Slip opinions decided 2005 — Tax Court Memorandum

In April 1994, Ps filed a request to extend the time for filing their 1993 Federal income tax return and remitted $ 125,000 therewith. Held: R's Appeals Office's determinations that Ps' April 1994 remittance was a payment rather than a deposit and that the amount Ps sought to apply to their post-1993 tax liabilities therefore had been paid outside the lookback period of sec. 6511(b)(2)(A), I.R.C., that is applicable to Ps' Jan. 2000 request for credit are sustained. 2.

Ps filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R to proceed with collection by levy of… Held: R's rejection of a $ 2,000 offer in compromise proposed by Ps did not constitute an abuse of discretion. Held, further, R's motion for summary judgment is granted, and R may proceed with collection of balances due as determined in a Notice Of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.

Ps excluded a portion of H's disability benefits from gross income for the 1999 and 2000 taxable years. R determined that Ps were required to include in gross income an additional portion of H's benefits. Held: Ps are not entitled under sec. 105, 104(a)(3), or 72,I.R.C., to exclude from gross income disability retirement benefits in an amount greater than permitted by R. Held, further, R is not precluded from making adjustments to Ps' gross income by reason of R's decision not to adjust prior years' income.

R determined a deficiency in Federal income tax with    respect to the joint return for 1998 made by P and her then    husband (which determination P did not contest); R denied P's    subsequent request for relief from joint and several liability    under I.R.C. sec. 6015(b), (c), or (f).      1. Held  P is eligible to elect relief under I.R.C.   sec. 6015(c), and R has failed to nullify the election by    demonstrating that she had actual knowledge at the time she    signed the joint return of the item giving rise to the    deficiency.      2. Held, further, R erred in denying P relief    under I.R.C. sec. 6015(c).      3. Held, further, P has no liability for the    deficiency.

P appealed a sec. 6330, 1All section references are to the Internal Revenue Code in effect for the years in issue. I.R.C., determination from R's Appeals Office. Held: The Court may retain jurisdiction over the case while on remand. Held, further, we shall not invalidate the Notice of Determination.

P filed a bankruptcy petition. R subsequently issued to P a Final Notice of Intent to Levy and Notice of Your Right to Hearing (final notice of intent to levy) under sec. 6330, I.R.C. After P's… Held: The final notice of intent to levy was issued to P in violation of the automatic stay imposed under 11 U.S.C. sec. 362(a) (2000) and was invalid and of no effect.

P received disability benefits under the Public Employees Retirement System, Ohio Rev. Code Ann. sec. 145.35(B) (Anderson 2001), which provides disability coverage to each member who has at least… Held: P received benefits under a provision in the statute that is not in the nature of a workmen's compensation act. Sec. 1.104-1(b), Income Tax Regs. Consequently, the benefits are not excludable from P's 1999 gross income.

R determined that (1) substantial amounts of income from P- H's plumbing business had not been reported on Ps' separate income tax returns; (2) Ps' marriage contract did not have the effect of… Held: R's position on income-splitting was substantially justified; P-W was not prevailing party on that issue. Sec. 7430(c)(4)(B)(i), I.R.C. 1986. 2.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate. Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $ 2,500.

In the summer of 2000, Ps, H and W, retained an attorney, M, to represent them as to their 1993 and 1994 income taxes. Held: The Court shall grant Ps' motion in that we find that M was not authorized by Ps to agree to either settlement on their behalf.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate. Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $ 2,500.

P and X were divorced in California. The San Diego County Superior Court awarded P and X joint legal and physical custody of their two minor children, designated X as the primary caretaker of the… Held: P had no continuing payment liability, as contemplated in sec. 71(b)(1)(D), with respect to the family support payments at issue.

P filed a petition for judicial review pursuant to sec.    6330, I.R.C., in response to a determination by R that levy    action was appropriate.      Held: Because P has advanced groundless complaints    in dispute of the notice of intent to levy, R's determination to    proceed with collection action is sustained.      Held, further, a penalty under sec. 6673,    I.R.C., is due from P and is awarded to the United States in the    amount of $ 5,000.

Held: R's Appeals officer did not abuse his discretion by sustaining a determination to proceed with collection by levy of P's unpaid… Held: R's Appeals officer did not abuse his discretion by sustaining a determination to proceed with collection by levy of P's unpaid liabilities following a telephonic conversation and an exchange of correspondence with P. P failed to prove that she requested a face-to-face interview with the Appeals officer during the course of the sec.…

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate. Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained.

