§1 — Tax imposed

We overruled this objection but observed that posttransaction evidence has its limits 55 See also Treas.

Section 1.2 of the 2016 option agreement stated that the 2014 option agreement “is superseded by” the 2016 option agreement.

In Loper Bright the Supreme Court overruled Chevron U.S.A.

485, 493 (2017), supplementing and overruling in part 147 T.C.

Aubuchon’s income as determined in the NOD and sustain, in part, and overrule, in part, the increased deficiency respondent asserted in his Amendments to Answer.

485, 493 (2017), supplementing and overruling in part 147 T.C.

2015-42), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

2244 (2024) (overruling Chevron, U.S.A., Inc.

We overrule petitioners’ objections.

485, 493 (2017) (citing § 7491(c)), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

39.45-1 (1953)), which related to section 45 of the Internal Revenue Code of 1939, continued to be effective as to section 482 of the Internal Revenue Code of 1954 until section 39.45-1 of Regulations 118 was superseded by new regulations.111 It took time for the Treasury Department to promulgate regulations relating to the provisions of the Internal Revenue Code of 1954.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

Rawat’s general 5 Congress effectively overruled Grecian Magnesite in the Tax Cuts and Jobs Act of 2017, Pub.

485, 493 (2017), supplementing and overruling in part 147 T.C.

Respondent requests that “the Court overrule its prior opinion in Swallows Holding I because the Chevron analysis materially differs from the Court’s National Muffler analysis.” We decline both parties’ invitations.

485, 493 (2017), supplementing and overruling in part 147 T.C.

We will also overrule Mr.

485 (2017), supplementing and overruling in part 147 T.C.

Ifthe terms of - 19 - [*19] part B(2) had never come to light in a tax proceeding, and iflater the easement had ever beenjudicially extinguished, there is no reason to suppose that a court distributing proceeds would have overruled the express terms ofpart B(2).

485, 493 (2017), supplementing and overruling in part 147 T.C.

2015-42), supplementing and overruling in part 147 T.C.

We overrule respondent's objection.

2015-42), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part Graev v.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

1008, as modified and superseded by Rev.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

1286, 1288, was superseded by Rev.

447, superseded by Rev.

1286, 1288, was superseded by Rev.

156 (1990), overruled.

Petitioner is therefore entitled to the entire amount ofits claimed DRD under subsection (a).32 BMC Software I is overruled.

- 5 - ofOhio (1) overruled petitioner's objections to the report and recommendations of the Board ofCommissioners on Grievances and Discipline, (2) concluded that petitioner's Federal crimes involved moral turpitude, and (3) permanently disbarred him from the practice oflaw in Ohio.

That revenue procedure was superseded by Rev.

Alternatively, Balsam Management argues that we should overrule Belk.

We will thus overrule respondent's determination of unreported income to the extent ofthe sum ofthose three payments, $17,400.

Lastly, we note that petitioner's reliance on our decisions in Cronan and Beaumont is misplaced as both those decisions involved tax years before the effective date, and were superseded by the 1934 enactment, ofsection 23(g).

Lastly, we note that petitioner's reliance on our decisions in Cronan and Beaumont is misplaced as both those decisions involved tax years before the effective date, and were superseded by the 1934 enactment, ofsection 23(g).

Il The revenue procedure cited in the regulation has been superseded by Rev.

The IRS objected to the logbook on grounds other than hearsay, but the Court overruled the objection.

It was superseded by a final regulation, 26 C.F.R.

The Court overrules respondent's objections and admits the checks as evidence.

We will not overrule the IRS's'concèssion, but we clearly should nòt allow a double deduction for this ite'm.

2000), is overruled.

However, petitioner argues that the check-the-boxre ulations are superseded by section 1.932-1(h)( ), Income Tax Regs., which pro ides: Solely for the purpose ofdetermining classification ofan eligihle entity under sec.

They assert that the Court did not address whether the MCLT was a grantortrust and that the Court "did not overrule the Bankruptcy Court with respect to its finding * * *, the Supreme Court merely said that Petitioner is not a 'grantor' in the classic sense ofthe term." Petitioners are wrong.

Therefore, respondent bears the heavy burden ofpersuading us that we should overrule our established precedent.

2012), we held that the public benefit standard applied in Scharfhas been superseded by the quid pro quo standard establishedby the Supreme Court in United States v.

We now overrule the objection on the basis of relevance; however, we note that had these documents been denied admission, it would not have changed the result because petitioner failed to submit additional documentation to clarify whether the deductions had been included in gross distributions or had already been

447, was superseded by Rev .

But they do point us to Revenue Procedure 2000-15, superseded by Revenue Procedure 2003-61 .

The wrinkle here is that section 274 (d) expressly overruled Cohan for certain types of business deductions (including travel) by imposing strict substantiation requirements.

The amendment overruled court decisions that exempted payments for nonphysical injuries from gross income .

18, as modified and superseded by Rev .

The treaty regarding Antarctica is still in effect, and therefore Antarctica remains a sovereignless region.3 Petitioner nevertheless contends that Martin has been overruled and superseded by the holding of the Supreme Court of the United States in Smith v.

345 (1994), superseded by legislation and supplemented by 107 T.C.

1996 Amendment of Section 3121(b)(20) In 1996, Congress overruled Flamingo Fish Corp.

Therefore, we shall overrule respondent’s objection.

From 1958 until the date that it was superseded by section 475, section 1.471-5, Income Tax Regs., specifically authorized dealers in securities to value securities inventories at (1) cost, (2) market, or (3) lower of cost or market, so long as the method employed by the dealer for tax purposes was also “the basis upon which his accounts are kept”.

345, 351 (1994), superseded by legislation and supplemented 107 T.C.

1993), before exercising this authority, that these rulings concluded that, for AMT purposes, the relevant taxpayers must make a separate computation of adjusted gross income in order to ascertain the charitable contribution limitation under section 170(b)(1), and that the Commissioner effectively overruled those rulings through the issuance of sec.

574 (1945), was effectively overruled by United States v.

In Reise we thereupon overruled Aaron and reaffirmed the position we took in Polk that the interest on the tax underpayment was attributable to the taxpayer’s trade or business.

Read had a constructive dividend, 9The majority does not purport to overrule or modify Arnes II.

30, 1984).] The Temporary Regulation remained in force until superseded by the final regulation, section 1.267(f)-1, Income Tax Regs.

The 1984 temporary regulation was in force until superseded by the final regulation, section 1.267(f)-1, Income Tax Regs., July 18, 1995.

We so state because we have consistently been reluctant to conclude that Congress overruled existing case law when the statutory language does not compel such a conclusion and Congress has not otherwise expressly indicated that such a result should ensue.

§ 1.36B-4(a)(1). The repayment limitation does not apply because petitioners’ household income is greater than 400% of the federal poverty line amount.

10 We disagree with petitioner with respect to all three of its arguments and conclude the grant proceeds are included in its income for 2007.4 A. Nonshareholder Contributions to Capital Section 118(a) generally excludes from gross income any contribution to the capital of a corporation. This includes contributions made by nonshareholders. Treas. Reg. § 1.118-1. The exclusion does not apply, however, to any money or other property transferred in consideration for goods or services rendered.5 Id.

We decline to follow respondent’s one-sided argument that the FMV of the S Corporations was approximately $300 million but that Mr.

As to the Commissioner’s alternative argument, the Trusts maintain that the Tenth Circuit’s decision is distinguishable because the deductions here are governed by section 641(c), which provides special rules for the taxation of ESBTs, rather than section 642(c).

These cases are inapposite: They involved taxpayer attempts to revoke prior elections that were valid on their face; the question here is whether GWA’s election was valid to begin with.

“Unlike ordinary net operating losses, [specified liability] losses have a ten-year carryback period.” Id. at 1258.

“The 40% penalty thus applies to the portion of [Holdings’] underpayment 57 [*57] attributable to claiming a value for the easement in excess of” $1,091,760. See Oconee Landing, T.C. Memo. 2024-25, at *75. We “need not address any potential reasonable cause defense,” as it does not apply to this penalty.

Accordingly, the presumption does not apply here.

The section 704(d) rules differ from section 705(a) as they distinguish between allowed or disallowed losses. Section 705(a) does not make such a distinction. Under section 705, all prior-year and current-year losses (both allowed and disallowed) decrease outside basis but not below zero. For purposes of section 704(d), outside basis is decreased only for prior-year losses that were allowed. Treas. Reg. § 1.704-1(d).

The cited case is therefore distinguishable on the ground that it did not involve a separate entity to which the deductions were attributable. Instead, it involved only a grantor trust. Furthermore, the cited case is distinguishable because the taxpayer never shifted its risk of loss to the trust; on the contrary, it was obligated to reimburse the trust for any shortfall caused by claims. See Anesthesia Serv. Med. Grp., Inc., 85 T.C. at 1039–41 (holding that a contributory agreement between the

He asserts that the criminal charges are distinguishable from the business of 6 HOCA LLC as the charges arose from Mr.

Further, our jurisprudence regarding section 165(c)(3) is, unlike that of section 2054 before Estate of Heller, clear and well settled. 4. Whether Tremont and Rye Broad were “merely” middlemen Relying on our opinion in Jensen v. Commissioner, T.C. Memo. 1993-393, 1993 WL 325102, aff’d, 72 F.3d 135 (9th Cir.

Petitioners’ argument (unlike the argument that the plan of merger violated BCL § 1922(a)(3)) was not made by the David Berwind Trust in the Warden litigation.

§ 1.469-9(c)(3). For purposes of determining if a taxpayer has materially participated in a real property trade or business, the activities of the taxpayer’s spouse are treated as work performed by the taxpayer. Treas. Reg. § 1.469- 9(c)(4); Temp. Treas. Reg. § 1.469-5T(f)(3). Section 469(i)(1) provides that section 469(a) does not apply to that portion of the passive activity loss for any tax year which is attributable to all rental real estate activities with respect to which such individual a

Assuming as we must for purposes of summary judgment that petitioners were mistaken about the value of the promissory notes, that mistake of fact is readily distinguishable from the one in Meyer’s Estate.

