Volume 119 — Tax Court Reports

Ps assigned to S their right to receive a portion of each of certain future annual lottery payments in exchange for a lump-sum payment to them by S of $… Held: S paid Ps a lump-sum amount for the right to receive certain future ordinary income. Held, further, Ps' right to receive certain future annual lottery payments does not constitute a capital asset within the meaning of sec. 1221, I.R.C. Held, further, the $ 1,040,000 that Ps received from S is ordinary income.

In an earlier opinion, we decided that P permitted its 1995 earnings to accumulate beyond the reasonable needs of its business. Held: This Court will not follow the holding of Court of Appeals on this point in Rutter Rex. Held, further, sec. 535(b), I.R.C., and underlying regulations are interpreted, and R's computation of P's accumulated earnings tax liability is correct.

Held: In this case involving a question of Federal taxes, respondent's motion in limine to deny petitioners' entitlement to assert the attorney-client privilege, granted based on the Federal common… Held: In this case involving a question of Federal taxes, respondent's motion in limine to deny petitioners' entitlement to assert the attorney-client privilege, granted based on the Federal common law doctrine of implied waiver.

P-H operated a law practice as a sole proprietorship at all relevant times. R audited Ps' 1987 joint tax return and made several adjustments to the Schedules A and C attached to this tax return. Held: Insofar as sec. 1.163-8T, Temporary Income Tax Regs., 52 Fed. Reg. 24999 (July 2, 1987), and sec. 1.163- 9T(b)(2)(i)(A), Temporary Income Tax Regs., 52 Fed.

This is an action for redetermination of employment status. G is the president and sole shareholder of P, an S corporation. P failed to treat G as an employee. Held: P is subject to Federal employment taxes since G, an officer, is an employee within the meaning of secs. 3121(d)(1) and 3306(i), I.R.C. 2. Held, further, P had no reasonable basis for not treating G as an employee and therefore is not entitled to relief pursuant to sec. 530 of the Revenue Act of 1978, Pub.

P had a self-directed IRA account of which C was the custodian.    P requested that C purchase common stock in X for the IRA.    Although the investment in X stock was not prohibited, C, as a    matter of policy, refused to purchase the stock because X was    not publicly traded. P arranged for C to issue a check drawn on    the IRA account made payable to X. C sent the check to P, who    forwarded it to X. X issued the stock in the name of P's IRA. P    received X's stock and delivered the stock to C. R determined    that there was a distribution from the IRA to P.    Held: P was a conduit for C, and there was no    distribution from the IRA to P. Lemishow v. Commissioner,    110 T.C. 110 (1998), distinguished.

On Sept. 10, 1991, Ps timely filed a joint 1990 Federal income tax return on which they reported that they: (1) Held a general partner interest in one partnership and limited partner interests in… Held: The 6-year period of limitations in sec. 6501(e)(1)(A), I.R.C., is inapplicable, and the assessment made on Nov. 6, 1997, was untimely. Ps' gross income stated in the return was determined by reference to the information returns of the partnerships.

Four months after the instant case was docketed, R sent P a so- called Branerton letter consisting of 68 pages of questions and requests for documents. Held: a protective order shall be issued. R's service of formal discovery is inconsistent with Rule 70(a)(1) and with the cases, such as Branerton v. Commissioner, 61 T.C. 691 (1974), which direct the parties to utilize informal consultation or communication before employing the formal discovery procedures.

Ps owned stock warrants in NMG. WCP sent a letter to NMG regarding its intention to purchase all the issued and outstanding stock of NMG. Held: Rev. Rul. 78-197, supra, provides that, in the case of a charitable contribution of stock, the Internal Revenue Service will treat proceeds of the sale of the stock as income to the donor only if at the time of the gift, the donee is legally bound, or can be compelled, to sell the shares.

R filed a motion to dismiss for lack of jurisdiction on the ground that Ps' petition was not timely filed. Held: The certified mail list is a record of regularly conducted activity under Fed. R. Evid. 802(6) and is self- authenticated by the accompanying declarations under Fed. R. Evid. 902(11).

On her 1991 tax return, P's filing status was listed as    "Married filing separate return". On Jan. 9, 2001, R    sent P a Notice of Determination Concerning Collection Action(s)    Under Section 6320 and/or 6330 regarding the 1991 tax year in    which R determined that P was not entitled to raise a spousal    defense because she did not file a joint return. On Feb. 12,    2001, P sent to the Tax Court a Petition for Lien or Levy Action    Under Code Section 6320(c) or 6330(d). R filed a Motion for    Partial Summary Judgment on the issue of whether P is eligible    for relief under I.R.C. sec. 6015.      Held: The petition was timely filed in order for    the Court to have jurisdiction to review R's denial of spousal    relief. Sec. 6015(e)(1), I.R.C.      Held, further, R's Motion for Partial Summary    Judgment is granted because there is no genuine issue as to    whether P is entitled to relief under I.R.C. sec. 6015. P is not    entitled to relief underI.R.C. secs. 6015(b), (c), and (f)    because she did not file a joint return.

