Tax Court in Brief | Hoakison v. Comm’r | Schedule F Farming Expense Deductions and Deficiencies Relating to Same

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The Tax Court in Brief – December 5th – December 9th, 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 December 5th, 2022, through December 9th, 2022

Hoakison v. Comm’r, T.C. Memo. 2022-117| December 5, 2022 | Paris, J. | Dkt. No. 16577-17 

Short Summary:  Mr. and Mrs. Hoakison (collectively, the “Hoakisons”) are long-time farmers.  They own real estate used for farming and utilize various equipment to assist with their farming operations, including tractors and pickup trucks.  In 2012, the Hoakisons also constructed a machine shed for a cost of $108,856, which was paid in cash.

The Hoakisons are not tax professionals and do not have advanced educations.  Accordingly, for their 2013, 2014, and 2015 tax years, they relied on Mr. Powell, a farm management specialist with a master’s degree in agricultural education, to prepare their returns on their behalf.

The IRS selected the Hoakisons’ 2013, 2014, and 2015 tax returns for examination.  The IRS disallowed many of the Schedule F, Profit or Loss from Farming (“Schedule F”), deductions they claimed related to their farming activities.  The IRS also imposed accuracy-related penalties regarding the disallowed deductions and related underpayment of tax for 2013, 2014, and 2015.

Key Issues

Primary Holdings:

Key Points of Law:

Insight: The Hoakison case demonstrates many of the substantiation cases that come before the Tax Court.  As the fact-finder, the Tax Court is often required to review the documents and testimony to determine the amounts, if any, that are permitted under the Code, Treasury Regulations, and existing court authority.  As Hoakison shows, the Tax Court often splits the differences amongst the parties when the case proceeds to trial.