§ 1.274- 5T(b)(6).9 8 We note that the exception under Treasury Regulation § 1.162-3 that allows a business deduction for “materials and supplies” does not apply here, since (among other reasons) both pieces of wireless equipment cost more than $200.

2002), aff’g 114 T.C. 366 (2000). Generally, a passive activity is any trade or business in which the taxpayer does not materially participate. See I.R.C. § 469(a)(1), (c)(1). Rental activity is passive unless the taxpayer qualifies as a real estate professional as defined in section 469(c)(7)(B). I.R.C. § 469(c)(2). If a taxpayer meets the definition of a real estate professional, then section 469(c)(2) does not apply, and the taxpayer’s rental real estate activity, if conducted as a trade or b

And there is no support for petitioner’s argument that section 170(e)(1) does not apply when the property donated is an easement.

Unlike the section 174 test, however, this evaluative process must follow the scientific method.

12 [*12] We have reached similar conclusions in cases where a taxpayer’s agent has misappropriated the taxpayer’s funds while purporting to act on the taxpayer’s behalf. In Grant v. Commissioner, T.C. Memo. 1995-29, 69 T.C.M. (CCH) 1716, 1719, for instance, we pointed out that although a taxpayer is generally treated as the recipient of any income received by his or her agent, that rule does not apply “where the agent receives and misappropriates funds for his own use, where the principal had no

Applicability of Section 1001 Having established that the open transaction doctrine does not apply, and that any gain derived from the transactions is classified as short-term capital gain, we turn to the calculation of decedent’s gain at the moments of the exchanges.

In short, unlike an immediate gift to charity, a contribution to a CRAT “blends the philanthropic intentions of a donor with his or her financial needs or the financial needs of others.” Id. As a rule, the grantor recognizes no gain when transferring appreciated property to a CRAT. See Buehner v. Commissioner, 65 T.C. 723, 740 (1976) (“A gift of appreciated property [to a CRAT] does not result in income to the donor .

However, in those cases, unlike the present case, the IRS required the taxpayer to provide some type of documentation to make the election. Here, the election automatically applies if the taxpayer is an eligible individual. Therefore, to comply with the section 4.01(B) requirement in substance, the taxpayer must file tax returns for each year they are the beneficiary of the plan for which they are seeking deferral.

Treasury Regulation § 1.721-1(b)(1) states in part: To the extent that any of the partners gives up any part of his right to be repaid his contributions (as distinguished from a share in partnership profits) in favor of another partner as compensation for services (or in satisfaction of an obligation), section 721 does not apply.

The applicable regulations distinguish between objective uncertainty as to the design of a product as a whole (i.e., its basic design specification) and objective uncertainty as to the design of a particular component or subcomponent. See Treas. Reg. § 1.174-2(a)(5).

§ 1402(a)(13) does not apply to a partner who is limited in name only.

We conclude that section 7491(a) does not apply here because petitioners have not produced evidence that they have satisfied the preconditions for its application.

Unlike a C corporation, an S corporation’s income and losses are treated like that of a partnership. § 1366.

These assets, however, are distinguishable from the FMC airplane because FMC’s specifically assigned function for its airplane was to allow Dr. Conrad to 33 We reached a similar conclusion that the lack of certified pilots precludes an airplane from being available for its specifically assigned function (of being flown) in Douglas v. Commissioner, T.C. Memo. 2011-214, 2011 WL 3849550.

§ 469(a)(1), (c)(1). Rental activity is passive unless the taxpayer qualifies as a real estate professional as defined in section 469(c)(7)(B). I.R.C. § 469(c)(2). If the taxpayer meets the definition of a real estate professional, then section 469(c)(2) does not apply, and the taxpayer’s rental real estate activity, if conducted as a trade or business or for the production of income, is not treated as a passive activity if the taxpayer materially participates in the activity.

2022-9, at *9–10, aff’d, 77 F.4th 557 (7th Cir. 2023). Under the all events test, a liability is incurred for the taxable year when (1) “all the events have occurred that establish the fact of the liability”; (2) “the amount of the liability can be determined with reasonable accuracy”; and (3) “economic performance has occurred with respect to the liability.” Treas. Reg. § 1.461-1(a)(2)(i); see § 461(h). The economic performance requirement does not apply “to any item for which a deduction is al

§ 61(a)(4). For divorced or separated taxpayers, alimony or separate maintenance payments were generally also includible in the recipient’s gross income during the year at issue (and were deductible from the payer’s gross income). §§ 71(a), 215(a).5 This general rule is inapplicable, however, for payments in an amount fixed by the terms of a divorce or separation instrument that were made or treated as made to support the payer’s children.

Palmarini’s method of using his bank and credit card statements to distinguish business and personal expenses, categorizing those expenses, and calculating the totals is substantially the same. Furthermore, there is no evidence from which to determine Palmarini Inc.’s taxable income in 2013 and 2014 other than its bank and credit card statements.

Petitioner nevertheless attempts to distinguish its legal effect by asking us to apply section 1.162-7(b)(2), Income Tax Regs., to a portion of the 2016 amount.27 This regulation provides that if contingent compensation is paid under a free bargain between an employer and employee before the services are rendered, then 27 This argument originally formed a part of petitioner’s motion for partia

7 tax because they exceed the greater of $5,000 or 10% of the amounts of tax required to have been shown on petitioner’s 2014 and 2015 returns, see § 6662(d)(1)(A). The stipulated exhibits also show that respondent’s agent obtained the required supervisory approval under section 6751(b). It follows that respondent’s burden of production has been met. The section 6662(a) accuracy-related penalty does not apply to any portion of an underpayment as to which there was reasonable cause and the taxpay

This case is distinguishable from Coca-Cola because the supply points in that case “were contract manufacturers that performed routine functions” and were “easily replaceable.” Id. By contrast in Medtronic I we concluded that MPROC did not perform routine functions. See Medtronic I, at *106–12.

Treasury requested comments “concerning whether gross receipts derived from the provision of certain types of online software should qualify under section 199 as being derived from a lease, rental, license, sale, exchange, or other disposition 24 of the software and, if so, how to distinguish between such types of online software.” Id. at 67,239. On June 12, 2006, Treasury issued temporary regulations regarding section 199.

Unlike Asiana Airlines, where the D.C. Circuit found sufficient evidence of congressional intent within the statutory text, there is no comparable text found in the statute before us. Asiana Airlines, 134 F.3d at 399.

But unlike prior years’ returns, his 2008 return reported that he held foreign financial accounts. However, on the line used to identify the foreign country or countries where he held any accounts, Mr. Clemons disclosed Germany but not Switzerland. Although his printed Turbo Tax instructions showed that he prepared an FBAR and those instructions directed him to “file it on or before June 30, 2009,” he did not timely file an FBAR. He did not include an election under section 1295 or 1296.

Unlike the television station in Richmond Television, however, Vizala had no revenue until well after going live. See id. at 903–04, 909 (explaining that the station launched in 1956 and sought to carry forward its business expense deductions as net operating losses to 1956 and 1957, which indicates it had income in those years).

Petitioner seeks to distinguish Brown II and Brown III on the the- ory that the COIC unit’s return letter and the SO’s notice of determina- tion were both issued there within a span of two years. We do not see how this distinction helps petitioner. This Court unambiguously ruled in Brown II that the statutory 24-month period “ends when the COIC unit returns a taxpayer’s OIC.” Brown II, 118 T.C.M.

Petitioner’s reliance on Bagley is inappropriate.13 Unlike the taxpayer’s expenses in Bagley, petitioner’s whistleblowing expenses are personal and nondeductible, since his whistleblowing activities were merely a continuation of his personal lawsuits against his Laguna Beach neighbors brought under the guise of alleging a CWA violation and not business expenses under section 162.

- 16 - [*16] Continuing education expenses are generally deductible. Sec. 1.162-5(a), Income Tax Regs. Travel expenses for continuing education may also be deductible. Sec. 1.162-5(e), Income Tax Regs. Travel and related expenses are subject to the strict substantiation requirements of section 274(d). Because these expenses are subject to the strict substantiation requirements, the Cohan doctrine does not apply.

One leading case stated: Although the exact function and scope of the (F) reorganization in the scheme of tax-deferred transactions described in section 368(a)(1) have never been clearly defined, it is apparent from the language of subparagraph (F) that it is distinguishable from the five preceding types of reorganizations as encompassing only the simplest and least significant of corporate changes.

Unlike income (or loss) of a C corporation, income (or loss) of an S corporation escapes corporate-level taxation and gets “passed through” to the shareholder on a pro rata basis. §§ 1363(a), 1366(a)(1); Mourad v.

4 [*4] (2017) (noting that a deed of gift can serve as a de facto CWA). A taxpayer may not deduct the contribution if the donation acknowledgment fails to meet these strict demands. See 15 W. 17th St. LLC, 147 T.C. at 562 (emphasizing that the doctrine of substantial compliance does not apply for purposes of section 170(f)(8)); see also Addis v.

See Neonatology, 115 T.C. at 99 (insurance agent lacked expertise to advise on tax rules for insurance plan). The exception of section 170(f)(11)(A)(ii)(II) does not apply.

Several of these factors are neutral or inapposite here.

See Neonatology, 115 T.C. at 99 (insurance agent lacked expertise to advise on tax rules for insurance plan). The exception of section 170(f)(11)(A)(ii)(II) does not apply.

- 10 - [*10] ers do not contend that Vericor’s payments to Enercon were “contingent on the success of the research,” so this first factor does not apply here.

