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A Year Of Lessons From The Tax Court (2022)
By Bryan Camp
Here is a chronological listing of all the Lessons From The Tax Court I posted in 2022, with links to the Lesson, the primary case discussed, and its author. I have also listed the primary Code sections mentioned or discussed in the Lesson. At the end of the chronological listing, you will find a table listing the posts by which Tax Court Judge authored the Court's opinion.
January 18: The Tacit Consent Rule, Om P. Soni and Anjali Soni v. Commissioner, T.C. Memo. 2021-137 (Dec. 1, 2021) (Judge Copeland) — §6013, §223, §51(b), §301(d), §6061(b), §6651, §6662
February 7: The Innocence Requirement In § 6015(c) Proportional Relief, Tara K. Tobin (Petitioner) and Jeffrey Tobin (Intervenor) v. Commissioner, T.C. Summ. Op. 2021-36 (Nov. 16, 2021) (Judge Guy) — §6015(c)
February 14: The Proper Baseline For Offers In Compromise, Edmund Gerald Flynn v. Commissioner, T.C. Memo. 2022-5 (Feb. 3, 2022) (Judge Urda) — §7122
February 22: The Tax Liabilities You Leave Behind, Estate of Anthony K. Washington v. Commissioner, T.C. Memo. 2022-4 (Feb. 2, 2022) (Judge Toro) — §6323
December 19, 2022 in Bryan Camp, Miscellaneous, Tax, Tax News, Tax Practice And Procedure, Tax Scholarship | Permalink
Lesson From The Tax Court: Taxpayers Behaving Badly 2022
This will be my last new post until January. Next Monday, December 19, my annual Year Of Lessons From The Tax Court will appear in this space. It is a chronological listing of all the Lessons I posted in 2022, with links to each Lesson, the primary case discussed, and the judge who wrote the opinion. You can find last year's edition here.
I will be spending my days (except for Christmas Day) grading exams. Grades are due Monday, January 2 and then I resume teaching on January 11, so you will not likely see my next Lesson From The Tax Court until January 23 (the week after the MLK holiday).
As is now customary, my last new blog of the year is a list of some of the cases I read during the year where something in the facts made me just shake my head (SMH in texting parlance). You can find the previous lists here (for 2018), here (for 2019), here (for 2020), and here (for 2021). This year I have five to share with you. I present them in chronological order. I invite you to consider which of them may be examples of just an empty head and which are examples of something worse.
And again this year I am giving out a Norm Peterson Award. You will find more explanation below the fold.
December 12, 2022 in Bryan Camp, New Cases, Tax, Tax News, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: It's Not Income If You Pay It Back In Time
We all know that taxpayers do not have to report loans as income. But it's not clear why. It has something to do with the obligation to repay. It might be the obligation to repay burdens other assets so the loan does not represent an actual increase in wealth. Or it might be the obligation to repay creates an open transaction that crosses tax years and, for good administrative reasons, we simply presume the loan amount will be repaid in full. For more details, see Lesson From The Tax Court: The Phantom Of The Tax Code—Discharge Of Indebtedness, TaxProf Blog (Feb. 19, 2018).
But what about when a taxpayer simply receives a payment that is not a loan, but appears to be a payment the taxpayer has a right to keep? When it later turns out to be erroneous, and the taxpayer repays it, was it even income to start with? Today we learn that if repayment of an erroneous distribution occurs in the same tax year as the distribution, there is no income to report. That was good news for the taxpayers in Elijah Servance and Corliss Severance v. Commissioner, T.C. Summ. Op. 2022-23 (Nov. 21, 2022) (Judge Copeland), who received disability payments from Hartford Life Insurance Co. that they repaid in the same year. The IRS said the payments were income. The Tax Court held for the taxpayers. Sure, the taxpayer lost the other, bigger, issue in the case—the one that got the Tax Analyst Headline of "Couple Could Not Exclude Retirement Benefits From Income." But this smaller issue about their disability insurance payments gives us two great lessons: one in tax law and one in tax procedure. Details below the fold.
December 5, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: An Object Lesson For Tax Professionals
It is not always easy to follow the advice you give others. A common question I get is "how long should I keep my tax records?" My somewhat snarky reply is "as long as you need to." The response is not entirely snarky because even though each tax year stands alone, events that occur in one year might have tax repercussions many, many years later.
In Betty Amos v. Commissioner, T.C. Memo. 2022-109 (Nov. 10, 2022) (Judge Urda), the taxpayer failed to keep records as long as she needed to is. It is an object lesson for all of us. Ms. Amos was a highly successful tax practitioner, a CPA, who had decades of high-level business experience. On her 2014 and 2015 returns she reported about $100,000 of IRA income against which she claimed over $4 million of net operating losses (NOLs) that dated back to 1999. While she could produce her 1999 tax returns showing the NOLs, she could not produce the underlying records substantiating what she had then reported, causing Judge Urda to write "It beggars belief that she would be unaware...[of] her responsibility to demonstrate her entitlement to the deductions she claimed." Op. at 11. Details below the fold.
November 14, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (7)
Lesson From The Tax Court: The Impact Of De Novo Review In Spousal Relief Cases
I don't just inflict misery on tax students. I also teach a class in Civil Procedure to first year law students. One recurring lesson there concerns the different standards courts of appeals use when reviewing trial court decisions. I want my students to learn to that the applicable standard of review matters. It not only makes a huge difference in the outcome of the current case, but it also can make a huge difference in the precedential effect of that case on later cases.
We learn today how the different standards of review affect both outcomes and precedential value of old spousal relief cases. We also learn how the Tax Court might be induced to finesse the bastardized administrative record rule in §6015(e)(7). In Pia O. Bacigalupi v. Commissioner, Docket No. 20480-21 (Order of Oct. 27, 2022) (Judge Holmes), the IRS Office of Appeals decided Ms. Baciglupi should be held to the joint liability she had agreed to bear when she signed the joint returns. They were unmoved by her present circumstances and denied her request for §6015(f) equitable relief. Despite the record review rule, Judge Holmes allowed her to testify, and on the basis of that testimony disagreed with the IRS about two crucial factors for spousal relief. Under an abuse of discretion review, that disagreement would not have mattered but under the de novo review, it made all the difference. The de novo review standard also allowed Judge Holmes to ignore certain precedents unfavorable to Ms. Baciglupi. Notice, however, this is just an unpublished bench opinion, so don't get too excited. For more about that, I recommend Keith Fogg's excellent post from last week on bench opinions in general and this case in particular. Meanwhile, you will find today's lesson in more detail below the fold.
November 7, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: Fake It Till You Make It
Today's lesson is how to win a valuation dispute with the IRS. I don't teach much about valuation in my basic tax course. When we work problems involving property, the problems generally tell students to assume a certain fair market value (FMV) for the property. For example, when I teach the deductions allowed by §170 for contributions of property to a charity, what I want students to learn is the reduce-to-basis rule. To work that particular rule, those problems just assert an FMV because I'm trying to get them to focus on what kind of property is being donated and to what kind of charity. See e.g. last week's lesson "The Reduce-To-Basis Rule For §170 Deductions," TaxProf Blog (Oct. 17, 2022).
I tell students that in real life, valuation is often open to dispute. That is because facts matter. And facts may often be disputed. Moreover, assumptions matter as well. And assumptions may often be questioned.
This week, we learn a great lesson from the Tax Court on how to win a valuation dispute against the IRS: have a better expert. While that is easy to say, the 43-page opinion in Champions Retreat Golf Founders LLC et al. v. Commissioner, T.C. Memo. 2022-106 (Oct. 17, 2022) (Judge Pugh), teaches how it is not always easy to do. Today's case involves the valuation of a conservation easement. The taxpayer's expert was not the best, but the IRS's expert was worse. So the taxpayer won. The lesson is kind of like the old joke that you don't have to outrun the bear: a taxpayer's valuation does not have to be the best possible; it just has to be better than the IRS' valuation. Details below the fold.
October 24, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (3)
Lesson From The Tax Court: The Reduce-To-Basis Rule For §170 Deductions
Basis is probably the most important concept I teach in my intro income tax course. I like thinking of basis as the tax history of a piece of property. It tracks what ought not to be taxed upon eventual sale or exchange of that property under the calculations required by §1001. But a proper understanding and tracking of basis can also be important for other reasons, such as determining the amount of a §165 loss ... or calculating the amount of a §170 deduction for charitable donations.
Donald Furrer and Rita Furrer v. Commissioner, T.C. Memo. 2022-100 (Sept. 28, 2022) (Judge Lauber), teaches a lesson on the importance of basis in determining the amount of a §170 deduction for the donation of property to charity. We also learn a cautionary lesson on the use and mis-use of Charitable Remainder Annuity Trusts (CRATs). The taxpayers here were farmers who donated crops to a CRAT and then attempted to claim a §170 deduction based on the fair market value of the donated crops. That ran afoul of the reduce-to-basis rule. Details below the fold.
Lesson From The Tax Court: Know Your TMP
In my now 22 years of teaching tax, I have assiduously avoided teaching partnership taxation. With any luck, I'll never have to. Inside and outside basis still confuse the heck outta me. But I do teach tax procedure, so I've been forced over the years to learn something about the rules governing audits of partnerships.
If there is one stand-out lesson I've learned, it's the one Judge Buch teaches us in Trevor R. Pettennude v. Commissioner, T.C. Memo. 2022-79 (July 18, 2022): individual partners are often at the mercy of their Tax Matter Partner (TMP) when it comes to participating in partnership-level determinations. The burden is on each partner to know their TMP, and to ensure they are in the loop on important partnership matters. That may even more true post-TEFRA. In today's case, Mr. Pettennude was a tiny partner in a large coal tax credit shelter partnership. The IRS caught on and audited the partnership. No one told Mr. Pettennude about either the audit or its results (not happy ones) until the IRS told him he owed about $850,000 in additional taxes. He tried to contest that in a CDP hearing. It did not go well. Details below the fold.
Lesson From The Tax Court: Don't Confuse Dummy Returns With Substitutes For Returns
The act of filing a return is central to tax administration. Section 6011 sets out the general requirement: "any person made liable for any tax imposed by this title" must file a return "according to the forms and regulations prescribed by the Secretary." Section 6012 gets more granular and gives more specific requirements and exemptions from filing.
When a taxpayer fails to file a return, even after being reminded to do so, the IRS can simply send the taxpayer a Notice of Deficiency (NOD), and let the taxpayer either agree to the proposed tax liability or petition Tax Court. Or the IRS can follow the §6020 Substitute For Return (SFR) process whereby it creates a return for the taxpayer either with or without the taxpayer's cooperation.
Regardless of how the IRS deals with the non-filer, an IRS employee first needs to create an account in the computer system for the relevant tax period. They do that by inputting the proper Transaction Code and preparing what is called a "dummy return" to support it. But there is one important difference between dummy returns used to set up the NOD process and dummy returns used to set up the SFR process: the §6651(a)(2) failure to pay penalties only apply to the failure to pay taxes shown on a "return." Thus, the penalties do not apply to bare NODs. They do apply to SFRs. That's why today's lesson is useful.
In William T. Ashford v. Commissioner, T.C. Memo. 2022-101 (Sept. 29, 2022) (Judge Vasquez), we learn what to look for in the IRS files to see whether a dummy return used by the IRS leads to a proper SFR or not. We also learn why you cannot always trust the advice you see on the IRS website. Details below the fold.
October 3, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (4)
Lesson From The Tax Court: Checks ... Still Matter
Who uses paper checks anymore? Not my kids. My daughter even prefers to incur a surcharge for using her debit card to pay her rent rather than walking a paper check to the rental office. The practical reason, she says, is that when she uses her debit card she can immediately see the impact on her checking account balance by looking at her "available balance" number in her banking app. If she wrote a check, she'd have to wait until the check cleared and she fears over-drawing her account.
That delay—between the time a person writes and check and the time it gets reflected in their checking account—is what gives us our lesson in Estate of William E. Demuth Jr. et al. v. Commissioner, T.C. Memo. 2022-72 (July 12, 2022 )(Judge Jones). In that case the issue was the value of an investment account on the date of the decedent's death. On that date there were 10 checks totaling $436,000 that had been written on the account but had not cleared. The Executor did not include that amount on the Form 706 because the recipients of the checks had deposited them before the decedent died. Their accounts had been credited. They had been paid. Or so thought the Executor. The IRS, however, thought that the checks had not been paid because they had not cleared the decedent's bank. So the money still belonged to the taxpayer and should have been included in the valuation of his Estate.
