Archive for the ‘Tax Court’ Category

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Time Was On His Side

Wednesday, March 2nd, 2011

Sometimes I have to be careful about jumping to conclusions. When I first looked at Charlton v. Commissioner I expected the taxpayer to lose. It wasn’t hard to jump to that conclusion when I read,

Throughout his career, Jeffrey pursued a myriad of income producing opportunities. His desire to earn large amounts of income with minimal effort led him to become involved with Amway, Herbalife, and numerous other multilevel marketing businesses (MLM). These endeavors were unsuccessful.

Next, I read that the petitioner learned about Trusts that magically made income tax disappear. In a footnote, Judge Foley notes,

Representatives of ProTec routinely told potential clients that the Internal Revenue Service had verified that the ProTec plan complied with tax laws. In 2004, certain representatives of ProTec pleaded guilty to a charge of conspiracy to defraud the United States in connection with their activities related to the promotion and marketing of fraudulent trust schemes.

But the petitioner missed out on that entity (whew) as it went out of business before he could invest. Unfortunately, he discovered Aegis. I’ve reported on Aegis in the past; suffice to say many of the principals ended up at ClubFed. With their CPA they attended an Aegis presentation and, “…[they] left the Aegis seminar convinced that the Aegis system was a legitimate tax minimization and asset protection plan.”

From 2002 – 2003 the IRS attempted to obtain records, but the petitioner fought the IRS, even suing employees. Eventually, a District Court ordered the petitioner to comply with an IRS summons (which he did). Finally, in 2007, the IRS issued deficiency notices for tax years 1999 and 2000. The IRS alleged that the petitioner, his partnerships, and his trusts engaged in fraud, so the normal 3-year statute of limitations wouldn’t apply. (In cases of fraud, the tax can be assessed at any time.)

Unlike in most Tax Court cases, the burden of proof is on the IRS in a fraud case. “Respondent must establish by clear and convincing evidence that Jeffrey and Mary filed false or fraudulent returns with the intent to evade tax.”

Simply put, respondent has failed to meet his burden…To the contrary, Jeffrey did not intend to evade tax but wrongfully believed that the ProTec plan and the Aegis system were legitimate tax avoidance techniques. Indeed, Jeffrey, Timothy, and Mr. Moore [the CPA] all believed that the Aegis system was legitimate and that the returns were accurate.

Mr. Moore, respondent’s primary witness, provided convincing testimony regarding the perceived legitimacy of the techniques and accuracy of the returns. His testimony relating to his advice to Jeffrey and Timothy, however, was inconsistent, incoherent, and at times incomprehensible. Nevertheless, Jeffrey, through his credible testimony, established that Mr. Moore did not express any doubt regarding the legitimacy of the tax planning arrangements. In fact, Mr. Moore was so comfortable with the tax planning arrangements that, after preparing the domestic trusts’ returns relating to the years in issue, he became a trustee of Jeffrey’s domestic trust.

Luckily for the petitioner, there are cases where “reliance upon an accountant to prepare accurate returns may negate fraudulent intent if the accountant was supplied with all the information necessary to prepare the returns.” Mr. Moore may have been “imprudent,” but the petitioner supplied him with all of his records. They may have “believed in and acquiesced to an elaborate scheme designed by con artists,” but the petitioner didn’t intend to commit fraud. Thus, the IRS is time-barred from redress.

Still, this case is a reminder that if it sounds too good to be true, it probably is. There is no magical trust that makes the income tax disappear.

Case: Charlton v. Commissioner, T.C. Memo 2011-51

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Posted in Scams, Tax Court | Comments Closed

Making $35,000 While Gambling with $800,000 Doesn’t Compute

Tuesday, February 15th, 2011

Even if you lose as a gambler, you’re supposed to report the income. Today, the Tax Court took up the case of a gambler who lost in more ways than one.

Our unlucky gambler spent quite a bit of time at Foxwoods, the big Indian casino in Connecticut. Our gambler didn’t report any gambling income, but somehow he had managed to have Currency Transaction Reports issued to him for over $800,000 in purchases of casino chips during 2004 and 2005.

Now, what do you with casino chips? You might sell one or two, but you gamble with them, of course. His return was selected for examination when he showed gross income of $16,450 and $18,230 in the two years selected for audit. The IRS was naturally curious how someone could buy $800,000 in casino chips while make $35,000.

