Volume 122 — Tax Court Reports

Ps filed a joint Federal income tax return for the taxable year 2000 reporting total tax of $ 2,831,360 and tax due of $ 196,006. Held: R's Motion for Summary Judgment will be denied. Sec. 6330(c)(2)(B), I.R.C., permits Ps to challenge the existence or amount of the tax liability reported on their original tax return because Ps have not received a notice of deficiency and have not otherwise had an opportunity to dispute the tax liability in question.

After submitting an application to and receiving an adverse    determination from respondent (R), petitioner (P) petitioned    this Court to seek our determination whether she is entitled to    relief from joint liability under sec. 6015(f), I.R.C.      R contends that: (1) In making our determination, we may    not consider evidence introduced at trial which was not included    in the administrative record; and (2) whether or not our review    is limited to R's administrative record, P is not entitled to    equitable relief under sec. 6015(f), I.R.C.      Held: Our determination whether P is entitled to    relief under sec. 6015(f), I.R.C., is made in a trial de novo;    thus, we may consider matter raised at trial which was not    included in the administrative record.      Held, further, P is entitled to equitable    relief under sec. 6015(f), I.R.C.

Petitioners (Ps), two S corporations and two shareholders of those corporations, received letters of proposed deficiency with respect to their 1993 and 1994 Federal… Held: R never took a position in the administrative proceeding as provided by sec. 7430(c)(7)(B), I.R.C., because Ps never received a notice of decision from the Appeals Office and R never sent Ps a notice of deficiency. Consequently, Ps do not qualify as prevailing parties under sec. 7430(c)(4), I.R.C. 2.

Respondent asks the Court to dismiss for lack of subject matter jurisdiction petitioner's overpayment claims under sec. 6512(b), I.R.C., for the years in issue to the extent that they involve… Held: On the basis of Estate of Baumgardner v. Commissioner, 85 T.C. 445 (1985), the Court has jurisdiction.

P, prior to his death, sold all of his shares in C to C's employee stock ownership plan in 1996. Held: P is not able to defer recognition of the gain that resulted from the sale because P failed to elect such treatment as required by I.R.C. sec. 1042.

Ps made a qualified offer, pursuant to sec. 7430, I. R. C., to resolve Ps' tax liabilities for the 1989, 1991, and 1992 tax years. Held: The parties entered into a contract to settle the docketed cases, as evidenced by Ps' qualified offer and R's acceptance of that offer. Held, further, Ps are not now allowed to reduce the amounts stated in the qualified offer for the years at issue by the amount of NOLs sustained in the 1988, 1990, 1993, and 1995 tax years.

P submitted a request for relief from joint and several    liability. P subsequently submitted an offer in compromise,    which R accepted. Before the offer was accepted, R sent P a    letter explaining that it was proposed that P be granted relief    under sec. 6015(c), I.R.C., and that P would be entitled to a    refund. After accepting the offer, R sent P a notice of    determination denying relief from joint and several liability    under former sec. 6013(e), I.R.C., and sec. 6015(b), (c), and   (f), I.R.C. P petitioned the Court under sec. 6015(e)(1), I.R.C.    P argues that the statement that P would be entitled to a refund    resulted in a mutual mistake of material fact or    misrepresentation sufficient for the offer in compromise to be    set aside. For the first time in his answering brief, P argues    that the doctrine of equitable estoppel applies.      Held: There was no mutual mistake or    misrepresentation sufficient to cause the offer in compromise to    be set aside. P's equitable estoppel argument is not considered    because it was not timely raised.

Ps and AFVW executed a residence agreement entitling Ps to lifetime residence at VW. VW provides four different levels of accommodations. Held: Ps are not required to use the actuarial method and may use the percentage method to determine the portions of the monthly service fees that are allocable to medical care. Held, further: Sec. 7491(a), I.R.C., places the burden of proof on R in certain situations.

On Aug. 14, 2002, R issued to P a final notice disallowing her claims for relief from joint and several liability on a joint return for the taxable years 1989 to 1994. Held: R was not barred under secs. 6015, 6320, or 6330, I.R.C., from filing a Federal tax lien against P prior to the entry of a final determination respecting P's claims for relief from joint and several liability under sec. 6015, I.R.C. Held, further, R's motion for summary judgment will be granted.

P, for Federal tax reporting purposes, claimed a California franchise tax deduction for 1989. Held: Sec. 461(d), I.R.C. , interpreted -- P is not entitled to accelerate California franchise tax deductions for the years under consideration.

As part of its statutory conversion under sec. 1012(a) and (b) of the Tax Reform Act of 1986, Pub. Held: among other things, for 1994: (1) The basis step-up provision of sec. 1012(c)(3)(A)(ii) of the Tax Reform Act of 1986, Pub.

On Dec. 19, 2002, R mailed to P two notices of determination concerning collection action. Held: The income tax notice of determination that was sent by certified mail to P at P's last known address was sufficient, notwithstanding the fact that P did not receive such notice.

In this TEFRA partnership proceeding, the Court entered an Order of Dismissal and Decision, and that decision was appealed to the Court of… Held: The motion to vacate was properly submitted to this Court, without leave of the Court of Appeals, under Standard Oil Co. of Cal. v. United States, 429 U.S. 17, 50 L. Ed. 2d 21, 97 S. Ct. 31 (1976), and Lydon v. Commissioner, 56 T.C. 128 (1971), is overruled and will no longer be followed because of the Supreme Court decision.

Ps sought redetermination under sec. 6213, I.R.C., of a deficiency for tax on self-employment income from a partnership in which H was an indirect partner. Held: Pursuant to sec. 7430, I.R.C., we cannot in this proceeding award Ps litigation and administrative costs incurred in connection with the proceedings in Grigoraci I. Held, further, Ps have failed to establish that they incurred litigation and administrative costs in this proceeding apart from a $ 60 filing fee.

