2024-04-01
In March 2024, the Tax Court published 18 opinions, which included a total of 366 pages. Below are graphs showing for the month: (i) the top 20 code sections referenced, (ii) cases cited 4 or more times, (iii) the number of opinions by judge, and (iv) the number of pages by judge. Below the charts are selected excerpts from the cases.
Below the Tax Court data are charts of documents published by the IRS during March 2024.
I am always interested in learning well-established tax principles. Often, court cases will explicitly indicate that a tax principle is well established or well settled. Or the court may concisely state the holding of a prior case in a parenthetical. Below are excerpts from the March 2024 Tax Court cases with these types of principles or holdings.
Aulisio v. Commr., T.C. Memo. 2024-29. (Marshall)
Green Gas Del. Statutory Tr. v. Commissioner, 147 T.C. 1, 65 (2016) (declining to apply the Cohan rule where only corroboration for documentary evidence was taxpayer's self-serving testimony)
Aulisio v. Commr., T.C. Memo. 2024-29. (Marshall)
Rosser v. Commissioner, T.C. Memo. 2001-79, 81 T.C.M. (CCH) 1467, 1471 (finding tax returns did not establish that the taxpayer had income and losses in the amounts reported on the returns)
Chappell v. Commr., T.C. Summary Opinion 2024-2. (Copeland)
Curphey v. Commissioner, 73 T.C. 766, 777-78 (1980) (holding that commuting expenses between a taxpayer's home office and a business location may be deductible if the home office is the taxpayer's principal place of business)
Gondal v. Commr., T.C. Memo. 2024-36. (Jones)
Magnon v. Commissioner, 73 T.C. 980, 993-94 (1980) ("Where a corporation confers an economic benefit on a shareholder without the expectation of repayment, that benefit becomes a constructive dividend, taxable to the shareholder, even though neither the corporation nor the shareholder intended a dividend.")
Gondal v. Commr., T.C. Memo. 2024-36. (Jones)
Castillo v. Commissioner, 84 T.C. 405, 408 (1985) ("The burden of proving fraud is on respondent, and he must do so by clear and convincing evidence.")
Hutchings v. Commr., . (Buch)
McKelvey v. Commissioner, T.C. Memo. 2002-63 (finding a taxpayer's research into and investigation of the business potential of creating a tree farm was not yet a functioning business.)
Hutchings v. Commr., . (Buch)
It is well established that the existence of a genuine profit motive is the most important criterium for finding that a given activity constitutes a trade or business.
Patel v. Commr., T.C. Memo. 2024-34. (Jones)
Crimi v. Commissioner, T.C. Memo. 2013-51, at *40 ("An expert witness may be allowed to testify in a proceeding before this Court when his or her scientific, technical, or other specialized knowledge might help us to understand the evidence or decide a fact in issue.")
Savannah Shoals, LLC v. Commr., T.C. Memo. 2024-35. (Goeke)
Lord v. Commissioner, T.C. Memo. 2010-196, slip op. at 5 (holding that the taxpayer did not substantially comply where the appraisal omitted the donation date, the date of the appraisal, and the fair market value of the donated property)
Savannah Shoals, LLC v. Commr., T.C. Memo. 2024-35. (Goeke)
Brooks v. Commissioner, T.C. Memo. 2022-122, at *17 (explaining that Congress "specifically" enacted the heightened substantiation requirements "to prevent the Commissioner from having to sleuth through the footnotes of millions of returns")
Standifird v. Commr., T.C. Memo. 2024-30. (Greaves)
Ernest S. Ryder & Assocs., Inc. v. Commissioner, T.C. Memo 2021-88, at *187-88 (finding fraudulent intent when a taxpayer created a complex business structure and assigned income to various entities to conceal income)
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
Balt. Gas & Elec. Co. v. United States, 817 F.2d 108, 116 (D.C. Cir. 1987) (noting that under the arbitrary and capricious standard of review, an agency is "required to respond to significant comments that cast doubt on the reasonableness of the rule the agency adopts")
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
Belair Woods, LLC v. Commissioner, T.C. Memo. 2018-159, at *10 (finding that the taxpayer did not substantially comply with reporting requirements when it failed to disclose cost or adjusted basis)
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
Bond v. Commissioner, 100 T.C. 32, 42 (1993) (finding that the taxpayer substantially complied with reporting requirements notwithstanding omission of appraiser's qualifications)
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
Lawrence v. Commissioner, 27 T.C. 713, 716-17 (1957) (observing that when one of our decisions is reversed by an appellate court, we must "thoroughly reconsider the problem in the light of the reasoning of the reversing appellate court and, if convinced thereby, . . . follow the higher court")
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
To be sure, "[t]he doctrine of stare decisis is important to this Court, and we are mindful of its role in [relevant cases]." Analog Devices, 147 T.C. at 443. But where, as here, we are faced with "issues on which a Court of Appeals has reversed our prior decision," see id., we are obligated to thoroughly reconsider our position, Lawrence, 27 T.C. at 716-17.
