In Zumo v. Commissioner, T.C. Summary Opinion 2013-66, the U.S. Tax Court examined a case involving the Internal Revenue Service’s (“IRS”) rejection of an offer in compromise based on doubt as to collectibility. An offer in compromise is a request by a taxpayer to settle their tax debt for an amount that is less than…
Tax Articles
IRS Closing Agreement Valid If Not Reviewed by Joint Committee on Taxation?
In AM 20133301F, the IRS addressed the validity of a closing agreement that was not submitted to the Joint Committee on Taxation or JCT for review prior to signing the agreement. Facts & Procedural History The taxpayer was an insurance company whose tax returns were being audited by the IRS. The IRS and taxpayer asked…
About IRS Appeals AJAC Project
The IRS Office of Appeals just released a memo describing its changes pursuant to its Appeals Judicial Approach Culture (AJAC) project. These changes do not really break new ground, but they address a few key issues that are often in dispute in appeals cases. About the IRS Office of Appeals The IRS Office of Appeals is…
Fashion Retailers Business Expenses Disallowed as Routine Substantiation Case
In Heinbockel v. Commissioner, T.C. Memo. 2013-125, the U.S. Tax Court considered a routine substantiation case and disallowed business expense deductions for a fashion clothing retailer. This case presents an opportunity to consider how to present routine substantiation cases to the IRS and to the courts. Facts & Procedural History Mrs. Heinbockel was in the…
Personal Guarantees for Self-Directed IRAs Are Prohibited Transactions
If you have a self-directed IRA, the IRA invests in LLCs, can you personally guarantee a loan for the LLC? The court addressed this in Peek v. Commissioner, 140 T.C. 12. Facts & Procedural History Mr. Fleck identified a business opportunity that he intended to invest in. Mr. Peek, Mr. Fleck’s lawyer, approached Mr. Fleck about…
Parking Garages: Parking Lot Depreciation Life
In recent Chief Counsel Memo #20125201F, the IRS concludes that open-air parking garages are considered buildings rather than land improvements for tax purposes. The IRS attorneys go on to say that the taxpayer’s conclusion to the contrary warrants the assessment of a negligence penalty. That is a pretty harsh result given that the tax law…
IRS Liable for Stock Loss After Levy
When the IRS levies or takes property from the taxpayer, the taxpayer has the right to request that the property be sold within 60 days. This rule applies to more than just stocks. It also applies to cryptocurrency, for example. In Zapara v. Commissioner, 126 T.C. 215 (2005), aff’d, 652 F.3d 1042 (9th Cir. 2011),…
What Gross Receipts are Used in R&D Credit?
For the research tax credit, what gross receipts do you include in computing its tax credit? Despite the credit being on the books for several decades, this is an open question. The court addressed this in Hewlett-Packard Co. v. Commissioner, 139 T.C. 8. Facts & Procedural History Hewlett-Packard Co. (“Hewlett-Packard”) is a global technology and service…
Does Work to Validate Prior Research Qualify for the R&D Tax Credit?
For the research tax credit, does work to validate prior research count as a qualified research expense? The court recently addressed this in United States v. Davenport, No. 3:09-cv-02455-L (N.D. Tex. 2012). Facts & Procedural History Morris and David Davenport (collectively, “Davenports”) were fifty percent owners of Burly Corporation (“Burly”). Burly manufactures residential metal roofing and…
Using Third-Party Statistics for Tax Deductions
If you remember the time before the widespread use of personal computers, you will understand this better than others. We live in a society full of data. It’s everywhere. And it’s growing in volume, scope, and utility. The explosion of data has allowed taxpayers to produce documents, documents, and more documents. But why? Documenting business…