Taxing Lessons From Court Decisions

Timely Filing

Image source: Public Domain via WikimediaCommons Generally, as long as you’ve properly addressed an envelope and included the right amount of postage, the timeliness of your tax filing is determined by the postmark date. (See Internal Revenue Code Section 7502 and related regulations.) When you use a private delivery service (PDS) such as FedEx, the postmark date is either the…

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Taxing Lessons From Court Decisions

Recordkeeping Redux, with Humor

Image source: Minh Nguyễn via Wikimedia Commons You can’t read many tax court decisions without coming to the realization that lack of good records is a continually recurring issue. Each petitioning taxpayer seems to believe his or her situation is special and will be the exception that will make the court overlook the strict substantiation requirements of section 274(d) (documenting the…

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Taxing Lessons From Court Decisions

Penalty on Early Withdrawal of Savings

Image source: GeorgHH, Public domain, via Wikimedia Commons T.C. Summary Opinion 2010-72 (Blade) clarifies the difference between a penalty on early withdrawal of savings, which is a deduction from gross income on Form 1040, US Individual Income Tax Return, and the 10% additional tax assessed when early withdrawals are taken from retirement plans. In this ruling, the taxpayer took an early…

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Taxing Lessons From Court Decisions

Statute of Limitations – Substantial Omission from Gross Income

Image Source: Deval Kulshrestha via Wikimedia Commons In the September 12, 2009 newsletter, Taxing Lessons featured T.C. Memo. 2009-195, Intermountain Insurance Service of Vail, LLC (click here to view the newsletter). The case covered the question of whether the standard three year statute of limitations for assessing tax applies to an overstatement of basis. In a new case (134 T.C. No.…

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Taxing Lessons From Court Decisions

Indemnity vs. Liability

Image source: Tangopaso via Wikimedia Commons T.C. Memo. 2010-77 (Jensen) highlights the complexities of divorce and taxes. In this case, the taxpayer received Form 1099-C, Cancellation of Debt, for a pre-divorce loan. Because the divorce decree stated the debt was incurred by his wife and assigned him right of indemnification under state law, he believed the debt forgiveness was income to…

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Taxing Lessons From Court Decisions

Refund Claims

Image Source: Public Domain, NARA, via Wikimedia Commons T.C. Memo. 2010-63 (Petty) offers a lesson in the perils of failing to file a return within the statutory time frame to claim an overpayment per IRC Sections 6511 and 6512. In this case, the taxpayer made estimated tax payments during 2004. She filed a timely extension for her return, but failed…

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Taxing Lessons From Court Decisions

Substantiation of Charitable Contributions

Image source: Public domain via Wikimedia Commons TC Memo 2010-45 (Friedman) demonstrates the importance of complying with recordkeeping requirements for charitable contributions (as found in Code Section 170(f)(8)(A) and Income Tax Regulation 1.170A-13). In this case, the taxpayer claimed noncash charitable deductions for equipment donations. The IRS disallowed the deductions because the taxpayer did not provide contemporaneous written acknowledgements from…

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Taxing Lessons From Court Decisions

Asset Titles and Estate Planning

Image Source: KeepWatch, via Wikimedia Commons T.C. Memo. 2010-26 (Goldberg) highlights the importance of understanding how asset titling can affect estate tax. In this case, Mr. Goldberg’s executor reported ownership of two parcels of New York real estate as if they were held by the decedent as tenants in common with his wife, who died three years earlier. The IRS said…

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