Author: Bryan Camp
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Lesson From The Tax Court: The Employer/Employee Gift Rule
Relationships can be messy. That is true whether they are work relationships or romantic relationships. But it is especially true for romantic relationships with co-workers. Throw in a power disparity (in either direction) and the relationship becomes even trickier. That is why I suspect most readers subscribe to the standard advice to avoid romantic relationships…
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Lesson From The Tax Court: The Impact Of De Novo Review In Spousal Relief Cases
I don't just inflict misery on tax students. I also teach a class in Civil Procedure to first year law students. One recurring lesson there concerns the different standards courts of appeals use when reviewing trial court decisions. I want my students to learn to that the applicable standard of review matters. It not only…
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Lesson From The Tax Court: Fake It Till You Make It
Today’s lesson is how to win a valuation dispute with the IRS. I don’t teach much about valuation in my basic tax course. When we work problems involving property, the problems generally tell students to assume a certain fair market value (FMV) for the property. For example, when I teach the deductions allowed by §170…
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Lesson From The Tax Court: The Reduce-To-Basis Rule For §170 Deductions
Basis is probably the most important concept I teach in my intro income tax course. I like thinking of basis as the tax history of a piece of property. It tracks what ought not to be taxed upon eventual sale or exchange of that property under the calculations required by §1001. But a proper understanding…
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Lesson From The Tax Court: Know Your TMP
In my now 22 years of teaching tax, I have assiduously avoided teaching partnership taxation. With any luck, I’ll never have to. Inside and outside basis still confuse the heck outta me. But I do teach tax procedure, so I’ve been forced over the years to learn something about the rules governing audits of partnerships.…
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Lesson From The Tax Court: Don’t Confuse Dummy Returns With Substitutes For Returns
The act of filing a return is central to tax administration. Section 6011 sets out the general requirement: “any person made liable for any tax imposed by this title” must file a return “according to the forms and regulations prescribed by the Secretary.” Section 6012 gets more granular and gives more specific requirements and exemptions…
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Lesson From The Tax Court: Honor The Corporate Fiction
A corporation has no soul to be damned and no body to be kicked. So supposedly said Baron Thurlow long, long ago. It is but a legal fiction. It’s not the Borg (which is science fiction, not legal fiction). The fictional nature of corporations creates all kinds of gnarly problems in criminal law, in constitutional…
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Lesson From The Tax Court: Checks … Still Matter
Who uses paper checks anymore? Not my kids. My daughter even prefers to incur a surcharge for using her debit card to pay her rent rather than walking a paper check to the rental office. The practical reason, she says, is that when she uses her debit card she can immediately see the impact on…
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Lesson From The Tax Court: The Finality Of Closing Agreements
Section 7121 authorizes the IRS to enter into “an agreement in writing” with taxpayers “in respect of any internal revenue tax for any taxable period.” Such agreements are called “Closing Agreements.” As implied by that name, the big idea here is that such agreements are meant to “close” a particular tax issue or a particular…
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Lesson From The Tax Court: Substantiation Means More Than Receipts
It’s the day after Labor Day. So it’s fitting for a post about a taxpayer who labored for a good cause only to learn that the Tax Code does not allow deductions for the cost of providing such labor unless linked to a trade or business. Yes, this is a §162 travel-away-from home case. Deductions…
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Lesson From The Tax Court: The Law Of Unintended Consequences
To say the Internal Revenue Code is complex is like saying a virus is hard to see. It understates the obvious. NSS. Today the Tax Court teaches us one consequence of that complexity: the meaning and scope of one statute (§6103) can be altered by the later addition of another statute (§7623(b)). The former is…
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Lesson From The Tax Court: State Law Label Did Not Control Federal Tax Consequences
Some things never change: people get married, people get divorced. Sure, the divorce rate has fallen somewhat, as this thoughtful 2018 Time Magazine analysis explains. But people continue to marry, and some non-trivial percentage of those marriages will end in divorce. Plenty of work for family lawyers. Other things constantly change: tax law, for example! …
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Lesson From The Tax Court: Taxpayer Could Not Prove His Way Out Of §162(f)