In (mostly) agreeing with the IRS, Judge Jones gives us a useful lesson on basic commercial law principles. Maybe my kids won't care, but enough folks still use checks that it's a lesson worth remembering. Details below the fold.
September 19, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (8)
Lesson From The Tax Court: The Finality Of Closing Agreements
Section 7121 authorizes the IRS to enter into "an agreement in writing" with taxpayers "in respect of any internal revenue tax for any taxable period." Such agreements are called "Closing Agreements." As implied by that name, the big idea here is that such agreements are meant to "close" a particular tax issue or a particular tax year or years. Accordingly, the general rule is that such agreements are final: they "close" the ability of either the IRS or the taxpayer to later assert a different position with respect to the matters covered in the Closing Agreement.
In Cory H. Smith v. Commissioner, 159 T.C. No. 3 (Aug. 25, 2022) (Judge Toro), the Tax Court teaches a lesson on that finality rule. There, the taxpayer had signed a Closing Agreement for multiple years promising not to claim the §911 exclusion for foreign earned income. He then reneged by filing amended returns (for some years) and original returns (for other years), breaking that promise. Even though the opinion is a 43-page precedential opinion, the lesson is relatively simple: Closing Agreements are final; one must be very careful when signing one because final means final.
What is also interesting (at least to me) is why the Tax Court may have taken extra effort to hammer on the finality rule and issue this opinion as a T.C. opinion. It seems Mr. Smith did not act alone. He appears to have received some dubious advice from his tax return preparer, an Enrolled Agent (EA) who awkwardly styles himself as "Dr." Castro. Op. at 16, note 20. That EA seems to have also given the same bum advice to a bunch of other taxpayers. The Court notes that "at least 19 other cases pending in our Court involve the same issue as the one presented here." Op. at 11, note 14. So making this first-out opinion a precedential opinion should help to efficiently dispose of all the rest. The Court makes the effort to note that all 19 of the other cases involve this same EA. This leads to some thoughts about potential §6694 penalties.
Details below the fold.
Lesson From The Tax Court: The Law Of Unintended Consequences
To say the Internal Revenue Code is complex is like saying a virus is hard to see. It understates the obvious. NSS. Today the Tax Court teaches us one consequence of that complexity: the meaning and scope of one statute (§6103) can be altered by the later addition of another statute (§7623(b)). The former is the statute that requires the IRS to keep taxpayer information confidential. The latter is the statute that allows whistleblowers to obtain Tax Court review of a denial of a whistleblower award.
In Whistleblower 972-17W v. Commissioner, 159 T.C. No. 1 (July 13, 2022) (Judge Toro), the Court said the IRS had to give a whistleblower the unredacted returns and return information of three taxpayers that the whistleblower informed on. Folks, this is a reviewed opinion and all 15 of the reviewing judges agreed with Judge Toro's decision (one judge did not participate). While the decision is rational, its conclusion is certainly not a slam dunk. IMHO it misses the forest for the trees, resting on a curious presumption about the statutory text in 6103. Whether or not readers agree with that, we can all agree this case illustrates how a later statute may give new meaning to the words in an older statute. That is an inherent difficulty in interpreting statutory language that is part of such a wickedly complex Code.
Trigger warning: today's post runs a bit longer than normal. So the refresh rate will likely bother those who click through. I am so sorry for that! But this lesson is really just so cool that I hope you will persevere.
August 29, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)
Lesson From The Tax Court: Taxpayer Could Not Prove His Way Out Of §162(f)
The basic rule is simple: the taxpayer bears the burden of proof. That is, all income is gross income unless the taxpayer proves a statutory entitlement to an exclusion; and no expenditure is deductible unless the taxpayer proves a statutory entitlement to a deduction.
Complexity comes in the statutes that allow exclusions and deductions. But the basic burden does not change: it is ultimately the taxpayer who must persuade either the IRS or the Tax Court of their entitlement to the exclusion or deduction claimed.
Clement Ziroli and Dawn M. Ziroli v. Commissioner, T.C. Memo. 2022-75 (July 14, 2022) (Judge Nega), shows us how the burden of persuasion applies in the complexity of a deduction statute. There, the taxpayer sought to deduct an expenditure that was allowed by §162(a) but might or might not be disallowed by the §162(f) prohibition of deductions for penalties. The taxpayer was unable to persuade the Tax Court that the expenditure was not a penalty. He could not prove the negative. Hence, no deduction.
The lesson relates back to the idea we looked at last week: the ambiguity of penalties. Here, that ambiguity worked against the taxpayer because of the burden of persuasion. Details below the fold.
August 15, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (5)
Lesson From The Tax Court: Non-Receipt of 1099 Does Not Get You Out of Penalties
When we think of penalties we naturally think of punishment. I mean, to channel Steven Wright, if a penalty is not punishment when why does the word start with "penal"? Both this week and next week's lesson teach us how penalties serve other purposes as well. Today, in Lionel E. Larochelle and Molly B. Larochelle v. Commissioner, T.C. Summ. Op. 2022-12 (July 12) (Judge Leyden), we learn why non-receipt of a Form 1099 does not constitute reasonable cause to escape the §6662(a) penalty for making a substantial understatement of tax. Next week we will look at whether a court-ordered disgorgement of illegal gains is a penalty for purposes of a §162(f) prohibition on deductions for governmental fines or penalties. Today's short lesson awaits below the fold.
August 8, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Lesson From The Tax Court: Excise Tax On Messed Up IRA Rollover Different From Income Tax
The tax laws are conflicted. They encourage retirement savings by permitting taxpayers to deduct contributions to their Individual Retirement Accounts (IRA's). But that encouragement is hedged by various restrictions and caps as well as a special excise tax imposed on contributions that exceed the applicable caps. And Congress crosses its fingers if taxpayers take early distributions. Those can result in penalties as well as inclusion in gross income. However, Congress uncrosses those fingers if the early distributions are properly rolled into another IRA.
Given these various statutory hedges and crossed-fingers, it's no wonder that navigating the tax rules for retirement accounts is tricky! Particularly tricky are managing rollovers from one type of retirement plan to another. Mistakes there can have both income tax consequences and excise tax consequences. Thus, we must always keep straight the difference between different types of taxes, just like we saw in last week's lesson.
This week, we learn how excise tax consequences are different than income tax consequences of a messed up IRA rollover. In Clair R. Couturier, Jr. v. Commissioner, T.C. Memo. 2022-69 (July 6, 2022) (Judge Lauber), the taxpayer escaped a huge income tax liability for messing up some of the rollover rules because the limitation period for assessment had run, but got snagged for a $8.5 million excise tax for excess IRA contributions. Yeah, we're talking a lot of money here, putting enough at risk for the taxpayer to hire one of the best tax lawyers in the country to represent him. Alas, even Lavar Taylor could not pull him out of the $8.5 million hole. He tried to argue that the IRS was bound by the income tax characterization of the transaction. The Court rejected that argument because...an excise tax is not an income tax. Details below the fold.
Lesson From The Tax Court: No §6015 Equitable Relief For §6672 Penalties
The Internal Revenue Code is full of taxes and penalties. Oh my, so many taxes and penalties! You must always stay aware of which kinds of taxes or penalties are at issue in order to know what rules of law apply. This week and next week will give us two lessons on the importance in keeping straight the different kinds of taxes and penalties.
In Angela M. Chavis, 158 T.C. No. 8 (June 15, 2022) (Judge Lauber), the taxpayer was seeking spousal relief under §6015(f) from Trust Fund Recovery Penalties assessed per §6672 against her and her then-husband. The liability for §6672 penalties is joint and several. And, if you squint, the text of §6015(f) appears to allow relief from any joint and several liability. Today we learn not to squint. Section 6015(f) provides relief only from joint liability for income taxes. Trust Fund Recovery Penalties are not income taxes. So no spousal relief for §6672 penalties. You will find a bit more (but not much) below the fold. It's a short lesson for a hot summer day.
July 25, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Lesson From The Tax Court: The Difference Between Rejecting An OIC And Reviewing A Rejection
Tax collection is a process, not an event. The process can last ten years or more. During that time many different events may occur. Different events may bring with them different decision-makers within the IRS. The secret sauce of representing clients is that when you hit an unfavorable decision-maker, try to find a new one. An example of that is getting a CDP hearing. CDP hearings allow taxpayers to pause collection while they ask for alternatives to full collection, such as Offers In Compromise (OICs). The CDP hearing is conducted by a Settlement Officer (SO) in the IRS Independent Office of Appeals (Appeals).
Thus, the SO represents a new layer of decision-making. But what do you get with this new decision-maker? Today's lesson teaches that you may not get what you think.
Michael D. Brown v. Commissioner, 158 T.C. No. 9 (June 23, 2022) (Judge Lauber), address what I think is a common misconception about CDP hearings: that Appeals makes decisions about collection alternatives. It does not. It reviews decisions made by the relevant IRS function. At issue in Brown was whether the IRS waited more than two years to reject his OIC, which was proposed as part of a CDP hearing. If so, then his low-ball OIC would be deemed accepted under §7122(f). Although the IRS unit that evaluated his OIC rejected it after a few months, the formal Appeals decision in the CDP hearing came more than two years later. Mr. Brown went to Tax Court, claiming the benefit of §7122(f). The Tax Court said no. Appeals did not reject the OIC; all it was doing was reviewing the rejection decision made by the IRS.
This was not a slam dunk win for the IRS. I think it's worth your time to see why. Details below the fold.
July 18, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: TP Did Not File Return By Giving Copy To IRS Employee
Figuring out when or whether a taxpayer has filed a return is important for many reasons. On the one hand, proper filing limits the time for the IRS to assess. Thus taxpayers generally want the courts to find they have filed. On the other hand, filing a frivolous or fraudulent return can lead to penalties. In those situations, taxpayers want the courts to find they have not filed!
Sometimes a taxpayer will give an IRS employee a copy of a return they claim was previously filed. Does that constitute the filing of a return? Well, it depends. Just like last week, I think it useful to compare the Tax Court and Circuit Court cases.
In a logic-challenged opinion, the Ninth Circuit recently decided giving a copy did constitute filing a return ... for for statute of limitations purposes. See Seaview Trading, LLC v. Commissioner, 447 F.3d 706 (9th Cir. 2022), rev'g T.C. Memo. 2019-122. While I agree with the dissenting judge that "the majority's analysis and conclusions are logically absurd and should not be the holding of this court," there is no denying the decision was good news for taxpayers.
Now comes the Tax Court and in Chule Rain Walker v. Commissioner, T.C. Memo. 2022-63 (June 15, 2022), Judge Nega decides that giving an IRS employee a copy of a frivolous return does not constitute filing a return ... for frivolous penalty purposes!
Win-win for taxpayers? As usual, the devil is in the details, which you can find below the fold.
Lesson From The Tax Court: A Reasonable Basis For Deducting Scrubs?
My students—especially those with accounting backgrounds—come to class expecting that tax law is all about bright line rules and lots of calculations. They are either disappointed, frustrated, or relieved to find that tax law is like other law: it's words, words that are generally complex, often opaque, and frequently mysterious. That's why taxpayers need competent tax practitioners to advise them!
Some tax practitioners are more aggressive and some are more cautious. Today's lesson is for the more aggressive ones. In Raul Romana and Maria Corazon Romana v. Commissioner, T.C. Sum. Op. 2022-9 (June 16, 2022), Judge Carluzzo generously allowed a taxpayer to deduct the cost of a her "scrublike clothing."
Those of us who are more cautious will disregard this decision. It's an outlier and, no, I certainly would not advise my client to start deducting the cost of this type of clothing! At the same time, however, the opinion may well provide aggressive taxpayers and their advisors protections from penalties if and when they try this trick at home. The substantive tax lesson is short and sweet. The penalty lesson is more complex, opaque, and mysterious.
June 27, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)
Lesson From The Tax Court: Ask The Right Court
It's sweet to beat the tax man. It's even sweeter when you can make the government pay your litigation costs and attorneys fees under §7430. But the bitter lesson for today is that you must be careful to ask the right court. Law is hierarchical. You can appeal a lower court's adverse decision to a higher court. But you cannot appeal a higher court's adverse decision to a lower court!
