Tax Court in Brief | Hall v. Commissioner | Additions to Tax for Underpayments and Income from Trusts

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The Tax Court in Brief – July 25th – July 29th, 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 July 25th, 2022, through July 29th, 2022

Hall v Commissioner, T.C. Memo. 2022-82 | July 28, 2022 | Marshall, J.| Dkt. No. 8541-20 

Short Summary: This case involves the disputed liability for (1) the deficiency in taxpayer’s income tax, (2) additions to tax for untimely filing of income tax returns, and (3) additions to tax for underpayments of estimated tax. In 2016 and 2017, Jamie B. Hall (Hall) was a beneficiary of two trusts. She received dividends and capital gains from each of the Trusts. Hall received Schedules K–1 (Form 1041), Beneficiary’s Share of Income, Deductions, Credits, etc., from each trust. Hall failed to file a federal income tax return for tax years 2015, 2016, or 2017. Hall did not pay any estimated income tax for the 2016 or 2017 tax year. IRS issued notices of deficiency for the 2016 and 2017 tax years assessing deficiencies and addition to tax. In trial IRS requested to increase the section 6651(a)(1) additions to tax to 25% of the amounts required for 2016 and 2017. Hall argued that the Social Security Administration created the Jamie Bennett Hall trust (one of the trusts) by assigning her a Social Security number and a Social Security card. Additionally, she argued the trust is an agency of the U.S. Government and not subject to tax. The Tax Court found this argument frivolous and sustain IRS determinations for 2016 and 2017.

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Primary Holdings:

Key Points of Law:

Insights:  This case is another example of a taxpayer failing to properly document and substantiate that the taxpayer is not liable for the determinations made by the IRS. We duly recommend getting proper advice before making any arguments against IRS to avoid a higher tax contingency. For additional information on frivolous arguments and 26 U.S.C. §6651and §6654, see Freeman Law:

Hatfield v. Comm’r, T.C. Memo. 2022-59 | June 13, 2022 | Lauber, J. | Dkt. Nos. 7327-20, 1500-21

Gianninis v Commissioner, T.C. Memo. 2022-65 | June 23, 2022 | Urda, J.| Dkt. No. 20132-19.

Kelly v. Comm’r, No. 13353-21L, T.C. Memo 2022-73 | July 13, 2022 | Lauber |