The petitioner did not cooperate during the audit with the IRS. The IRS sent “several information document requests” to the petitioner because he claimed that other had used his rewards card and obtained casino chips. “Petitioner never provided any of the requested documentation.”

The IRS reconstructed the petitioner’s income, figuring that for every dollar expended in net casino chip purchases there was a dollar of income. He also assumed every dollar of income earned was used for purchasing casino chips. All told, that led to the IRS assuming that there was $372,759 of unreported income in 2004 and $264,375 in 2005.

When the petitioner got that news, his passport suddenly became available; the petitioner was out of the country during some of the purchases so the final number for unreported income was $159,599 for 2004 and $250,975 for 2005.

In his pretrial memorandum petitioner claimed that his casino chip purchases were financed by a loan he obtained from the “Fukkianese community” and that he would testify to this effect. However, petitioner failed to show up for trial.

Fukkianese are Chinese from the Fukien province. And nothing was presented at the trial showing there was any loans from the Fukkianese community or anyone else.

In an audit, it’s important to cooperate fully with the IRS. First, you may be able to get the burden of proof shifted to the IRS (if your audit finds its way to Tax Court). Second, if you cooperate with the IRS your audit will go far smoother; the auditor will be far more willing to compromise on some issues.

Of course, when a case gets to Tax Court its helpful to have proof of what you claim.

Petitioner did not introduce any evidence at trial to demonstrate that the cash purchases at Foxwoods were made with cash from nontaxable sources. Rather, he argues that because respondent has conceded that 11 CTRs were erroneously attributed to him, the remaining CTRs are unreliable and cannot be used as the basis for reconstructing his income. We disagree.

If you are a gambler and have CTRs issued to you, make sure you (1) report your gambling income and losses, (2) have income to justify the purchase of the CTRs, and (3) keep good records proving this. In today’s case, the gambler did none of this. Indeed, the IRS received a log from Foxwoods noting that the petitioner gambled even more extensively; the IRS could have sought an increased deficiency based on this information. (And it’s clear from the decision that the Court would have upheld this.)

As for the petitioner, he was hit with back taxes, penalties (including the accuracy related penalty), and interest. The taxes alone are near $200,000, and that’s just tough to do on an income of $35,000.

Case: Pan v. Commissioner, T.C. Memo 2011-40

Posted in Gambling, Tax Court | 2 Comments »

Unlearning the Income Tax: Another Journey to Frivolity

Tuesday, February 8th, 2011

About once a year I decide to post about the newest Bozo scheme to get out of the income tax. It’s that time again: Today, we learn about the Institute for Unlearning.

Yes, that’s a real website and its proprietor, one Patrick Mooney, espouses that, “[A] private sector worker’s earnings are not legally subject to the federal tax on income. They never have been, and as long as we still have a Constitution, they never will be.” Mr. Mooney was highly confident in his beliefs, so he filed a 2005 tax return with all zeroes, and claimed a refund of $2,647.48, the amount he had withheld in federal tax during the year.

The IRS didn’t appreciate Mr. Mooney; after he submitted his tax return they denied his refund and wrote him a letter warning him that he was submitting a frivolous tax return. Even the IRS sending him documents warning about why you have to file tax returns didn’t dissuade the intrepid Mr. Mooney. He continued, and sent a letter protesting the IRS’ decision to deny his claim. The IRS assessed a $500 penalty for filing a frivolous return, and eventually sent him a Notice of Deficiency.

The dispute ended up in Tax Court. This was not the first time Mr. Mooney ended up in Tax Court; he similarly petitioned the Court regarding his 2004 tax return. As you might guess, he lost and also had to pay a $1,000 Tax Court Penalty for filing a frivolous case. You probably know where today’s case is heading….

Do yourself a favor if you’re ever even thinking of petitioning the Tax Court and telling a Tax Court judge that there’s no income tax because [the reason is irrelevant; none will work]. Just don’t do it.

Petitioner’s assertion that the payments he received in 2005 were not taxable income within the meaning of the law are frivolous. We do not address petitioner’s frivolous and groundless arguments with “somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.”

Things got worse for the petitioner. The IRS won, of course, on the tax due, the failure to file penalty, and the failure to pay penalty. But the IRS decided to also assert the fraud penalty.