In Celia Mazzei v. Commissioner, T.C. Memo. 2022-43 (May 2, 2022) (Judge Thornton), the taxpayer asked the wrong court for attorneys fees and because of that had nowhere to go when the court denied fees. Ms. Mazzei had fought the IRS for over 10 years, losing in Tax Court in a reviewed opinion in 2018. Undaunted, she appealed to the Ninth Circuit. She won! Yay! Her attorneys then filed a "protective" motion with the Ninth Circuit for both her appellate litigation costs (about $70,000) and her trial court litigation costs (some $330,000). The government argued that its litigating position was substantially justified.
The Ninth Circuit's response was disappointingly succinct: "denied." Undaunted, Ms. Mazzei's attorneys then asked the Tax Court for the $330,000 in trial court litigation costs. The government opposed the motion for the same reason it gave the Ninth Circuit. Judge Thornton, however, rejected the §7430 request for a different reason. He ruled that the Ninth Circuit's single word left the Tax Court powerless to act on the request. Appeals go up the hierarchy, not down. The taxpayer had asked the wrong court. Details below the fold.
June 13, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: Taxpayer Held To His Word(s) Regarding Alimony
Congress eliminated the deduction for alimony in the December 2017 Reconciliation Act (informally called the Tax Cuts and Jobs Act, or TCJA). The concept is still important, however. First, the legislation grandfathered in alimony payments made pursuant to divorce or separation instruments executed on or before December 31, 2018. So the question of whether a payment qualifies as alimony will thus still be important for many taxpayers for years to come. Second, the definition continues to play an important role in analyzing the support requirements for dependents. See §152(d)(5).
Determining whether payments constitute alimony is not always easy and errors can lead to §6662 penalties for careless taxpayers and their advisors. Jihad Y. Ibrahim v. Commissioner, T.C. Summ. Op. 2022-7 (May 16, 2022) (Judge Weiler), teaches us the importance of the words used in divorce instruments. There, Dr. Ibrahim sought to deduct $50,000 in payments to his ex-wife. He called them as alimony on his return. But the marital separation agreement and the divorce decree did not call them that. The IRS disallowed the deduction as contrary to the plain language in the divorce decree. Despite Dr. Ibrahim's ingenious arguments, the Tax Court agreed with the IRS and held the taxpayer to his word(s). Details below the fold.
June 6, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)
Lesson From The Tax Court: The Sharp Corners Of The §170 Substantiation Requirements
The sainted Justice Holmes once wrote: "Men must turn square corners when they deal with the Government." It is no accident that Justice Holmes wrote that in a tax case. Rock Island R.R. v. United States, 254 U.S. 141, 143 (1920). Of all the corners in all the laws governing citizen interaction with government, tax laws contain some of the squarest. This is a lesson we've seen before. See Lesson From The Tax Court: The Structure Of Substantiation Requirements of §170, TaxProf Blog (Sept. 24, 2018). But I think it's a lesson worth repeating: the substantiation rules in §170 contain some very sharp corners. The lesson is important for high-end donations such as the one in today's case. And it is not just a lesson for taxpayers, but also for charities.
In Martha L. Albrecht v. Commissioner, T.C. Memo. 2022-53 (May 25, 2022) (Judge Greaves), the taxpayer made a very large donation to a museum and claimed a §170 charitable donation deduction on her return. The IRS said that the 5-page document memorializing the gift did not meet the statutory substantiation requirements for such a gift. The Tax Court agreed. Thus, no §170 deduction. Details below the fold.
May 31, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: Counting The Days
Most people know that the IRS generally has three years to audit a return. Calculating the proper three-year period, however, requires close attention to both the start date and the end date. You need to count those days properly. I tried to drill into my students the practice of always consulting a calendar when attempting to calculate the proper dates. Christian Renee Evert v. Commissioner, T.C. Memo. 2022-48 (May 9, 2022) (Judge Marshall), reinforces that teaching: to calculate the period in which the IRS can assess a tax, you need to properly count the days in the three year period.
Lesson From The Tax Court: Avoiding The 2-Year Lookback Period In Bankruptcy
Today's lesson is about how to maximize the discharge of tax liabilities through bankruptcy. It's a lesson on timing. Last year I blogged two cases showing how a bankruptcy tolls both the collection and assessment limitation periods in the Tax Code. See Lesson From The Tax Court: For Whom The Bankruptcy Tolls, TaxProf Blog (July 19, 2021). Today's lesson is the flip side: we learn how taxpayers who want to discharge old tax liabilities through bankruptcy need to be careful about how the two-year lookback exception to discharge may be tolled by provisions in the Tax Code.
I offer today's lesson in honor of Bob Pope, who died on April 29th. Bob was one of those remarkable attorneys who could navigate the complex interplay of bankruptcy and tax law. He was one of the founders of the Tax Collections, Bankruptcy and Workouts Committee in the ABA Section of Taxation, along with Paul Asofsky, Fran Sheehy, Ken Weil, and Mark Wallace. He will be missed.
Bob would appreciate today's lesson. In Robert J. Norberg and Debra L. Norberg v. Commissioner, T. C. Memo 2022-30 (Apr. 5, 2022) (Judge Lauber), the taxpayers filed their 2016 return in February 2019 without paying the tax they reported due. When the IRS started collection, the Norbergs asked for a CDP hearing. When they got to Tax Court in September 2020 they filed a bankruptcy petition, hoping to wipe out the liability. They failed because they mis-timed their bankruptcy petition. An irony is that these taxpayers could have likely gotten their desired discharge if they had ignored the siren song of CDP. Bob could have taught them that. And, if you click below the fold, you too can learn this lesson on how to maximize the discharge of tax liabilities in bankruptcy.
May 9, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (3)
Lesson From The Tax Court: Distinguishing Employees From Independent Contractors
Pro Publica has proudly proclaimed that "If You're Getting a W-2, You're a Sucker." I know lots of workers who would strongly disagree. For them, being a W-2 worker (a/k/a "employee") is far more beneficial than their realistic alternative, which is being a 1099 worker (a/k/a "independent contractor"). The Pro-Publica story was channeling this Brookings Institution study which noted how business owners can often hide their income but workers cannot because their employers rat them out with W-2s.
But most workers have no realistic choice. Just ask your next Uber or Lyft driver. For them, as for many others in various industries—from child-care to health-care to landscaping and construction—the choice is not whether or not to hide income. Their choice is only whether their income gets reported to the IRS on a Form W-2 or a Form 1099. The upside of being an employee is lower employment taxes and eligibility for unemployment benefits. The potential downside is no §199A and no ability to deduct unreimbursed job expenses, given the current nastiness codified in §67(g).
And the choice of status is often on the employer. Employers must decide whether and when to treat their workers as employees or as independent contractors. Today's lesson shows how they might be on the hook if they make the wrong classification. Pediatric Impressions Home Health, Inc. v. Commissioner, T.C. Memo. 2022-35 (Apr. 12, 2022) (Judge Greaves), teaches us how Tax Court distinguishes employees from independent contracts. It also shows us a potential safe harbor that employers can use to escape the unpaid obligations if it turns out they erroneously classified employees as independent contractors. Details below the fold.
Lesson From The Tax Court: What's Excluded From The §132 Exclusion?
Tax Day is here! And what better way to observe the day than a lesson on §132, a lesson that evokes the ghost of Dan Rostenkowski, whose curmudgeonly visage appears to the right. For those who don't know, Rostenkowski was the chairman of the House Ways and Means Committee from 1981 until 1994 when, in the great tradition of Illinois politicians, he was indicted on various counts of fraud, eventually pleading guilty to mail fraud. Yes, political corruption in Illinois actually has its own Wikipedia entry.
During his time as head of the House tax writing committee, Rostenkowski oversaw multiple major legislative changes. Perhaps his crowning glory was his role in the 1986 Tax Reform Act, which has long been viewed as a triumph (however short-lived) of sound tax reform.
Today's lesson has its genesis in the earlier Deficit Reduction Act of 1984, PL 98-369, 98 Stat. 494. There, Congress wrote a new §132 to exclude from gross income a long list of traditional employee fringe benefits. In Douglas Mihalik and Wendy J. Mihalik v. Commissioner, T.C. Memo. 2022-36 (Apr. 13, 2022) (Judge Gustafson), Mr. Mihalik received free airline tickets for himself and members of his family. He sought the exclusionary shelter of §132. While §132 is very broadly written to cover various family members of an employee, Judge Gustafson teaches us how some family members are excluded from the exclusion. Details below the fold.
April 18, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: 50 Ways To Lose Your Interest Abatement Request
Obtaining an abatement of interest reminds me of Paul Simon's song 50 Ways to Leave Your Lover. Sure, the "50 ways" in the song title is misleading. By my count, Simon gives us only four. And some are singularly unhelpful for real life advice. I mean, "make a new plan, Stan"? Really? But the hyperbole does it's job: it draws attention to idea there are the multiple ways to break off a relationship.
My Lesson title is also hyperbolic, but serves the same purpose. When a taxpayer wants the IRS to abate interest charges, there are lots of ways to lose. Jeremy Edwin Porter v. Commissioner, T.C. Memo 2022-23 (March 28, 2022)(Judge Greaves) gives us a nice review of some of them. There, the hapless taxpayer was trying to get interest abated for, among other periods, a 34 month period where the Tax Court did not rule on pending discovery motions. The Court sustained the IRS rejection of the abatement request because, even if the delay was unreasonable, and even if it was not attributable to Mr. Porter, it was caused by the Tax Court, not the IRS. Ouch.
This gives us a good excuse to review the many ways the IRS can reject an interest abatement request. And perhaps learn how to be a diligent litigant so as to keep your client's case moving along during Tax Court litigation. I hope today's lesson is more helpful than Simon's song. At least it won't be an earworm. Details below the fold.
Lesson From The Tax Court: Penalty Approval In Conservation Easement Cases
The §6751(b) supervisory approval requirement for penalties has been a thorn in the side of both the IRS and the Tax Court. Today's lesson shows us how the IRS penalty approval process in conservation easement audits has forced taxpayers to reach for wilder and less credible attacks in their attempts to avoid penalties by finding IRS procedural foot-faults.
First, in Pickens Decorative Stone LLC v. Commissioner, T.C. Memo. 2022-22 (Mar. 17) (Judge Lauber), the taxpayer argued that when the IRS had publicly committed in a general Notice to seeking penalties against the types of syndicated conservation easement scheme it had engaged in, the IRS was disabled from complying with §6751(b) because the supervisor in the audit had not signed off on that public Notice. Yeah, pull your eyebrows down; the argument lost.
Second, in Oxbow Bend, LLC v. Commissioner, T.C. Memo. 2022-23 (Mar. 21, 2022) (also Judge Lauber), the taxpayer similarly argued the IRS failed to comply with §6751(b) when the Revenue Agent (RA) had failed to secure supervisory approval before telling the taxpayer during a status conference that penalties were "under consideration" when in fact the RA was completing an internal document recommending penalties that very day. That was a loser as well. Details below the fold.
April 4, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (5)
Lesson From The Tax Court: Take The Administrative Appeal
Taxpayers famously focus on trying to get their "day in court" against the evil IRS. The Independent Office of Appeals (Appeals) is no court. It is not surprising, then, that taxpayers' myopia often leads them down the dangerously wrong path of ignoring their opportunity to go to Appeals. Today's lesson teaches us one reason that is a mistake.
In Mahammad A. Kazmi v. Commissioner, T.C. Memo. 2022-13 (Mar. 1, 2022) (Judge Paris), the IRS was seeking to collect a §6672 Trust Fund Recovery Penalty (TFRP) assessed against the taxpayer. In a Collection Due Process (CDP) hearing, Mr. Kazmi attempted to explain why the assessment was improper against him. He relied on the rule that a taxpayer can challenge a liability in a CDP hearing if the taxpayer had not had a prior opportunity to do so. While Mr. Kazmi had been given the opportunity to take an administrative appeal during the prior §6672 assessment process, he said that should not count because it did not give him a day in court. While that argument might have traction in other situations, it failed in this one. Details below the fold.
March 28, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink
Lesson From The Tax Court: What Constitutes A CDP 'Hearing'?
Before the IRS can start collecting unpaid tax liabilities by levy, §6330(b)(1) requires it to give taxpayers an opportunity for a Collection Due Process (CDP) hearing with the IRS Independent Office of Appeals.
Many taxpayers do not fully understand how CDP hearings work. First, they erroneously expect that a CDP hearing is a discrete and physical event where they (finally!) confront the evil IRS. Second, they erroneously expect that the point of the hearing is for the evil IRS to justify collection, including proving the correctness of the assessment. Finally, they expect that they can go to Tax Court and get a do-over if they don't like the result they get from the CDP hearing. Taxpayer with those expectations are doomed to disappointment.
