Volume 123 — Tax Court Reports

Ps filed joint Federal income tax returns for 1998 and 1999 but did not make full payment of the tax liabilities. Held: further, R's motion to dismiss for lack of jurisdiction is granted. Ps did not file a sec. 6330, I.R.C., hearing request within 30 days of the June 23, 2000, notice of intent to levy. See sec. 6330(a)(3), I.R.C. The Dec. 14, 2001, notice of intent to levy did not entitle petitioners to a sec. 6330, I.R.C., hearing.

On Jan. 24, 2002, the Court entered a decision that there was an overpayment of $ 238,847.24 regarding E's estate tax liability, which amount… Held: An overpayment means any payment of tax in excess of the tax which is properly due. For purposes of determining the amount of an overpayment, the term tax includes any underpayment interest due thereon. Thus, an overpayment by definition is the amount by which payments exceed the tax and interest for the period of underpayment.

In 2000, P had a net profit of more than $ 16,000 from the practice of law. P also earned $ 13,435 from acting activities and had acting-related expenses of $ 17,878 for 2000. Held: The term adjusted gross income in sec. 62(b)(1)(C), I.R.C., means the same as adjusted gross income in sec. 62(a), I.R.C., and thus is computed based on a taxpayer's gross income from all sources.

H is a general partnership, its managing partner is S, and its other two partners are M and P. H's business activity is primarily the… Held: Pursuant to sec. 708(b)(1)(A), I.R.C., H did not terminate for Federal tax purposes during 1998; as of the end of that year, H's winding up of its affairs in complete cessation of its business operation was dependent on the resolution of P's lawsuit as to the failure of S to follow the procedures by which the partners of H had agreed…

On Oct. 31, 1995, P and R entered into an offer-in-compromise. The terms of the offer-in-compromise required P to, among other things, timely file his 1995 through 1999 tax returns. Held: Pursuant to sec. 6330(c), I.R.C., abuse of discretion is the applicable standard of review. Held, further, When reviewing R's determination for an abuse of discretion under sec. 6330, I.R.C., we may consider evidence presented at trial which was not included in the administrative record.

P did not file a Federal income tax return for 1999. Within 3 years of the due date of that return, R mailed a notice of deficiency to P for 1999. Held: Pursuant to the flush language of sec. 6512(b), I.R.C., which was added to the Code by the Taxpayer Relief Act of 1997, Pub.

P filed with the Court a petition for determination of relief from joint and several liability on a joint return. Held: Neither sec. 6015, I.R.C., nor Rule 325, Tax Court Rules of Practice and Procedure, precludes a nonelecting spouse from intervening in a proceeding before the Court for the purpose of supporting the electing spouse's claim for relief.

P filed for bankruptcy on Dec. 3, 1990, at which time he owned all of the shares of two S corporations. Held: Where P, an individual S corporation shareholder, filed for bankruptcy before the corporation's yearend, operating losses sustained by the corporation during the year in which he filed for bankruptcy are reported by the bankruptcy estate, not P, because income or loss of an S corporation is determined as of the last day of the…

P's wholly owned subsidiary S made payments to certain truck drivers whom S leased to certain trucking companies. Held: the parties' respective positions as to the import of Beech Trucking Co. v. Comm'r, 118 T.C. 428 (2002), rejected. Held, further, on the facts presented, S is the common law employer of the truck drivers to whom it made the payments at issue. Held, further, the limitation imposed by sec. 274(n)(1) applies to those payments.

P was an investor in a partnership involved in tax shelter litigation in this Court. Held: The settlement agreements constituted binding agreements between P and R; settled all taxable years after 1982 with respect to the partnership; and converted the partnership items into nonpartnership items, giving R 1 year in which to assess any income tax liabilities for taxable years included under the settlement agreements' terms.

R determined a deficiency in P's 2001 Federal income tax and an addition to tax under sec. 6651(a)(1), I.R.C. P filed a petition with the Court in… Held: Because the petition and amended petition fail to state a justiciable claim for relief, R is not obliged to produce evidence in support of the addition to tax determined by R in the notice of deficiency. Held, further, R's motion to dismiss will be granted and this case will be dismissed and decision entered in R's favor.

Sec. 3121(b)(20), I.R.C., classifies as self-employed those crew members of a fishing boat, with a crew of fewer than 10, who are compensated with a share of the boat's catch of fish or a share of… Held: P was self-employed under sec. 3121(b)(20), I.R.C., because proceeds from the sale of the catches of fish after subtraction of operating expenses depend on the amount of each catch.