The instant case involves many badges of fraud. Petitioner is intelligent and well educated and properly filed and paid taxes for a number of years before he recently began to claim, on the basis of various tax-protester arguments, that his income is not subject to Federal income taxation. Petitioner wrote on his Web site about his efforts to avoid paying income taxes, characterizing his plan as a “‘get out of income taxes free’ Monopoly card”. Pursuant to the strategy described on his Web site, he failed to report any income on his 2005 Form 1040; yet he acknowledged at trial that he did receive income during 2005. Petitioner received and has read Internal Revenue Service publications discussing tax-protester arguments like the ones he has employed and explaining why such arguments fail. Despite petitioner’s being fully informed by respondent about the frivolous nature of his arguments, petitioner’s correspondence with respondent has been filled with tax-protester arguments and has not addressed the factual accuracy of respondent’s determination. Petitioner has also previously attempted to use similar arguments to dispute his tax liability before this Court, and he is aware that we consider such arguments frivolous and groundless.

The Court also wasn’t in the mood for his frivolity.

Apparently, the $1,000 penalty did not deter petitioner from making frivolous and groundless arguments before this Court. Accordingly, we shall impose a $2,000 penalty on petitioner pursuant to section 6673. If petitioner persists in raising frivolous arguments before this Court, wasting time and resources that should be devoted to taxpayers with genuine controversies, and continues to refuse to shoulder his fair share of the tax burden, we will not hesitate in the future to impose a significantly higher penalty.

As expected, arguing that there is no income tax is just not going to work. It doesn’t matter if you’re arguing with the IRS, the Tax Court, or your state tax agency. Just don’t do it! If someone approaches you with a tax protester argument, look at this list of reasons why they are all wrong. Or you can be like the petitioner today, who wants us all to unlearn a basic reality: Yes, Virginia, there is an income tax and you do have to pay it.

Case: Mooney v. Commissioner, T.C. Memo 2011-35

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If You Fail Twice, The Third Time Isn’t the Charm

Tuesday, May 18th, 2010

Some people just don’t have good luck. Charlie Brown kept trying to hit that pitch…but just kept striking out. So it goes for an unlucky couple from California. The wife gets seriously injured when she’s truck by a shopping cart. She wins a judgment against the individual who hit her, but then loses it when that individual declares bankruptcy. She is hurt again in an industrial accident on her job.

Then things get weird. The couple is audited for 2000 and 2001, with that case eventually reaching the Tax Court. They lose, appeal to the 9th Circuit, and lose. They’re audited for 2003, with that case reaching the Tax Court. They lose. And they’re back again for 2004 and 2005.

First, they claim that they can take a Net Operating Loss on the loss of the income that they didn’t receive because of the bankruptcy judgment. Well, since they never declared the income, there’s no loss of income for tax purposes. The couple also received pension income that they didn’t declare. The IRS asserts collateral estoppel–basically, the issue was litigated already, and you lost so you can’t litigate it again. The Court notes that the IRS is correct. This same issue was litigated in the first two court cases, with the facts being identical.

Next, the couple claims a long-term capital loss carryover. But they didn’t have a long-term capital loss in a prior year. They recharacterized some of the “loss” of the income from the shopping cart accident as a capital loss. The Tax Court had none of that.

The couple didn’t include part of the pension income of the husband. “Petitioners offered no evidence that Ms. Green’s pension
income was payment of worker’s compensation. At trial Mr. Green testified that GM was either “ignorant or malicious” in issuing
the Form 1099-R but the record is devoid of anything to corroborate this claim.” The couple wasn’t successful here, either.

The couple claimed significant medical expense deductions, but “…petitioners have failed to provide any records to
substantiate the amounts of those expenses or the dates and times those expenses were incurred.” They didn’t win on this, or trying to deduct the cost of a housekeeper, gas and electricity, and accrued (but unpaid) medical expenses. The latter are never deductible, a housekeeper isn’t deductible, and they didn’t keep records proving the medical necessity for the gas and electricity.

The IRS alleged a fraud penalty. Here, though, the IRS overreached. For there to be fraud, “…petitioners intended
to evade taxes known to be owing by conduct intended to conceal, mislead, or otherwise prevent the collection of taxes.” The petitioners fully cooperated during their audit and did nothing to conceal or mislead the IRS.

On the other hand, the Tax Court did find the couple negligent.

