Case Summaries

Akers v. Comr., T.C. Memo. 2010-85

(taxpayer's rental of owned cabin in California not rental activity under the passive loss rules, thus taxpayer cannot deduct expenses associated with cabin rental; cabin considered residence and taxpayer must include rental amount as income with no offsetting deduction under I.R.C. Sec. 280A).


Sykes, et ux. v. Comr., T.C. Memo. 2010-84

(taxpayers, married couple, not entitled to casualty loss deduction for water damage to home; taxpayers did not prove amount of damage claimed; penalties applicable because failure taxpayer's negligently failed to maintain records or substantiate claims).


IRS Info. 2010-0118 (April 21, 2010)

(qualified tuition reduction is excluded from income for education below the graduate level, but law school tuition reduction not excludible). 


Lam v. Comr., T.C. Memo. 2010-82

(petitioner's capital losses not properly deductible on Schedule C; court rejected taxpayer's "Turbo Tax Tim Geithner" defense).


IRS Info. 2010-0101 (Apr. 19, 2010)

(foreign ag workers on H2A visas are exempt from social security and medicare tax and are not subject to withholding, but amounts paid to them must be reported on Form 1099-Misc if amount paid during the year is $600 or more). 


C.C.A. 201020009 (April 16, 2010)

(I.R.C. Sec. 2035(b), which specifies that for gift tax paid on gifts made within three years of death the amount of gift tax is to be included in the decedent's gross estate for purposes of computing the estate tax, does not apply if the decedent is a non-resident alien for transfer tax purposes; I.R.C. Sec. 2014(b), which generally applies I.R.C. Secs. 2035-2038 to estate of nonresidents, is trumped by I.R.C. Sec. 2104(b) which only applies to "property of which the decedent has made a transfer"; "transfer" means "gratuitous transfer" and payment of gift tax is not a gratuitous transfer, thus Sec. 2035(b) inapplicable). 


IRS Info. 2010-0078 (Apr. 16, 2010)

(taxpayer fails to qualify for long-term homeowner tax credit because home purchased before credit's effective date of November 7, 2009). 


White v. Comr., T.C. Summ. Op. 2010-48

(taxpayer, noncustodial parent, not entitled to dependency exemption; children were not "qualifying children," were not "qualifying relatives" and taxpayer failed to submit Form 8332 to ex-spouse).


Jensen v. Comr., T.C. Memo. 2010-77

(debtor, former spouse, was obligor on indebtedness with bank and had to recognize CODI upon bank's cancellation of the debt in spite of the fact that ex-spouse agreed, pursuant to divorce decree, to assume indebtedness; debtor spouse was original obligor on indebtedness and meaning of "incurred" in divorce decree unclear).


Trask v. Comr., T.C. Memo. 2010-78

(real estate professional did not elect to make election to group multiple real estate rental activities as single activity under I.R.C. Sec. 469(c)(7)(A); taxpayer also not eligible for NOL carryover and some deductions for "repairs" related to taxpayer's property disallowed).


Recovery Group, Inc., et al. v. Comr., T.C. Memo. 2010-76

(plaintiff, S corporation shareholders, must amortize cost of covenant not to compete over 15 years because it is an I.R.C. Sec. 197 intangible; no accuracy-related penalty imposed).


IRS Info. 2010-0092 (Apr. 15, 2010)

(IRS again takes position that related party sales are disallowed for purposes of the first-time homebuyer credit; no statutory analysis provided). 


Lehman v. Comr., T.C. Memo. 2010-74

(petitioners, married couple not entitled to NOL because they couldn't show that they ran an inn during the tax years at issue; sufficient evidence lacking for court to verify substantiation of taxpayers' expenses). 


IRS Info. 2010-0103 (Apr. 14, 2010)

(married couple not eligible for first-time homebuyer tax credit because wife owned principal residence in prior three years, and can't take long-term homeowner credit because husband didn't reside in wife's home for long-enough period of time). 


Kraatz & Craig Surveying, Inc. v. Comr., 134 T.C. 167 (2010)

(plaintiff corporation provides land surveying services, but does not provide any services that are required to be performed by licensed engineers; IRS took position that such services are "engineering services" under Treas. Reg. Sec. 1.448-1T(e)(4)(i) and, thus, the corporation is a qualified personal service corporation subject to a 35 percent tax rate; court agrees that land surveying is in the field of engineering and court not bound to follow state (Tennessee) law under I.R.C. Sec. 448(d)(2) which distinguishes land surveying from engineering by requiring separate licenses for each service; temporary regulation upheld as valid).