- 10 - [*10] ers do not contend that Vericor’s payments to Enercon were “contingent on the success of the research,” so this first factor does not apply here.

Unlike a payment representing a return of capital, the payments are not tied to the financial success of the partnership.35 Like a salary, guaranteed payments are ordinary income to the partners and deductible to the partnership under section 162 or 263, as appropriate.36 The Hohls and the Blakes argue that because guaranteed payments are not considered part of a partner’s distributive share only for purposes of section 61(a) and section 162(a), they are considered as “distributive shares of par

Petitioners offer no plausible - 26 - explanation why the death benefits they received under the Legacy Plan, unlike all other employer-provided insurance benefits, should be excluded from “fringe benefits” that are subject to this rule.7 Besides pointing us to the correct technical analysis, section 1372 confirms the error of petitioners’ reliance on section 1.301-1(q), Income Tax Regs.

1930) (explaining that where a taxpayer credibly establishes that he paid or incurred a deductible expense but does not establish the amount of the deduction, the Court may estimate the allowable amount in certain circumstances); Boyd v. Commissioner, 122 T.C. at 320 (explaining that Cohan rule is inapplicable to section 274(d) expenses).

- 8 - [*8] in the IRS examination of the Gregorys’ returns resulted in section 164(a) deductions for CLC tax expenses, which the IRS treated as non-miscellaneous itemized deductions (i.e., not subject to section 67(a)’s 2-percent floor). The remaining CLC expenses were aggregated and permitted as deductions to the extent allowed under section 183(b)(2). Consequently, we decline to address the Gregorys’ motion to the extent it requests the Court to hold that section 67(a) does not apply to sectio

- 24 - [*24] categories of reported office expenses leaves us without a basis upon which to distinguish between business expenses and personal expenses. See Davis v. Commissioner, T.C. Memo. 2006-272, 2006 WL 3780743, at *10 (finding that the Court does not have an adequate basis upon which to make a Cohan estimate where a taxpayer did not offer evidence to demonstrate allocation of internet fees between business and personal uses).

- 10 - [*10] ers do not contend that Vericor’s payments to Enercon were “contingent on the success of the research,” so this first factor does not apply here.

Petitioner testified that her internet was used 85- - 11 - 90% for business purposes, but she did not distinguish between business and personal use with respect to her cell phone. We consider it reasonable that 75% of petitioner’s internet and cell phone use was related to her employment with Coca-Cola, and therefore she is entitled to a $1,728.75 deduction for internet and cell phone expenses.

- 10 - [*10] ers do not contend that Vericor’s payments to Enercon were “contingent on the success of the research,” so this first factor does not apply here.

2d 688, can be read to support petitioner's position, we decline to follow that court's analysis.

Unlike a payment representing a return of capital, the payments are not tied to the financial success of the partnership.35 Like a salary, guaranteed payments are ordinary income to the partners and deductible to the partnership under section 162 or 263, as appropriate.36 The Hohls and the Blakes argue that because guaranteed payments are not considered part of a partner’s distributive share only for purposes of section 61(a) and section 162(a), they are considered as “distributive shares of par

-32- [*32] However, section 1235(a) does not apply if the transferee is a related person.

By its terms that regulation does not apply here since petitioner did attach appraisal summaries to each of his returns.

The TEFRA rules distinguish between “partnership items”, which are subject to the TEFRA rules, and “nonpartnership items”, which are not. See sec. 6231(a)(3) and (4).

- 10 - [*10] ers do not contend that Vericor’s payments to Enercon were “contingent on the success of the research,” so this first factor does not apply here.

- 12 - [*12] The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the tax- payer acted in good faith with respect to * * * [it]." Sec.

No similar regula- tory exception existed (or was needed) in Romano-Murphy and that case is there- fore distinguishable from this one. Finally, it is clear that SO2 discharged all ofher other responsibilities under section 6630(c)(3). Petitioner expressed no interest in a collection alternative, and SO2 was not required to propose one for him. See Aviles v. Commissioner, T.C. Memo. 2020-12, at *11; Gentile v.

6662(a) and (b)(1) and (2). The accuracy-related penalty does not apply, however, to any part ofan underpayment oftax ifit is shown that the taxpayer acted with reasonable cause and in good faith with respect to that portion.

-51- [*51] deduction in computing the partner's regular taxable income. Under the plain terms ofsection 1402(a), income from a business an individual carries on directly can be reduced by deductions only to the extent that those deductions are "allowed by" subtitle A (sections 1 through 1563). But that limitation does not apply to the individual's distributive share ofpartnership income or loss.

- 12 - [*12] The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the tax- payer acted in good faith with respect to * * * [it]." Sec.

6662(a) and (b)(1) and (2). The accuracy-related penalty does not apply, however, to any part ofan underpayment oftax ifit is shown that the taxpayer acted with reasonable cause and in good faith with respect to that portion.

7491(a) does not apply here because petitioner has not produced evidence that it has satisfied the preconditions for its application.

- 18 - [*18] Petitioners failed to maintain adequate substantiating records for expenses underlying the deductions claimed on their 2009, 2010, and 2011 returns. Therefore, respondent has met his burden ofproduction with respect to the imposition ofsection 6662(a) accuracy-relatedpenalties. The accuracy-related penalty does not apply to any part ofan underpayment oftax ifit is shown that the taxpayer acted with reasonable cause and in good faith with respect to that portion.

The sum ofthose amounts, or $291,267, exceeds petitioner's 2015 tax liability as determined in the notice ofdeficiency, $276,128, - 31 - [*31] and substantially exceeds the correct amount oftax for 2015 as redetermined in this opinion. Petitioner thus had no "underpayment oftax" for 2015, and the fraud penalty therefore does not apply.

Petitioners seek to distinguish Pine Mountain. However, for them to qualify for the deduc- tion, the deed must satisfy both sec. 170(h)(2) and (5).

Petitioner contends that this regulation does not apply here or that the necessary conditions were met.

By its terms the regulation petitioner cites does not apply here.

- 28 - [*28] Campbell and whether it substantially complied with the requirements under section 170 and the regulations thereunder for a CWA, we have held on numerous occasions that the doctrine ofsubstantial compliance does not apply with respect to the CWA requirements.

Consequently, an S corporation, unlike a traditional C corporation, generally pays no Federal income tax.5 Instead, a shareholder ofan S corporation must report a pro rata share ofthe S corporation's taxable income, 5As exceptions to this general rule an S corporation may be taxable in certain circumstances on built-in gains and passive investment income, see secs. 1374 and 1375, and for recapture ofcertain inventory benefits and investment credits, see secs.

An understatement ofincome tax is substantial ifit exceeds the greater of 10% ofthe tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). Respondent has shown that petitioner has substantial understatements. An accuracy-relatedpenalty does not apply, however, to any portion ofan underpayment oftax ifthe taxpayer shows he or she acted with reasonable cause and in good faith with respect to that portion.

amounts not so reported that were previously assessed (or collected without assessment) over (2) any rebates made - 40 - [*40] (where a rebate is defined as so much ofan abatement, credit, refund or other repayment, as was made on the ground that the correct tax was less than the excess ofamount (1) over rebates previously made). Sec. 6664(a). Section 6664(c)(1) provides that the penalty under section 6662(a) does not apply to any portion ofthe underpayment to the extent that the taxpayerhad re

Upon delivery the grain was commingled for processing such that the grain from members was not distinguished or separated from the grain from nonmembers. AGP Grain Marketing made payments to members under the grain contracts totaling $131,458,557, $134,795,630, $198,179,971, and $158,166,019 in 2006, - 10 - 2007, 2008, and 2009, respectively.

An authority "having some facts in common with the tax treatment at issue is not particularly relevant ifthe authority is materially distinguishable on its facts, or is otherwise inapplicable". Sec. 1.6662-4(d)(3)(ii), Income Tax Regs.; see also Antonides v.

Accordingly, the presumption does not apply here.

2011-116, 2011 Tax Ct. Memo LEXIS 112. Dingman is inapplicable to the present case.

Commissioner, 116 T.C. at 446-447. The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion." Sec.

Omission ofthe notice required on the first page ofthe return must - 13 - [*13] also be considered with other errors in determining whether an individual is qualified for the exclusion and intends to make the election. We have also considered whether petitioners' late returns substantially complied with the regulations. Respondent argues that the doctrine does not apply because the applicable standards are established in section 1.911-7(a)(4), Income Tax Regs.

7491(c). Further, we observe that petitioner claimed a deduction under section 162(a) with respect to legal expenses related to Ms. Ray's damages despite being aware ofthe fact that those were not related to the purported business. For that reason, respondent has also met his burden ofproduction with respect to, and we find that petitioner's underpayment oftax was also attributable to, negligence. The accuracy-related penalty under section 6662(a) does not apply to any portion ofan underpayment

6662(a), (b)(2), (d)(1)(A). Petitioners reported tax liabilities of$17,111, $1,013, and $2,730 on their returns for 2013, 2014, and 2015, respec- tively. The notice ofdeficiency determined tax liabilities of$71,034, $20,411, and $13,953, respectively. Although respondent's concessions will reduce those liabilities slightly, it is obvious that petitioners' understatement ofincome tax for each year will be "substantial." See sec. 6662(d)(1). The section 6662 penalty does not apply to any portion o

Commissioner, 112 T.C. 247, 250 (1999). Mr. Williams' Schedule F activities failed to produce gross income in excess ofdeductions at any time during their operation. Nor does the record establish that NutraTech's Schedule F activities ever produced gross income in excess ofdeductions for purposes ofinvoking the presumption. Accordingly, the presumption does not apply in these cases.