P reported tax on his 1994 and 1996 Federal income tax    returns but did not remit those amounts. R assessed those    amounts and demanded payment thereof. After several years of    continued nonpayment, R issued to P a notice of intent to levy.    P timely requested a hearing pursuant to sec. 6330, I.R.C. At    the hearing, P asserted that the amounts of tax shown on his    1994 and 1996 returns are incorrect but would not say whether he    believed his correct income to be higher or lower than the    amounts reported. R subsequently issued to P a notice of    determination upholding the proposed collection action. P timely    petitioned the Court for review, and R moved for summary    judgment.      1. Held: A taxpayer who reports an amount of tax on    his tax return is not precluded from challenging the accuracy of    that amount at a sec. 6330, I.R.C., hearing. Montgomery v. Commissioner, 122 T.C. 1, 122 T.C. 1, 122 T.C. No. 1(2004), followed.      2. Held, further , summary judgment is    appropriate since P has averred no facts sufficient to show    error in the taxes assessed on the basis of his 1994 and 1996    returns or otherwise with respect to the notice of    determination.

P filed a timely petition for judicial review pursuant to sec. 6330(d)(1)(A), I.R.C., in response to a notice of determination by R to proceed with collection of… Held: For the purpose of this collection proceeding, the Appeals officer agreed to assume that petitioner's 1989 and 1991 tax liabilities were discharged in bankruptcy. We will not remand this case for a clearer articulation of the Appeals officer's determination relating to petitioner's bankruptcy discharge.

IPO II, an LLC but treated as a partnership for Federal income tax purposes, is owned by IO, an S corporation, and F, an individual. Held: All of the liability is allocable to F because IO cannot be related to F or to IE for purposes of determining the allocation of the recourse liability pursuant to sec. 1.752-4(b)(2)(iii), Income Tax Regs.

Ps are shareholders in C, a trucking company formed pursuant to sec. 1361, I.R.C. C compensates its drivers at a rate of 25 to 32 cents per mile. Held: Despite the presentation of evidence at trial as to the estimated, nonmeal travel expenses incurred by C's drivers, Ps have failed to establish a basis for deducting 80 percent of the per diem allowance paid to the drivers. Beech Trucking Co. v. Commissioner, 118 T.C. 428 (2002), followed.

D and H, United Kingdom corporations, were controlled foreign corporations with respect to P. H was a wholly owned subsidiary of D. In… Held: In light of R's administrative guidance pertaining to the tax effects of a liquidation governed by secs. 332 and 381, I.R.C., D's deemed sale of H's assets constitutes a sale of property used in D's trade or business within the meaning of sec. 1.954-2(e)(3)(ii) through (iv), Income Tax Regs., with the result that D's gain on that…

P's ch. 11 bankruptcy commenced in 1995, and he was    discharged upon the confirmation of his plan of reorganization    during 1997. Effectively, at the time of confirmation, all of    the estate's assets were transferred to a liquidating trust for    the benefit of creditors. P had net operating losses (NOLs) that    arose in years prior to the bankruptcy commencement. P's    bankruptcy estate also incurred tax losses. The bankruptcy    estate succeeded to P's precommencement NOLs. Under sec.   1398(i), I.R.C., P would succeed to the tax attributes (NOLs) of    the bankruptcy estate, upon its termination. P contends that his    ch. 11 bankruptcy terminated upon the confirmation of the plan    and the discharge of the debtor. R contends that a ch. 11    bankruptcy does not terminate until closed by a final order of a    bankruptcy court.      P seeks to apply NOLs to his 1995, 1996, and 1997 income    which was not includable in the bankruptcy estate. R contends    that P may not carry NOLs to any years prior to the termination    of P's bankruptcy estate; i.e., 1996 or 1995.       1. Held: The "termination" of P's ch. 11    bankruptcy, for purposes of sec. 1398, I.R.C., occurred upon the    confirmation of the plan and discharge of the debtor.       2. Held, further, P may use NOLs with    respect to his separate tax reporting in the year of the    commencement of his bankruptcy and later years, to the extent    allowed under sec. 172, I.R.C., and the regulations thereunder.

Petitioner wife was a tenant-stockholder in a cooperative housing corporation. Held: A deduction under sec. 216(a)(1), I.R.C., does not reduce alternative minimum taxable income.

Following R's audit of Ps' 1993 through 1996 Federal income tax returns, R's revenue agent (A) prepared a Form 4549-CG, Income Tax Examination Changes, that listed $ 7,556.09 as the total amount of… Held: Ps' waiver in the Form 4549-CG does not preclude Ps from challenging in this proceeding the existence and amount of interest underlying the lien.

Before the effective date of sec. 6330, I.R.C., R served a continuing wage levy on P's employer. After the effective date of sec. 6330, I.R.C., R levied P's severance pay pursuant to the continuing wage levy. Held : P's severance pay constitutes salary or wages within the meaning of sec. 6331(e), I.R.C. Because the continuing wage levy was initiated before the effective date of sec. 6330, I.R.C., this Court lacks jurisdiction to review R's levy of P's severance pay.

P, a nonresident alien residing in Israel during 1997, 1998, and 1999 (years in issue), became entitled to 20 annual payments of $ 722,000 each by virtue of a 1992 purchase of a $ 1… Held: The payments at issue are not annuities as that term is defined in the treaty, because they were not paid under an obligation to make the payments in return for adequate and full consideration as provided in the treaty. Accordingly, the payments are subject to U.S. tax as determined by R.