Adams v. Comr., T.C. Memo. 2010-72

(50 percent beneficial owner of land trust assumed benefits and burdens of ownerships and was, therefore, entitled to mortgage interest deduction; state (Michigan) law controls nature of taxpayer's rights in trust - while trust agreement states that taxpayer had no right, title or interest in trust property, other documents referred to taxpayer as "buyer" and other attributes of a sale were present such as downpayment, closing costs and payment of principal and interest, and beneficial owner responsible for maintenance of trust property, had to pay taxes on it, and had right to property's proceeds from rents, mortgages or sales and could obtain title by paying balance of purchase price and had to obtain insurance on the property; while other factors weighed against beneficial owner having burdens and benefits of ownership, such factor were outweighed by those supporting beneficial owner bearing burdens and benefits of ownership;  IRS waived the issue of whether land trusts are shams).


Colegrove, et ux. v. Comr., T.C. Summ. Op. 2010-44

(amounts taxpayer withdrew from taxpayer's IRA constituted a distribution rather than a loan and were includible in taxpayer's gross income and subject to 10 percent penalty tax; distributions received were not in form of annuity; taxpayer had no income tax basis in IRA).


Koziej, et ux. v. Comr., T.C. Summ. Op. 2010-40

(married couple that failed to report bank deposits in income determined to have taxable income on such amounts; couple failed to show that unreported deposit amounts were nontaxable loans - no corroborating evidence that amounts received from friends were loans and no evidence that couple entered into loan agreements or intended to repay amounts; accuracy-related penalty upheld).


Holmes, et ux. v. Comr., T.C. Summ. Op. 2010-42

(petitioner, a pastor, received housing allowance that was not includable in gross income under I.R.C. Sec. 107; but petitioner lacked sufficient records to substantiate claimed business deductions on Schedule C).


IRS Infor. 2010-0107 (Apr. 12, 2010)

(home purchased before Nov. 7, 2009, does not qualify for long-term homeowner tax credit). 


IRS Info. 2010-0083 (Apr. 12, 2010)

(wife entitled to first-time homebuyer tax credit for purchase of home with spouse from wife's father-in law because purchase occurred before Nov. 7, 2009). 


IRS Info. 2010-0112 (Apr. 12, 2010)

(married couple that purchased land to build new residence on is eligible for either first-time homebuyer credit or long-term homeowner credit for constructed homes, purchase date is date home occupied). 


Ex Parte Green, et al., 58 So. 3d 135 (Ala. Sup. Ct. 2010)

(case involves dispute over ownership of farmland owned by decedent that died intestate in 1962 without a spouse or children).


IRS Info. 2010-0073 (Apr. 9, 2010)

(IRS again takes the position, without analysis of the statute, that I.R.C. Sec. 36 bars home purchases from taxpayer's parents as being eligible for the first-time homebuyer tax credit).


Wolfgram v. Comr., T.C. Memo. 2010-69

(plaintiff's claim for various business expense deductions associated with construction of new home to be used as a bed and breakfast denied; no business involved; dependency deductions and credits also denied; penalties for failure to timely file and pay penalties upheld). 


IRS Info. 2010-0088 (Apr. 7, 2010)

(taxpayer eligible for 2008 version of first-time homebuyer credit (with recapture provision, rather than 2009 version, based on when home was purchased). 


IRS. Info. 2010-0091 (Apr. 7, 2010)

(IRS again takes the position, with no statutory analysis that purchases from relatives (including parents) are disallowed for purposes of the first-time homebuyer credit). 


Priv. Ltr. Rul. 201029004 (Apr. 7, 2010)

(taxpayer, engaged in real estate business and qualified under I.R.C. Sec. 469(c)(7)(B) granted extension of time to make election to group all interests in rental real estate as a single rental real estate activity). 


IRS Info. 2010-0086 (Apr. 6, 2010)

(IRS again takes the position, with no statutory analysis, that purchases from relatives don't qualify for the first-time homebuyer tax credit). 


Klauer, et al. v. Comr., T.C. Memo. 2010-65

(S corporation owners (sheet metal manufacturing business in Iowa) entitled to charitable deduction for transfer of land via bargain sales to non-profit trust in accordance with option agreement; step transaction doctrine not applicable).


Priv. Ltr. Rul. 201027015 (Apr. 5, 2010)

(portion of credit card purchases that taxpayers can get back via cash rebates or donate to charity are not includible in gross income; amount donated to charity is charitable contribution on date of receipt by charity). 


Bellco Credit Union v. United States, 735 F.Supp.2d 1286 (D. Colo. 2010)

(plaintiff not liable for UBIT on royalty income from accidental death and dismemberment insurance; plaintiff liable for UBIT on credit insurance for years that plaintiff failed to maintain income records, and liable for UBIT on share of profits from "Credit Union Indirect Lending Association" - income not related to plaintiff's exempt purpose). 