While actively serving in the U.S. Armed Forces in the Vietnam conflict, H was exposed to Agent Orange and consequently developed lung cancer. Held: The Social Security disability insurance benefits that H received in 1999 are includable in Ps' gross income under sec. 86, I.R.C., and are not excludable under sec. 104(a)(4), I.R.C.Haar v. Commissioner, 78 T.C. 864, 866 (1982), affd. 709 F.2d 1206 (8th Cir. 1983), followed.

In 1995, a State court (court) decreed that P pay to O in connection with their divorce 113 monthly payments of alimony totaling $ 117,000. Held: An alimony deduction for Federal income tax purposes rests on fulfilling the requirements set forth in sec. 71, I.R.C. Sec. 71(b)(1)(D), I.R.C., provides that payments may qualify as alimony only if there is no liability to make any such payment * * * as a substitute for such payments after the death of the payee spouse.

H is an ordained Baptist minister. In this proceeding to    collect Ps' unpaid 1992 and 1993 tax liabilities by levy, Ps    submitted to R's Appeals Office an offer in compromise, claiming    a "tithe to church" as part of their necessary living    expenses. In evaluating Ps' ability to pay their outstanding tax    liabilities, the Appeals officer declined to take these alleged    tithing expenses into account.      Held: Under relevant provisions of the Internal    Revenue Manual, tithes that a minister is required to pay as a    condition of employment are allowable in determining ability to    pay outstanding tax liabilities. Held, further,    because Ps failed to substantiate that H was employed as a    Baptist minister after R initiated the collection proceedings,    the Appeals officer did not abuse his discretion by declining to    take into account Ps' alleged tithing expenses. Held,    further, the disallowance of Ps' alleged tithing expenses    for this purpose did not violate H's First Amendment rights to    free exercise of religion.

Ps owned and actively engaged in the conduct of two S corporations, B and J. B rented real property BB from Ps, and J rented real… Held: Sec. 1.469-2(f)(6), Income Tax Regs., recharacterizes rental income from the taxpayer's active business as nonpassive, thereby removing such income from the calculation of passive loss for a sec. 469, I.R.C. activity, despite the proper grouping of such income with an item of passive loss against which such income would otherwise be…

R assessed income tax, interest, and civil fraud liabilities for Ps' 1971 tax year. Held: Ps' liability to R was not satisfied when R issued M the notice of levy because it only provided R with legal custody of Ps' account receivable from M. Held, further, R did not have dominion and control over the account receivable from M to Ps.

In an earlier opinion, Charles Schwab Corp. v. Commissioner , 122 T.C. 191 (2004) (Schwab II), we held that sec. 461(d), I.R.C., applied to a 1972 change in California (Cal.) franchise tax law. Held: The effect of sec. 461(d), I.R.C., analyzed and in the factual context of this case, P is entitled to a $ 932,979 Cal. franchise tax deduction.

By notice of determination dated Nov. 22, 2002, R denied    P's request for relief under the equitable relief provisions of   sec. 6015(f), I.R.C., for the taxable year 1997 solely because    P's request was made more than 2 years after R's first    collection activity on th e 1997 account. In May 1999, R    withheld a $ 291 refund P claimed on her 1998 individual Federal    income tax return to partially offset the unpaid 1997 joint    liability. R's related notice of offset did not advise P of her    rights to seek relief under sec. 6015, I.R.C.      Held: The May 1999 offset was a collection action.   Campbell v. Commissioner, 121 T.C. 290 (2003).      Held, further, The Commissioner is required    to include with collection-related notices, such as the letter    sent to P informing her of the withholding of her refund for    1998, a description of taxpayers' rights under sec. 6015, I.R.C.    Internal Revenue Service Restructuring and Reform Act of 1998   (RRA 1998), sec. 3501(b), Pub. L. 105-206, 112 Stat. 770.      Held, further, It is inequitable and an ab    use of discretion for R to apply the 2-year limitation period of    Rev. Proc. 2000-15, sec. 5, 2000-1 C.B. 447, 449, because of R's    failure to send the notice required by RRA 1998 sec. 3501(b).

On Sept. 30, 2003, P filed a bankruptcy petition under ch. 13 of the Bankruptcy Code. Held: The Court lacks jurisdiction in this case on the ground the petition was filed in violation of the automatic stay imposed under 11 U.S.C. sec. 362(a)(8). R's motion to dismiss for lack of jurisdiction will be granted.

On Feb. 23, 2004, R issued to P a Notice of Determination Concerning Collection Action(s) for the taxable years 1989, 1990, 1993, 1996, 1998, and 2000. Held: The Court lacks jurisdiction in this case on the ground the petition was filed in violation of the automatic stay imposed under 11 U.S.C. sec. 362(a)(8). R's motion to dismiss for lack of jurisdiction will be granted.