The issue before the court was whether the taxpayer received a taxable, deemed distribution in 2014 from an account that was treated and consistently reported by the Taxpayer as an IRA even though the account entered into a number of prohibited transactions beginning in 2011. In a designated order on January 31, 2019 , Judge…
In order to avoid the flow-through of examination adjustments, the Taxpayer in Mowry v Commissioner[1] attempted to argue that an S corporation, in which he was a minority shareholder, had ceased to be a valid S Corporation. The Taxpayer argued that disproportionate distributions to the majority shareholder (i.e., not the Taxpayer) over several years created…
In Garcia v. Commissioner [1], the Taxpayers were a married couple embroiled in litigation over alleged corporate fraud by an international bank specialist. The specialist’s fraud devalued the couple’s minority interest in a “South African exploration and gold mining investment company” (“R&E”). The Taxpayers along with other investors funded most of the expensive litigation from…
Joe and Mary operate a closely held business that generates a net operating loss in 2005 and 2007. The net operating loss from 2005 and 2007 are carried forward and are used to offset business income on Joe and Mary’s 2015 tax return. Joe and Mary’s 2015 tax return is selected by the IRS for…
Flume v. Commissioner (here) revolved around one noteworthy issue: did the taxpayer’s reliance on the advice of his tax return preparer spare the taxpayer from $110,000 in penalties for the taxpayer’s failure to report foreign investments on Form 5471? The taxpayer argued that he relied on the expertise of his tax return preparer to guide…
In Goldsmith v. Commissioner, T.C. Memo. 2017-20 (link) the Tax Court held that the payments from the shareholder’s S corporation were not wages. The Tax Court reasoned that the payments to the taxpayer constituted a non-taxable return of capital. The court reached this conclusion even though the taxpayer did not draw a salary for the…
The taxpayer in Shaffran v Commissioner, T.C. Memo. 2017-35 (link) was not an owner, officer, or employee of a restaurant that got behind in its federal payroll taxes. Yet, the IRS still attempted to assert the Trust Fund Recovery Penalty (“TFRP”) against the taxpayer under the theory that he was a “de facto officer”. How…
In Namen v. Commissioner[1], the taxpayer was a podiatrist in private practice. He was one of 6 members of an LLC that operated a surgical center, which closed in 2009. For federal income tax purposes, the LLC was treated as a partnership. The taxpayer claimed a loss on his personal 2009 income tax return from…