The basic rule is simple: the taxpayer bears the burden of proof. That is, all income is gross income unless the taxpayer proves a statutory entitlement to an exclusion; and no expenditure is deductible unless the taxpayer proves a statutory entitlement to a deduction. Complexity comes in the statutes that allow exclusions and deductions. But…
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The Tax Consequences Of Name, Image, And Likeness Rules For College Athletes
Following the Supreme Court’s decision in National Collegiate Athletic Association v. Alston, 594 U.S. ___ (2021), the NCAA started allowing college athletes to accept payments for use of their name, image and likeness, effective July 1, 2021. That change in policy has created a host of various compliance issues, such as trademark licensing issues. It…
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Lesson From The Tax Court: Non-Receipt of 1099 Does Not Get You Out of Penalties
When we think of penalties we naturally think of punishment. I mean, to channel Steven Wright, if a penalty is not punishment when why does the word start with “penal”? Both this week and next week’s lesson teach us how penalties serve other purposes as well. Today, in Lionel E. Larochelle and Molly B. Larochelle…
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Lesson From The Tax Court: Excise Tax On Messed Up IRA Rollover Different From Income Tax
The tax laws are conflicted. They encourage retirement savings by permitting taxpayers to deduct contributions to their Individual Retirement Accounts (IRA’s). But that encouragement is hedged by various restrictions and caps as well as a special excise tax imposed on contributions that exceed the applicable caps. And Congress crosses its fingers if taxpayers take early…
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Lesson From The Tax Court: No §6015 Equitable Relief For §6672 Penalties
The Internal Revenue Code is full of taxes and penalties. Oh my, so many taxes and penalties! You must always stay aware of which kinds of taxes or penalties are at issue in order to know what rules of law apply. This week and next week will give us two lessons on the importance in…
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Lesson From The Tax Court: The Difference Between Rejecting An OIC And Reviewing A Rejection
Tax collection is a process, not an event. The process can last ten years or more. During that time many different events may occur. Different events may bring with them different decision-makers within the IRS. The secret sauce of representing clients is that when you hit an unfavorable decision-maker, try to find a new one. …
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Lesson From The Tax Court: TP Did Not File Return By Giving Copy To IRS Employee
Figuring out when or whether a taxpayer has filed a return is important for many reasons. On the one hand, proper filing limits the time for the IRS to assess. Thus taxpayers generally want the courts to find they have filed. On the other hand, filing a frivolous or fraudulent return can lead to penalties. …
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Lesson From The Tax Court: No §163 Deduction From Foreclosure Proceeds
It’s not just Death and Taxes that are certainties in life. Having lived through the economic downturns in 1973, 1981, 2001, and 2008, I now believe we can add Recessions to the list. And another one seems to be coming. So this may be a good time to pay attention to Ronald W. Howland, Jr.…
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Lesson From The Tax Court: A Reasonable Basis For Deducting Scrubs?
My students—especially those with accounting backgrounds—come to class expecting that tax law is all about bright line rules and lots of calculations. They are either disappointed, frustrated, or relieved to find that tax law is like other law: it’s words, words that are generally complex, often opaque, and frequently mysterious. That’s why taxpayers need competent…
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Lesson From The Tax Court: How To Tell When Land Is Held As A Capital Asset
When a taxpayer buys land and later sells it, the character of the resulting gain or loss will depend on whether taxpayer held the land as an investment or instead held it like inventory, to be sold to customers as part of a trade or business. It is not always easy to tell how the…
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Lesson From The Tax Court: Ask The Right Court
It’s sweet to beat the tax man. It’s even sweeter when you can make the government pay your litigation costs and attorneys fees under §7430. But the bitter lesson for today is that you must be careful to ask the right court. Law is hierarchical. You can appeal a lower court’s adverse decision to a…
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Lesson From The Tax Court: Taxpayer Held To His Word(s) Regarding Alimony
Congress eliminated the deduction for alimony in the December 2017 Reconciliation Act (informally called the Tax Cuts and Jobs Act, or TCJA). The concept is still important, however. First, the legislation grandfathered in alimony payments made pursuant to divorce or separation instruments executed on or before December 31, 2018. So the question of whether a…