We hold that petitioners are liable for the penalty for negligence in 2004 and substantial understatement of income tax in 2005. Petitioners’ failure to produce records substantiating their medical expenses, NOL deductions, and Social Security disability benefit exclusions supports the imposition of the accuracy-related penalty for negligence for 2004. Petitioners’ understatement of income tax as reflected in the notice of deficiency is greater than $5,000 and 10 percent of the tax required to be shown on the return in 2005. Thus, respondent has met his burden of production under section 7491(c)…The Court sympathizes with petitioners for the injuries that have afflicted them over the years. Unfortunately, given the dearth of evidence to substantiate petitioners’ medical expenses, NOL deductions, and Social Security disability benefit exclusions, we are unable to mitigate the penalties.

I neglected to mention that the husband worked for the IRS for several years; “with this background, he had a wider range of knowledge of tax matters than do members of the general public.” This didn’t help their cause.

In the end, though, the key was the lack of documentation. I tell this to every client: document, document, and document some more. The tax system works based on records. If you’re audited, the IRS will be far more impressed with records than facts.

For our unlucky couple, the third time was anything but the charm. Hopefully, there isn’t a fourth case already on the Tax Court’s docket.

Case: Green v. Commissioner, T.C. Memo 2010-109

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What’s Good for the Goose Is Good for the Gander

Wednesday, December 30th, 2009

If you move and don’t notify the IRS, bad things can happen. The IRS can send to your last known address a Notice of Deficiency. Even if you don’t receive it, it will be considered received if it was sent to your last known address.

Today the Tax Court looked at the opposite situation. What happens if you do let the IRS know of your new address and the IRS sends a Notice of Deficiency to your old address?

The case the Court looked at involved an Estate Tax Return. The IRS elected to examine the Estate Tax Return and notified the fiduciary. The fiduciary was forced to move offices and let the IRS Revenue Agent know verbally of his new office address. The IRS also discovered the fiduciary’s home address.

This all occurred in the late 1990s. Eventually the IRS decided to issue a Notice of Deficiency. That notice was sent on December 8, 1999 to the old (bad) address. It was returned as undeliverable. When the 90-day period to contest the Deficiency expired (on March 7, 2000), the IRS assessed the deficiency, tax, and penalty against the Estate. Eventually, the Estate discovered this and filed a Tax Court Petition in 2008.

The question the Court faced was simple: Should the IRS have mailed the Notice of Deficiency to the new address? The Court noted,

The estate argues that respondent knew at the time the deficiency notice was issued that the estate’s address had changed, and that respondent therefore failed to use reasonable care and diligence in mailing the deficiency notice to the estate’s last known address. We agree. Information that the Commissioner knows or should know through use of his computer system is attributable to the Commissioner’s agents. Abeles v. Commissioner, supra at 1030; Buffano v. Commissioner, supra. Respondent’s revenue agent informed the estate’s examiner on May 20, 1999, only six months before the deficiency notice was issued, that respondent’s computer records listed the Crown Point address as a new residential address for Mr. Keenan. We find that the examiner knew of the estate’s new address at the time he issued the deficiency notice to the estate.

The Court noted that had the IRS mailed the Notice to both the old and new addresses the Notice of Deficiency would have been valid. However, because the IRS didn’t use reasonable care the Notice of Deficiency is invalid. Thus, the Estate doesn’t owe the IRS anything.

Yet another reason to document everything you do with the IRS. The IRS is supposed to use reasonable care and diligence. When they don’t and the taxpayer challenges the deficiency the taxpayer will win.

Case: Estate of Paul Rule v. Commissioner, T.C. Memo 2009-309

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Thank You, George Cohan: A Gambler Gets Lucky

Thursday, December 3rd, 2009

George Cohan is known as “the man who owned Broadway.” He also proved quite helpful to a gambler today at the US Tax Court.

Jose Caro liked horse racing. Any and every day he could, he went to the track and bet on the races. Sometimes he won, but for the most part he lost. He also has had experience dealing with the IRS.

Some time ago he was audited, and he survived with a “no change” audit. For record-keeping, he put all of his losing betting slips and any W-2Gs and other items noting the amount won inside of the program for each day. He then taped the programs shut and noted the amount won and lost on the outside of the program. That’s a good example of keeping contemporaneous records.

Unfortunately for Mr. Caro, he made a mistake in choosing his accountant. The unnamed individual made numerous mistakes with his return, leaving off $70,883 in wins. When the IRS again audited him the accountant vanished into thin air, along with Mr. Caro’s records. The gambler believed that he had numerous losses that could be taken, but with no records the IRS disallowed the additional $70,883 in gambling losses. That’s where Mr. Cohan comes in.

