The Tax Court in Brief – April 18th- April 22nd, 2022
Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
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Tax Litigation: The Week of April 18th, 2022, through April 22nd, 2022
- Treece Financial Services Group, v. Comm’r, 158 T.C. No. 6 | April 19, 2022 | Kerrigan, J. | Dkt. No. 20850-19
- Sezonov. Comm’r, TC Memo. 2022-40| April 20, 2022 | Marvel, J. | Dkt. No. 26650-17
- Kohout v. Comm’r, T.C. Memo. 2022-37 |April 18, 2022 |Jones, J. | Dkt. No. 11958-17
Bindel v. Commissioner | April 20, 2022 | Urda, P. | Dkt. No. 9552-19
Short Summary:
Petitioner challenged IRS determinations of tax deficiencies of approximately $24,000 in each of two tax years; he had reported having no taxable income. Petitioner worked as a software developer. In each of the tax years, he received over $100,000 from employers who reported his wages to the IRS on W-2s. Petitioner claimed entitlement to refund of the withholdings. He attached to his tax returns Form 4852, claiming that he “did not receive any wages as defined in section 3401(a) and section 3121(a).” The IRS noted the discrepancy and issued deficiency notices.
Primary Holdings:
- Petitioner’s arguments in support of his reporting of no taxable income were frivolous.
- The Court declined to impose a section 6673(a)(1) penalty for maintaining a frivolous claim because the petitioner had not made frivolous claims in previous years, but it warned petitioner against repeating frivolous claims.
Key Points of Law:
Generally, IRS deficiency determinations are presumed correct and once the IRS has established a factual foundation linking a taxpayer to the income-producing activity, the taxpayer must show by a preponderance of the evidence that a deficiency determination is arbitrary or erroneous. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Carson v. United States, 560 F.2d 693, 695–96 (5th Cir. 1977); Portillo v, Commissioner, 932 F.2d at 1133; Carson, 560 F.2d at 695–96.
Congress is empowered to levy income against any source of income and assertions that wages from private-sector employers are not taxable “income” are frivolous. See Parker v. Commissioner, 724 F.2d 469, 471–72 (5th Cir. 1984); see also Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984); Wnuck v. Commissioner, 136 T.C. 498, 510–12 (2011).
Insights:
One who receives wages for services rendered must pay income tax on those wages. It’s pretty much that simple.
Tax Court Litigation Attorneys
Need assistance litigating in the U.S. Tax Court? Freeman Law’s tax attorneys are experienced litigators with trial-tested litigation skills and in-depth substantive tax knowledge, having collectively litigated hundreds of cases before the U.S. Tax Court. Our tax controversy lawyers have extensive experience in Tax Court matters involving partnership audits and litigation under both the TEFRA and BBA regimes, international tax penalties, foreign trusts, valuation, reasonable compensation disputes, unreported income, fraud penalties, other tax penalties, and many other matters. We draw on our experience and wealth of tax knowledge to advise and guide clients through the entire tax controversy process, building the right strategy to resolve tax controversies from day one. Schedule a consultation or call (214) 984-3000 to discuss your Tax Court concerns or questions.
