David Byron Fugler & Cindy Diane Fugler
United States Tax Court · 2025-11-17
This case involved married petitioners challenging an IRS notice of deficiency for their 2018 joint federal income tax return, which arose after they surrendered two whole life insurance policies on their children that carried outstanding loans from premiums and interest. The Tax Court examined whether the policy terminations generated taxable income, whether interest accrued on the policy loans qualified as a deductible business expense rather than nondeductible personal interest, the applicability of an accuracy-related penalty, and a request for equitable relief from joint liability under section 6015(f). The court determined that the surrenders produced taxable income because loan balances exceeded the taxpayers' basis in the policies, rejected the interest deduction due to insufficient evidence of any trade or business use, and denied the husband's claim for equitable relief while accepting the IRS concession granting relief to the wife. Adjustments to the deficiency amount were left for computation under Tax Court Rule 155.
taxes
Sherman Derell Smith
United States Tax Court · 2025-03-24
This case involved Sherman Derell Smith disputing a notice of deficiency for his 2018 federal income tax regarding an additional depreciation deduction claimed on Schedule E for rental property in Los Angeles that had been converted from personal to income-producing use. The parties resolved all issues raised in the original notice, leaving only the question of whether Smith could claim this depreciation on his untimely filed return submitted years later. The Tax Court ruled that Smith was not entitled to the deduction. The court explained that under section 167 and Treas. Reg. § 1.167(g)-1, a taxpayer must substantiate the property’s depreciable basis as the lesser of fair market value or adjusted basis at conversion, but Smith’s estimates lacked the required precision and supporting evidence for both values.
taxes
Roger M. Fredenberg & Kimberly D. Fredenberg
United States Tax Court · 2025-01-16
This case involved married petitioners challenging IRS determinations of federal income tax deficiencies and section 6662 accuracy-related penalties for tax years 2017 and 2018, after their original returns prepared by a third party contained multiple errors. The disputed issues centered on petitioners' entitlement to deductions for a real estate rental activity reported on Schedule E for both years and unreimbursed employee business expenses reported on Schedule A for 2017. The court found that petitioners had the requisite profit motive for the rental property under section 183, allowing otherwise allowable deductions subject to section 469 limitations, but required substantiation for specific expenses. For the employee expenses, vehicle deductions were disallowed due to an unreliable mileage log, a $449 phone expense deduction was allowed, and reasonable estimates were permitted for tools and uniforms under the Cohan rule, subject to section 67 limitations.
taxesbusiness & regulatory
Kwaku Eason & Ashley L. Leisner
United States Tax Court · 2024-08-13
This U.S. Tax Court case involved petitioners Kwaku Eason and Ashley L. Leisner, who claimed Schedule C deductions for expenses related to courses and startup activities for a planned real estate advisory business conducted through their newly formed S corporation in 2016. The court addressed whether the deductions were allowable as trade or business expenses and whether petitioners were liable for a section 6662 accuracy-related penalty. The court held that the deductions were properly disallowed because petitioners had not yet begun carrying on an active trade or business by the end of 2016, as they had only taken preparatory steps like forming the entity and enrolling in courses without generating income or providing services. However, the court rejected the penalty, finding that petitioners had reasonable cause and acted in good faith given the uncertainty around the timing of business commencement and the fact that the underlying expenses were actually paid.
taxesbusiness & regulatory
Whistleblower 6544-19W
United States Tax Court · 2024-07-18
The case involved a whistleblower who provided information to the IRS about a tax avoidance scheme marketed by an investment banking firm, leading to the collection of millions in federal taxes; the petitioner challenged the Whistleblower Office's award of only 22% of collected proceeds rather than the maximum 30%. The U.S. Tax Court reviewed the WBO's determination for abuse of discretion based solely on the administrative record. The court upheld the 22% award, finding it was supported by law and fact because the WBO properly applied Treasury regulations allowing separate award percentages for different actions and assessing only one positive factor (identifying connections between transactions) while noting that related claims could receive different percentages. The reasoning emphasized that the regulations guide the quantification of the whistleblower's contribution without requiring a higher award or consideration of awards in other claims, and the proceeds resulted partly from the IRS's own further investigation.
taxes
Danny Karl Doberstein & Margeri Kerr Doberstein
United States Tax Court · 2022-05-26
The case involved petitioners Danny Karl Doberstein and Margeri Kerr Doberstein challenging a notice of deficiency from the IRS for their 2017 federal income tax, specifically the disallowance of a $5,500 deduction for a contribution to an individual retirement account. The Tax Court dismissed the case for lack of prosecution as to Margeri Kerr Doberstein and decided in favor of the Commissioner. The court reasoned that petitioners failed to meet their burden of proving the contribution was made to a traditional IRA rather than a SEP-IRA, as the documentation from Charles Schwab indicated it went to the SEP-IRA and no clear evidence corrected that, leading to the disallowance being sustained.
taxes