Today's lesson is for them. In Brian K. Bunton and Karen A. Bunton v. Commissioner, T.C. Memo. 2022-20 (Mar. 10, 2022), Judge Morrison gives a nice short lesson on what constitutes a CDP hearings. The taxpayers complained that their CDP hearing was defective because (1) the Settlement Officer (SO) had not given them an in-person hearing, and (2) the IRS did not show the assessment was correct. The Court rejected those complaints and in so doing, shows us what constitutes a CDP hearing. Details below the fold.
March 21, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: The Finality Rule For §7430 Qualified Offers
When you litigate against the IRS you may win but not prevail. That is, even though §7430(a) promises that a "prevailing party" can recover costs and attorneys fees, it's hard to be a "prevailing party" within the meaning of the statute. If the government's ultimately losing position was substantially justified at the relevant time, the winning taxpayer won't be a prevailing party. Sometimes that leads to a seemingly strange result that even if the Office of Appeals badly messes up, the taxpayer will not be a prevailing party if Chief Counsel catches the error and promptly concedes. Keith Fogg blogged a good example of this over at Procedurally Taxing last week.
The Qualified Offer process is a substitute for being a prevailing party. Making a properly qualified offer to settle a case removes the government's "substantially justified" defense. Thus, if you make the offer during the administrative process, you can set up a recovery even if Chief Counsel concedes.
But making a effective Qualified Offer has its own difficulties. Today's lesson looks at one of the key rules for making a qualified offer: the finality rule. In Gina C. Lewis v. Commissioner, 158 T.C. No. 3 (Mar. 3, 2022) (Judge Pugh), the taxpayer offered to settle an audit of her joint return by agreeing to 100% of a proposed deficiency. But on a closer examination, she really just crossed her fingers, reserving the right to contest that liability through the §6015 spousal relief provisions at some unspecified later date. So it was not really an offer to settle. It was an offer to kick the can down the road. Indeed, many years later, in Tax Court, the IRS agreed she was entitled to full relief under §6015(c). Ms. Lewis then asked for costs and fees under §7430 on the grounds that the IRS had ended up worse off than if it had accepted her offer. The Tax Court said no, for reasons discussed below the fold.
March 14, 2022 in Bryan Camp, News, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: The Tax Liabilities You Leave Behind
We all know you can't take it with you. But what happens to the "it" after you die? Ideally, you will have paid all your debts, and your Estate will distribute your "it" to the objects of your affection. The IRS will probably not be one of the objects of your affection.
However, few of us do everything ideally. If you leave behind unpaid tax obligations, Congress has ensured that the federal government gets priority over the objects of your affection. And tax claims also take priority over most other creditors. But most is not all. Some creditors get paid before the Tax Dude. Thus, if your unpaid tax obligations exceed the assets in your Estate, then the objects of your affection will take bupkis ... unless they also happen to be one of the few types of creditors that get priority over the unpaid taxes.
That is what we learn from Estate of Anthony K. Washington v. Commissioner, T.C. Memo. 2022-4 (Feb. 2, 2022) (Judge Toro). There, the decedent died with unpaid federal tax liabilities that exceeded the assets in his Estate. The decedent's ex-wife tried to convince the Tax Court that her claim against the Estate took priority over the tax claim. Alternatively, she argued that the IRS erred when it did not account for her claim in evaluating the Estate's Offer In Compromise (OIC), because ignoring her claim simply was not fair because paying the tax claim would leave the Estate with nothing.
Both arguments failed. The case teaches us a lesson about the federal tax lien and about the difficulty Estates face in obtaining OICs. Details in the usual space, below the fold.
February 22, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)
Lesson From The Tax Court: The Proper Baseline For Offers In Compromise
Paying taxes can be painful. When money is tight and other needs are pressing, sending money to the federal government understandably sinks on the taxpayer's priority list. But not the government's! Congress wants to make sure that paying taxes remains at the top of every taxpayer's priority list. That is why it gives the IRS really awesome collection powers. If that duty to pay taxes is not uniformly enforced, the thinking goes, then voluntary compliance goes out the window and soon that window will be smashed by rocks thrown by rioting mobs. Don't want that.
At the same time, Congress recognizes that, sometimes, circumstances should permit payment of less than the full amount. The Offer In Compromise (OIC) process is designed to address those situations. The ability to secure an OIC, however, must always be evaluated against a default of full payment, not against a default of no payment. That is what we learn from Edmund Gerald Flynn v. Commissioner, T.C. Memo. 2022-5 (Feb. 3, 2022) (Judge Urda). There, the Court held that the taxpayer was not entitled to an OIC just because the full-pay obligation would be financially painful. Details below the fold.
February 14, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)
Lesson From The Tax Court: The Innocence Requirement In § 6015(c) Proportional Relief
Section 6015 allows taxpayers to obtain relief from an otherwise joint and several liability. The statute contains three related provisions allowing relief. Siblings. First is the eldest child, traditional innocent spouse relief. It was formerly in §6013(e) and is now found in §6055(b). Second is the quite middle child, a proportionate relief provision that basically permits unwinding the jointly filed return. That's in §6015(c). Third is the wild child, an equitable relief provision that permits relief when it would be unfair to impose joint liability. That's in §6015(f).
Of these three spousal relief provisions, the wild child §6015(f) gets most of the attention, at least in court, because it is a very facts-and-circumstances determination and so leads to the most disputes between a requesting spouse and the IRS. There is also robust case law on the bossy oldest child §6015(b) because it has been around the longest, since 1971.
Today's lesson is about §6015(c), the oft overlooked middle child. While, arguably, all three provisions involve some concept of innocence, we learn today a crucial difference between how that concept works for (c) relief and (b) relief. In Tara K. Tobin (Petitioner) and Jeffrey Tobin (Intervenor) v. Commissioner, T.C. Summ. Op. 2021-36 (Nov. 16, 2021) (Judge Guy), an IRS audit disclosed multiple items of unreported income. Ms. Tobin asked for §6015(c) relief, agreeing to take responsibility for her unreported income items and leaving Mr. Tobin responsible for his. Mr. Tobin objected, claiming that Ms. Tobin was not innocent enough to qualify for proportional relief. In a short but useful lesson, we learn why the Tax Court decided for Ms. Tobin. Details below the fold.
February 7, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Lesson From The Tax Court: The Presumption Of Regularity
No, today's lesson has nothing to do with your gastrointestinal system. But it does relate to what comes out of the bureaucratic process. The presumption of regularity affects a broad range of IRS work product, such as Notices of Deficiencies, Certificates of Assessments and, in today's case, Penalty Approval forms.
In Long Branch Land LLC v. Commissioner, T.C. Memo. 2022-2 (Jan. 13, 2022) (Judge Lauber), the taxpayer attempted to take a very large charitable deduction for donation of a conservation easement. In its Notice of Deficiency, the IRS not only disallowed the deductions but also proposed to assess penalties under §6662 and §6662A. In Tax Court the IRS moved for partial summary judgment on the issue of whether it complied with the supervisory approval requirements of §6751(b)(1).
The taxpayer argued that the IRS failed to comply with the penalty approval requirements because the IRS employee who approved the penalty was not the "immediate supervisor" of the IRS employee who proposed the penalty. Judge Lauber rejected the argument, invoking the presumption of regularity. His use of the doctrine, however, demonstrates it chameleon-like quality: it is both a rule of law and a rule of evidence. Details below the fold.
January 31, 2022 in Bryan Camp, New Cases, Scholarship, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (1)
Lesson From The Tax Court: The Tacit Consent Rule
Every marriage requires trust. In my own marriage my DW trusts me to handle our finances. I'm sort of the CFO of our marriage. As part of my duties I prepare our taxes. I try to explain them to my DW before I file, but more often than not she just waves me away with a smile, saying "I trust you." Back in the day when we filed paper returns I at least was able to ensure she signed the returns. But now that we file electronically, I just make a few clicks and, boom!, it's filed.
I have sometimes questioned whether we are really filing a joint return when it's only me doing all the clicking for the electronic submission. When one files electronically there is nothing analogous to an actual signature to show that both spouses have even seen, much less approved, of what is submitted. You just need to create two 5-digit numbers, one for each spouse. Tax return preparers at least get to secure a wet signature on Form 8879 to show both spouses consented to the return preparer submitting the electronic return. I got nothing like that. Just a smile and a "I trust you."
Today's lesson answers my question. In Om P. Soni and Anjali Soni v. Commissioner, T.C. Memo. 2021-137 (Dec. 1, 2021) (Judge Copeland), we learn that a spouse can tacitly consent to a joint return even when the spouse does not actually sign the return and even when someone else forges the spouse's signature! Whether there is tacit consent depends on the facts and circumstances of the filing. And perhaps the most important factor is a history of one spouse's trust in the other. Details below the fold.
January 18, 2022 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Here is a chronological listing of all the Lessons From The Tax Court I posted in 2021, with links to, the Lesson, the primary case discussed and its author. I have also listed the primary Code sections mentioned or discussed in the Lesson. At the end of the chronological listing, you will find a table listing the posts by which Tax Court Judge authored the Court's opinion.
January 11: Too Much Control Over IRA Distribution Makes It Income (Brett John Ball v. Commissioner, T.C. Memo. 2020-152 (Nov. 10, 2020) (Judge Halpern) — §72, §408, §451, §671, §4975)
January 19, 2021: The CDP Silver Linings Playbook (Wiley Ramey v. Commissioner, 156 T.C. No. 1 (Jan. 14, 2021) (Judge Toro) — §6320, §6330)
January 25, 2021: No Deduction for Disguised Dividends (Aspro, Inc. v. Commissioner, T.C. Memo. 2021-8 (Jan. 21, 2021) (Judge Pugh) — §162)
February 1: No Product? No §162 Deduction! (William Bruce Costello and Martiza Legarcie v. Commissioner, T.C. Memo. 2021-9 (Jan. 25, 2021) (Judge Halpern) — §162, §212)
December 20, 2021 in Bryan Camp, Miscellaneous, Tax, Tax News, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Lesson From The Tax Court: Taxpayers Behaving Badly (2021)
This will be my last new post until January. I will be spending my days (except for Christmas Day) grading exams. Grades are due Monday, January 3th and then I resume teaching on January 11th, so you will likely see my next Lesson From The Tax Court on January 18th (the day after MLK holiday).
For the fourth year, my last new blog of the year presents cases where something in the facts made me just shake my head (SMH in texting parlance). You can find the previous lists here (for 2018), here (for 2019) and here (for 2020). This year I have six to share with you. I present them in chronological order. I invite you to consider which of theme may be examples of just an empty head and which are examples of something worse.
This year I also continue giving the Norm Peterson Award. You will find more explanation below the fold.
Lesson From The Tax Court: Taxpayer 'Filed' Return Even Though IRS Could Not Process It
Case law gets made when things go wrong. When things go right, a taxpayer will file a return, the IRS will process the return, and the taxpayer will receive any claimed overpayment as a refund. Today's lesson arises from a breakdown between filing and processing. It teaches us the difference between those concepts.
In James Forrest Willetts v. Commissioner, T.C. Sum. Op. 2021-39 (Nov. 22, 2021) (Judge Kerrigan), the taxpayer sought refund of an overpayment on the basis of a Form 1040 the IRS had refused to accept for processing because of concerns about identify theft. The IRS was not sure whether the return was genuine. By the time the taxpayer demonstrated the genuineness of the Form 1040, it was too late to get the refund unless the taxpayer's submission of the rejected Form 1040 constituted the "filing" of a "return." The Tax Court framed the question as follows: "whether the Form 1040 petitioner mailed...constitutes a properly filed return." Op. at 5. But do you see there are two questions presented in this framing? First, did the rejected Form 1040 qualify as a "return." The Court said yes. Second, was the rejected Form 1040 "filed" when the IRS could not process the Form? Again, the Court said yes.
The holdings in this non-precedential opinion are consistent with the recent Tax Court precedential opinion Fowler v. Commissioner, 155 T.C. No. 7 (2020), curiously uncited by Judge Kerrigan. Fowler held a taxpayer had validly filed electronically even though the taxpayer had not supplied his Identify Protector Taxpayer Identification Number (IP-TIN) and thus the IRS could not process the return because, as in today's case, it did not know who had submitted the return.
In this age of computer processing, especially as taxpayers and the IRS wrestle with such issues as identify theft and the complications created by COVID regarding return filing requirements, discerning whether and when a taxpayer "files" a document that qualifies as a "return" becomes all the more critical. This Lesson helps us understand the issues at play. Details below the fold.
Lesson From The Tax Court: Who Is An IRS Employee's Immediate Supervisor For §6751 Penalty Approval?