Furthermore, petitioner failed to maintain - 19 - adequate substantiating records for many ofthe expenses underlying the deductions claimed on petitioners' 2012 and 2013 returns. As a result, we find that respondent met his burden ofproduction with respect to the negligence penalty. The accuracy-related penalty does not apply to any part ofan underpayment oftax ifit is shown that the taxpayer acted with reasonable cause and in good faith with respect to that portion.

We find the facts in Bond to be materially distinguishable from the facts in the present case and petitioners' reli- ance on that case to be misplaced.

Unlike Supplemental Security Income benefits, which are based on need, SSDI benefits are generally based on work history and the amount ofthe beneficiary's prior contributions. See 42 U.S.C. secs. 402, 423(c)(1) (2012); 20 C.F.R.

Petitioners exhibited a lack ofdue care by failing to - 17 - [*17] substantiate their Schedule C expenses and noncash charitable contributions. Thus, respondent has met his burden ofproduction with respect to the section 6662(a) penalties for negligence.5 The accuracy-related penalty does not apply with respect to any portion of the underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.

Although we did use the phrase "original signature," our holding in Turco is distinguishable from this case and Gen.

Dividends from an FSC to a corporate parent--unlike most dividends from a foreign subsidiary--were generally not taxed because the parent received a 100% dividends received deduction for dividends from an FSC.

The regulations excuse the omission ofbasis information only if reasonable cause is established in the explanation attached to the appraisal sum- 4Petitioner contends that Belair strictly complied with section 155(a)(1) of DEFRA, which (unlike the regulations) required only that basis be reported some- where on the tax return. See 98 Stat. at 691.

2014-141, at *17. Petitioner does not contend that the burden of proofshould shift to respondent under section 7491(a), nor has it established that the requirements for shifting the burden ofproofhave been met. Accordingly, the burden ofproofremains on petitioner. See sec. 7491(a)(2). As an initial matter we note that section 280A, which allows a deduction for home office expenses, is inapplicable to C corporations such as petitioner.

In Judge Dennis' view, the fact that "the substitution occurs within the outer boundaries ofthe * * * ranch tract makes no meaningful -41- difference," because the easements in any event "do not attach in perpetuity to the initially defined parcel ofreal property." R at 562-563. In short, "[b]ecause the easement does not govern a 'defined and static' parcel ofland," Judge Dennis con- cluded that it "does not constitute a 'qualified conservation contribution' under § 170(h)." R at 562 (citing Be

Therefore, there was no completed gift with respect to the cash surrender value remaining as ofdecedent's date ofdeath, and section 2512(b) is inapplicable.

Although we did use the phrase "original signature," our holding in Turco is distinguishable from this case and Gen.

Dividends from an FSC to a corporate parent--unlike most dividends from a foreign subsidiary--were generally not taxed because the parent received a 100% dividends received deduction for dividends from an FSC.

Petitioner contends that we should distinguish Rodriguez as being decided narrowly on its facts and conclude in this case that deemed or constructive dividends were paid out ofthe CFCs' earnings and profits, to which section 1(h)(11) may apply.

Unlike domicile, residency does not require "an intent to make a fixed and permanent home." Vento v. Dir. of V.I. BIR, 715 F.3d 455, 467 (3d Cir.

212 deductions, unlike sec. 162(a) deductions, are generally deductible only to the extent they exceed 2% of an individual's adjusted gross income, see sec.

The regulations distinguish them. See sec. 1.641(b)- 2(b), Income Tax Regs.

1.469-9(g)(3), Income Tax Regs. Petitioners filed a statement with their 2013 income tax return electing to treat all oftheir interests in rental real estate as a single rental real estate activity. Since petitioners concede that BC LLC and Lumpkin were not real estate activities during the tax years at issue, there is only one rental property and the election does not apply.

Commissioner, 112 T.C. 247, 250 (1999). Mr. Williams' Schedule F activities failed to produce gross income in excess ofdeductions at any time during their operation. Nor does the record establish that NutraTech's Schedule F activities ever produced gross income in excess ofdeductions for purposes ofinvoking the presumption. Accordingly, the presumption does not apply in these cases.

The parties agree that the loan regime does not apply here.

Although we did use the phrase "original signature," our holding in Turco is distinguishable from this case and Gen.

Although we did use the phrase "original signature," our holding in Turco is distinguishable from this case and Gen.

Moreover, petitioners argue, unlike in the case ofdomestic students who travel to other locations for their summerjobs, employers benefit from SWTP participants' maintenance of residences in their home countries because the employers (1) may legally employ such nonresident aliens to fill seasonal employment needs that might otherwise go unmet, (2) recognize employment tax savings, see sec.

An understatement is substantial in the case ofan individual ifthe - 54 - [*54] amount ofthe understatement for the taxable year exceeds the greater of 10% ofthe tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

Commissioner, 122 T.C. 1, 8-9 (2004). Section 104(a)(1) and the regulations thereunder provide that retirement payments are excludable from gross income ifthey are received pursuant to a workmen's compensation act or a statute in the nature ofa workmen's compensation act. See Sewards v. Commissioner, 138 T.C. 320, 322 (2012), M, 785 F.3d 1331 (9th Cir. 2015); sec. 1.104-1(b), Income Tax Regs. Section 104 does not apply, however, to the extent that payments are determined by reference to the empl

6001; INDOPCO, Inc. v. Commissioner, 503 U.S. at 84; sec. 1.6001-1(a), (e), Income Tax Regs. Insofar as the Court has sustained respondent's disallowance ofdeductions, the Court has done so because petitioners did not produce records sufficient to substantiate their deductions. Respondent has therefore met his burden of production to show that petitioners were negligent and disregarded the applicable rules or regulations.¹6 A penalty under section 6662(a) does not apply to any portion ofan under

section 1.864-6, Income Tax Regs., refers to these two elements together as the "material factor" test, explaining "regularly carries on activities ofthe type", see sec. 864(c)(5)(B), as "realized in the ordinary course". Because the regulation employs the phrase 2°By its terms, section 864(c)(4)(B) and (c)(5) does not apply to gains from dispositions ofpartnership interests, because such gains are not one ofthe three types ofincome denoted in section 864(c)(4)(B)(i)-(iii).

Unlike the American Opportunity Credit, the Lifetime ¹4While the record reflects that petitioner attended classes at three postsecondary institutions (COC, CSUN, and St. John's) for a number ofyears beginning in 2004, it has not been established that petitioner had "completed" more than four years ofpostsecondary education before 2013.

- 13 - [*13] section 72(p)(2)(C). See Rule 143(c) (providing in part that statements made in briefs do not constitute evidence); Reiffv. Commissioner, 77 T.C. 1169, 1175 (1981). Petitioners also contend that ifsection 1.72(p)-1, Income Tax Regs., does not apply, there was no distribution because: (1) all parties to the loan acted as though they agreed to suspend payments; (2) the substance ofthe repayments should be honored over the form that was required; or (3) Mrs.

- 13 - [*13] Petitioner's tax year in issue is 2010, which began on January 1, 2010. Therefore, Rev. Proc. 2010-13, supra, does not apply, and petitioner was required to file an election as prescribed under the Code.

- 17 - The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that she acted in good faith.

Parkinson is distinguishable because petitioner has failed to prove that any portion ofthe disputed $85,000 was paid to him for physical injury or physical sickness. III. Conclusion We sustain respondent's adjustment including the disputed $85,000 in petitioner's 2012 gross income.

Moreover, petitioners argue, unlike in the case ofdomestic students who travel to other locations for their summerjobs, employers benefit from SWTP participants' maintenance of residences in their home countries because the employers (1) may legally employ such nonresident aliens to fill seasonal employment needs that might otherwise go unmet, (2) recognize employment tax savings, see sec.

The necessary facts have been stipulated by - 14 - [*14] both parties. And petitioners have not argued that the burden ofproof should be shifted to respondent; thus section 7491(a) does not apply.

7537-98 (July 10, 2002)." Respondent has not argued that the instant case is distinguishable from McNamara I. Instead, his argument is based solely upon this Court's following its "Substantially similar orders were entered in Bot v. Commissioner, T.C. Dkt. No. 7970-98 (July 10, 2002), and Hennen v.

It is true that the mortgage provisions ofsection 1.170A-14(g)(2), unlike the extinguishment provisions ofparagraph (g)(6) (discussed below in part III.A.2), do not explicitly mention proceeds. It is evidently this fact that prompts Palmolive to argue that-- the subordination requirement ofSection 1.170A-14(g)(2) * * * does not require or permit consideration ofthe use ofinsurance proceeds prior to extinguishment.

- 15 - [*15] ing ofsection 469(c)(7). That section provides that the rental real estate activity ofa real estate professional is not per se passive. See Kosonen v. Commissioner, T.C. Memo. 2000-107, 79 T.C.M. (CCH) 1765; sec. 1.469-9(b)(6), (c)(1), Income Tax Regs. Ifa real estate professional materially participates in a rental real estate activity, that activity is treated as nonpassive, and the section 469(a) disallowance does not apply.

At trial peti- tioners produced credit card statements which they had annotated to distinguish between alleged "corporate" and "personal" expenses. These statements with check marks and notations lack the specificity necessary to establish the business purpose for each expenditure as required by section 274(d). See sec. 1.274-5T(c), Temporary Income Tax Regs., supra.

Usually, the tested party will be the least -139- [*139] complex ofthe controlled taxpayers and does not own valuable intangible property or unique assets that distinguish it from potential uncontrolled comparables. See, e.g., id. Respondent contends that petitioner failed to disclose material facts regarding the use ofEEI U.S. distribution as the tested party. During its 1994-97 audit petitioner proposed to use a CUP method which would have changed the tested party from the Island plants to CH

- 17 - The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that she acted in good faith.

- 18 - [*18] Commissioner, 85 T.C. 731, 742-743 (1985). And while section 1.274- 5T(c)(5), Temporary Income Tax Regs., supra, allows taxpayers to substantiate deductions by reasonable reconstruction, respondent urges that the Cohan rule does not apply to the items required to be substantiated under section 274(d).