P failed to file a Federal income tax return for the 2000 year. Held: P is liable for the deficiency determined by R and for additions to tax under secs. 6651(a)(1) and 6654, I.R.C.

S1 and S2, Delaware business trusts, were formed in 1998    and were capitalized by the contribution thereto of stock by D    through a revocable trust and by WTC as trustee of various    trusts created for the benefit of D's children and    grandchildren. At his death in 1999, D held through the    revocable trust a 45.236-percent interest in S1 and a 47.336-    percent interest in S2.      Held: D's transfers of stock to S1 and S2 were bona    fide sales for adequate and full consideration within the    meaning of secs. 2036(a) and 2038, I.R.C., such that the value    of the transferred assets is not included in his gross estate    under these statutes.

D's gross estate included a 6.44-percent interest in a closely held corporation (C) whose assets consisted primarily of marketable securities. Held: The built-in capital gain tax liability should be discounted to reflect when it is reasonably expected to be incurred. Held further: Amounts of discounts for lack of control and marketability decided.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R to proceed with collection by lien of assessed income tax liabilities for 1991, 1992,… Held: Remanding this matter to respondent's Appeals Office for recording would be neither necessary nor productive. Held, further, R may proceed with collection of balances due as determined in a Notice Of Determination Concerning Collection Action(s) UnderSection 6320 and/ or 6330.

Ps failed to file a Federal income tax return for the 2001 year. Held: Ps are liable for the deficiency determined by R and for additions to tax under sec. 6651(a)(1), I.R.C.

J purported to form a qualified employee stock ownership plan    for Ps. R determined deficiencies, and J, on behalf of Ps,    petitioned this Court. R believed J had a conflict of interest    under Rule 24(g), Tax Court Rules of Practice and Procedure. J    informed Ps as to his potential conflict of interest, received    Ps' informed consent to continue representing them in the    proceeding, and retained H to represent Ps as co-counsel. R    informed the Court of J's potential conflict of interest during    a conference call and in a pretrial memorandum. The cases    settled before trial, decisions were entered, and these    decisions are now final. Ps move the Court to vacate the    decisions, asserting primarily that R and J did not adequately    inform the Court of J's potential conflict of interest, which,    in turn, constituted fraud on the Court.    Held,Ps' motion will be denied for failure to establish a    fraud on the Court.

R determined deficiencies and additions to tax for P's 1999, 2000, and 2001 taxable years. Held: P received unreported income in the form of wages and nonemployee compensation during 1999, 2000, and 2001, upon which he is liable for Federal income taxes. Held, further, P is liable for self-employment taxes pursuant to sec. 1401, I.R.C., on income earned in the form of nonemployee compensation during 2000 and 2001. Held, further, P is liable for the sec. 6651(a)(1), I.R.C., addition to tax for failure timely to file income tax returns for each of the years in issue. Held, further, P is liable for the sec. 6654, I.R.C., addition to tax for failure to pay estimated tax for the years 1999 through 2001. Held, further, a penalty under sec. 6673, I.R.C.,    is due from P and is awarded to the United States in the amount    of $ 5,000

P stopped working in 1999 to attend college. At that time, P had $ 34,656.29 in a public employees retirement system (PERS) account. Held: Sec. 72(t)(2)(E), I.R.C., does not allow P to escape the additional tax of sec. 72(t)(1), I.R.C., as to any part of the distributions used for her 1999 and 2000 expenses; to escape that tax, sec. 72(t)(2)(E), I.R.C., requires that qualified higher education expenses be for the taxable year of the distribution.

On Jan. 5, 2004, R issued a notice of deficiency to petitioners.The envelope containing Ps' petition was postmarked by a privatepostage meter with a date of March 30, 2004. Held: R's motion to dismiss for lack of jurisdiction willbe denied because the preponderance of the evidence establishesthat Ps' petition was timely filed in accordance with sec.301.7502-1(c)(1)(iii)(B)(2 ), Proced. & Admin. Regs.

P filed no income tax return for 2000, and R determined a deficiency in tax and additions to tax on account thereof. Held: P's claim that he has no obligation to file a tax return and pay tax is without merit. 2. Held, further, P has failed to prove that his basis in any of the securities is greater than zero. 3. Held, further, P is liable for an addition to tax under sec. 6651(a)(1), I.R.C., for failure to file a return. 4.

