Volume 125 — Tax Court Reports

P has moved for partial summary judgment (the motion). R objects on the ground that P has failed to establish that there is no genuine issue as to any material facts. Held: The report is inadmissible hearsay without the availability of the preparing expert for cross-examination. See Fed. R. Evid. 705. 2. Held: The motion will be denied because P has failed to establish that there is no genuine issue as to any material facts.

Ps seek administrative costs for expenses incurred inadministrative proceedings with R regarding the 1993 taxableyear. Held: The letter issued by R in December of 1995 is not anotice of the decision of the Internal Revenue Service Office ofAppeals. Consequently, Ps are not entitled to recoveradministrative costs because they are not prevailing partiesunder sec. 7430(c)(4), I.R.C.

P timely petitioned for review under sec. 6330(d), I.R.C., ofR's determination to proceed with levies to collect unpaidFederal income taxes for 1997, 1998, and 1999. Held: P's claim concerning the disposition of his 1997remittance is a relevant issue relating to the unpaid tax for1997, and we have jurisdiction to consider facts and issuesarising in 1995, a year not the subject of the notice ofdetermination, insofar as they are relevantto computing the unpaid tax for 1997.

P entered into a cost-sharing agreement to develop intangibles with S, its foreign subsidiary. Held: R's allocation is contrary to the arm's-length standard mandated by sec. 1.482-1(b), Income Tax Regs. , because uncontrolled parties would not allocate the spread or the grant date value relating to employee stock options. 2. Held, further, P's allocation satisfies the arm's- length standard mandated by sec. 1.482-1, Income Tax Regs.

Ps are qualified labor organizations under I.R.C. sec. 501(c)(5) and are exempt from taxation under I.R.C. sec. 501(a). Ps did not timely file annual returns required by I.R.C. sec. 6033(a)(1). Held: The Tax Court does not have jurisdiction over I.R.C. sec. 6652(c)(1) penalties for purposes of I.R.C. sec. 6330, and R's motions will be granted.

A few individuals controlled a corporation (P1) and a limited liability company (ALSL). Held: P1 may not deduct the unrecovered funds as either a bad debt or a loss of equity. Held, further, S may not aggregate all of L's equipment leasing activities in that sec. 465(c)(2)(B)(i), I.R.C., treats as a single activity only those activities for which the equipment is placed in service in the same taxable year.

R issued a notice of levy on Ps' State tax refund to collect unpaid assessed additions to tax. Held: The Court has jurisdiction under sec. 6330(d), I.R.C., to review R's determination regarding the levy upon Ps' State tax refund.

In 1998, Times Mirror's investment subsidiary, TMD, divested itself of a legal publishing business through the Bender transaction. Held: The primary consideration received in the transaction was control over $ 1.375 billion paid by Reed. Held, further, the Bender transaction did not qualify as a tax-free reorganization because the terms and provisions of the contractual documents, as interpreted and implemented by Times Mirror and Reed, effected a sale.

Prior to a scheduled sec. 6330, I.R.C., hearing with P, R's settlement officer received a memorandum from R's insolvency unit advisor that questioned the credibility and motives of P's counsel in a… Held: The memorandum constitutes a prohibited ex parte communication pursuant to Rev. Proc. 2000-43, 2000-2 C.B. 404, and therefore the instant case will be remanded to R's Appeals Office for a new hearing.

H & W filed a joint Federal income tax return for 1994. Held: The disallowed medical/dental expenses are erroneous items that gave rise to a portion of the deficiency and must be allocated between H & W in determining the portion of the deficiency properly allocable to W under sec. 6015(d), I.R.C. 2.

The estate filed Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return (estate tax return). Held: In computing the gross estate value, the value of the assets held in the IRAs is not reduced by the anticipated income tax liability following the distribution of the IRAs.

P received commitment fees for entering into prior approval purchase contracts with mortgage originators. Held: In substance and form, P's prior approval purchase contracts were put options, and P properly reported the nonrefundable portion of the commitment fees as option premiums.

Ps are Mr. Lofstrom (H) and Paula Lofstrom (W-2). H was previously married to Dorothy Lofstrom (W-1). Held: A contract for deed is a third-party debt instrument under sec. 1.71-1T(b), Q&A-5, Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984). Ps may not deduct as alimony the value of a contract for deed transferred to W-1 because it does not constitute a cash payment. Id.; see secs. 61(a)(8), 71(a), and 215(a) and (b). 2.

Ps paid tuition and fees of $ 27,283 to two Jewish day schools for the religious and secular education of their five children in 1995. Held: None of Ps' payments for tuition, fees, and Mishna classes in 1995 are deductible as charitable contributions. Held, further, Ps are not liable for the accuracy- related penalty under sec. 6662, I.R.C.

P asks us to review a determination by R's settlement officer (SO) that R may proceed with collection by levy of P's unpaid tax liability for 1999. Held: P's testimony is excluded. 2. Held, further, SO's testimony is admitted as to meaning of notations and abbreviations in her case activity report; the remainder of her testimony is excluded. 3.