The Tax Court in Brief – November 7 – November 13, 2020

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The Tax Court in Brief November 7 – November 13, 2020

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 November 7 – November 13, 2020

Lashua v. Comm’r, T.C. Memo. 2020-151

November 9, 2020 | Marvel, J. | Dkt. No. 9144-19

Short SummaryIn 2016, the taxpayer had an IRA with National Financial Services, LLC, from which he received a distribution of $7,800.  The taxpayer filed a 2016 tax return but failed to report the IRA distribution and any addition to tax under Section 72(t).  At the time of the IRA distribution, the taxpayer had not yet reached the age of 59 ½ and no portion of the IRA distribution was deposited into another IRA or other retirement account.  The IRS issued a notice of deficiency to the taxpayer; however, the notice of deficiency was not signed by any IRS employee.  The taxpayer petitioned the Court for a redetermination.

Key Issue:  Whether the taxpayer:  (1) had $7,800 of unreported retirement income; (2) is liable for an additional tax of $780 under Section 72(t) for an early distribution from a qualified retirement plan; and (3) received a valid notice of deficiency.

Primary Holdings

Key Points of Law:

InsightThe Lashua decision shows that the IRS can utilize information returns to determine whether income from IRAs has been properly reported on a taxpayer’s tax return.  In the event an early IRA distribution has been made and no other exception applies, the IRS can impose an additional 10% addition to tax under Section 72(t).

Dang v. Comm’r, T.C. Memo. 2020-150

November 9, 2020 | Marvel L.P. | Dkt. No. 4346-18L

Short SummaryAt the conclusion of the trial, Petitioners filed a motion for reasonable litigation and administrative costs. Neither party requested a hearing on the matter, there was no material fact in dispute.  The Tax Court decided the Petitioner’s motion on the basis of the parties’ submissions and the existing record.  The Tax Court found that the Petitioners did not incur “reasonable administrative costs” and were not entitled to an award of reasonable litigation costs because the position of the IRS was “substantially justified.”

Key Issue:  Did the Petitioners meet the statutory requirements for litigation and/or administrative costs after having been through an IRC § 6330/6320 hearing and a Tax Court trial.

Primary Holdings

Key Points of Law:

InsightThis case clearly lays outs the requirements that a taxpayer must meet in order to be awarded litigation and/or administrative costs.  It also highlights the need for taxpayers to fully research the requirements so as to not spend funds unnecessarily.

Kissling v. Comm’r, T.C. Memo. 2020-153 

November 12, 2020 | Holmes, M. | Docket No. 19857-10

Short Summary: The Court examined charitable contribution deductions taken by Petitioners based on historic preservation conversation easements. Specifically, the Court examined the value before and after the easement to determine if the amount of charitable contribution deduction was warranted. It was warranted, but reduced slightly.

Key Issues: What is the value of a conservation easement for historic preservation purposes when local law already restricted what could be done with the property?

Primary Holdings:

Key Points of Law:

Insight: Kissling analyzes the rules regarding charitable contribution deductions for conservation easements under Section 170. Specifically, this case presents an interesting circumstance where conservation easements donated on property are already limited on improvements to some extent by local law.  However, the Petitioners successfully argued that the conservation easement still provided conservation value over that already provided by local law. This is a notable case where a taxpayer actually reversed the full disallow of a conservation easement deduction by the IRS.


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