The Transupport, Inc. v. Commissioner, No. 17-1265 (1st Cir. 2018) case involved evidence that was not sufficient to support imposing a penalty, but the same evidence was sufficient to hold the taxpayer liable for the tax. The case provides an opportunity to consider how courts evaluate evidence in tax cases. The Facts & Procedural History…
Tax Articles
IRS Summons Reaches Attorney’s Client Names
Communications with an attorney are generally protected from disclosure. But what about client names? And what power does the IRS have the power to force an attorney to disclose the names of his clients? Can the IRS issue an IRS summons to get this information? The court addressed this in U.S. v. Servin, No. 17-1371 (3d…
Court Rejects the ‘Taking All Necessary Steps’ Defense to Penalties
If you take all of the steps to prepare and remit a tax return to the IRS except for placing it in the mail, is this sufficient to avoid a failure to timely file penalty? There is case law suggesting that it may be in some circumstances. The U.S. Tax Court recently addressed this in…
Misappropriated Money Subject to Tax, Even if No Criminal Violation
The proceeds of criminal activities are taxable income. Money that is embezzled from an employer is taxable to the embezzling employee. But what about money transferred between friends with the agreement that one of them will invest the funds, but he instead uses the funds personally and in doing so did not violate a criminal…
Some Filing Deadlines are Strict, Others are Not
When it comes to fixing tax problems, procedural footfaults can make solving the problem even more difficult. Filing deadlines are an example. The Duggan v. Commissioner, No. 15-73819 (9th Cir. 2018), case provides an example. Contents1 Facts & Procedural History2 Not the Typical Timely Filing Case3 Not a Case Involving an Exception to Timely Filing4…
Court: IRS Cannot Apply New Law Based on Conduct Predating the Law
In Rafizadeah v. Commissioner, 150 T.C. No. 1 (2018), the court concluded that the IRS made a late assessment of tax and penalties. The case turns on whether the IRS can benefit from the longer six-year assessment period based on an information return filing that the law did not obligate the taxpayer to make at…
Family Cattle Operation Denied Tax Deductions
In Barnhart Ranch Co. v. Commissioner, No. 16-60834 (5th Cir. 2017), the court considered who was entitled to deduct expenses for cattle that were descended from cattle the taxpayers inherited and other cattle that were subsequently purchased. The case shows how important it is to implement an accounting system to capture income and expenses in…
Is the IRS Bound by It’s Letters and Notices?
If the IRS sends a taxpayer a letter saying that it will process their refund claim but then it fails to do so, is the IRS bound by its letter? The court recently addressed this in Hawver v. Commissioner, T.C. Memo. 2017-244. Contents1 The Facts & Procedural History2 Is An IRS Letter or Notice a…
Payments to Foreign Student Studying in U.S. Subject to Tax
We get quite a few questions from students who are in the U.S. on student visas as to whether their research awards are taxable in the U.S. The answer depends in large part on the terms of the applicable tax treaty and whether the awards are compensation for services or pure grants. The recent Dovzhenok…
IRS Cannot Use Court to Collect from Third Party Located in Another State
The IRS has a number of collection tools at its disposal. This includes the ability to take the taxpayer’s property without court intervention. This power doesn’t extend to all property. For example, the IRS has to go through the courts to get at property held by third parties. As the court reminded the IRS in…