Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Lesson From The Tax Court: The Unforeseen Circumstances Rule For §121 Home Sale Exclusions
The Tax Code gives homeowners many tax breaks. Chief among them is the ability to exclude up to $500k of gain from the sale of a principal residence (for married taxpayers filing jointly). Taxpayers seeking this exclusion must meet some basic requirements, set out in §121. Taxpayers who fail the requirements, however, may still qualify…
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Solo Practitioner, Backed By Latham & Watkins, Wins SCOTUS Tax Ruling
National Law Journal, Solo Practitioner, Backed by Latham & Watkins, Wins SCOTUS Tax Ruling: A Fargo, North Dakota, solo practitioner, with help from Latham & Watkins, scored a unanimous victory in the U.S. Supreme Court on Thursday for herself, and low-income taxpayers and small businesses. The court, in an opinion by Justice Amy Coney Barrett, ruled…
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Lesson From The Tax Court: What’s Excluded From The §132 Exclusion?
Tax Day is here! And what better way to observe the day than a lesson on §132, a lesson that evokes the ghost of Dan Rostenkowski, whose curmudgeonly visage appears to the right. For those who don’t know, Rostenkowski was the chairman of the House Ways and Means Committee from 1981 until 1994 when, in…
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Lesson From The Tax Court: 50 Ways To Lose Your Interest Abatement Request
Obtaining an abatement of interest reminds me of Paul Simon’s song 50 Ways to Leave Your Lover. Sure, the “50 ways” in the song title is misleading. By my count, Simon gives us only four. And some are singularly unhelpful for real life advice. I mean, “make a new plan, Stan”? Really? But the hyperbole…
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Lesson From The Tax Court: Penalty Approval In Conservation Easement Cases
The §6751(b) supervisory approval requirement for penalties has been a thorn in the side of both the IRS and the Tax Court. Today’s lesson shows us how the IRS penalty approval process in conservation easement audits has forced taxpayers to reach for wilder and less credible attacks in their attempts to avoid penalties by finding…
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Lesson From The Tax Court: Take The Administrative Appeal
Taxpayers famously focus on trying to get their “day in court” against the evil IRS. The Independent Office of Appeals (Appeals) is no court. It is not surprising, then, that taxpayers’ myopia often leads them down the dangerously wrong path of ignoring their opportunity to go to Appeals. Today’s lesson teaches us one reason that…
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Lesson From The Tax Court: What Constitutes A CDP ‘Hearing’?
Before the IRS can start collecting unpaid tax liabilities by levy, §6330(b)(1) requires it to give taxpayers an opportunity for a Collection Due Process (CDP) hearing with the IRS Independent Office of Appeals. Many taxpayers do not fully understand how CDP hearings work. First, they erroneously expect that a CDP hearing is a discrete and…
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Lesson From The Tax Court: Generally Is Not Always—Or—That’s The Way The Ball Bounces
We law professors are often accused of hiding the ball of legal analysis. Teaching the basic tax law course presents a particular challenge because of the multiplicity of statutory rules that the ball bounces against. We try to teach students the general rules of what constitutes income, what gets allowed as deductions, when both must…
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Lesson From The Tax Court: A New Twist On Travel Away From Home Deductions?
