Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Lesson From The Tax Court: The Actual Payment Doctrine
Today is a lesson in timing. When I teach timing I emphasize to my students that they must analyze income items separately from deduction items. Today is an example of how the analysis applicable to inclusion can be different from the analysis applicable to deductions. As to income, we all know about the constructive receipt…
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Lesson From The Tax Court: It Takes More Than Putting In The Hours To Avoid §469 Restrictions
Tax Day approaches. I know many folks are putting in the hours on preparing tax returns this week … or else putting in the minutes filing Form 4868. But we all know—especially when unhappy clients come to us to fix a return messed up by some whack-a-doodle preparer—just putting in hours in filing tax returns…
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The Trump Indictment, Tax Law, And Conway Twitty
New York Times, A Surprise Accusation Bolsters a Risky Case Against Trump: The unsealed indictment against former President Donald J. Trump on Tuesday laid out an unexpected accusation that bolstered what many legal experts have described as an otherwise risky and novel case: Prosecutors claim he falsified business records in part for a plan to deceive…
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Lesson From The Tax Court: Attend Carefully To Your Entity Baskets
Easter approaches. On that day our church grounds will be overrun with children scampering to collect eggs into the various baskets, bags, and other containers they bring (or we give them if they need). They do not have to worry about what kind of container they use to collect their eggs. The candy will taste…
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Lesson From The Tax Court: The Whistleblower Who Blew Too Hard
Section 7623(b)(1) says that the IRS must reward whistleblowers when the information they provide causes the IRS to start “any administrative or judicial action” to collect unreported or unpaid taxes. In such cases, whistleblowers can get an award of up to 30% of the proceeds actually collected from such actions. Id. So what happens if…
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Lesson From The Tax Court: Another Reason To Keep Good Records
Last week’s Lesson looked at the inherent unreliability of third-party information returns. Taxpayers need to keep good records to refute those errors. This week’s Lesson continues that theme: keeping good records can help avoid a bank deposits analysis. When the IRS is forced to reconstruct income using the bank deposits method, it puts taxpayers in…
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Lesson From The Tax Court: Fill Out The Damn Form
The fuss has focused on FBARs. The FBAR requirements and penalty provisions have been hotly litigated. Recently the Supreme Court issued an opinion in Bittner v. U.S., deciding that the penalties were not as harsh as the government thought they should be. But forget FBAR. Today’s lesson is about a different, yet equally important, foreign…
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Lesson From The Tax Court: The New Evidence Rule In Spousal Relief Cases
When a taxpayer requests spousal relief under §6015, the IRS must decide whether to grant it. If the IRS denies relief, the taxpayer can petition the Tax Court. §6015(e). In 2019 Congress created a modified administrative record rule for how the Tax Court is supposed to conduct that review. Taxpayer First Act, 133 Stat. 981,…
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Lesson From The Tax Court: The Limited Review Of Passport Revocation Certifications
Today’s lesson is about §7345, created by Congress in 2015. The idea behind §7345 is simple. If you owe taxes and the government threatens to take your passport, you are more likely to pay up. But its operation is complex. It requires the IRS to first certify to the State Department that a taxpayer has…
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Lesson From The Tax Court: Mortgage Interest Deductions When The Payor Is Not The Borrower
Families can be complicated. Tax law can be complicated. Put those complications together and you get today’s lesson: family obligations to pay interest on a mortgage don’t support the §163 deduction even though they might, informally, be as binding as legal obligations. In Hrach Shilgevorkyan v. Commissioner, T. C. Memo. 2023-12 (Jan. 23, 2023) (Judge…
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Lesson From The Tax Court: The Tax Court Is Not Your Advocate
Today I present two lessons. First, we learn why diabetes is not a per se disability sufficient to avoid penalties for early 401(k) distributions. Second, we learn that pro se litigants cannot rely on the Tax Court to consider potential arguments they could have raised, but did not. Diabetes is a well-known and widespread disease,…
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2nd Circuit To Decide Whether Vermont Law School Can Cover Underground Railroad Murals Against Artist’s Wishes
Following up on my previous posts (links below), Bloomberg Law, Law School’s Covering of Slavery Murals Probed by 2nd Cir.: Vermont Law School found a somewhat receptive Second Circuit as it defended a ruling allowing it to permanently cover murals depicting the Underground Railroad without violating an artists’ rights law. Artist Samuel Kerson argued that…
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WSJ Op-Ed: The Ninth Circuit Upholds A Wealth Tax
Wall Street Journal Op-Ed: The Ninth Circuit Upholds a Wealth Tax, by Christopher Cox (Former Rep. (1989-2005) & SEC Chair (2005-2009)) & Hank Adler (Chapman): The 16th Amendment authorizes the federal government only to tax income, but some members of Congress would love to tax wealth as well. That is widely understood to be unconstitutional,…
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Lesson From The Tax Court: The Meaning Of ‘Business Premises’ In §119
It’s a new year. And what better way to start than with the fundamental lesson I teach my students in our first few classes: “Everything is income. Everything including all your non-cash receipts.” Yeah, I actually sing that to the class, to the tune of Everything is Awesome from the Lego movie. It scans. Treas.…
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Lesson From The Tax Court: Taxpayers Behaving Badly 2022
This will be my last new post until January. Next Monday, December 19, my annual Year Of Lessons From The Tax Court will appear in this space. It is a chronological listing of all the Lessons I posted in 2022, with links to each Lesson, the primary case discussed, and the judge who wrote the…
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Lesson From The Tax Court: It’s Not Income If You Pay It Back In Time
We all know that taxpayers do not have to report loans as income. But it's not clear why. It has something to do with the obligation to repay. It might be the obligation to repay burdens other assets so the loan does not represent an actual increase in wealth. Or it might be the obligation…
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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…