August 1st, 2022
Federal Tax Update
Author: David S. De Jong
In Keefer v. United States, 130 AFTR2d 2022-5002, a Texas Federal District Court denied an individual a charitable deduction for a 4 percent limited partnership interest in a hotel given to a donee organization for the purpose of establishing a donor advised fund inasmuch as the acknowledgement letter was deficient in failing to state that the fund had “exclusive legal control over the assets contributed.”
In Malek v. Commissioner, in a Bench Opinion the Tax Court denied pre-2018 deductions for employee business expenses by a police officer who did not submit claims for reimbursement as well as alleged cash charitable contributions where no substantiation existed.
RETIREMENT AND ESTATE PLANNING
In Couturier v. Commissioner, TC Memo 2022-69, the Tax Court ruled that IRS can impose an excise tax on excess contributions to an IRA without a Notice of Deficiency and without regard to the income tax statute of limitations.
In United States v. Gonzalez, 129 AFTR2d 2022-________, a Florida Federal District Court stated that an IRA is not exempt from garnishment under an order for restitution.
In Estate of DeMuth v. Commissioner, TC Memo 2022-72, the Tax Court found that only one of eleven checks using the annual exclusion for gifts cleared by the time of death, thus the others were not completed transfers and were to be includable in the decedent’s estate.
In Revenue Procedure 2022-32, IRS extended the time for electing portability by estates not otherwise required to file an estate tax return up to the fifth anniversary of the first spouse’s date of death with the submitted return stating at the top that it is “filed pursuant to Rev. Proc. 2022-32 to elect portability under Section 2010(c)(5)(A).”
In Filler v. Commissioner, 130 AFTR2d 2022-5093, the Ninth Circuit Court of Appeals agreed with the Tax Court that a doctor who invented a certain MRI technique did not meet the criteria under Code Section 1235 for claiming capital gain on the transfer of the patent inasmuch as he set up numerous entities to hold the technology and patent.
In Wolpert v. Commissioner, TC Memo 2022-70, the Tax Court agreed with the IRS denial of most business expenses claimed by a consultant over two years for total lack of substantiation and generalized testimony insufficient to allow even the expenses not requiring strict substantiation; in Gonzalez v. Commissioner, TC Summary Opinion 2022-13, the Tax Court found that automobile and other travel expenses were substantiated in the required detail but other expenses of a parttime clothing designer were disallowed as inadequate.
In Ziroli v. Commissioner, TC Memo 2022-75, the Tax Court ruled that a disgorgement of profits by a taxpayer facing SEC civil liability for securities violations was nondeductible as the expenses were not “ordinary and necessary” and the disgorgement was imposed to protect the general welfare and not to compensate the Government for any losses; the settlement with the SEC had stated that the taxpayer would not be able to claim any deduction.
In Kinney v. Commissioner, TC Memo 2022-81, the Tax Court concluded that a lawyer’s expenses in defending against disbarment were nondeductible when the source of the claim was personal misconduct (in being litigious) as were most law-related expenses after his disbarment.
In Letter Ruling 202226018, IRS denied 501(c)(3) status to an equine activities club as it found the organization to further a substantial recreational purpose and a minimal educational purpose if at all.
In Bennett v. Commissioner, in a Bench Opinion the Tax Court found that a physician who failed to timely file and pay was subject to both penalties as she showed an ability to practice medicine despite an alleged reduction in hours.
In Bedrosian v. United States, 130 AFTR2d 2022-________, the Third Circuit Court of Appeals agreed with a Pennsylvania Federal District Court, on remand after the District Court originally applied erroneously a subjective rather than an objective test, that an individual acted willfully by disclosing only one of two foreign bank accounts.
In Ledesma v. Commissioner, in a Bench Opinion with little detail, the Tax Court determined that a Petition was not filed late despite the length of time between mailing and receipt where there was credible testimony; the Court did not indicate whether the mailing was by certified or registered mail.
In Barbeau v. Internal Revenue Service, 130 AFTR2d 2022-________, a California Federal District Court declined to give additional time for a refund in the case of a taxpayer alleging disability due to an abusive relationship, the Court indicating that a written statement was required with the claim for refund and not many months later when it was separately provided; in Ruebsamen v. United States, 130 AFTR2d 2022-________, the Court of Federal Claims reached the same conclusion in the case of an otherwise late refund claim.
In Long v. United States, 130 AFTR2d 2022-________, a Utah Federal District Court held that IRS was not required to remove its lien on a husband’s property transferred to his wife pursuant to a divorce.
In In Re: Weber, 130 AFTR2d 2022-________, a Florida Bankruptcy Court exempted a refund attributable to excess withholding on social security, taking the position over the objection of the trustee that the social security recipient consented only to subjecting the money to payment of his tax liabilities and not to any other claim such as bankruptcy.
In Soler v. Commissioner, TC Memo 2022-78, the Tax Court denied equitable innocent spouse relief to a wife after balancing the factors and determining that she had constructive knowledge of the understatement and the law was not designed to protect the “intentionally ignorant.”
In Chief Counsel Advice 202226010, IRS held that a federal tax lien attached to consideration given to a taxpayer in exchange for his business interests overriding an alimony obligation from the proceeds to his former wife.