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
Stare decisis is "[t]he doctrine of precedent, under which a court must follow earlier judicial decisions when the same points arise again in litigation." Stare decisis, Black's Law Dictionary (11th ed. 2019). Courts have repeatedly taken the position that "[s]tare decisis is the preferred course because it promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process." Payne v. Tennessee, 501 U.S. 808, 827 (1991).
Valley Park Ranch, LLC v. Commr., 162 T.C. No. 6 (2024). (Jones)
However, "any departure from the doctrine of stare decisis demands special justification." Arizona v. Rumsey, 467 U.S. 203, 212 (1984). This "special justification" is over and above the belief "that the precedent was wrongly decided." Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 266 (2014).
White v. Commr., T.C. Memo. 2024-31. (Fried)
Montgomery v. Commissioner, 122 T.C. 1, 8-9 (2004) (holding that taxpayers are allowed to challenge the underlying liability where the taxpayers self-assessed their underlying liability and did not receive a statutory notice of deficiency)
Wycoff v. Commr., T.C. Memo. 2024-37. (Lauber)
Even though petitioner is not a lawyer, a modest inquiry using an internet search engine would have led her to online sources showing the frivolous nature of these arguments. See Wnuck v. Commissioner, 136 T.C. 498, 504 (2011) ("Anyone with the inclination to do legal research . . . will confront such authorities."). The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled principles before they file and litigate. Takaba v. Commissioner, 119 T.C. 285, 295 (2002)
2024-03-21
Yesterday the IRS published Notice 2024-31 which provides adjustments to the limitation on housing expenses for specific locations in 2024.
Code §911(a) allows a qualified individual to elect to exclude from gross income an “Exclusion Amount” related to foreign earned income and a “Housing Cost Amount.” The Exclusion Amount for 2024 is $126,500.
The Housing Cost Amount is generally defined as an amount equal to the excess of (A) the “Housing Expenses” of an individual for the taxable year, over (B) 16% of the Exclusion Amount.
For example, if an individual had Housing Expenses during 2024 of $25,000, the Housing Cost Amount that could be excluded from that individual’s income would be 4,760 (25,000 - [126,500 X 16%]).
Housing Expenses, however, are generally limited to an amount equal to 30% of the Exclusion Amount in effect for the calendar year ($37,950 for 2024). Thus, the maximum Housing Cost Amount for 2024 which is excludible from income would generally be $17,710 ($37,950 - [126,500 X 16%]).
The IRS is authorized to issue guidance to adjust the limit on Housing Expenses based on geographic differences in housing costs relative to housing costs in the United States. Pursuant to this authority, the IRS published Notice 2024-26 to provide adjustments to the limitation on Housing Expenses for high cost locations.
For example, the limitation on Housing Expenses for 2024 in Seoul, Korea is $49,200. Therefore, an individual living in Seoul with housing expenses in 2024 of $49,200 or more could exclude from income an amount of $28,960 ($49,200 - [126,500 X 16%]).
An individual generally qualifies for Code §911 during the period which the individual meets the tax home requirement and either the bona fide residence requirement or the physical presence requirement. If it is the first year or the last year that an individual meets these requirements, the amounts above are prorated for the year accordingly.
2024-03-06
In February 2024, the Tax Court published 19 opinions, which included a total of 433 pages. Below are graphs showing the number of opinions by judge and the number of pages by judge. [Edited 3/9/2024. Also below is a chart showing the top 20 code sections referenced by the Tax Court during the month.] [Edited 3/10/2024. Also below is a chart showing the cases cited 4 or more times by the Tax Court during the month.]
I am always interested in learning well-established tax principles. Often, court cases will explicitly indicate that a tax principle is well established or well settled. Or the court may refer to a “cardinal rule” or a “doctrine.” Below are excerpts from some of the February 2024 Tax Court cases referring to these types of principles, doctrines, or rules.
Hubbard v. Commr., T.C. Memo. 2024-16. (Marshall)
Old Colony Tr. Co. v. Commissioner, 279 U.S. 716, 729 (1929) ("[D]ischarge by a third person of an obligation to [the taxpayer] is equivalent to receipt by the person taxed.").
