Presented below is a roundup of significant tax cases from the last few weeks.
- Balocco v. Commissioner, T.C. Memo. 2018-108 (July 9, 2018): Judge Kerrigan found that personal aircraft maintenance expenses incurred by a “property flipper” were: (1) not ordinary or necessary expenses; and (2) were not properly substantiated by the taxpayer.
- Archer v. Commissioner, T.C. Memo. 2018-111 (July 16, 2018): Judge Cohen reaffirmed the requirement for taxpayers to substantiate their expenses pursuant to Code section 6001. Archer engaged in unrelated marketing and construction operations, but failed to adequately document his transactions, offering only oral testimony and handwritten notes as substantiation, which the Court deemed insufficient.
Federal District Court:
- United States v. Durham, No. 4:18-MC-00137 JAR (E.D. Mo. July 9, 2018): Judge Ross ordered the taxpayer to answer certain questions, finding that a prior affidavit submitted by the taxpayer to the IRS effectively waived the taxpayer’s Fifth Amendment right against self-incrimination. The waiver was subject matter specific, so the taxpayer’s Fifth Amendment rights persisted for questions unrelated to the affidavit.
- United States v. Arora, 1:17-cv-00584-SWS-MLC, 2018 BL 251732 (D.N.M. July 16, 2018): The IRS relied on the deliberative process privilege to withhold two memoranda discussing the imposition of penalties from the affected taxpayer. The court concluded that the penalty determination was an application of agency policy and the agency’s deliberative process in formulating the decision are protected.
- Whitsitt v. Cato IRS Agent, et al., No. 2:17-cv-1818-EFB PS (E.D. Cal. July 19, 2018): A “Tax Avoider” could not enjoin the IRS from the collection of taxes due to a lack of subject matter jurisdiction under the Anti-Injunction Act for claims that would restrain the collection of taxes.
- Coggin v. United States, No. 1:16-CV-106 (M.D.N.C. July 17, 2018): A spouse was barred from filing untimely separate returns to reverse timely filed joint returns even though the spouse did not sign the original joint returns. The court found that the undisputed facts indicate the spouse intended to file joint returns, and is therefore barred from revoking an otherwise valid joint return to pay a lesser amount of tax on separate returns filed years later.