Robert S. Goodman and Matthew N. Tobias, for participant Arthur M. Handler.

L is a general partnership the direct partners of which arethree limited liability companies (LLCs). Held: Because a determination of the ownership of apassthrough entity that is a direct partner in a partnership mayinvolve information not usually maintained by the partnership, adetermination of the members of the LLCs (and thus indirectpartners of L) is a nonpartnership item that the Court is notallowed to decide in this TEFRA…

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 2001. Held: P's testimony is irrelevant since neither he nor his counsel communicated the extenuating circumstances to the SO (nor has P explained his failure to do so). 2. Held, further, R may proceed with collection since the deadline was reasonable.

R determined deficiencies and additions to tax against Ps and hundreds of other taxpayers who then signed piggyback agreements with R, agreeing to be bound by the outcome of selected test cases… Held: because Ps and their counsel had become aware of the misconduct of R's attorneys and of the pending appeals by test case petitioners when they entered into their stipulated decisions, Ps are not entitled to have those decisions vacated.

P failed to file Federal income tax returns for the 1998 and 2001 years. Held: P is liable for deficiencies in his income taxes and additions to tax under secs. 6651(a)(1) and 6654, I. R. C., for 1998 and 2001.

Ps excluded $ 12 million of a $ 76 million settlement from gross income for the 1995 taxable year pursuant to sec. 104 (a)(2), I.R.C. R determined the $ 12 million was not excludable. Held: Ps are not entitled to exclude the $ 12 million settlement amount from gross income.

Kelley A. Blaine and Robert V. Boeshaar, for

F is a foreign corporation. P, a U.S. subsidiary of F, is a film processing company. Held: P did not establish that it had a tax basis in each of the three terminated relationships and, thus, is not entitled to deduct losses related to these relationships. 2. Held, further, R's section 482, I.R.C., adjustments, relating to the intercompany transaction, are arbitrary and capricious. 3.

P initially filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate for the taxable years 1985 and 1999. Held: R's determination to proceed with collection action for 1999 is sustained.

P filed a petition for judicial review pursuant to sec. 6330,    I.R.C., in response to a determination by R that levy action was    appropriate for taxable year 1996.    Held: R's determination to proceed with collection action    is sustained.    Held, further, under the facts and circumstances,    R's denial of equitable relief under sec. 6015(f), I.R.C., is    sustained.

Monica J. Miller and Robert W. Dillard for respondent.

Petitioner (P) and Daniel O'Dowd each owned 50 percent of the stock of an S corporation (GH). O'Dowd exercised his rights under the shareholders' agreement to buy P's shares. Held: P is taxable on the payment he received for his GH stock and related interest in the years paid. Held, further, P is taxable on a distributive share of GH's income in 2000.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate. Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $ 3,000.

During 1996, 1997, and 1998, Ps operated a multilevel marketing    enterprise through two related S corporations, M and K.    Held: Ps are entitled to deductions claimed through and    in connection with expenditures of M and K as redetermined    herein for 1996, 1997, and 1998.    Held, further, Ps are not entitled to include in    cost of goods sold for M an amount claimed for purchases in    1998.    Held, further, Ps are not entitled to a reduction    in adjusted gross income of $ 550,000 for 1996.    Held, further, Ps are liable for accuracy-related    penalties pursuant to sec. 6662, I.R.C., for 1996, 1997, and    1998.

P filed a petition for judicial review pursuant to secs. 6320 and 6330, I.R.C., in response to a determination by R to leave in place a filed notice of Federal tax lien. Held: Because P has advanced groundless complaints in dispute of the filed notice of tax lien, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $ 5,000.

Ps filed a petition for judicial review pursuant to secs. 6320 and 6330, I.R.C., in response to determinations by R that lien and levy actions were appropriate. Held: Because Ps have advanced groundless complaints in dispute of the notices of lien and levy, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from Ps and is awarded to the United States in the amount of $ 5,000.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate. Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained. Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $ 2,500.

P, a nonprofit corporation, filed two successive applications with R for a determination of tax exempt status, Form 1023, Application for Recognition of Exemption under Section 501(c)(3)… Held: P failed to exhaust its administrative remedies, a jurisdictional prerequisite to declaratory proceedings in the Tax Court relating to the status of an organization under sec. 501(c)(3), I.R.C., as required by sec. 7428, I.R.C. Therefore, jurisdiction of this Court is not available.