Today's lesson involves yet more litigation over IRS compliance with the penalty approval process required by the formerly toothless §6751(b)(1). In Sand Investment Co., LLC, et al. v. Commissioner, 157 T.C. No. 11 (Nov. 23, 2021) (Judge Lauber), the Tax Court continues teaching us the scope and operation §6751(b), a series of lessons it started back in 2017 when its decision in Graev v. Commissioner, 149 T.C. 485 (2017), gave the statute sharp teeth. Among other requirements, the statute says approval must come from an IRS employee's "immediate supervisor." In today's case, the IRS employee who proposed a bunch of penalties had two supervisors but only one definitely signed timely. Judge Lauber finds that function trumps form in identifying which of the two supervisors was the right one to approve the proposed penalties. This is a short lesson, and also one that will may be rendered moot. Legislation passed by the House and now before the Senate de-fangs §6751(b). Details below the fold.
Lesson From The Tax Court: How To Mess Up Your Checkbook IRA
The idea that freedom means control over your own destiny s arguably the most defining characteristic of American culture. It is most certainly the basis on which various companies promote "checkbook IRAs." If you Google that term you will find a gaggle of companies urging people to take full control of their retirement funds, to free themselves from restrictive IRA custodians. The companies promote structures that purport to allow taxpayers maximum freedom over their investment decisions. Freedom equals control.
In Andrew McNulty and Donna McNulty v. Commissioner, 157 T.C. No. 10 (Nov. 18, 2021)(Judge Goeke) we learn that too much control messes up a checkbook IRA. There, Mr. and Ms. McNulty created a checkbook IRA, funded it with transfers from their other retirement accounts, and then used the money to buy gold coins which they stored in their home. The Tax Court said that last bit—storing the physical coins in their home—was too much control and thus the receipt of the coins was a taxable distribution to them. While the taxpayers crossed the line in this case, it may not be altogether clear where that line is. How far can a taxpayer go before they mess up their checkbook IRA? Let's see what we can learn. Details below the fold.
Lesson From The Tax Court: Not Every Decision Comes With An Opinion
Once a taxpayer petitions the Tax Court to contest a Notice of Deficiency (NOD), the Tax Court will issue a decision in the case. The taxpayer has no option to nonsuit the case like plaintiffs can do in state courts or in federal district courts. It's what I call the Hotel California rule: the taxpayer might check out (e.g. by abandoning the case), but can never leave (the Court's decision will issue). For details, see Lesson From The Tax Court: The Hotel California Rule, TaxProf Blog (Nov. 12, 2018).
Today we learn that even though the Tax Court will issue a decision, it may not issue an opinion. More, we learn why that is so. In Paul Puglisi & Ann Marie Puglisi, et. al., v. Commissioner (4796-20, 4799-20, 4826-20, 13487-20, 13488-20, 13489-20) (Nov. 5, 2021) (Judge Gustafson), the IRS conceded all of a proposed deficiency (except for a small part that the taxpayers had conceded). It asked the Court to enter decisions in favor of the taxpayers. The taxpayers objected! They wanted more than a victory. They wanted fries with that: an opinion to go with the decision. Judge Gustafson decided to accept the IRS concession and enter a decision for the taxpayers without an accompanying opinion on the merits. In a 17-page Order he teaches us that while the Tax Court has the discretion to issue an opinion even when the IRS concedes a case, it will do so only under extraordinary circumstances. Details below the fold.
Lesson From The Tax Court: Whistleblower Died, But His Claim Survived
The IRS has long been authorized to award informants a fee for information. Informants unhappy with their awards, however, have not always had easy access to judicial review. That changed in 2006 when Congress modified §7623 to permit taxpayers to ask the Tax Court to review "any determination regarding an award." §7623(b)(4). Tax Reform and Health Care Act of 2006, 120 Stat. 2922, 2959. For a description of how the program works, see Lesson From The Tax Court: The Slippery Slope Of Tax Court Review, TaxProf Blog (Oct. 12, 2020).
Getting that Tax Court determination can take a long, long time. That is because awards are first determined by the IRS Whistleblower Office (WBO) as a percentage of the proceeds collected from the taxpayer and collection can take a long, long time (hello CDP!). At the end of all that time, if the whistleblower is not happy with the award, they can petition the Tax Court. And obtaining a final decision from Tax Court can take a long, long, time as well. Put those two long processes together and you are easily looking at 20 years from the first blow of the whistle to the final strike of the judicial gavel.
So what happens to the whistleblower's claim if the whistleblower dies during that long, long time? In Joseph A. Insinga v. Commissioner, 157 T.C. No. 8 (Oct. 27, 2021) (Judge Gustafson), we learn that a whistleblower's Estate can continue to assert a claim for an award even after the whistleblower dies. It's a seemingly simple lesson, but one that not as straightforward as you might expect, requiring the Tax Court to discern and apply common law doctrines. Details below the fold.
Lesson From The Tax Court: Of Distributive Shares And The CDP Mashup
Sometimes our biggest problems are self-created. In Taryn L. Dodd v. Commissioner, T.C. Memo. 2021-118 (Oct. 5, 2021) (Judge Lauber), the taxpayer was attempting to repudiate a tax liability she had self-reported but had not paid. Her multi-year slog through Collection Due Process (CDP) involved three trips to the Tax Court. Only in the third trip do we learn this basic lesson about passthrough entities: a partner must report as income her distributive share of partnership income, whether or not that share is actually received. So now Ms. Dodd not only has her 2013 liability to pay off, she also has all the additions to tax and interest that continues to accrue.
We also learn a second lesson, a lesson about the structure of CDP. The difference between Appeals Officers (AOs) and Settlement Officers (SOs) is more than just the title. Each has different subject matter competencies but only SO's conduct CDP hearings, which are generally all about collection issues. Sometimes, however, taxpayers can raise substantive tax issues, creating a CDP mashup. When a taxpayer uses CDP to contest the merits of a liability, the lesson here is to be sure to ask the SO to confer with an AO. Otherwise you get stuck like Ms. Dodd. Details below the fold.
Classic Lesson From The Tax Court: Sex And Deductions
I was going to title this week's blog "The Concept of Inherently Personal." But I could not resist trying to put some clickbait in the title. Today I want to discuss two classic cases from Tax Court. They explore the never-ending balancing act needed to decide when an expense is deductible when it has both a personal and business aspect. Between them, the two cases teach us a lesson about life in all its fullness. That they both involve sex makes the lesson perhaps more memorable, but no less appropriate to any type of mixed business/personal deduction. And while both cases involve sex, they do so from interestingly different perspectives.
In Vitale v. Commissioner, T.C. Memo. 1999-131 (Judge Fay), the Court denied deduction of certain expenses (payments to prostitutes), finding that the concededly business purpose of the expense was overcome by its inherently personal nature. Yet in Hess v. Commissioner, T.C. Summary Opinion 1994-79 (Judge Joan Seitz Pate), the Court permitted a depreciation deduction for certain expenses (breast implants), finding that the inherently personal nature of the expense was overcome by its obvious business purpose.
You will find the surprisingly non-salacious details below the fold.
October 11, 2021 in Bryan Camp, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (2)
Lesson From The Tax Court: The Many Rooms Of Tax Court Power
All federal courts (except the Supreme Court) are created by Congress. Congress defines the extent to which each federal court can invoke the power of the federal government to coerce the parties before them. The fancy legal term for that power is "jurisdiction." Like all other federal courts, the Tax Court is a court of limited jurisdiction, limited to the powers that Congress permits it to exercise.
The Tax Court sometimes claims its power is more limited than other federal courts but that idea has been rightly called "fatuous." Flight Attendants v. Commissioner, 165 F.3d 572, 578 (7th Cir. 1999) (Posner, J.) ("The argument that the Tax Court cannot apply the doctrines of equitable tolling and equitable estoppel because it is a court of limited jurisdiction is fatuous. All federal courts are courts of limited jurisdiction.").
What is true, however, is that Congress gives the Tax Court much specific grants of powers than other federal courts. I think of the varied jurisdictional grants as different rooms of power. When you go to Tax Court, the extent of its powers depends on which door you enter and what room of power you find yourself in. What the Court can do for you in some cases, it cannot do for you in others because of the way that Congress has written the statute. It depends on which room of power you are in. That's the lesson we learn in Michael D. Brown v. Commissioner, T.C. Memo. 2021-112 (Sept. 23, 2021), where Judge Kerrigan explains that what the Tax Court can do when exercising its CDP jurisdiction is more limited than what it can do when exercising its deficiency jurisdiction. The taxpayer was in the CDP room and wanted relief that could only be granted in the Deficiency room. Those different rooms of power are different in scope and do not overlap. Details below the fold.
Lesson From The Tax Court: Emotional Distress Is Not Physical Illness
My dad practiced medicine for some 40 years as both a surgeon and family practitioner. He raised us to believe that someone who did not have objectively detectable causes for their physical symptoms was not really ill: it was "all in their head." The medical term for that idea is "psychosomatic disorder."
The Tax Code makes the same distinction. Section 104(a)(2) permits taxpayers to exclude damages recovered for objectively detectible physical injuries or physical sickness. But they may not exclude damages received for a sickness that is simply "all in their head." The legal term for that idea is "emotional distress."
Rebecca A. Tressler v. Commissioner, T.C. Summ. Op. 2021-33 (Sept. 13, 2021) (Judge Greaves), teaches us that damages even for severe emotional distress are not excludable unless properly linked to a physical injury. Ms. Tressler had sued her former employer, alleging a variety of wrongs. One allegation was that the employer failed to prevent a physical assault by another employee. Ms. Tressler claimed these wrongs had caused her emotional distress which, in turn, had caused various physical ailments. The employer settled. Both the IRS and Tax Court denied a §104(a)(2) exclusion because the settlement language failed to properly link the payments she received to physical injuries she sustained; they were just linked to her claim for emotional distress. It was all in her head.
It did not have to be this way. I think we can learn from this case how to write better settlement agreements.
Lesson From The Tax Court: Failure To Understand Issue Preclusion May Trigger Sanctions
Some people just cannot take no for an answer. That is one of the reasons §6673 permits the Tax Court to impose a penalty of up to $25,000 on taxpayers who stubbornly present either frivolous or groundless arguments.
It is sometimes difficult, however, to distinguish a "no" from a "not now." Karson C. Kaebel v. Commissioner, T.C. Memo. 2021-109 (Sept. 9, 2021) (Judge Halpern), teaches a good lesson about issue preclusion, which is the important legal doctrine that tells us when "no" means "no." The taxpayer there asked the Tax Court to make the IRS take back a certification it had sent to the State Department. But the reasons the taxpayer offered had already been rejected by both the Tax Court and the Court of Appeals in prior cases brought by the taxpayer about different subjects. Judge Halpern explains why those no's were really and truly no's. He also considers imposing §6673 penalties for the taxpayer's intransigence. So this will be a good lesson to learn, if for no other reason than to avoid penalties! Details below the fold.
Lesson From The Tax Court: Retirement Plan Drafting Error Loses Taxpayer $51k Deduction
As tax practitioners know, to err is human, but to forgive requires a new set of regs. Gayle Gaston v. Commissioner, T.C. Memo. 2021-107 (Sept. 2, 2021) (Judge Marvel), teaches us the lesson that if you want to get the §404(a) deduction for contributions to a profit-sharing plan, you need to be sure to properly link the plan to the taxpayer's trade or business. In this case, the taxpayer received substantial deferred compensation payments from Mary Kay Cosmetics after her separation from that company and made substantial contributions to a retirement plan her tax advisor drafted for her. Unfortunately, her one-participant profit sharing plan did not identify any trade or business as the source of the plan contributions. That was error. Both the IRS and the Tax Court were unforgiving. Details below the fold.
Lesson From The Tax Court: IRS Can Issue Multiple 'Final' Spousal Relief Determinations
Yogi Berra would have been a great tax practitioner. In Nilda E. Vera v. Commissioner, 157 T.C. No 6 (Aug. 23, 2021), Judge Buch does his best Yogi Berra imitation by teaching us that just because the IRS issued one "final determination" about an innocent spouse claim does not prevent it from issuing a second "final determination" to the same taxpayer when the taxpayer resubmits the same claim for the same year. That means taxpayers potentially get a second opportunity to petition the Tax Court for review of an IRS rejection even when the taxpayer missed the first opportunity. The Tax Court thus interprets the law to encourage taxpayers to keep resubmitting equitable relief claims because one never knows when the IRS might issue a second final determination, either deliberately or, as here, because of a goof-up. As Yogi might have said: it ain't final until it's final! So when at first your claim's denied, file, file again. In the context of §6015(f) relief requests, that is not actually a bad result. Details below the fold.
September 7, 2021 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink | Comments (0)


