November 12th, 2025
November Federal Tax Update
Posted in: Tax Law Tagged: David S. De Jong
Author: David S. De Jong
INDIVIDUALS
In Corning Place Ohio v. Commissioner,136 AFTR2d 2025-6363, the Sixth Circuit Court of Appeals agreed with the Tax Court that the $22 million deduction for donating a charitable easement 16 months after purchasing a historic building for $6 million constituted a gross overstatement and that the proper deduction was $900,000; in Paul Adams Quarry Trust v. Commissioner, TC Memo 2025-112, the Tax Court tossed a conservation easement deduction of over $10 million and found the value of the entire property to be $985,000 and that of the easement to be $612,000.
In Lake Jordan Holdings v. Commissioner, TC Memo 2025 – 123, the Tax Court allowed a $1.1 million deduction for a conservation easement rather than the $12.7 million claimed, the Court noting that the value claimed was “egregious… yet another in the depressingly long line of cash grabs dressed up in eleemosynary clothing.”
In Bayou Serpent Property v. Commissioner, Docket No. 4659-25, the Tax Court threw out the IRS attempt to disallow a $76 million conservation easement deduction where IRS filed its final partnership adjustment beyond its 270-day period for filing; the Tax Court had previously thrown out a regulation measuring the clock from the end of the partnership’s 270 days upon notification of a proposed underpayment and found that the law measures the period from when the partnership’s objections are received by IRS.
In Pascucci v. Commissioner, 136 AFTR2d 2025-6417, the Second Circuit Court of Appeals agreed with the Tax Court that an investor in a fund which in turn invested substantially all of its money with Robert Madoff could not claim a theft loss as an ordinary deduction as the theft was not directly from the taxpayer.
In Notice 2025-69 IRS provided guidance to individuals for reporting their qualifying tip income and overtime premium income in 2025 in light that the applicable W-2s and 1099s will not be modified until 2026.
Treasury Secretary Scott Bessent, announced that Final Regulations to be effective in 2026 will bar undocumented immigrants from receiving the refundable part of individual tax credits.
BUSINESS
In Schwarz v. Commissioner, TC Memo 2025 – 122, the Tax Court concluded that a 2024 decision of the U.S. Supreme Court requiring that agency regulations must represent the best interpretation of law rather than any reasonable interpretation did not change its prior decision finding that the taxpayers did not operate a huge ranch in West Texas for profit after years of losses despite revenues in excess of $1 million per year.
In United States v. Flaim, 136 AFTR2d 2025-6367, a Pennsylvania Federal District Court determined that a manager of two health care businesses was a responsible person and willfully failed to pay employment taxes, the taxpayer arguing unsuccessfully that keeping the business operating justified nonpayment.
In Notice 2025-62, IRS indicated that no penalties will apply to employers and other payors regarding the information on qualified tips and qualified overtime compensation if not provided on information returns but employers are encouraged to voluntarily provide this information to employees.
PROCEDURE
Proposed Regulations Under Code Section 6109 were withdrawn as they would have dictated the various classes of tax return preparers eligible to obtain a PTIN; the withdrawal follows a 2014 District of Columbia Circuit Court of Appeals decision upholding an injunction prohibiting IRS from regulating tax return preparers.
In Center for Taxpayer Rights v. Internal Revenue Service, 136 AFTR2d 2025-6103, the District of Columbia Federal District Court blocked IRS from sharing data with immigration enforcement officials as being in violation of federal law.
In Patel v. Commissioner, 165 TC No. 10, the Tax Court allowed an accuracy penalty to stand in the case of a couple who owned an eye surgery center and made payments to microcaptives where the proceedings indicated that the owner’s interest was in maximizing income tax deductions.
In United States v. Saydam, 136 AFTR2d 2025 -6506, a California Federal District Court ruled that an FBAR penalty at 50 percent on a highest balance of over $875,000 was not excessive and not in violation of the Eighth Amendment where the violation was willful.
In Vicko v. United States, 136 AFTR2d 2025 -1709, a Florida Federal District Court held that IRS could deny a married couple a share of partnership losses through computational adjustments rather than issuing a Notice of Deficiency where the partnership entity determined that the couple was not a partner and no losses were allocated to them.
In Quinones v. United States, 136 AFTR2d 2025 -6562, the US Court of Claims agreed with the Government’s counterclaim that a married couple who inflated both the income and the withholding on a W-2 due to “intangibles” had to pay back a refund of over $444,000; the couple attempted to argue that IRS was barred from getting money back as it had approved the refund (despite a W-2 showing Social Security withholding in excess of the annual maximum).
In Iglinski v. United States, 136 AFTR2d 2025 -7422, a Wisconsin Federal District Court denied a Government motion to dismiss a suit for a overpayment of taxes as untimely based on a 53-year old Revenue Ruling which stated that the original return and not an amended return marked the start of the statute of limitations, the Court wanting to review the Ruling in light of the fact that the claim for refund affected amounts both paid with the original and amended return.
In United States v. Young, 136 AFTR2d 2025 – 6364, a Massachusetts Federal District Court gave an IRS lien priority over a mortgage company which failed to respond to the suit brought by the Government.
In Fisher v. Commissioner, TC Memo 2025-124, the Tax Court denied taxpayers’ request for an installment agreement when their real estate had over $1.6 million in home equity.
In Sample v. Commissioner, TC Memo 2025-118, the Tax Court gave equitable innocent spouse relief to a separated spouse who continued to live with her husband, a dentist, for three years and denied the relief for an additional three at which point she knew of the recurring substantial underpayments.
In Dicks v. Internal Revenue Service, 136 AFTR2d 2025 -8462, a California Federal District Court ruled that a discharge of tax liability in bankruptcy simply releases personal liability for the debt but does not extinguish it such that the “full payment rule” denies the bankrupt standing in the Court to obtain a refund based on an amended return.
National Taxpayer Advocate Erin Collins indicated that penalty waivers in the future will be determined automatically by IRS for failure to file, pay or deposit where a taxpayer has not been penalized in the most recent three years.
In Chief Counsel Advice 2025470141, IRS ruled that a filed tax return that was marked as “COPY” constitutes a valid filing as it contains sufficient information to calculate tax liability.
