Tax Law Summaries
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Richard A. Perkins v. Commissioner
No. 14587-06L,
U.S. Tax Court, 11/20/2008
Holding: The U.S. Tax Court has ruled the Internal Revenue Service ("IRS") may proceed with a levy action to collect petitioner Rickard Perkins' unpaid taxes, disregarding the latter's application for a refund that he sought to offset his outstanding tax liabilities. According to the Tax Court, petitioner failed to prove that he was financially incapable under Section 6511(h) of the Internal Revenue Code ("IRC") which would have tolled the statute of limitations for such a refund claim. Since the period of limitation for petitioner's claim has expired, he was no longer entitled to request for a refund.
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Michael Neil McWhorter v. Commissioner
No. 1365-07,
United States Tax Court, 11/24/2008
Holding: The U.S. Tax Court has sustained a taxpayer's claim that he was an employee of Boyle Energy and not an independent contractor liable for self-employment taxes. The Tax Court found that respondent Commissioner of the Internal Revenue Service ("IRS") did not challenge the credibility of petitioner’s testimony and acknowledged that some of the relevant factors cited in a court precedent favored petitioner's claim. But the Tax Court stated that the taxpayer had no reasonable cause for failing to file a return reporting that he received $126,760 in compensation and other amounts of income during 2002. The failure of Boyle Energy to withhold taxes that should have been withheld neither excused petitioner’s failure to file the return and pay the taxes nor relieved him of the additions to tax under applicable provisions of the Internal Revenue Code ("IRC").
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David Cavazos v. Commissioner
No. 28664-07L,
United States Tax Court, 11/17/2008
Holding: The U.S. Tax Court has upheld a determination of the Internal Revenue Service ("IRS") to proceed with a levy against a taxpayer ("petitioner") for his unpaid federal income tax for 2002. The Tax Court gave three reasons why the IRS's motion for summary judgment should be granted. First, the IRS appeals officer’s determination was reasonable in view of petitioner's repeated failure to provide requested financial information, especially the Form 433-A. Second, petitioner failed to raise during the collection hearing any relevant issues or appropriate defenses pertaining to the proposed collection action, and his failure to offer any collection alternatives for the appeals officer to consider. Third, petitioner failed to file his income tax return for 2006. He had been advised that his 2006 return was overdue, yet he never fulfilled this obligation. It is not an abuse of discretion for an appeals officer to reject an Offer-in-Compromise ("OIC")on the ground that the taxpayer has a history of noncompliance with tax laws or is noncompliant with current tax obligations.
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Stedman v. Commissioner of Internal Revenue
No. 108002-05,
U.S. Tax Court, 10/27/2008
Holding: The U.S. Tax Court ruled that a court-ordered payment of attorney's fees arising from divorce proceedings were not deductible as alimony. The Tax Court determined that due to lack of evidence to support a contrary finding, it concluded that petitioner Jack Stedman's obligation to make the payments would not terminate upon the death of his former spouse. Hence the payments did not satisfy the requirements of section 71(b)(1)(D) of the Internal Revenue Code ("IRC"). The Tax Court likewise upheld the imposition by the Commissioner of Internal Revenue ("CIR") of a 20 percent accuracy-related penalty for understatement, resulting from Stedman's improper attempt to deduct as alimony the court-ordered payments. The Tax Court based its decision on the finding that Stedman, a certified public account ("CPA"), was negligent and disregarded tax rules and regulations.
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Hennessey v. Commissioner of Internal Revenue
No. 07-60647,
U.S. Court of Appeals for the Fifth Circuit, 10/22/2008
Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the Tax Court's decision denying a couple's request for litigation costs. This case arose after a finding by the Internal Revenue Service ("IRS") that numerous deductions in the Hennessey couple's tax returns were not adequately substantiated. The couple eventually settled with the IRS in the Tax Court, after which they moved for costs. The Tax Court denied their request in a decision that was upheld by the Fifth Circuit. According to the Fifth Circuit, the Hennesseys failed to carry their burden of proving their deductions were proper. They did not provide the IRS with supporting documentation for all of their trips; some of the documentation they did provide was not consistent with their deductions; and they did not provide the required business purpose needed for several deductions. Finally, the Fifth Circuit found that the Hennesseys failed to include income received in 1995 on their tax returns, and that failure provided the IRS with substantial justification to take its administrative position.
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Tax Law Commentaries
Following are Tax Law Commentaries elaborating on the significance of the most important of the Tax Law Summaries.
Page 1 of 1 of Tax Law Commentaries
Swallows Holding, Ltd. V. Commissioner
Posted: 11/17/2008
Commentary: The recent win for the IRS in Swallows Holding, Ltd. V. Commissioner, 515 F.3d 162 (3rd Cir. 2008), elucidates the ongoing debate over the appropriate standard for judicial review of Treasury regulations. In Swallows, the Third Circuit reversed a Tax Court decision and applied the highly deferential standard set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) to uphold a Treasury regulation, finding that Congress intended for the agency action to have the force of law. While the decision is notable for its deferential treatment of the IRS regulation, it is equally notable for the unanswered questions left in its wake.
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Related summary: Third Circuit Upholds IRS' New Timely Filing Regulation
Page 1 of 1 of Tax Law Commentaries