Goolsby v. Comr., T.C. Memo. 2010-64

(taxpayer failed to hold replacement property received in an I.R.C. Sec. 1031 exchange for investment purposes or for use in the taxpayer's trade or business; taxpayer moved into replacement property within two months of the exchange and used it as a residence).


IRS Info. 2010-0106 (Apr. 1, 2010)

(purchase of home from taxpayer's parents does not qualify for first-time homebuyer credit; no statutory analysis provided). 


IRS Info. 2010-0085 (Apr. 1, 2010)

(taxpayer may claim credit for cost of installing geothermal heat pump at newly constructed home; but cannot claim credit for energy efficient windows because they must be installed on an existing home in accordance with I.R.C. Sec. 25C). 


IRS Info. 2010-0080 (Mar. 31, 2010)

(cost of herb that is prescribed by physician to treat migraines can qualify as medical expense under I.R.C. Sec. 213 for purposes of flexible spending account; taxpayer must be able to substantiate the medical condition, that the herb alleviates the condition, and that the herb wouldn't have been purchased but for the condition). 


IRS Info. 2010-0102 (Mar. 31, 2010)

(with no analysis of the statute, IRS says that purchases from certain relatives do not qualify for the first-time homebuyer tax credit). 


Fucaloro, et ux. v. Comr., T.C. Sum. Op. 2010-37

(taxpayers, married couple, not entitled to deductions for losses from business and related expense deductions from husband's boxing activity; taxpayers failed to establish that boxing activity engaged in for profit; sufficient records not kept).


Fleming v. Comr., T.C. Memo. 2010-60

(married couple failed to substantiate virtually all of the business deductions that they claimed for the tax year at issue; advertising expense allowed).


Bozick v. Comr., T.C. Memo. 2010-61

(widow entitled to innocent spouse relief for joint tax liability with deceased spouse because she didn't significantly benefit from unpaid tax liability and husband forced her to sign return). 


Contreras, et ux. v. Comr., T.C. Summ. Op. 2010-35

(taxpayer's, a married couple, entitled to alimony deduction for entire amount of mortgage payments attributable to residence that husband's former spouse owned and occupied during tax year; mortgage payments satisfied requirements of I.R.C. Sec. 71(b)(1)(A)). 


In re Estate of Owen, No. W2009-015310COA-R3-CV, 2010 Tenn. App. LEXIS 222 (Tenn. Ct. App. Mar. 29, 2010)

(will construction case; unambiguous language of will excluded specifically devised real estate from the control of personal representative; real estate not subject to control of estate pending administration). 


IRS Info. 2010-0093 (Mar. 29, 2010)

(home purchased before Nov. 7, 2009 doesn't qualify taxpayer for first-time homebuyer tax credit). 


United States v. Guyton, 372 Fed. Appx. 5 (11th Cir. 2010)

(estate executor liable for decedent's unpaid federal income taxes resulting from decedent' pre-death sale of farm; sale income placed in joint bank account with decedent's son and was not income in respect of decedent; accordingly, sale income properly reported on decedent's final Form 1040 and estate liable for tax).


Iowa Dept. of Rev. Ltr. Rul. 10201017 (Mar. 26, 2010)

(IDOR admits error in denying capital gains deduction claimed on taxpayer's 2006 Iowa return; business assets that are held by the business for more than one year are eligible for the capital gain deduction if the business was held for at least 10 years and the taxpayer satisfied the material participation requirement for those 10 years). 


IRS Info. 2010-0072 (Mar. 25, 2010)

(IRS takes the position, without analysis of I.R.C. Sec. 36(c)(3), that taxpayer does not qualify for first-time homebuyer tax credit upon purchase of home from father's estate, unless the sale is in satisfaction of a pecuniary bequest). 


IRS Info. 2010-0084 (Mar. 24, 2010)

(couple's purchase of home for daughter for daughter not qualified for long-term homeowner credit; purchase occurred before effective date of credit). 


IRS Info. 2010-0153 (Mar. 24, 2010)

(for charitable contributions made by credit card, contributions are deductible in the year that the charge is made regardless of when creditor paid; contributions must be substantiated). 


Wellpoint, Inc. v. Comr., 599 F.3d 641 (7th Cir. 2010)

(plaintiff, insurance company, not entitled to business expense deduction for amounts paid to settle lawsuits and related legal and professional expenses related to cases brought by various state attorney generals after plaintiff had acquired other insurance companies; such amounts were attributable to resolving title to assets and are properly characterized as capital expenditures; Tax Court's decision entitled to deference). 


IRS News Release, IR-2010-35 (Mar. 23, 2010)

(statistics for 2010 filing season show that average refund has increased over 2009 amount by 9.6 percent to an average of $3,036 as a result of taxpayers losing jobs for which withholding has already occurred and new refundable credits for primarily lower income persons as a result of the 2009 spending bill).


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