2000-107, 79 T.C.M. (CCH) 1765; sec. 1.469-9(b)(6), (c)(1), Income Tax Regs. Ifa real estate professional materi- ally participates in a rental real estate activity, that activity is treated as nonpassive and the section 469(a) disallowance does not apply.

At trial peti- tioners produced credit card statements which they had annotated to distinguish between alleged "corporate" and "personal" expenses. These statements with check marks and notations lack the specificity necessary to establish the business purpose for each expenditure as required by section 274(d). See sec. 1.274-5T(c), Temporary Income Tax Regs., supra.

- 34 - [*34] 6662(d)(1)(A). Respondent has met the initial burden ofproduction because our conclusions as to the deficiencies result in the following substantial understatements ofincome tax: 10% Oftax required Year to be shown Understatement 2006 $47,094 $448,309 2007 33,434 311,021 2008 4,546 27,493 The burden is on petitioners to prove that the penalties are inappropriate. The section 6662(a) penalty does not apply with respect to any portion of the underpayment for which it is shown that the

R Unlike an investor, a trader's expenses are deducted in determining adjusted gross income rather than as itemized expenses. Whether petitioner's trading activity constituted a trade or business is a question offact. S_e_e Higgins v. Commissioner, 312 U.S.

Moreover, petitioners argue, unlike in the case ofdomestic students who travel to other locations for their summerjobs, employers benefit from SWTP participants' maintenance of residences in their home countries because the employers (1) may legally employ such nonresident aliens to fill seasonal employment needs that might otherwise go unmet, (2) recognize employment tax savings, see sec.

res comprises a liability from * * * [decedent]'s viewpoint, I display the dollar amounts as negative quantities." (Emphasis added.) Because decedent had only obligations under the contracts-- and obligations are not property--the VPFCs were not property under section 1001, and therefore section 1001 is inapplicable.

5Unlike the corresponding 2013 Schedule C, petitioners' 2014 Schedule C for 1st Class Tax Services did not include deductions for car and truck expenses.

2014-161, is factually distinguishable because the taxpayer in that case was actively marketing the property at issue before the deed in that case was recorded, whereas in the present case petitioner represents that the warehouse has never been offered for sale. But as we noted earlier, under sec. 1.170A-14(g)(3), Income Tax Regs., we are to test the possibility--as of"the date ofthe gift"--that the donee's rights might be defeated.

Respondent has thus satisfied section - 9 - 7491(c) by carrying his burden ofproduction ofdemonstrating a "substantial understatement ofincome tax" under section 6662(b)(2).2 The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the tax- payer acted in good faith" with respect to it.

Respondent argues that the members were not limited partners for the purposes ofsection 1402(a)(13), and that, therefore, the exclusion does not apply.

Respondent argues that the members were not limited partners for the purposes ofsection 1402(a)(13), and that, therefore, the exclusion does not apply.

Woods, 571 U.S. , 134 S. Ct. 557 (2013); Gustashaw v. Commissioner, T.C. Memo. 2011-195. Consequently, respondent has satisfied his burden ofproduction, and the 40% gross valuation misstatement applies to petitioners' underpayments absent a showing ofreasonable cause. B. Reasonable Cause and Good Faith The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

Woods, 571 U.S. , 134 S. Ct. 557 (2013); Gustashaw v. Commissioner, T.C. Memo. 2011-195. Consequently, respondent has satisfied his burden ofproduction, and the 40% gross valuation misstatement applies to petitioners' underpayments absent a showing ofreasonable cause. B. Reasonable Cause and Good Faith The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

Respondent argues that the members were not limited partners for the purposes ofsection 1402(a)(13), and that, therefore, the exclusion does not apply.

Hoffmann "had no real opportunity to charter the aircraft profitably." In short, each ofthe authorities cited by petitioners is either "materially distinguishable on its facts, or is otherwise inapplicable to the tax treatment at issue." & sec. 1.6662-4(d)(3)(ii), Income Tax Regs.

Be- cause we decide these cases on a preponderance ofthe evidence, we need not - 11 - [*11] decide which party has the burden ofproof. See sec. 7491(a); Estate of Turner v. Commissioner, 138 T.C. 306, 309 (2012). A. The Bad Debt Deduction Section 166(a)(1) provides that "[t]here shall be allowed as a deduction any debt which becomes [wholly] worthless within the taxable year." For a nonbusi- ness bad debt held by a taxpayer other than a corporation, section 166(a)(1) does not apply, and the tax

1994-114, 67 T.C.M. (CCH)2434, 2435; Kaechele v. Commissioner, T.C. Memo. 1992-457, 64 T.C.M. (CCH) 459, 460; sec. 1.152- 4(d)(1), Income Tax Regs. Once a child is considered emancipated under State law, section 152(e)(1) is inapplicable and the general provision ofsection 152(a) controls.

The question we must decide is whetherpetitioner transferred "all substantial rights" to the relevant technology, such that the royalties he received are eligible for capital gain treatment under section 1235.¹ Finding as we do that petitioner retained valuable rights in the technologythat was the subject ofthe transfer, we sustain respondent's determination that section 1235 does not apply and that the royalties constituted ordinary income.

"Negligence" includes any failure to make a reasonable attempt to comply with the Code, - 17 - including any failure to keep adequate books and records or to substantiate items properly. See sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. The section 6662(a) accuracy-related penalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

Respondent's contention that the division ofmarital property must - 10 - [*10] relate to the divorce instrument is based on the first, second, and third sentences ofthe regulation (which refer to the divorce instrument) but overlooks the fourth sentence. The third sentence ofthe regulation provides that there is a presumption that section 1041 does not apply to "[a]ny transfer not pursuant to a divorce or separation instrument".

103-213, at 565 n.32 (1993), 1993-3 C.B. 393, 443), but it must meet the requirements ofsection 170(f)(8)(B). The doctrine ofsubstantial compliance does not apply to excuse compliance with the strict substantiation requirements ofsection 170(f)(8)(B).

Unlike the mostly ministerial changes listed in section 1.61-22(j)(2)(ii), Income Tax Regs., adding a health expense - 37 - [*37] reimbursement benefit through amending the SBP adoption agreement resulted in creating a new right under the existing split-dollar life insurance arrangement.

1.152-4(g), Example (6), Income Tax Regs. Therefore, section 152(e) is inapplicable and the general rule ofsection 152(a) controls.4 See, e.g., Ferguson v.

103-213, at 565 n.32 (1993), 1993-3 C.B. 393, 443), but it must meet the requirements ofsection 170(f)(8)(B). The doctrine ofsubstantial compliance does not apply to excuse compliance with the strict substantiation requirements ofsection 170(f)(8)(B).

"A taxpayer cannot engage in an exchange with himself; an exchange ordinarily requires a 'reciprocal transfer ofproperty, as distinguished from a transfer ofproperty for money consideration'." DeCleene v. Commissioner, 115 T.C.

We find the cases on which decedent's estate relies to be materially distinguishable from the instant case and its reliance on those cases to be misplaced.

"A taxpayer cannot engage in an exchange with himself; an exchange ordinarily requires a 'reciprocal transfer ofproperty, as distinguished from a transfer ofproperty for money consideration'." DeCleene v. Commissioner, 115 T.C.

Id.¹² Although the issue in the instant case involves the application ofsection 1.170A-14(g)(6), Income Tax Regs., the determinative facts are distinguishable from those in Kaufman, which involved the claim priority ofa donee organization and a mortgagee with respect to extinguishment proceeds.

We find the facts in each ofthose cases to be materially distinguishable from the facts that we have found in this case and petitioner's reliance on each ofthose cases to be misplaced.

Code and Munici- pal Regulations explicitly distinguish between them. The Mayor is authorized to declare a "legal holiday," but that authorization appears in a different section of the D.C. Code from that which authorizes her to declare a state ofemergency. See D.C. Code sec. 1-612.02(b) (2014) (specifying rules with respect to enumerated legal holidays "and any other day designated to be a legal holiday by the Mayor").

The Gates Opinion is inapposite to the resolution ofwhether petitioners are entitled under section 165 to deduct as an ordinary loss the claimed Elm Court loss.

Petitioners attempt to distinguish the above-cited caselaw by contending that the capitalization ofthe 2008-09 interest was a true discharge ofthe interest because there was a "substantial modification" ofthe promissory note under section 1.1001-3, Income Tax Regs.

6211, 6662(d)(2), 6664(a). That being so, it is petitioner's burden to establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a); Welch v. Helvering, 290 U.S. at 115. The accuracy-relatedpenalty does not apply with respect to any portion of an underpayment for which it is shown that the taxpayer had reasonable cause and acted in good faith.

M - 15 - Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

"A taxpayer cannot engage in an exchange with himself; an exchange ordinarily requires a 'reciprocal transfer ofproperty, as distinguished from a transfer ofproperty for money consideration'." DeCleene v. Commissioner, 115 T.C.

- 14 - The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

-16- [*16] sec. 1.6662-3(b)(3). A position generally has a reasonable basis ifthe position is reasonably based on one or more authorities listed in section 1.6662- 4(d)(3)(iii), Income Tax Regs., which includes the Internal Revenue Code, temporary and final regulations, revenue procedures and revenue rulings, and court decisions. Sec. 1.6662-4(e)(2)(i), Income Tax Regs.; id. sec. 1.6662-3(b)(3). The penalty under section 6662(a) does not apply ifthe taxpayer can demonstrate that he or she: (1) h

Unlike the taxpayer in Frank Lyon, which entered into a sale-leaseback with another taxable entity such that the transaction was tax neutral as a result, petitioner entered into a transaction with a tax-exempt entity. This would allow petitioner to double-dip into the tax benefits by deferring the tax under section 1031 and using deductions related to the test transactions.

