Amount Paid to Ex-Spouse to Buy Her out of Dental Practice Did Not Increase Taxpayer’s Basis (Steven Matzkin and Sarah Schroeder v. Comm., TCM 2020-117) In January 2003, Steven Matzkin formed, with a partner, Dental Care Alliance, LLC (DCA). When Dr. Matzkin formed DCA, he was married to Georgeann. In May 2008, after more than

Malpractice Award Arising from a Divorce Settlement Was Taxable – Attorney Fees Weren’t Deductible (Carole Holliday v. Comm., TCM 2021-69) Carole Holliday filed a malpractice lawsuit against her divorce attorney. She claimed that her divorce attorney’s representation constituted negligence and gross negligence and that he breached the duty of fair dealing and his fiduciary duties

Charitable Contribution Denied; Substantiation Rules Not Strictly Complied With (Joe Alfred Izen v. Comm., 38 F.4th 459 (5th Cir. 2022)) During an IRS audit of Joe Alfred Izen’s 2012 tax return, Mr. Izen remembered he donated his 50% partnership interest in a vintage airplane to the Houston Aeronautical Heritage Society. He filed a Form 1040X

$3.5 Million Property Charitable Contribution Deductions Denied for Lack of Appraisal (Duane Pankratz v. Comm., TCM 2021-26 (Mar. 4, 2021)) In 2008, Duane Pankratz donated his interests in four oil and gas projects, valued at $2 million, to Missionary Church, Inc. and made a large noncash donation of 5.78 acres for road and utility improvements,

Missing Basis Entry on Form 8283 Means Taxpayer Loses Non-Cash Charity Deduction of $7,949,000 (Oakhill Woods, LLC, Effingham Managers, LLC, Tax Matters Partner v. Comm., TCM 2020-24) Strict substantiation requirements apply. To deduct non-cash contributions in excess of $5,000, the donor must obtain a qualified appraisal of the contributed property, attach a “fully completed” appraisal

Net Investment Income Tax Cannot Be Reduced by Foreign Tax Credits (Paul Young Kim v. US (5:22-cv-00691 (CA-9, Mar. 28, 2023)) Paul Kim is a US citizen who resided in South Korea until Sep. 2015, when he relocated to California. For the taxable year ending December 31, 2015, Mr. Kim timely filed a Form 1040

No Social Security Number Means No Credits (Adam Sowards V. Comm., TCM 2023-99) Adam Sowards and his spouse jointly filed federal income tax returns for the three years at issue. The 2008 return claimed the additional child tax credit (ACTC) with respect to his four children, along with the earned income tax credit (EITC) and

Insolvency Must Be Proved to Exclude CODI (Donald S. Ahaiwe, pro se, v. Comm., TCSO 2023-7) Donald Ahaiwe claimed an exclusion from income for canceled debt related to a credit card. Mr. Ahaiwe argued that he was insolvent at the time the debt was canceled and, therefore, met the requirements of §108(a)(1)(B) for the exclusion.

Alimony Requirement #6: Tax Court Allowed Alimony Paid in Arrears Under Court Order (Jeffrey and Sandra Siegel v. Comm., TCM 2019-11) Jeffrey Siegel was divorced in 2003. He was required to make spousal maintenance payments of $10,110 per month and child support of $5,000 per month. After the divorce, Siegel’s business went into bankruptcy, his

Tax Shelter Promoter Penalties Applied Because Of Faulty Appraisals (James Tarpey v. US, CA-9, Doc. No. 22-35208 (Aug. 17, 2023)) James Tarpey, a lawyer, and businessman, formed Project Philanthropy, Inc. d/b/a/ Donate for a Cause (“DFC”) around 2006. DFC facilitated the donation of timeshares for timeshare owners who no longer wanted to pay timeshare fees

Donation of Appreciated Stock was Assignment of Income (Estate of Scott M. Hoensheid et al. v. Comm., TCM 2023-34) Scott Hoensheid in anticipation of the sale of Commercial Steel Treating Corp. (CSTC), a closely held corporation, contributed 1380 shares of CSTC to Fidelity Charitable Gift Fund (a donor advised fund). Contributing appreciated stock. When a

Non-Cash Donations of More Than $5,000 Require an Appraisal (Duncan Bass v. Comm., TCM 2023-41) Duncan Bass made noncash charitable gifts in 2017 to Goodwill, the Salvation Army, and Lend-A-Hand, which were reported on three Forms 8283 attached to his tax return. According to the Form 8283, the gifts to Goodwill had an appraised fair

Deed Was Not a Proper Contemporary Written Acknowledgement (Kenneth and Anita Brooks v. Comm., TCM 2022-122) On Dec. 15, 2006, the Kenneth and Anita Brooks Family LLC purchased 85 acres of real property known as Cotton Row Farm in Liberty County, Georgia, for $1,350,000. On the same day, the LLC subdivided the property into two

Contemporaneous Receipt Did Not Include “No Goods and Services” Statement So No Charitable Deduction Allowed (Martha Albrecht v. Comm., TCM 2022-53) Martha Albrecht and her late husband acquired a large collection of Native American jewelry and artifacts during their marriage. In December 2014, Ms. Albrecht donated 120 items from this collection to the Wheelwright Museum

“Reasonable Cause” for Omitted Basis on Form 8283 Saves the Deduction (Wendell H. Murphy, Jr., and Wendy Murphy v. Comm., TCM 2023-72) Wendell and Wendy Murphy, through Duplin Land Development Inc., an S corporation, owned two tracts of land, which they developed into a 1,500-lot residential community with two 18-hole golf courses, a clubhouse, a

Widow Can’t Use Deceased Husband’s AMT Credits (Nadine Vichich v. Comm., 146 TC No. 12) Before his marriage to Nadine Vichich, William Vichich exercised incentive stock options that resulted in AMT liability, which he reported on a 1998 tax return filed jointly with his first wife, Marla. Payment of the AMT liability in 1998 generated

Unsigned Return Was Still a Valid Married Filing Joint Return (Lindsey Jones v. Comm., CA-9, 2022-1 USTC §50,111 (Feb. 3, 2022)) The Ninth Circuit Court of Appeals found that the Tax Court did not err by concluding that Lindsey Jones tacitly consented to the filing of a joint return. A joint tax return signed by