The Tax Court in Brief September 27 – October 1, 2021

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The Tax Court in Brief September 27 – October 1, 2021

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.

Tax Litigation: The Week of September 27 – October 1, 2021


Whistleblower 14377-16W v. Comm’r, T.C. Memo. 2021-113 

September 27, 2021 | Halpern, J. | Dkt. No. 14377-16W

Short Summary:  The whistleblower brought a whistleblower action under section 7623 of the Code, seeking review of the IRS Whistleblower Office’s (WBO) denial of his claim for a reward.  The whistleblower also sought to remain anonymous.  In a prior decision, the Tax Court had determined that the whistleblower should not proceed anonymously; however, the Tax Court was reversed by the D.C. Circuit Court of Appeals.  The IRS moved for summary judgment and contended that the WBO did not abuse its discretion in denying the whistleblower’s request for an award.

Key Issues:

Primary Holdings:

Key Points of Law:

Insight: As this case shows, overturning the WBO’s determination not to grant a whistleblower award can sometimes be an uphill battle.  Accordingly, whistleblowers should ensure that they properly provide all relevant facts and arguments to the WBO as part of their Form 211.


Gregory v. Comm’r, T.C. Memo. 2021-115

September 29, 2021 | Jones, J. | Dkt. No. 10336-18

Short Summary: During tax years 2014 and 2015, Petitioners Carl and Leila Gregory operated CLC Ventures, Ltd. (“CLC”), which generated income and incurred expenses from boat chartering activities. The Gregorys reported CLC’s activities on Schedule C for each tax year. The IRS audited the Gregorys’ tax returns and issued a Notifce of Defiency, assessing deficiencies and certain accuracy-related penalties. The IRS determined that the CLC activities lacked a profit motive and recharacterized (1) the Schedule C income as non-Schedule C “other income,” and (2) the Schedule C expenses as miscellaneous itemized deductions to the extent allowable under Section 183 (with certain exceptions).

On May 29, 2018, the Gregorys timely filed their petition for redetermination of the deficiencies and accuracy-related penalties. On March 6, 2020, the Gregorys filed a motion, requesting that the Tax Court hold as a matter of law that the deductions provided under Section 183(b) for activities not engaged in for profit are not subject to Section 67(a)’s 2-percent floor on miscellaneous itemized deductions.

Key Issues:

Primary Holdings:

Key Points of Law:

Insight: As this case suggests, “hobby loss” issues are a regular issue for taxpayers. Moreover, expenses and deductions denied by the IRS as business deductions may be miscellaneous itemized deductions subject to a 2-percent floor. Accordingly, taxpayers who have relatively high AGIs will likely miss out on these deductions. Further, taxpayers should note that the particular issue highlighted by Gregory is not applicable for tax years affected by the TCJA (i.e., 2018 through 2025).


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