Partnership C owned and operated natural gas gathering systems to transport gas purchased from natural gas producers. Held: Because C's use of its gathering systems determines the proper asset class, and because C was not a natural gas producer, the components in question are not within asset class 13.2; rather, they are used by C to transport gas and are, therefore, within asset class 46.0, with a 15-year recovery period.

In 1991 and 1992, D gave stock to Cs and other donees. For gift tax purposes, D valued the stock at $ 100 per share. Held: Pursuant to sec. 2035(c), I.R.C., D's gross estate includes the $ 4,680,284 in gift taxes paid by or on behalf of D with respect to his 1991 and 1992 gifts of stock.

P moved to strike paragraphs from the answer to the second amended petition, in which paragraphs R affirmatively alleged that additional… Held: Pursuant to sec. 7436, I.R.C., the Court has jurisdiction over R's affirmative allegations contained in the answer to the second amended petition that the additional individuals are employees of P and that P is liable for additional employment taxes, additions to tax, and penalties for the taxable periods in the notice of…

On Feb. 22, 2001, R mailed to P a final notice of intent to levy    (final notice) for 1990, 1991, and 1992. On the same day, R    mailed to P a final notice for 1995. On March 17, 2001, P timely    requested a hearing under sec. 6330, I.R.C. (Hearing), as to    both final notices. Subsequently, R's Appeals officer (A) held    with P an "equivalent hearing" under sec. 301.6330-1(i),    Proced. & Admin. Regs. A informed P at the equivalent hearing    that P was not allowed a Hearing because, A mistakenly believed,    P's request for a Hearing was untimely. A later issued to P a    decision letter sustaining the proposed levy.    Held: The determination reflected in the decision letter,    coupled with P's timely petition to this Court with respect    thereto, serves to invoke this Court's jurisdiction under sec.    6330(d)(1), I.R.C.

P filed a petition with the Court challenging R's administrative determination granting his former spouse relief from joint and several liability on joint returns pursuant to sec. 6015(f), I.R.C. R… Held: The Court will grant R's motion and dismiss this case for lack of jurisdiction on the ground that R did not issue a notice of deficiency to P, nor did R make any other determination with regard to P that would confer jurisdiction on the Court.

P, on three separate occasions, advised the Court and R that he had filed petitions in bankruptcy. Held: R's motion will be granted. P is liable for a criminal fine under sec. 7456, I.R.C. , as a sanction for his misbehavior.

This case is before the Court to consider whether P must pay a penalty pursuant to sec. 6673(a)(1), I.R.C., and whether P's counsel must pay… Held: P is liable for a penalty under sec. 6673(a)(1), I.R.C., since his position in this case is frivolous. 2. Held, further, P's counsel is liable for R's excess costs under sec. 6673(a)(2), I.R.C., since he both knowingly and recklessly made frivolous arguments, thus unreasonably and vexatiously multiplying these proceedings.

P filed joint tax returns for taxable years 1982 to 1988 with H. H filed a return in 1989 with the filing status of Married filing separate. P did not file a tax return in 1989. Held: Pursuant to I.R.C. sec. 6015(e), we have jurisdiction to review the denial of P's request for relief under I.R.C. sec. 6015 for taxable years 1982 to 1988, and we have jurisdiction to review R's failure to make a determination on P's request for relief under I.R.C. sec. 6015 for 1989.

Petitioner (P), a U.S. citizen residing in American Samoa, was employed as chief engineer of a fishing vessel that operated primarily… Held: American Samoan source or effectively connected income is excludable from U.S. income by sec. 931(a), I.R.C., even though the Secretary has not issued regulations under sec. 931(d)(2), I.R.C. Held, further, To the extent P's fishing income in 1995, 1996, and 1997 was earned in international waters, it is not American Samoan source or…

P is an affiliated group of corporations filing a consolidated Federal income tax return. Held: In the context of a life-nonlife consolidated return, the AMT book income adjustment is to be made using a consolidated approach, with a single adjustment for the entire group.

To collect petitioner's (P) unpaid income tax liabilities for 1987-89, respondent (R) issued a notice of levy to a fund in which petitioner maintained accounts and issued to P a notice of jeopardy… Held: The Tax Court has jurisdiction under sec. 6330(d), I.R.C., to review R's determination that R's use of a jeopardy levy was appropriate.