Back in 1930, George Cohan was one of the first victims of a tax audit (from the then Bureau of Internal Revenue). Mr. Cohan couldn’t produce all of his records, and the Bureau disallowed his deductions. He appealed to the Board of Tax Appeals and lost. He then took his case to court.

Here’s the key point of the court decision:

In the production of his plays Cohan was obliged to be free-handed in entertaining actors, employees, and, as he naively adds dramatic critics. He had also to travel much, at times with his attorney. These expenses amounted to substantial sums, but he kept no account and probably could not have done so. At the trial before the Board he estimated that he had spent eleven thousand dollars in this fashion during the first six months of 1921, twenty-two thousand dollars, between July first, 1921 and June thirtieth, 1922, and as much for his following fiscal year, fifty-five thousand dollars in all. The Board refused to allow him any part of this, on the ground that it was impossible to tell how much he had in fact spent, in the absence of any items or details. The question is how far this refusal is justified, in view of the finding that he had spent much and that the sums were allowable expenses. Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making. But to allow nothing at all appears to us inconsistent with saying that something was spent. True, we do not know how many trips Cohan made, nor how large his entertainments were; yet there was obviously some basis for computation, if necessary by drawing upon the Board’s personal estimates of the minimum of such expenses. The amount may be trivial and unsatisfactory, but there was basis for some allowance, and it was wrong to refuse any, even though it were the travelling expenses of a single trip. It is not fatal that the result will inevitably be speculative; many important decisions must be such. We think that the Board was in error as to this and must reconsider the evidence. [emphasis added]

Today, this is called the Cohan Rule: A taxpayer can use estimated when he can show some factual foundation to make a reasonable estimate of the expense.

Mr. Caro’s records, through no fault of his own, vanished with his accountant. The Tax Court noted:

Petitioner was a compulsive gambler who gambled every day possible. We are confident after hearing his testimony that petitioner placed as many losing bets as he did winning ones…Instead, he often depended on his grown children for help in paying his bills. We are convinced that petitioner sustained unreported gambling losses that were sufficient to offset his unreported gambling income for 2006. Petitioner’s credible and convincing testimony regarding the extent of his gambling losses, together with the other evidence, provides a sufficient basis for this decision.

The petitioner prevailed without records thanks to the Cohan rule. Do note that it is far easier to win at an audit if you have contemporaneous records, and you usually won’t need to go through the expense of a case at Tax Court.

Case: Caro v. Commissioner, T.C. Summary 2009-184

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Just Like the Last Time…

Wednesday, October 28th, 2009

When the first paragraph of a Tax Court decision ends, “Mr. Oropeza’s position is, in a word, “frivolous.” Just like we held it was the last time he was in Tax Court,” it’s likely the case is worth reading—if only for the humor value. And that’s the case here.

The petitioner earned wages in 2002 and 2003 but reported zeroes on his tax return because income wasn’t income constitutionally. That’s frivolous, and since the World Series began today, let’s call that strike one. Eventually the petitioner received a notice of Intent to Levy, and he responded to the IRS. He said he had learned his lesson: “In his request he specifically renounced any of his previous arguments that the Commissioner might consider frivolous, and asked only that the IRS verify that it had followed all required procedures.” The IRS did exactly that.

The petitioner got his hearing but he couldn’t raise any real issues. In the end, the petitioner said he’d see the IRS in Court. And that’s where the case went:

…Mr. Oropeza gives us no reason to upset the Appeals officer’s conclusion that a levy is appropriate–Mr. Oropeza did not suggest any collection alternatives to balance against the government’s interest in efficient tax collection.

We also reject Mr. Oropeza’s procedural arguments. Taxpayers who make only frivolous arguments aren’t entitled to face-to-face hearings. Lunsford v. Commissioner, 117 T.C. 183, 189 (2001). Taxpayers who make no arguments are likewise not entitled to a face-to-face hearing. Oropeza, T.C. Memo. 2008-94.

It’s not a good thing when the Tax Court can give as a citation your prior failed attempt in Tax Court. Needless to say, the petitioner lost the case. That’s strike two.

What is lucky today was that he didn’t suffer a penalty for bringing a frivolous case in the Tax Court. He certainly could have, so Mr. Oropeza should consider himself very lucky. Somehow, he avoided strike three, but he still does owe the tax.

