Slip opinions decided 2017 — Tax Court Memorandum

P-H was the sole shareholder and president of CLCL, an S corporation. CLCL provided high-risk capital to various companies, including G-L, LFP, and WSC. Held: The advances by P-H through CLCL were not loans but investments in equity, and they did not become worthless in 2005. Therefore Ps are not entitled to a business bad debt deduction for 2005. Held, further, Ps are liable for an accuracy-related penalty under I.R.C. sec. 6662(a).

P asks us to review a determination by IRS Appeals sustaining a lien notice and a notice of proposed levy to collect delinquent installment payments of estate tax. Held: IRS Appeals' determination is sustained.

R mailed P a notice of determination sustaining a proposed collection action. P prepared a petition, applied postage using a private postage meter, and mailed the petition to the Court. The Court did not receive the petition within 30 days of the date of the notice of determination. Further, the petition was received by the Court later than a document "would ordinarily be received if it were postmarked at the same point of origin by the U.S. Postal Service on the * * * last day of the period, prescribed for filing the * * * [petition]." R moved to dismiss the case for lack of jurisdiction. Held: P's petition does not satisfy the requirements of sec. 301.7502-1(c)(1)(iii)(B)(2), Proced. & Admin. Regs., and we must dismiss this case for lack jurisdiction.

P-H is a real estate entrepreneur. During or before 1997, P-H and at least two Chinese citizens who he believed were politically influential formed a venture in China intending to prosper financially… Held: Ps failed to report income to the extent stated herein. Held, further, tax consequences determined as to four items that the parties dispute as to income that respondent determined was reportable on Schedule D, Capital Gains and Losses.

H operated bail bonding and towing businesses throughout tax years 2008, 2009, and 2010. Held: R's adjustments are sustained because Ps have failed to prove by a preponderance of the evidence that the determinations in the notice of deficiency are incorrect.

P provided information to the IRS Whistleblower Office (WO) regarding individuals TH and TW's alleged failure to disclose their ownership… Held: We need not decide the standard of review in this case because we would sustain R's determination under either a de novo or an abuse of discretion standard of review. Held, further, because the administrative action taken by the IRS against the taxpayers was not based on his information, P is not entitled to a whistleblower award.

P was a North Carolina fireman for over 24 years before retiring on disability in 1991. At that time he began receiving from LGERS a disability retirement allowance computed with reference to his age, length of service, and average final compensation. In a later year he also began receiving an FRSWPF pension. For 2012 P received information returns from LGERS and FRSWPF showing taxable distributions of $34,829 and $2,000, respectively, but reported only $2,324 of taxable retirement income. For 2012 P also failed to report as income certain distributions, an error he has since conceded. Held: The LGERS and FRSWPF distributions are not excludable from gross income as amounts received under workmen's compensation acts as compensation for injuries or sickness because they are retirement pensions determined by reference to P's age or length of service, or his prior contributions. Seesec. 1.104-1(b), Income Tax Regs.

Ps were the sole owners of a corporation (C). C partially redeemed Ps' shares for its liquid noncash assets and then sold all its operating assets, which generated a large tax liability. Held: Under I.R.C. sec. 6901, the question of whether we can or must recast a series of transactions is a question of state fraudulent-transfer law.

P-H flew airplanes for a South Korean airline company in 2011 and 2012, but he spent only about a third of each year in South Korea and more than 40% of each… Held: For 2011 and 2012, P-H was not a qualified individual for purposes of the foreign earned income exclusion of I.R.C. sec. 911(a), because his abode was within the United States for purposes of I.R.C. sec. 911(d)(3) and because he was not a bona fide resident of South Korea for purposes of I.R.C. sec. 911(d)(1)(A).

P, upon service retirement from the U.S. Army, became entitled to a pension, which the Army reported to R as taxable. The Department of Veterans Affairs subsequently assigned P a disability rating retroactive to the day after his retirement. P unavailingly petitioned the Army to reclassify his retirement as disability based, hoping to make his pension nontaxable. SeeI.R.C. sec. 104(a)(4). P did not file a Federal income tax return for 2011. R determined that P was liable for an income tax deficiency and failure-to-file and failure-to-pay penalties. R sent P a notice of deficiency, which P did not contest. R assessed the tax. P failed to pay, and R issued a final notice of intent to levy. P requested a collection due process hearing, wherein Appeals sustained the levy notice. P, seeking to challenge his underlying tax liability, timely petitioned this Court for review of the Appeals determination. R has moved for summary judgment. Held: P is precluded under I.R.C. sec. 6330(c)(2)(B) from contesting his underlying tax liability before Appeals and this Court because he received a notice of deficiency and failed to contest it timely. Goza v. Commissioner, 114 T.C. 176 (2000), followed. Held, further, R is entitled to summary adjudication that Appeals did not abuse its discretion in sustaining the final notice of intent to levy.

As of the 2012 tax year, M and K together owned 80% of S1, an S corporation, which owned Q, a qualified subchapter S subsidiary. Held: S2 is not the incorporated pocketbook of M and K. Held, further, S2 is neither an agent of M and K nor a conduit. Held, further, M and K had made an actual economic outlay to S2, which in turn made an actual economic outlay to S1 and Q. Held, further, the step transaction doctrine does not apply.