized Offer in Compromise Unit returned the offer without review and collection actions began, the Masons requested a Collection Due Process hearing before IRS Appeals. The Appeals officer sustained the collection action after reviewing only whether the Unit had abused its discretion in returning the offer, without independently evaluating the offer's merits or the taxpayers' financial information and claimed special circumstances. The Tax Court held that the Appeals officer abused her discretion by failing to conduct such an independent review when the full offer packet was before her.

taxesprocedure