THE BEST ONE CAN SAY ABOUT 2008 is that it's over. Asia fared very poorly this year -- particularly measured in local currencies. The worst performers (in local currencies) were onetime darling Vietnam, down 67%, followed by China -- the Shanghai Composite was down 64% midway last week. Even the best performers saw a sea of red. The region's top markets were New Zealand, off 34%, and Malaysia, down 39%.
The best non-Japan Asia mutual fund this year was Matthews Asian Growth & Income (ticker: MACSX), down 34% midway through December, followed by Sparx Asia Pacific Equity Income (SPAIX), off 39.8%. The average mutual fund in the Asia ex-Japan category was down 51.5% in the same period. The top Japan fund was DFA Japan Small Company (DFJSX), down 16.2%, followed by Wisdom Tree Japan High-Yielding Equity (DNL), off 18.5%. Over all, the average Japan fund fell 35.6%. The No. 1 China fund, Templeton China (TCWAX), slid 43.8%. The average China fund had a 53.2% loss.
More than a decade after its financial crisis, Asia is again bowed and bloodied, with more pain likely. Estimates for Corporate Asia, both developed and emerging, are still too high, as last week's downward revision by Toyota Motor (TM) shows. "We still do not see an earnings bottom" in Tokyo, Goldman Sachs analyst Kota Yuzawa told Dow Jones Newswires last week.
Many hedge-fund managers put up gates this year to avoid withdrawals that would force them to sell at the currently depressed prices. That can't continue indefinitely. The hope is that in '09, selling will be more orderly. "My guess is that the panic is gone, but we still have to get comfortable, get more liquidity, diminish risk aversion," says Rodolfo Amoresano, an emerging-markets specialist and senior managing director at Greylock Capital Management.
Fitting Ending: As they have so many weeks this year, most Asian markets tanked last week.
Indeed, emerging markets proved "turbo-coupled," quips Ignatius Chithelen, managing partner of Banyan Tree Capital, falling more and faster than their developed brethren. Why? Emerging markets are a barometer of "investor confidence and greed in the developed countries that largely determine their ability to raise capital," says Chithelen.
Some 10 years ago, China's neighbors fretted about its ambitions, as shown by Rene Pastor's Scribblings on the Run, a collection of the Reuters journalist's stories, most with Asian datelines. They're still fretting, while China's rapid slowdown, forecast by its market's steep decline, raises more questions about the sustainability of growth in the region.
Also still here: Japan's weak domestic economy and dependence on exports. "Despite recovering and building up domestic savings, [Japan] still hasn't been able to build a robust domestic economy; it's quite extraordinary," says Richard Watt, a global portfolio manager at Epoch Investment Partners. Hence, he's "structurally underweight Japan."