When I teach the §162 travel away from home deductions I tell my students to distinguish between transportation costs (on the one hand) and meals/lodging costs (on the other hand). Transportation costs are covered by Rev. Rul. 99-7. Their deductibility turns on job site location. To deduct meals and lodging expenses, however, the taxpayer must…
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Lesson From The Tax Court: The Tax Liabilities You Leave Behind
We all know you can’t take it with you. But what happens to the “it” after you die? Ideally, you will have paid all your debts, and your Estate will distribute your “it” to the objects of your affection. The IRS will probably not be one of the objects of your affection. However, few of…
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Lesson From The Tax Court: The Proper Baseline For Offers In Compromise
Paying taxes can be painful. When money is tight and other needs are pressing, sending money to the federal government understandably sinks on the taxpayer’s priority list. But not the government’s! Congress wants to make sure that paying taxes remains at the top of every taxpayer’s priority list. That is why it gives the IRS…
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Lesson From The Tax Court: The Innocence Requirement In § 6015(c) Proportional Relief
Section 6015 allows taxpayers to obtain relief from an otherwise joint and several liability. The statute contains three related provisions allowing relief. Siblings. First is the eldest child, traditional innocent spouse relief. It was formerly in §6013(e) and is now found in §6055(b). Second is the quite middle child, a proportionate relief provision that basically…
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IRS Offers To Settle Cryptocurrency Case, But Taxpayer Wants Precedent That Mining/Staking Is Not A Realization Event
Press Release, Taxpayer Lawsuit Demands Confirmation of Tax Treatment of Staking Rewards: Today, the Proof of Stake Alliance (POSA), a leading blockchain industry association, celebrated important news: as part of ongoing federal litigation (Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.)), the government has offered to refund plaintiff Joshua Jarrett for the taxes he paid when he created new…
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COVID-19 Tuition Refund Fights Heat Up In Appeals Courts
National Law Journal, 'Watching the Outcome Like a Hawk': COVID-19 Tuition Refund Fights Heat Up in Appeals Courts: After failures in district courts, a handful of students have taken their COVID-19 tuition refund fights to appellate courts in cases that are being closely watched by the higher education community. Many of the lawsuits, alleging universities…
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Lesson From The Tax Court: The Presumption Of Regularity
No, today’s lesson has nothing to do with your gastrointestinal system. But it does relate to what comes out of the bureaucratic process. The presumption of regularity affects a broad range of IRS work product, such as Notices of Deficiencies, Certificates of Assessments and, in today’s case, Penalty Approval forms. In Long Branch Land LLC…
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Morse: A Tax Deadline Missed By One Day Leads To A Supreme Court Showdown Over Equity, Jurisdiction – And Grammar
SCOTUSblog: A Tax Deadline Missed By One Day Leads to a Showdown Over Equity, Jurisdiction – and Grammar, by Susan C. Morse (Texas; Google Scholar): The argument on Wednesday in Boechler v. Commissioner of Internal Revenue will consider whether “equitable tolling” — which allows courts to excuse missed deadlines in some circumstances — is available for a…
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Lesson From The Tax Court: Taxpayers Behaving Badly (2021)
This will be my last new post until January. I will be spending my days (except for Christmas Day) grading exams. Grades are due Monday, January 3th and then I resume teaching on January 11th, so you will likely see my next Lesson From The Tax Court on January 18th (the day after MLK holiday).…
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WSJ: A Couple Stored IRA Gold At Home. They Owe The IRS $300,000.
Following up on Bryan Camp (Texas Tech), Lesson From The Tax Court: How To Mess Up Your Checkbook IRA: Wall Street Journal Tax Report, A Couple Stored IRA Gold at Home. They Owe the IRS More Than $300,000.: It’s official: Owners of individual retirement accounts with assets invested in gold and silver coins can’t store them…
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Lesson From The Tax Court: Taxpayer ‘Filed’ Return Even Though IRS Could Not Process It
Case law gets made when things go wrong. When things go right, a taxpayer will file a return, the IRS will process the return, and the taxpayer will receive any claimed overpayment as a refund. Today's lesson arises from a breakdown between filing and processing. It teaches us the difference between those concepts. In James…
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Lesson From The Tax Court: Who Is An IRS Employee’s Immediate Supervisor For §6751 Penalty Approval?
Today’s lesson involves yet more litigation over IRS compliance with the penalty approval process required by the formerly toothless §6751(b)(1). In Sand Investment Co., LLC, et al. v. Commissioner, 157 T.C. No. 11 (Nov. 23, 2021) (Judge Lauber), the Tax Court continues teaching us the scope and operation §6751(b), a series of lessons it started…
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Lesson From The Tax Court: How To Mess Up Your Checkbook IRA
The idea that freedom means control over your own destiny s arguably the most defining characteristic of American culture. It is most certainly the basis on which various companies promote “checkbook IRAs.” If you Google that term you will find a gaggle of companies urging people to take full control of their retirement funds, to…
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Lesson From The Tax Court: Not Every Decision Comes With An Opinion
Once a taxpayer petitions the Tax Court to contest a Notice of Deficiency (NOD), the Tax Court will issue a decision in the case. The taxpayer has no option to nonsuit the case like plaintiffs can do in state courts or in federal district courts. It’s what I call the Hotel California rule: the taxpayer…
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Lesson From The Tax Court: A Hard Choice Is Still A Choice
I have a strict attendance policy in that a student is either either there or not. I don't do excused absences. Students get six absences with no penalty and with no questions asked. Their seventh absence, however, results in a one-increment reduction of their final grade (B+ to B, e.g.), again with no questions asked. …