Hubbard v. Commr., T.C. Memo. 2024-16. (Marshall)
Glenshaw Glass Co. v. Commissioner, 348 U.S. at 431 ("Here we have instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion. The mere fact that the payments were extracted from the wrongdoers as punishment for unlawful conduct cannot detract from their character as taxable income to the recipients.").
Hubbard v. Commr., T.C. Memo. 2024-16. (Marshall)
Du Poux v. Commissioner, T.C. Memo. 1994-448, 68 T.C.M. (CCH) 667, 668 ("[F]ailure to receive tax documents [such as Form 1099-MISC, Miscellaneous Income] does not excuse taxpayers from the duty to report income.").
Crumedy v. Commr., T.C. Memo. 2024-19. (Ashford)
Grunsted v. Commissioner, 136 T.C. 455, 460 (2011) ("This Court and others have repeatedly characterized returns reflecting zero income and zero tax as frivolous.").
Martino v. Commr., T.C. Memo. 2024-18. (Lauber)
Mendes v. Commissioner, 121 T.C. 308, 312-13 (2003) (holding that an argument not pursued on brief may be considered "abandoned").
Whistleblower 14376-16W v. Commr., T.C. Memo. 2024-22. (Thornton)
Weiss v. Commissioner, 147 T.C. 179, 196 (2016) ("The IRM lacks the force of law and does not create rights for taxpayers.").
Oconee Landing Property, LLC v. Commr., T.C. Memo. 2024-25. (Lauber)
Boree v. Commissioner, 837 F.3d at 1105 ("[T]he [taxpayers] deducted expenses related to the property . . . , a practice inconsistent with capital gains treatment . . . .").
Oconee Landing Property, LLC v. Commr., T.C. Memo. 2024-25. (Lauber)
Jones v. Commissioner, 560 F.3d at 1199; Strasburg, 79 T.C.M. (CCH) at 1704 ("The allowable charitable contribution deduction for ordinary income property is limited to the basis of the property donated.").
Oconee Landing Property, LLC v. Commr., T.C. Memo. 2024-25. (Lauber)
Lenihan v. Commissioner, T.C. Memo. 2006-259, 92 T.C.M. (CCH) 463, 466 (holding that the cost basis reported by a taxpayer on his Federal tax return was merely a statement of his position, not evidence that his figure was correct).
Couturier v. Commr., 162 T.C. No. 4 (2024). (Lauber)
United States v. Dixieline Fin., Inc., 594 F.2d 1311, 1312 (9th Cir. 1979) (collecting cases) ("[An assessment] consists of no more than the ascertainment of the amount due and the formal entry of that amount on the books of the secretary.").
Couturier v. Commr., 162 T.C. No. 4 (2024). (Lauber)
Bufferd v. Commissioner, 506 U.S. 523, 525-26 (1993) ("Code § 6501(a) establishes a generally applicable statute of limitations providing that the Internal Revenue Service may assess tax deficiencies within a 3-year period from the date a return is filed.").
Couturier v. Commr., 162 T.C. No. 4 (2024). (Lauber)
N.Y. & Presbyterian Hosp. v. United States, 881 F.3d 877, 886 n.13 (Fed. Cir. 2018) ("[T]itles [in the Code] have no legal effect . . . .").
Couturier v. Commr., 162 T.C. No. 4 (2024). (Lauber)
Badaracco v. Commissioner, 464 U.S. at 398 ("Courts are not authorized to rewrite a statute because they might deem its effects susceptible of improvement.").
Whistleblower 14376-16W v. Commr., T.C. Memo. 2024-22. (Thornton)
Wadleigh v. Commissioner, 134 T.C. 280, 294 (2010), it is "well-settled" that IRM provisions are "directory rather than mandatory, are not codified regulations, and clearly do not have the force and effect of law," Marks v. Commissioner, 947 F.2d 983, 986 n.1 (D.C. Cir. 1991), aff'g T.C. Memo. 1989-575; accord Weiss v. Commissioner, 147 T.C. 179, 196 (2016) ("The IRM lacks the force of law and does not create rights for taxpayers."), aff'd, No. 16-1407, 2018 WL 27593.
Meyer v. Commr., T.C. Memo. 2024-15. (Buch)
"Judicial estoppel is an equitable doctrine that prevents parties in from asserting positions contradictory to those they previously have affirmatively persuaded a court to accept." Huddleston v. Commissioner, 100 T.C. 17, 26 (1993).