- 14 - The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

Unlike the taxpayer in Frank Lyon, which entered into a sale-leaseback with another taxable entity such that the transaction was tax neutral as a result, petitioner entered into a transaction with a tax-exempt entity. This would allow petitioner to double-dip into the tax benefits by deferring the tax under section 1031 and using deductions related to the test transactions.

Petitioner argues that the facts ofthis case are distinguishable from the facts in Mitchell I.

- 14 - meets the definition ofa real estate professional. The Court concludes that petitioner did not meet the definition ofa real estate professional." Rental activity (including commercial rental real estate activity) is passive unless the taxpayer qualifies as a real estate professional as defined in section 469(c)(7)(B). Sec. 469(c)(2). Ifa taxpayermeets that definition (sometimes that taxpayer is referred to as a real estate professional), then section 469(c)(2) does not apply and the taxpa

152(e)(2). Respondent provided a copy ofa child support order to establish that petitioner was in fact a "noncustodial parent". However, the child support order was entered August 3, 2015. It does not contradict petitioner's testimony. Further, the child support order was not effective until August 1, 2015. Petitioner sufficiently met his burden ofestablishing that he and his wife were married during 2013, and any special requirement ofa Form 8332 under section 152(e)(2) is inapplicable.

The court distinguished the taxpayer's business from service businesses, such as law firms and medical practices, for which "the use ofcapital is merely incidental." R at 411.

Unlike the mostly ministerial changes listed in section 1.61-22(j)(2)(ii), Income Tax Regs., adding a health expense - 37 - [*37] reimbursement benefit through amending the SBP adoption agreement resulted in creating a new right under the existing split-dollar life insurance arrangement.

Be- cause we decide these cases on a preponderance ofthe evidence, we need not - 11 - [*11] decide which party has the burden ofproof. See sec. 7491(a); Estate of Turner v. Commissioner, 138 T.C. 306, 309 (2012). A. The Bad Debt Deduction Section 166(a)(1) provides that "[t]here shall be allowed as a deduction any debt which becomes [wholly] worthless within the taxable year." For a nonbusi- ness bad debt held by a taxpayer other than a corporation, section 166(a)(1) does not apply, and the tax

Stanley acknowledged that petitioners used some ofthe loan proceeds to pay personal expenses, and petitioners made no attempt to distinguish between those loan proceeds used for personal expenses and those used for other purposes that might permit deduction. We likewise have insufficient evidence to make any reasonable allocation between payment ofpersonal expenses and other uses. See Sec. 1.163-8T(a)(3), Temporary Income Tax Regs., 52 Fed.

A "substantial understatement" is an understatement ofincome tax that exceeds the greater of - 12 - 10% ofthe tax required to be shown on the return or $5,000. See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs. The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

This means that any refundable portion ofthe QEZE Real Property Tax Credit that remained after first reducing the Maineses' state income-tax liability is taxable as income.¹¹ The exclusionary aspect ofthe tax-benefitrule under section 111(a) does not apply here to the extent that the decreased pass-through income from Huron reduced the Maineses' federal tax liability.

23We also note that unlike the statutory provision at issue in Mayo Found., sec. 482 purports only to empower the Secretary to allocate income among controlled entities but not to directly govern taxpayer conduct. See sec. 1.482- 1(a)(3), Income Tax Regs.

7491(c). Respondent met his burden ofproduction by showing that petitioners were not entitled to $5,200 ofthe $6,000 deduction claimed on their 2010 return. The burden thus shifts to petitioners to prove that the penalty does not apply.

-53- [*53] $49,512.15, and $32,049 for the years 2008, 2009, and 2010, respectively. These amounts exceed 10% ofthe tax required to be shown on the respective returns, which for each year exceeds $5,000. Petitioners also satisfy the 10% income tax test as well.6 Thus, respondent has carried his burden ofdemonstrating that petitioners substantiallyunderstated their income tax for each year at issue. Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to a

A disguised sale occurs when (1) a partner directly or indirectly transfers money or property to a partnership, (2) there is a related direct or indirect transfer ofmoney or other property by the partnership to such partner, and (3) the transfers are properly characterized as a sale or exchange ofproperty when viewed together. Sec. 707(a)(2)(B). In all cases the 38(...continued) bona fide partnership and therefore that sec. 707 does not apply in the case at hand.

- 16 - [*16] section 6662 penalty. Sec. 7491(c). Respondent met his burden of production by showing that petitioner's wages did not qualify as foreign earned income excludable under section 911(a). S_e_e Rogers v. Commissioner, T.C. Memo. 2013-77, 105 T.C.M. (CCH) 1478 (2013). The burden ofproofthus shifts to petitioners to show that the penalty does not apply.

Commissioner, 71 T.C. at 1124-1125 (noting that where section 274 does not apply, taxpayermay offer other credible evidence inlieu ofsubstantiating records).

The purpose ofthe material participation test is to distinguish actively participating in the operation ofa business from investor- type activity. The fact that Mr. Kline skippered the four Kline charters and/or that the charter participants were his friends and acquaintances might be ofsome importance ifthis was a not-for-profit or section 183 case, but respondent has conceded that petitioners were engaged in a business and that is not the question for our consideration.

- 16 - [*16] section 6662 penalty. Sec. 7491(c). Respondent met his burden of production by showing that petitioner's wages did not qualify as foreign earned income excludable under section 911(a). S_e_e Rogers v. Commissioner, T.C. Memo. 2013-77, 105 T.C.M. (CCH) 1478 (2013). The burden ofproofthus shifts to petitioners to show that the penalty does not apply.

Second, Davis is inapposite because it involved an exchange, not a gift.

"For purposes ofanalyzing a case under section 183," the Commissioner argues, "the courts distinguished technical expertise with respect to breeding, promoting and showing horses from expertise 16 At trial Donna Egan, an expert on Arabian horse marketing, advertising, and promotion, testified that the Egyptian Event, held each year in Lexington, Kentucky, is "the premier show for Egyptian Arabian Horses in the world today * * *.

"For purposes ofanalyzing a case under section 183," the Commissioner argues, "the courts distinguished technical expertise with respect to breeding, promoting and showing horses from expertise 16 At trial Donna Egan, an expert on Arabian horse marketing, advertising, and promotion, testified that the Egyptian Event, held each year in Lexington, Kentucky, is "the premier show for Egyptian Arabian Horses in the world today * * *.

In 2012 the Commissioner officially explained that the "tort-type rights test was intended to distinguish damages for personal injuries from, for example, damages for breach ofcontract." T.D. 9573. The change in the section 104 regulation reflected a profusion ofremedies for persons who are physically injured and recover under no-fault statutes, so that they are treated like those who are physically injured and recover through more traditional actions in tort.

Publication 1542 provides Federal per diem allowances that apply only to employers for reimbursements of - 18 - [*18] lodging, meals, and incidental expenses. See IRS Publication 1542. Because petitioner is not an employer, such an allowance is inapplicable to him.

The purpose ofthe material participation test is to distinguish actively participating in the operation ofa business from investor- type activity. The fact that Mr. Kline skippered the four Kline charters and/or that the charter participants were his friends and acquaintances might be ofsome importance ifthis was a not-for-profit or section 183 case, but respondent has conceded that petitioners were engaged in a business and that is not the question for our consideration.

"For purposes ofanalyzing a case under section 183," the Commissioner argues, "the courts distinguished technical expertise with respect to breeding, promoting and showing horses from expertise 16 At trial Donna Egan, an expert on Arabian horse marketing, advertising, and promotion, testified that the Egyptian Event, held each year in Lexington, Kentucky, is "the premier show for Egyptian Arabian Horses in the world today * * *.

We conclude that under section 121 petitioners' Diamond Bar house was not petitioners' principal residence for two ofthe five years preceding its sale. We accordingly sustain respondent's determination that the section 121 exclusion does not apply.

Respondent has carried the - 20 - [*20] burden ofproductionto show that petitioneracted negligently for tax years 201.0 and 2011. The accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.

That being so, it is petitioners' burden to - 12 - establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe tax required to be shown in the tax return for that year or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

- 11 - [*11] Sec. 7491(c). Once the Commissioner satisfies his burden, the burden shifts to the taxpayerto prove that the penalty does not apply.

Unlike interest, the late fee does not accrue periodically but is instead charged only once. Regardless of whether the late fees are deductible as interest under sec. 163, because oftheir nexus to CHMD's acquisition ofequipment used in the operation ofits medical practice, they qualify as ordinary and necessary business expenses and would be deductible under sec.

Negligence also includes any failure by a taxpayerto keep - 16 - [*16] adequate books and records or to substantiate items properly. Sec. 1.6662- 3(b)(1), Income Tax Regs. Respondenthas demonstrated thatpetitioner failed to keep accurate records with respect to his claimed deductions. The accuracy-relatedpenalty does not apply with respect to any portion of an underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.

ds that his flight training expenses and the costs ofhis training flights are deductible as "educational expenses." To give rise to deductible business expenses, the education in question must maintain or im- 4The cases petitioner cites to support the business relatedness ofhis training flights are inapposite.

Unlike the taxpayer in Maddux, which had stopped developing the property two years before the sale, GDLP continually engaged in efforts to plan and develop the La Jolla property up until the purchase date. See id. at 1287.

Hence, respondent concludes, CNT's partners each entirely left out an income item from;its, his, or her return, so Home Concrete's rule is inapposite.

ds that his flight training expenses and the costs ofhis training flights are deductible as "educational expenses." To give rise to deductible business expenses, the education in question must maintain or im- 4The cases petitioner cites to support the business relatedness ofhis training flights are inapposite.

23We also note that unlike the statutory provision at issue in Mayo Found., sec. 482 purports only to empower the Secretary to allocate income among controlled entities but not to directly govern taxpayer conduct. See sec. 1.482- 1(a)(3), Income Tax Regs.

