Slip opinions decided 2016 — Tax Court Memorandum

Petitioner and Ms. Belot formed and jointly owned three businesses during their marriage. They were divorced in 2007. Held: The division of property held during the marriage of petitioner and Ms. Belot accomplished by the 2008 settlement agreement qualifies for nonrecognition treatment under I.R.C. sec. 1041.

Ps filed a 2011 return, which R processed in May 2012, that showed an overpayment of income tax due to overwithholding from wages. According to documentation R submitted, as of April 15, 2012, Ps' overpayment for 2011 was credited against their 2009 tax liability. R then determined a deficiency in Ps' 2011 income tax, which he now concedes. R moved for entry of decision that there is no deficiency due from, nor any overpayment due to, Ps for 2011. Ps moved for entry of decision that they are due a refund of the amount overwithheld for 2011. Held: Because R established that the crediting of the overpayment shown on Ps' 2011 return as of the due date of that return was consistent with established practice, the documentation that R submitted is reliable evidence that the overpayment was, in fact, credited. Held, further, because I.R.C. sec. 6402 allows for the crediting of refunds shown on a return before a final determination of the taxpayer's tax liability for the year covered by the return, Ps' 2011 overpayment was credited against their 2009 tax liability "under" I.R.C. sec. 6402, and, consequently, the Court has no jurisdiction to review the propriety of the credit. SeeI.R.C. sec. 6512(b)(4).

P, who made no returns of income tax for the years in issue, objects to R's proceeding with collection of unpaid tax solely on the ground that, for failure of R to mail to her a notice of tax… Held: P bears the ultimate burden of proving that R did not mail the notice.

In 2011 P-H was a partner of a New York partnership, which reported P-H's distributive share of partnership income as $479,743. On their timely filed 2011 tax return, Ps reported only $75,000 of the income from P-H's partnership. Ps contend that P-H's fiduciary duties under State law required him to use the remainder to pay partnership expenses to keep the firm from failing. Held: Ps are liable for income tax on P-H's full distributive share of partnership income for 2011. Any payment of partnership expenses by P-H was a contribution to capital, and he can deduct his share of the partnership's expenses. Held, further, Ps are liable for an accuracy-related penalty for an underpayment attributable to a substantial understatement of income tax for their failure to report partnership income.