Case: Oropeza v. Commissioner, T.C. Memo. 2009-244

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Deducting Prostitutes Doesn’t Work Well (Nor Does Deducting Porn)

Wednesday, September 16th, 2009

Supreme Court Justice Potter Stevens famously uttered about pornography, “I shall not today attempt further to define the kinds of material I understand to be embraced . . . [b]ut I know it when I see it….” That’s a subject matter that rarely gets to the Tax Court, but it did earlier this week.

William Halby, a 78-year old tax attorney from New York, attempted to deduct his visits to prostitutes and his pornography purchases as medical expenses. The Tax Court was having none of that. Besides the obvious dubious nature of the deduction, there is no deduction allowed for illegal activities and prostitution is illegal in New York.

Hat Tip: April15.com and Roth Tax Updates.

Posted in Tax Court | 1 Comment »

A Statute of Basis

Tuesday, August 11th, 2009

An interesting Tax Court decision came down today in the case of Beard v. Commissioner. The taxpayer sells a business and correctly notes the gross income. However, he may have made a major error in calculating his basis (generally, the cost of acquiring the business). The IRS alleges he overstated the basis leading to an understatement of income. However, the IRS doesn’t get around to sending the Notice of Deficiency until after the three-year statute of limitations has expired. Can the IRS use the extended six-year period when, under Section 6501(e)(1)(A)

If the taxpayer omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return.

The question the Court had to decide was whether or not the alleged overstatement of basis (the Court, in ruling on this motion, assumed that there was an overstatement of basis) was equivalent to an omission from gross income. Unfortunately for the IRS, the law wasn’t on their side here. Section 6591(e)(1)(A)(i) defines gross income in this case as,

In the case of a trade or business, the term ‘gross income’ means the total of the amounts received or accrued from the sale of goods or services * * * prior to the diminution by the cost of such sales or services.

Section 6501(e)(1)(A)(ii) provides a safe harbor for taxpayers in this regard,

In determining the amount omitted from gross income, there shall not be taken into account any amount which is omitted from gross income stated in the return if such amount is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature and amount of such item.

Two court cases took the wind out of the IRS’ sails. The court noted,

In Colony, Inc. v. Commissioner, 357 U.S. 28, 33, 37 (1958), the Supreme Court, interpreting section 275(c) of the 1934 Revenue Act, the predecessor of section 6501(e), held that the extended period of limitations applies to situations where specific income receipts have been “left out” in the computation of gross income and not when an understatement of gross income resulted from an overstatement of basis…

In Bakersfield Energy Partners, LP v. Commissioner, 128 T.C. 207 (2007), affd. 568 F.3d 767 (9th Cir. 2009), a partnership (Bakersfield) which owned oil and gas property used the Internal Revenue Code’s partnership termination and transfer provisions to increase its basis in that property before selling it to a third party in 1998…Because Bakersfield did not omit any income receipt or accrual in its computation of gross income, we held that the Supreme Court’s decision in Colony applied and Bakersfield’s overstatement of basis did not trigger the extended limitations period…

We believe that it would be inappropriate to “distinguish and diminish the Supreme Court’s holding in Colony”. Bakersfield Energy Partners, LP v. Commissioner, 128 T.C. at 215. The principles of Colony apply where a taxpayer overstates his basis…

We assume that petitioners overstated the bases of their S corporations on their 1999 return. Under Colony and Bakersfield, petitioners did not omit income from their return such as would subject them to the extended period of limitations. Accordingly, petitioners’ motion for summary judgment will be granted.

So whether or not Mr. Beard’s businesses overstated their basis, the IRS is precluded from coming after him because he correctly reported the gross income and the statute of limitations had run out. Sometimes time is on your side.

Posted in Tax Court | Comments Closed

Paging President Obama and Secretary Geithner

Thursday, February 5th, 2009

Today the Tax Court decided Taylor v. Commissioner, a case involving a lien and a levy. While the case itself is interesting (the petitioner is a famous singer), it’s the Court’s conclusion that interested me:

Both petitioner and respondent repeatedly commented on petitioner’s stature as a beloved and well-known professional singer as support for their respective positions in these consolidated cases. We disagree with both parties insofar as they contend that a taxpayer’s celebrity status is somehow relevant to what this Court must do in deciding whether the Commissioner’s collection action may proceed. Every taxpayer, no matter how famous or notorious, has a legal obligation to honestly report and pay his or her income tax liability each year and is entitled to fair enforcement of Federal tax laws. [footnote omitted]

Anyone who believes that Secretary Geithner was treated identically to how you or I would be treated, please step forward….

Posted in Tax Court | 1 Comment »

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