CORPORATIONS
Court sustains proposed levy action against corporation owing employment tax liabilities
The Tax Court granted an IRS motion for summary judgment and sustained a proposed levy action in collection of $213,460, arising from a corporation’s: (1) employment tax liabilities and related Sec. 6651(a)(1) additions to tax for failure to timely file Forms 941, Employer’s Quarterly Federal Tax Return, Sec. 6651(a)(2) additions to tax for failure to timely pay employment taxes, and Sec. 6656 penalties for failure to timely deposit employment taxes for quarters ending March 31, June 30, and Sept. 30, 2013 (2013 quarters); and (2) Sec. 6651(a)(2) additions to tax for failure to timely pay employment taxes and Sec. 6656 penalties for failure to timely deposit employment taxes for quarters ending Dec. 31, 2016, and March 31, June 30, and Sept. 30, 2017 (2016 and 2017 quarters). The court also held that the IRS settlement officer involved in the case did not abuse her discretion in finding the taxpayer ineligible for a collection alternative. Friendship Creative Printers Inc., T.C. Memo. 2021-19 (2/22/21).
Court upholds deficiency assessed against California corporation selling marijuana
The Tax Court held that a California corporation that sells marijuana and miscellaneous related paraphernalia has only one trade or business when so little money comes in from anything other than sales of marijuana. Noting that the IRS had conceded the penalties assessed against the taxpayer, the court sustained the tax deficiencies against the taxpayer. Desert Organic Solutions, T.C. Memo. 2021-22 (2/22/21).
INDIVIDUALS
American Express rebates are cash equivalents and thus includible in income
The Tax Court held that a married couple had to recognize additional income totaling $35,665 for 2013 and $276,381 for 2014 on the basis of rewards they acquired from American Express equal to 5% of their purchases of prepaid Visa gift cards, debit cards, and money orders because, the court concluded, the rewards are cash equivalents and not goods or services that may be subject to rebates. The court also upheld the IRS’s inclusion in the couple’s income of related payments of Blue Cash Reward Dollars, which are based on a percentage of the dollar amount of the card user’s eligible purchases, for direct purchases of money orders and cash infusions to reloadable debit cards. Anikeev, T.C. Memo. 2021-23 (2/23/21).
Taxpayer who argued wages are not income is liable for penalties for unpaid tax liabilities
The Tax Court held that (1) a taxpayer, who argued that his wages were not taxable income and who had unpaid tax liabilities, was liable for penalties under Sec. 6702 for 2010 and 2011, and (2) the IRS had met the supervisory approval requirements of Sec. 6751(b) for the penalties assessed. However, while rejecting IRS requests for sanctions against the taxpayer, the court held open the possibility that those sanctions could be imposed in the future. Llanos, T.C. Memo. 2021-21 (2/22/21).
Taxpayer’s involvement in preparing joint returns precludes innocent spouse relief
The Tax Court rejected a taxpayer’s request for innocent spouse relief for taxes owed on joint returns filed with her ex-husband prior to their divorce. The court based its decision on the fact that the taxpayer was involved in handling the household expenses and in preparing the joint tax returns for the years at issue and the court did not believe her accusations of spousal abuse. Rogers, T.C. Memo. 2021-20 (2/22/21).
INTERNATIONAL
IRS issues 2021 Sec. 911 housing cost adjustments
The IRS issued the annual Sec. 911 adjustments, which determine housing cost amounts eligible for exclusion or deduction in 2021. The notice is effective for tax years beginning on or after Jan. 1, 2021; however, taxpayers may apply the 2021 adjusted housing limitations contained in Section 3 of the notice to tax years beginning in 2020. Notice 2021-18 (2/26/21).
IRS PROCEDURE
IRS provides tax relief for Texas severe winter storm victims
The IRS announced that Texas victims of winter storms that began Feb. 11, 2021, will now have until June 15, 2021, to file various individual and business tax returns and make tax payments. TX-2021-02 (2/22/21).
OPR announces disciplinary sanctions
The IRS Office of Professional Responsibility (OPR) announced recent disciplinary sanctions involving attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. Announcement 2021-3 (2/22/21).
Court upholds filing of notice of tax lien against delinquent taxpayer
The Tax Court granted summary judgment to the IRS in a Collection Due Process case involving a car salesman, who had underpaid his 2014 federal income tax by approximately $62,000, and upheld the IRS’s filing of a notice of federal tax lien. The court noted that the taxpayer was free to submit to the IRS at any time a collection alternative in the form of an offer in compromise or an installment agreement, supported by the necessary financial information. Galloway, T.C. Memo. 2021-24 (2/24/21).
Business meal deductions after the TCJA
Quirks spurred by COVID-19 tax relief