Lewis R. Carluzzo

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

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

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

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

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

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

This U.S. Tax Court case involved petitioner Leila Saedian challenging a notice of deficiency for her 2014 federal income tax return, which disallowed various Schedule A itemized deductions including home office expenses, travel-related meals, office supplies, internet and cell phone costs, medical expenses, and charitable contributions, along with an accuracy-related penalty. After concessions by both parties on some items, the court addressed the remaining disputed deductions under Internal Revenue Code rules requiring substantiation and specific qualifying conditions. The court allowed a partial deduction for internet and cell phone expenses based on estimated business use but disallowed the medical expense deduction because the substantiated amounts did not exceed the 10% adjusted gross income threshold and rejected the charitable contribution claims due to lack of required documentation such as receipts or canceled checks. It also addressed other employment-related expenses tied to her role at Coca-Cola, applying standards from sections like 162, 213, and 170. The decision reflects partial allowance of deductions where evidence supported business connection and full disallowance where substantiation or statutory limits were not met.

taxes

This case involved Tondalaya Gamble and Ronald Jamison challenging IRS notices of deficiency for 2013 and 2014 that disallowed deductions for losses from their S corporation Total Woman Wellness, recharacterized certain income, limited gambling loss deductions, and imposed accuracy-related penalties. The Tax Court dismissed the case as to Jamison for lack of prosecution and held that the petitioners were not entitled to the S corporation loss deductions because the expenses related to Gamble's employment at hospitals rather than qualifying business activities of the S corporation, and any allowable employee business expenses had to be claimed on Schedule A instead. The court further found that the petitioners failed to substantiate gambling losses beyond the amount the IRS allowed due to lack of contemporaneous records. However, the court ruled that the petitioners were not liable for the accuracy-related penalties because they reasonably relied on a paid tax return preparer with whom they had a long-standing relationship.

taxesbusiness & regulatory

The case concerns New World Infrastructure Organization's challenge to the IRS's denial of its application for tax-exempt status under section 501(c)(3) of the Internal Revenue Code. The organization, incorporated as a nonprofit in Nevada and controlled by the same individuals who owned a related for-profit entity, described its planned activities as developing and testing prototype machinery to produce large corrugated metal pipes for infrastructure projects that would ultimately benefit government agencies. The Tax Court held that the petitioner does not qualify for exemption under section 501(a) because it is not operated exclusively for exempt purposes, as its activities primarily benefit private interests, it functions as a successor or facade for the for-profit business, and the record does not show that its work lessens governmental burdens or meets the requirements for scientific or charitable classification. The court relied on the administrative record, the organization's lack of bylaws or public affiliations, and evidence of private inurement to the founders.

taxesbusiness & regulatory

The case involved petitioners Todd and Judy Minarich disputing IRS notices of deficiency for their 2013 and 2014 federal income taxes, which included adjustments increasing their pro rata share of income from their S corporation (Real Appeal, Inc.) due to disallowed deductions, along with challenges to various Schedule E deductions and the imposition of accuracy-related penalties under section 6662(a). After multiple concessions by both sides on specific deduction amounts, the remaining issues centered on the proper tax treatment of the S corporation's expenses, the petitioners' rental and business deductions, and penalty liability. The court held that the petitioners were not liable for the accuracy-related penalties for either year because they demonstrated reasonable cause and good faith by furnishing complete source documents and QuickBooks records to a competent paid tax return preparer, whose errors led to the underpayments.

taxes

This case involves Maria Claudia Ginos seeking relief from joint and several liability for unpaid 2008 federal income taxes under section 6015(f) of the Internal Revenue Code. The taxes arose from a joint return filed during her marriage to Ronald Leon, whose construction business generated the income, and the liability remained unpaid after their divorce. The Tax Court examined multiple factors, including the petitioner's knowledge of the tax due when signing the return, her involvement in the business, lack of compliance with tax laws in subsequent years, and her mental health, ultimately concluding that it would not be inequitable to deny relief. The court therefore held that the petitioner was not entitled to innocent spouse relief.

taxesfamily law

This U.S. Tax Court case involved petitioners Richard and Janice Post challenging a $5,350 deficiency and accuracy-related penalty for their 2014 federal income tax return, specifically disputing the IRS's disallowance of various unreimbursed employee business expense deductions claimed on Schedule A. After concessions by both parties, the court addressed deductions for items including weaponry and ammunition for required qualifications, mileage and travel to training and ranges, meals, legal insurance, and advanced skills training related to Mr. Post's employment as a correctional officer with the California Department of Corrections and Rehabilitation. The court allowed some deductions where expenses were substantiated as ordinary and necessary to employment and not subject to reimbursement under the collective bargaining agreement or where the Cohan rule applied due to credible evidence, but denied others lacking sufficient documentation, failing strict substantiation requirements under section 274(d), or not shown to be non-reimbursable. The IRS's accuracy-related penalty was conceded and not upheld.

taxeslabor & employmentbusiness & regulatory