Hubbard v. Commr., T.C. Memo. 2024-16. (Marshall)
"Under the constructive receipt doctrine 'funds [or other property] which are subject to a taxpayer's unfettered command and which he is free to enjoy at his option are constructively received by him whether he sees fit to enjoy them or not.'" Estate of Caan v. Commissioner, No. 14783-18, 161 T.C., slip op. at 20 (Oct. 18, 2023) (quoting Estate of Brooks v. Commissioner, 50 T.C. 585, 592 (1968)).
Acqis Technology, Inc. v. Commr., T.C. Memo. 2024-21. (Marshall)
The sham transaction doctrine requires courts and the Commissioner to look beyond the form of a transaction and to consider its substance. Slone v. Commissioner, 810 F.3d 599, 605 (9th Cir. 2015), vacating and remanding T.C. Memo. 2012-57.
2024-03-03
We created a new heat map of the number of enrolled agents per million people by state. The heat map can be found here.
All of our heat maps can be found here.
2024-02-25
The IRS provides a list of active enrolled agents on its website. As of September 2023 there were a total of 64,489 enrolled agents, and as of September 2022 there were a total of 63,013 enrolled agents (a 2.3% increase).
The vast majority of the enrolled agents are in the United States. However, as of September 2023 there were 4,078 enrolled agents outside the United States, and as of September 2022 there were 3,559 enrolled agents outside the United States.
The enrolled agents inside the United States grew at a rate of 1.6% from September 2022 to September 2023, but the enrolled agents outside the United States grew at a rate of 14.6% during the same period. Thus, the growth of enrolled agents outside the United States is much higher than the growth inside the United States.
Below is a chart showing the number of enrolled agents as of September 2023 and September 2022 for countries that have at least 20 enrolled agents.
China is the only country that had a decrease in the number of enrolled agents.
2024-02-20
Continuing our series on Famous Tax Quotes, today's tax quote is from a Supreme Court case holding that the Fifth Amendment doesn't excuse a complete failure to file a tax return:
[The taxpayer] could not draw a conjurer’s circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law.
United States v. Sullivan, 274 U.S. 259, 263 (1927).
2024-02-11
Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle), today's tax quote is:
[I]t is well settled that taxpayers must file timely income tax returns on the basis of the best information available to them at the time, and then file an amended return if necessary. Estate of Vriniotis v. Commissioner, 79 T.C. 298, 311 (1982). We accordingly conclude that [the taxpayer] is liable for the late-filing addition to tax for all five years.
Avery v. Commr., T.C. Memo. 2023-18.
2024-02-04
Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle), today's tax quote is from a recent Tax Court case dealing with microcaptive insurance companies:
Although the Swift captives displayed some attributes of insurance companies, they failed to operate as insurance companies and their premiums were nonsense. We therefore conclude that the Swift captives did not provide insurance in the commonly accepted sense.
Swift v. Commr. , T.C. Memo. 2024-13.
2024-01-27
The Tax Court has substantially reduced the number of opinions that it publishes each year.
In 1996, the Tax Court published 553 Memorandum Opinions. In 2023, the Tax Court published 154 Memorandum Opinions, a 72% decrease.
In 1996, the Tax Court published 49 Reported Opinions. In 2023, the Tax Court published 29 Reported Opinions, a 41% decrease.
In 2001, the Tax Court began publishing Summary Opinions. In 2001, the Tax Court published 89 Summary Opinions. In 2023, the Tax Court published 35 Summary Opinions, a 61% decrease.
In 2008, the Tax Court began publishing Bench Opinions. In 2008, the Tax Court published 142 Bench Opinions. In 2023, the Tax Court published 49 Bench Opinions, a 65% decrease.
Below is a chart of the number of opinions issued by each Tax Court judge in 2023.
Typically, the Special Trial Judges only issue Summary and Bench Opinions. However, during 2023, Chief Special Trial Judge Carluzzo issued two Memorandum Opinions and Special Trial Judge Landy also issued two Memorandum Opinions. Unfortunately, the Tax Court website was revised several years ago so that opinions can no longer be directly linked to. Otherwise, I would link to the cases mentioned.
Below is a chart of the number of pages published by each Tax Court judge in 2023. Judge Morrison authored 3M Co. v. Commr., 160 T.C. No. 3 (2023), which itself was 346 pages long.
2024-01-26
Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2023.
The number of published expatriates for the fourth quarter was 1,145, bringing the total number of published expatriates in 2023 to 3,260. The number of expatriates for 2023 is a 15% decrease from 2022.
Below are two charts. The first chart shows the annual expatriations from 2008 to 2023. The second chart shows the quarterly expatriations from 2014 to 2023, including an 8-quarter moving average.
The 8-quarter moving average continues to be somewhat below 1,000 names per quarter.
For our prior coverage of expatriation, see all posts tagged Expatriation.