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The Marshall Islands did not compete at the 2011 World Championships in Athletics from August 27 to September 4 in Daegu, South Korea.

Team selection

One athlete was
announced to represent the country
in the event due to the preliminary Entry List.  However, he did not appear on the Official Start List.

References

External links
Official local organising committee website
Official IAAF competition website

Nations at the 2011 World Championships in Athletics
World Championships in Athletics
Marshall Islands at the World Championships in Athletics

redpajama_set_name: RedPajamaWikipedia


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Q: The convergence of sequence. i'd like to show that $a_n=-\ln(n)+$$\sum_{k=1}^{n}  {{1}\over {k}} $ converges to some $\alpha$ $\in$$[0,1]$
I found that the sequence monotone decreasing sequence, by mathematics induction.
So i'd like to show that the sequence $a_n$$\in$$[0,1]$, for concluding above statement.
But I'm stuck here. How can I show that?
I tried to $a_n$ is monotone decreasing and $a_1$=1, $a_n$$\in$$(-$infinity$,1]$ but i can't find how to show that it is more than equal to 0 ..

A: Hint
Consider the map $f(n)=1/n$ on $[1,n]$
Then,
$\int_1^n f(n)\,dn$$\leq$$1+1/2+1/3+....+1/n$.
( This can be seen from, upper sum is greater than or equal to actual area under the curve.)
Hope you can follow from here.

redpajama_set_name: RedPajamaStackExchange


I wanted to make something to mark this time in history. Something that is still affecting my state, even weeks following Hurricane Harvey. Appropriately named, "Rainfall", this wall hanging is made of navy tweed, gray tweed, ivory, and blue/gray/beige twisted with ivory fibers. I will continue to make small contributions to rebuild Texas as long as needed.
Two large hoops each measure 14" in diameter, center small hoop measures 6" in diameter, approximately 44.5" long.


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York St John University
York St John University Business School offers a number of undergraduate programmes in tourism, including Tourism Management, Tourism Management and Marketing and from September 2017; Tourism Management and Spanish. The tourism courses combine specific sectorial issues such as industry structure, culture, policy and social responsibility with key management areas such as Finance, Human Resources, Marketing and Strategy.
A key focus of the award is that it provides a knowledge base and set of skills that are academically rooted and professionally relevant, combining theoretical awareness with practical concerns. This is achieved through the extensive use of case study material from around the world and reflecting the strong international focus of the programme, together with an underpinning of relevant theory from a variety fields such as cultural geography, economics, sociology and anthropology. Central to the programme is a commitment to self-directed enquiry through project work and research and the exploration of opportunities to encounter and engage with tourism a real cultural issue and key business sector.
In the Business School we work closely with a range of tourism organisations in the city, including Visit York, the local tourism agency, the Minster Quarter, and the Continuum group which operate a number of attractions in York and nationally. As a signatory of PRiME (Principles of Responsible Management Education), York St John Business School is committed to integrating corporate responsibility and sustainability within all our programmes.
York St John University is located in the heart of the ancient city of York on a historic city centre campus. In 2016, the University celebrates it 175 year anniversary. As a leading city destination outside of London, York attracts an average of 7 million visitors a year. The city boasts a wealth of cultural and heritage attributes and a number of world famous attractions, such as the York Minster, the National Railway Museum, and the Jorvik Viking Centre. The city is a great place to study tourism.
January 29, 2016 Tourism Concern Academic Members ecotourism, ecotravel, ethical tourism, ethical travel, Responsible Tourism, responsible travel, tourism, tourism concern, tourism industry, Travel, York St John University

