Freeman Law | The Tax Court in Brief

Share this Article
Facebook Icon LinkedIn Icon Twitter Icon

Freeman Law is a tax, white-collar, and litigation boutique law firm. We offer unique and valued counsel, insight, and experience. Our firm is where clients turn when the stakes are high and the issues are complex.

The Tax Court in Brief

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.

For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.

The Week of August 8 – August 14, 2020

Sham v. Comm’r, T.C. Memo. 2020-119 | August 12, 2020 | Gustafson, J. | Dkt. No. 10531-17

Short SummaryMs. Sham became unemployed and suffered from medical problems requiring treatment.  Later, she became an independent business consultant for a medical doctor.  Ms. Sham filed 2010 through 2015 income tax returns late and claimed significant medical expense deductions and other deductions on Schedules A and C.

The IRS issued a notice of deficiency to Ms. Sham.  In the notice of deficiency, the IRS determined that she had failed to report all of her income for the years at issue and that some of her claimed deductions should be disallowed.  In addition, the IRS imposed accuracy-related penalties for 2010 through 2013 and late-filing, late-payment, and failure-to-pay estimated tax penalties for 2013 through 2015.

Key Issues:  Whether Ms. Sham:  (1) failed to report all amounts of gross income; (2) is entitled to all deductions she claimed beyond those conceded by the IRS in the notice of deficiency or during the court proceedings; and (3) is liable for the accuracy-related penalties for 2010 through 2013 and additions to tax for the years 2013 through 2015.

Primary Holdings

Key Points of Law:

InsightOne of the primary functions of the Tax Court is to review evidence (documents, testimony, etc.) and make a determination of the taxpayer’s tax liability for the year in question.  The Sham decision shows the perils a taxpayer may undergo if they do not keep good records to substantiate their claimed deductions, particularly those that are subject to heightened substantiation rules under Section 274(d).