We conclude that under section 121 petitioners' Diamond Bar house was not petitioners' principal residence for two ofthe five years preceding its sale. We accordingly sustain respondent's determination that the section 121 exclusion does not apply.

Unlike the taxpayer in Maddux, which had stopped developing the property two years before the sale, GDLP continually engaged in efforts to plan and develop the La Jolla property up until the purchase date. See id. at 1287.

Kantchev appears to be arguing that, as long as Victory Film fulfilled the intent ofCongress in enacting section 181, Victory Film's failure to satisfy the election requirement that section 181(a)(1) imposes does not control whether Victory Film's "production qualifies for * * * the benefits ofthis election".

- 6 - Unlike 2010, petitioner did not itemize deductions for 2011 but rather claimed the standard deduction.

6013(d)(3); Butler v. Commissioner, 114 T.C. 276, 282 (2000). The married filingjointly status does not apply to a Federal income tax return unless both spouses intend to make ajoint return.

- 21 - [*21] 173, but it carefully distinguished many ofthe propositions Rosenthal used to reach that result. It first reread California Corporation Code section 15025--the only authority cited in Rosenthal to support its statementthat communityproperty is divested ofits characterupon transferto a partnership.

Respondent argues that no proximate relationship exists and the above cases are distinguishable because: (1) the motocross racing activity expenses were actually personal expenses; (2) DEC operated in Boise whereas most ofBen's races took place outside ofthat area; and (3) petitioners have not shown that the motocross racing activity brought in new customers.

Rather, the only authorities petitioners cite are Code sections and Treasury regulations that are inapposite to the case at hand.

Petitioners argue that unlike the taxpayers in those cases, Mr. Allred was current on his child support payments and should be allowed the exemption. In Miller, we deniedthe dependency exemption because the taxpayer did not satisfy the signature requirement ofsection 152(e)(2).

Negligence includes any failure to make a reasonable attempt to comply with the - 12 - provisions ofthe Internal Revenue Code. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. But the section 6662(a) penalty does not apply to any portion ofan underpayment oftax ifit is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith with respect to that portion.

1219(a)(1)(A), (e)(1), 120 Stat. at 1083, 1085. In the case of an individual the substantial valuation misstatementpenalty applies only where the portion ofthe underpayment for the taxable year attributable to the substantial valuation misstatementexceeds $5,000. See sec. 6662(e)(2). Generally, the accuracy-relatedpenalty does not apply with respect to any portion ofthe underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

1.707-1(a), Income Tax Regs. Section 707 applies even ifit is determined after the application ofthe rules that the purported partner is not a partner. Sec. 1.707-3(a)(3), Income Tax Regs.; see also sec. 1.707-6(a), Income Tax Regs.4 Therefore, the status ofa continuing partner-partnership relationship does not govern our decision in this case.

Commissioner, 141 T.C. at 341-342 (discussing Steller v. Sears, Roebuck & Co., 116 Cal. Rptr. 3d (Ct. App. 2010)). Accordingly, section 104(a)(1) does not serve to exclude the $65,000 settlement payment from petitioner's income. C. Section 104(a)(3) Generally, amounts received through accident or health insurance for personal injuries or sickness are excluded from gross income under section 104(a)(3). This exclusion does not apply, however, ifthe amounts are either (1) attributable to contributi

- 21 - [*21] the burden shifts to the taxpayerto prove that the penalty does not apply.

Rogers provided credit card statements to substantiate portions ofthe amount deducted, butthese statements clearly included charges attributable to both personal and business expenses; and he made no effortto distinguish the two. We sustain the IRS's determinations regardingthe nondeductibility ofinterest expenses claimed on Mr. Rogers' Schedule C. ¹³(...continued) (7th Cir. 1965).

But unlike section 170(h)(2)(C), those isolated situations address exchanges for "like" or "similar" property and do not involve an express statutory requirement that an interest be "in perpetuity".

469(c)(7)(A).6 5(...continued) exception is completelyphased out for taxpayers whose adjusted gross income (AGI) equals or exceeds $150,000. See sec. 469(i)(3)(A). Petitioners do not contend their AGI was less than $150,000 for 2008 or that any special phaseout rule applies. Therefore this exception does not apply.

In short, section 280A is simply inapposite given the actual use ofthe Solitude Way property.

A "substantial - 8 - understatement" includes an understatement ofincome tax that exceeds the greater of 10% ofthe tax required to be shown on the return or $5,000. See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs. The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves thatthere was reasonable cause for such portion andthat he acted in good faith with respect thereto.

Weiss' understanding, neither the primary text ofthe regulation nor Example 4 (which speaks to an individual who, unlike Mr. Weiss, received disability retired pay under 10 U.S.C.

The 1994 plan amendments and the 2001 plan document failed to distinguish between 5% owners and non-5% owners and therefore failed to specified properly the required distribution beginning dates. The 1994 plan amendments stated that, for all participants, accrued benefits be distributed or installments begin not later than April 1 following the calendar year in which the employee attains age 70½.

We have held that the phrase "[1]osses from wagering transactions" in section 165(d) refers to amounts expended on wagers, as distinguished from other expenses paid or incurred in carrying on the trade or business ofgambling. See Mayo v. Commissioner, 136 T.C.

1.6662-3(b)(1), Income Tax Regs. A "substantial understatement" includes an understatement ofincome taxthat exceedsthe greater of 10% ofthe tax required to be shown on the return or $5,000. See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs. The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpaymentifthe taxpayerproves thatthere was reasonable cause for such portion and that he acted in good faith with respect thereto.

Because the Court decides this case without regard to the burden ofproof, section 7491 is inapplicable.

We have held that the phrase "[1]osses from wagering transactions" in section 165(d) refers to amounts expended on wagers, as distinguished from other expenses paid or incurred in carrying on the trade or business ofgambling. See Mayo v. Commissioner, 136 T.C.

- 11 - [*11] $22,655, which is greater than 10% ofthe tax required to be shown on the return, and exceeds $5,000. Accordingly, respondent has met his burden of production with respect to petitioner's substantial understatement ofincome tax for 2009. The accuracy-relatedpenalty does not apply to any portion ofan underpayment, however, ifit is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith with respect to that portion.

Therefore, Forrest, which involved a section 31 credit, is inapposite and not controlling.

"In order to constitute a deferred exchange, the transaction must be an exchange (i.e., a transfer ofproperty for property, as distinguished from a transfer ofproperty for money)." Sec. 1.1031(k)-1(a), Income Tax Regs.

Therefore, Forrest, which involved a section 31 credit, is inapposite and not controlling.

170(f)(11)(A)(ii)(II). The burden ofproving reasonable cause is on the taxpayer. Rule 142(a). In Crimi v. Commissioner, T.C. Memo. 2013-51, we interpretedthe section 170(f)(11)(A)(ii)(II)reasonable cause standard by looking to the reasonable cause standard ofother Code provisions. "Reasonable cause requires that the taxpayer have exercised ordinary business care and prudence as to the challenged item * * * 29At least one court has held that the substantial compliance doctrine does not apply wher

1.6662-3(b)(1), Income Tax Regs. Respondenthas demonstratedthat petitioner failed to keep accurate records with respect to his participation in his rental activities, the participation of third parties in his rental activities, and his participation in the businesses ofhis companies. Respondenthas shownthat petitioner acted negligently with respect to 2009. The accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment for which it is shown that the taxpayerhad reasonab

2009-191. Petitioner husband obtained documents through his employment. The FCA obligated petitionerhusband to give the Government all supporting documentation. Petitionerhusband did not demonstrate any right to prevent Kyphon or the medical providers from using or disclosing the information. See 6(...continued) 1234A. As stated, petitioners have not demonstratedthe existence ofa capital asset, and sec. 1234A does not apply.

- 19 - The section 6662(a) accuracy-related penalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

But unlike section 170(h)(2)(C), those isolated situations address exchanges for "like" or "similar" property and do not involve an express statutory requirement that an interest be "in perpetuity".

In Gefen, unlike Dakotah, Gemini Twin Fund III, and Oden, a limited partner directly assumed partnership recourse indebtedness and also became obliged to make additional capital contributions. See Gefen, 87 T.C. at 1501 n.23.

Section 1.1502-2, Income Tax Regs., provides that the computation ofan affiliated group's tax liability shall be determined by adding together the following categories oftax: - 8 - (a) The tax imposed by section 11 on the consolidatedtaxable income for such year (see §1.1502-11 for the computation of consolidatedtaxable income); (b) The tax imposed by section 541 on the consolidated undistributed personal holding company income; (c) Ifparagraph (b) ofthis section does not apply, the aggregate o

- 21 - [*21] 173, but it carefully distinguished many ofthe propositions Rosenthal used to reach that result. It first reread California Corporation Code section 15025--the only authority cited in Rosenthal to support its statementthat communityproperty is divested ofits characterupon transferto a partnership.

Therefore, Forrest, which involved a section 31 credit, is inapposite and not controlling.

The tort-type rights test was intended to distinguish damages for personal injuries from, for example, damages for breach ofcontract. Since that time, however, Commissionerv. Schleier, 515 U.S.

6662(a) and (b)(1). The accuracy-related penalty does not apply, however, to portions ofan underpayment as to which the taxpayer acted in good faith and with reasonable cause.

Additionally, petitioner's Schedule C did not provide the required information for a valid section 181 election. This Court has on limited occasions applied the doctrine ofsubstantial compliance involving failures to make an election according to the applicable regulations. See Estate ofChamberlain v. Commissioner, T.C. Memo. 1999-181, aff'd, 9 Fed. Appx. 713 (9th Cir. 2001). Substantial compliance does not apply to the essential requirements ofa statute.

