In a reviewed opinion, the Tax Court has found that a sophisticated taxpayer (i.e., a hedge fund manager) could not avoid penalties by relying on the reasonable cause defense under Sec. 6664(c)(1) where the taxpayer presented no evidence that the omitted income was because he relied on advice given by the tax return preparer.
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Woodsum v. Commissioner, 136 T.C. No. 29 (2011)
The Tax Court finds that a consolidated group of companies which hired a former outside consultant (both a CPA and an Attorney) as their Vice President of Taxes was subject to penalties under Section 6664 on unreported personal holding company tax for the tax years in which he was their in-house advisor. The taxpayer was able to rely upon the reasonable cause exception from penalties for the tax year in which the same consultant was an independent paid provider.
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7 W Enterprises v. Commissioner, 136 T.C. No. 26 (2011)
The U.S. Tax Court in a reviewed opinion, accompanied by two concurrences, rejects the applicability of final Treas. Reg. Sec. 301.6229(c)(2)-1(b) and follows its opinions in Intermountain Insurance Service of Vail v. Commissioner and Bakersfield Energy Partners, LP v. Commissioner to hold that the 6 year statute of limitations does not apply to an understatement of income. The majority opinion, sua sponte, considered the final regulations in light of the U.S. Supreme Court’s opinion in Mayo Foundation v. United States.
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Carpenter Family Investments, LLC v. Commissioner, 136 T.C. No. 17 (2011)
The Tax Court, in a reviewed opinion authored by the indefatigable Judge Dawson, holds that a decision letter from the Office of Appeals disregarding the frivolous arguments of a taxpayer, along with other legitimate arguments, is a determination under Section 6330(d)(1) for jurisdictional purposes.
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Thornberry v. Commissioner, 136 T.C. No. 16 (2011)
On a motion for summary judgment, the Tax Court rules that over the counter foreign currency options are not “foreign currency contracts” under Sec. 1256.
In some instances, and in this case, offsetting foreign currency options are used as part of a strategy to reduce federal income tax known as a major/minor transaction. Though not part of the court’s opinion here, the IRS might argue (and indeed may have argued) that this transaction is substantially similar to a “Son of Boss” transaction which it deems to be an abusive tax shelter. The effect of the court’s ruling in this case effectively denies the taxpayer the federal tax benefit realized by the transaction.
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Garcia v. Commissioner, TC Memo. 2011-85
In a reviewed opinion, the Tax Court holds that a state tax credit is a capital asset when sold. However, petitioner was not entitled to the basis it claimed in the credit or long term capital gain treatment.
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Tempel v. Commissioner, 136 T.C. No. 15 (2011)
In a reviewed opinion, the Tax Court grants respondent’s Daubert motion to exclude expert testimony and denies the taxpayer’s charitable contribution deduction for the grant of a conservation easement.
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Boltar, LLC v. Commissioner, 136 T.C. No. 14 (2011)
The Fourth Circuit Court of Appeals reversed the Tax Court and remanded for further proceedings. The appellate court held that the transfers between investor partners and the partnership were not non-taxable capital contributions followed by partnership distributions as previously determined by the Tax Court but rather were disguised sales of state tax credits subject to tax.
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Virginia Historic Tax Credit Fund 2001 LP v. Commissioner, No. 10-1333 (4th Cir., March 29, 2011)
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Virginia Historic Tax Credit Fund 2001 LP v. Commissioner, TC Memo. 2009-295
The Tax Court, in a reviewed opinion by Judge Gustafson, find that the bad debt deductions of a hedge fund manager/employee/investor were associated with his role as the fund manager and therefore were allowable trade or business deductions under Section 166.
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Dagres v. Commissioner, 136 T.C. No. 12 (2010).
The Tax Court, in a memorandum opinion by Judge Cohen, found that IRC § 6901 did not apply to the former shareholders of a closely held C corporation allegedly involved in an Intermediary Transaction tax shelter.
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Starnes v. Commissioner, T.C. Memo 2011-36