redpajama_set_name: RedPajamaCommonCrawl


The only constant in the world is change, and that is especially true in the field of technology. So what changes can we expect in 2018?
The current wave of innovative technologies will continue to gain momentum and further disrupt traditional industries throughout 2018. Personal data will become even more valuable and new regulations will try to protect that information. Ransomware attacks will continue to become even more sophisticated, forcing data protection vendors to dig deep and invest accordingly to create innovative anti-ransomware solutions that are easy and affordable for anybody with a computer.
The General Data Protection Regulation (GDPR), which is due to go into effect in Europe on May 25, 2018, is going to send shockwaves around the world. Designed to protect the privacy of EU citizens, it will affect all companies doing business in Europe, regardless of where their headquarters are located.
The GDPR will likely result in some confusion, and will certainly create additional burdens for international companies that already have to comply with domestic data privacy laws. These companies will be looking for a balance to ensure both sets of regulations are satisfied.
The push for citizen privacy is not isolated in Europe. China, Turkey, Russia, and several other countries have already passed similar laws, while additional countries are expected to follow suit, especially in fast-growing markets such as Asia Pacific.
Failure to comply with GDRP could lead to fines of up to 20 million euros (23.5 million dollars) or 4 percent of the company's annual revenue, whichever is greater. If the size of fines is any indication of what's to come, the watchdogs will be paying close attention to large corporations. We expect to see at least one corporation fined for a GDPR violation before the end of 2018.
We also predict that because the GDPR includes compulsory reporting of data breaches, we'll find out that the problem of ransomware is actually much worse than previously thought. That's because mandatory reporting will expose thousands (or even millions) of cyber-attacks that, until now, have gone unreported because businesses were too ashamed to admit the loss of customers' data.
Ransomware is not new, but every new attack brings a fresh reminder of how unprepared businesses are to face such attacks. A lot has been said in the last 12 months about the importance of system patches and security updates, but we are certain that many companies remain unprepared to face attacks in 2018.
Next year we expect new types of ransomware to mount even larger attacks than this year's historic WannaCry and NotPetya outbreaks. It's very likely that 2018 will also see a strain of ransomware used as a cyber weapon, targeting specific organizations with the sole purpose of destroying their data.
IoT devices will also become new targets for ransomware. Remember the Y2K bug and the fear that we wouldn't be able to use our VCRs and washing machines in the year 2000? The next few years could see those fears become reality.
Earlier this year, for example, hackers used ransomware to disable the door locks on guest rooms in a hotel in Austria. As IoT devices are increasingly targeted, such instances are only going to happen more and more.
In 2018, ransomware criminals will become a lot more creative. They'll reuse and extend the old ransomware code, as they did this year, and develop new methods to highjack data. Attacks against backup files, cloud workloads, social network accounts, and even IoT devices will increase.
In addition, new types of ransomware will quietly infect user devices and avoid detection by lying dormant for a period of time. Instead of hitting multiple files simultaneously, it will use slow encryption, scrambling small parts of important files, only to reveal itself at the most inconvenient time. Other strains will be smart enough to monitor system processes in order to understand how the data is protected, and use that information to strike only after the user's backup is disabled.
We also expect there to be targeted ransomware attacks against critical infrastructure such as power stations and airports. Ransomware will be converted into a digital weapon that can only be stopped with the help of artificial intelligence-driven solutions.
IoT devices have become an integral part of our daily lives. Self-driving cars, smart appliances, smart home devices, are all designed to make our lives simpler, and more efficient.
Undoubtedly the growth of IoT devices will continue well beyond 2018. During the coming year, the IoT industry will focus on developing specialized platforms and commercializing IoT data. IoT platforms will take advantage of global cloud providers such as AWS or Microsoft for data storage, extending their global reach. Enterprises will use IoT to roll out voice-activated services and marketers will use the collected data to get closer to their customers.
In the midst of this, data protection and security will remain a major concern. The DDoS attack launched from webcams last year showed that the majority of IoT devices are largely unprotected and exposed to hacking.
In 2018 there will also be a noticeable shift toward edge computing, i.e. pushing the majority of IoT processing power back to the device level. As IoT devices look for greater speed and autonomy, sending data to and from the cloud in real time will become unfeasible. A self-driving car or drone, for example, will need to make an instant decision without relying on its ability to communicate with the cloud.
As the cloud becomes auxiliary to the new distributed IoT architecture, the value of data residing at the edge will also continue to increase. That will create a new need for protecting edge devices, since the data on an edge device will need to be backed up and protected from malicious attacks.
Edge computing will also accelerate the adoption of blockchain technologies as the default method of ensuring the security and authenticity of data communication. Multiple companies will be competing for a spot in this technology space.
The explosive growth of Bitcoin this year promoted the reliability and benefits of the underlying technology used by this cyber currency, the blockchain. In 2017, blockchain became the second most popular search word on Gartner's website, and distributed ledger technology will continue to gain significance across a number of industries.
Deloitte predicts that blockchain projects are going to exceed cloud computing and IoT in venture capital investment. Countries with official blockchain strategies, like Malta, will end up leading regional markets and the global industry in general.
Blockchain will help to address several modern-day security concerns, including issues with contracts, identity, and fraud management. Blockchain-based lists will help financial organizations and online retailers easily vet their customers and combat fraudulent activities.
Blockchain terminology will continue to evolve as well. Industry players will focus on providing functional or architectural descriptions instead of relying on the term "blockchain." The Australian Securities Exchange, for example, avoided the word when announcing its deployment of a "distributed ledger technology" for clearing and settlement earlier this year, focusing on its functionality, rather than looking for popularity.
While the hype around the word "blockchain" will subside in the coming year, we'll see major blockchain-inspired applications in healthcare, financial, insurance, and e-commerce sectors. Blockchain will become the default technology wherever there is a need to ensure the integrity of transactions or data.
Artificial Intelligence (AI) has become a necessity for every company dealing with large amounts of data. Whether it's recognizing your voice on a smartphone or identifying a cyber-attack before it destroys your data, AI is now an integral part of the modern-day technological development. It provides the insight that gives companies a competitive advantage – and in 2018, insight will drive AI adoption even further.
Companies will use AI to augment existing products, giving them a competitive advantage. That's because they are sitting on tons of unstructured data collected from their devices and software. Since there was no easy to way to analyze this data, it couldn't be used to generate insights for product improvement. It's like collecting telemetry data from Formula 1 cars that would enable you to make improvements to the car's design and performance, but not having any way to interpret that data. AI, machine learning (ML) and deep learning (DL) change that, making data analysis easy and accurate.
In data protection, AI will be used to recognize ransomware patterns and block cyber-attacks. It will also be used to recognize the data that is stored in backups and offer semantic search, understanding synonyms and even generalizations. One example would be a search for "job applications". It would retrieve all CVs, selection criteria documents, and cover letters, even if the phrase "job application" was not used within the document or in the file name. Next year will be filled with AI applications that will advance the functionality of the traditional software.
In 2018 we'll also see a new class of products with AI at its core. Together with IoT and blockchain, AI will bridge the gap between human intuition and computer calculation to become part of everyday decision making.
With its power to interpret data and discover patterns, AI will help business leaders to make informed and contextualized decisions, reducing risk. It will also improve the customer experience by helping businesses to engage with customers to better understand their needs and behavior patterns.
AI insight will be the key to the next wave of innovative solutions, reducing the gap between humans and machines.


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Niecy Nash To Star In 'Kidnapped: The Kamiyah Mobley Story' Lifetime Movie From Robin Roberts
by Denise Petski
Emmy winner Niecy Nash is set to star in Kidnapped: The Kamiyah Mobley Story, the first movie greenlit by Lifetime under the Robin Roberts Presents movie and documentary banner, from Rock'n Robin and Lincoln Square Productions. Production is currently underway on the movie, executive produced by award-winning journalist Roberts, and is slated for premiere in 2020/
Also starring Rayven Symone Ferrell (The Hate U Give) and Ta'Rhonda Jones (Empire), Kidnapped: The Kamiyah Mobley Story is the true story of a young woman who discovers at age 18, she was abducted as a baby and the family she knew to be hers, wasn't hers at all. The film will be followed by a companion documentary featuring the real-life people depicted in the movie.
"I'm thrilled to share this young woman's story and produce something so poignant for the Lifetime audience," said Roberts, President of Rock'n Roberts Productions.
See full article at Deadline »
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Sell like a Rockstar
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Paul Kenny, founder of group-discount site Cobone, tells Alicia Buller about his plans to build the biggest dot-com in the region.
Alicia Buller
If you were to conjure up an image of the proverbial dot-com founder – you'd dream up Paul Kenny. The nattily-dressed 26-year-old Irishman might be young, but he thinks big. "I'm going to build the largest e-commerce site in the Middle East," he says. Kenny launched Cobone, the regional group-discount website, just over a year ago amid a scrum of competition. Incumbent site GoNabit had already cornered some of the latent market with a four-month head start on Kenny.
"They were the first-mover but within six weeks we were number one," he says, peering out over a barely-furnished office. Cobone, part of the locally-founded Jaber Internet Group which sold Maktoob,com in 2009, recently moved buildings to free up space for more employees. "Revenues have grown 30 per cent a month since we started."
GoNabit was recently acquired by US group-discount buying site Living Social in a move that was widely seen as a positive for M&A activity within the tech sector, but Kenny attributes the takeover to
"desperation". The CEO claims he now owns 67 per cent of the market, with US-firm Groupon commanding a 22 per cent share, GoNabit with six per cent, and the rest with smaller firms. "People don't realise that it takes a lot resource to set up a group-buying site. The initial set up is resource heavy – you need to fill the finance, marketing and IT departments. A few of the smaller sites will disappear in time."
Certainly, Cobone introduced a wide range of payment options, which has proved key in a developing market still wary of buying goods over the internet. Kenny's site allows customers to purchase goods with credit cards, pre-paid cards and, crucially, cash-on-delivery.
"Local culture was holding e-commerce back. People perceived that the internet was not safe, although everyone paid their DEWA and Etisalat bill through the web. That culture is beginning to change but people still have that hesitancy," he says. "Group discount sites are a gentle way to introduce the population to e-commerce. They already know the outlets we are displaying, they can even call them up and check, so it's real."
Group-buying sites have become household names globally, offering discounts on anything from nail spas to personal training sessions and restaurant meals. However, the Middle East market is still nascent and Kenny plans to soak up some of the potential growth. While some local firms make a profit by mass-discounting their products to large numbers of customers, the main selling point for companies displaying their deals on Cobone is the extra marketing and exposure the site can offer. A rock-bottom deal on a nail spa, for example, may lure clients away from their usual salon to try another beauty spot on the other side of town.
"Companies are realising that offline marketing is more expensive than online marketing. On day one, Cobone was a difficult sell – not now. Businesses have realised the value of it. You take that marketing budget and you flip it and you actually get cash back for it," he says.
As local in-boxes begin to clutter up with deals on products and services, the range of offers has become bewilderingly wide, with Cobone even offering a discount for a RAK free-zone company license recently. Will this sort of non-descript discounting eventually cheapen the value of products and lead to apathy?
"The daily deal model is still very immature as a whole as it has been in operation for just over two years. From our experience we have found that diversification is key and offers more choice increases the audience size," says Kenny. " For example, we had a billboard at the Dubai Media One hotel which was extremely successful selling almost 40 units, a $28,000 Nissan Pathfinder that sold four units, and the UAE trade license sold two units. Diversifying the model is the key to success."
Kenny can often be seen working until 3am. And when he's not working on the site, he's encouraging other employees in his company to take the plunge and become entrepreneurs in their own right – launching new divisions within Cobone.
"I act as a venture capitalist and they present their business plans to me. I'm going to prove that you can do anything no matter who you are."
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