Unlike the sanction imposed under 28 U.S.C. sec. 1927, discussed below, it is unknown at this time under which statute petitioner was ordered to pay the $262 sanction to opposing counsel.

- 14 - activity exceeds the deductions for any two ofseven consecutive taxable years, the activity is presumed to be engaged in for profit for purposes ofsection 183 unless the Commissioner establishes to the contrary. Sec. 183(d); sec. 1.183-1(c)(1), Income Tax Regs. Because petitioners claimed losses for each oftheir taxable years 2005, when Ms. Craig began her horse activity, through 2011, the presump- tion under section 183(d) does not apply in the instant case.

Petitioners failed to report Form W-2 wage income and income from a distribution shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. See sec. 61. Petitioners acted negligently under the circumstances. Because ofsection 1.6662-2(c), Income Tax Regs., we need not address the applicability ofthe penalty on the ground ofsubstantial understatement ofincome tax for 2008. The accuracy-relatedpenalty does not apply with respec

Petitioner's horse breeding - 11 - [*11] activity failed to produce income in excess ofits deductions at any time during its operation. Accordingly, the presumption does not apply in this case.

Petitioner's explanation ofthe ongoing health issue and the unavailability ofrecords necessary -15 - [*15] to filing her return does not apply equally to the simpler task ofmaking a payment.

170(f)(8)(B); Schrimsher v. Commissioner, T.C. Memo. 2011-71, 101 T.C.M. (CCH) 1329, 1330 (2011). We have held that the doctrine ofsubstantial compliance does not apply to excuse a failure to comply with the requirements of section 170(f)(8)(B) because they are more than merelyprocedural requirements but rather go to the heart ofthe statute's purpose.

The court's conclusion on this point, however, does not apply here.

(CCH) at 1178; see also Sklar v. Commissioner, 125 T.C. at 292. The reasoning ofthese cases, however, is inapplicable here for two reasons.

Unlike the deed in Scheidelman, which provided a conservation easement only for the facade, petitioners' deed concerns the front, side, rear, and measured height ofproperty, as required by section 170(h)(4)(B) following the enactment of the PPA in 2006.

- 16 - [*16] The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofthe underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.' Sec.

-10- [*10] Commissioner, 358 U.S. 59, 60 (1958). On the other hand, the exception does not apply and the taxpayer's tax home remains the principal place of employment ifthe employment away from home is indefinite.

tion 17 corporation may be primarily commercial * * * [and] federal cases involving tribal sovereign immunityjustify a parallel treatment for federal income "(...continued) Even so, since the regulation effectively established the position in the ruling, and since we hold that Uniband is materially distinguishable from a section 17 corporation, the same analysis suffices for both its pre- and post-regulation years.

In making this coniparison, we consider the respective interests in the physical properties, the nature ofthe title conveyed, the rights ofthe parties, the duration ofthe interests, and any other factor bearing on the nature or character ofthe properties as distinguished from their grade or quality. Peabody Natural Res. Co. v. Commissioner, 126 T.C.

1.6662-5(g), Income Tax Regs. In the Court ofAppeals for the Second Circuit, a gross valuation misstatement exists and thus the 400% penalty applies where a claimed tax benefit is disallowed for lack ofeconomic substance. Gilman v. Commissioner, 933 F.2d at 150-152. An accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment, however, for which a taxpayer had reasonable cause and acted in good faith.

wever, in Simmons we did not apply the substantial compliance doctrine to decide whether the taxpayer satisfied the contemporaneous written acknowledgmentrequirement ofsection 170(f)(8); instead, we noted that the substantial compliance doctrine may apply to the qualified appraisal requirements - 21 - [*21] ofsection 170(f)(11). Accordingly, Simmons does not stand for the proposition for which petitioner cites it. Furthermore, "[t]he doctrine of substantial compliance does not apply to excuse c

Respondent's argument is inapposite.

1.6662- -18- [*18] 3(b)(1)(ii), Income Tax Regs. Finally, respondent will have also met his burden ofproduction for imposing the accuracy-relatedpenalty ifRule 155 computations show thatpetitioner had a substantial understatement ofincome tax. See, e.a., Jarmanv. Commissioner, T.C. Memo. 2010-285, 100 T.C.M. (CCH) 599, 602 (2010); Prince v. Commissioner, T.C. Memo. 2003-247, 86 T.C.M. (CCH) 283, 288 (2003). Petitioner argues that the accuracy-relatedpenalty does not apply because he believed th

- 8 - [*8] Section 611(a) provides that under the regulations prescribed by the Secretary, a reasonable allowance for depletion is to be allowed in computing the taxable income derived from oil and gas wells. Ordinary income from an oil and gas well may be eligible for cost depletion under section 612 or percentage depletion under section 613A. Section 613A(d)(5) provides that percentage depletion for income from oil and gas wells does not apply to "any lease bonus, advance royalty, or other amo

- 18 - The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

- 4 - substantial economic effect under section 1.704-1(b), Income Tax Regs. Both section 465 and section 1.704-1(b), Income Tax Regs., were among the grounds on which respondent supported the adjustments made in the FPAA. Petitioner filed a motion for partial summaryjudgment regarding the 40% gross valuation misstatement penalty, arguing that this penalty does not apply as a matter oflaw because petitioner conceded the correctness ofadjustments proposed in the FPAA on grounds unrelated to valua

Additionally, unlike unrecognized gain, excluded discharge ofindebtedness income may affect the tax liability ofS corporation shareholders. Section 108(b)(1) specifies that the amount ofdischarge ofindebtedness income excluded from gross income is applied to reduce the tax attributes ofthe taxpayer.

In fact, unlike petitioner's payment for Palmer's trusts in 1993, Optimum Health received nothing in exchange for its trust payments in 1994 and 1995.

This Court has also noted in the past that "an authority is oflittle relevance if it is materially distinguishable on its facts from the facts ofthe case at issue." Antonides v. Commissioner, 91 T.C.

1.6662-3(b)(1), Income - 10 - [*10] Tax Regs. The Tinneys did not maintain adequate records ofthe disputed items, and they did not review the return before filing it. The IRS has carried its burden ofproduction with respect to the section 6662(a) penalty for negligence. For the same reasons we conclude (1) there was no reasonable cause for the underpayment and (2) the Tinneys did not act in good faith. See sec. 6664(c)(1) (the accuracy-related penalty does not apply with respect to any underpay

Petitioners are deemed to have used the 265 Cold Soil property for personal purposes throughout the subject years, and - 97 - [*97] we therefore need not decide whether section 183 applies for that property. See sec. 280A(f)(3) (where section 280A(a) applies with respect to the use ofa dwelling unit for any year, section 183 generally does not apply to that unit for that year); sec.

6662(h)(2)." Petitioner reported the value ofthe second conservation easement to be $1,049,850 on his 2003 income tax return. This amount exceeds 400% ofthe value (i.e., $128,000) now asserted by respondent. Pursuant to section 6664(c)(2) the gross valuation misstatementpenalty does not apply if(A) the claimed value ofthe property was based on a "qualified appraisal" made by a "qualified appraiser" and (B) in addition to obtaining such an appraisal, the taxpayermade a good-faith investigation of

Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause, and (2) acted in good fàith.

7491(c). To meet this burden, respondent must produce evidence establishing that it is appropriate to impose this penalty. Once respondent has done so, the burden ofproofis on petitioners to show that the penalty does not apply.

We will not attempt to distinguish Mr. Potok's criminal intent in causing petitioners to enter the contract from his intent in taking the improperly used $188,070 from them; we believe these intertwined actions were part ofa scheme by Mr.

24Unlike this case, the Court in Peek v. Commissioner, 140 T.C.

The Commissioner bears the burden ofproduction with - 17 - respect to a section 6662 penalty. Sec. 7491(c). Once the Commissioner satisfies his burden, the burden shifts to the taxpayerto prove that the penalty does not apply.

Although an investor purchases and sells securities for his or her own account, an investor, unlike a trader, is not considered to be in the trade or business within the meaning ofsection.162(a) ofselling securities.

Pursuant to section 6664(c)(1), an accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause and (2) acted in good faith.

Commissioner, 116 T.C. at 446. Ifthe Commissioner satisfies his initial burden ofproduction, the burden of producing evidence to refute the Commissioner's evidence shifts to the taxpayer, and the taxpayermust prove that the penalty does not apply.

Petitioners 1. Application ofSection 2703(a)(2) Petitioners argue that section 2703(a)(2) does not apply to the cotenants' agreement because paragraph 7 thereofrestricts only the sale ofany ofthe 62 works ofart covered by that agreement (cotenant art).

1212(a) establishes rules governing carrybacks and carryovers ofa corporation's net capital losses, permitting such losses to offset capital gains in (continued...) - 12 - capital losses from sales or exchanges ofcapital assets are allowed only to the extent ofcapital gains from sales or exchanges ofcapital assets. Sec. 1211(a). Although by its terms section 1211 does not apply to gain or loss resulting from a disposition that is not a "sale or exchange", see, e.g., Helvering v.

6662(a) and (b)(1). The accuracy-related penalty does not apply, however, to portions ofan underpayment as to which the taxpayer acted in good faith and with reasonable cause.

Finally, we have no occasion to consider the income tax consequences for an employerthat, unlike Tryco, makes a nondesignatedpayment ofdelinquent employmenttaxes under section 3403. Compare L & L Marine Serv., Inc. v. Commissioner, T.C. Memo. 1987-428 (employer's payment ofemployees' share ofdelinquent employment taxes not deductible under section 162(a) either as compensation or as an ordinary and necessary business expense), with IRS Field Service Advisory 200025002, (June 23, 2000) (employer'

Respondent bears the búrden ofproduction, but petitioner bears - 8 - [*8] the burden ofproof, with respect to the addition to tax under section 6651 and any accuracy-related penalty under section 6662. See sec. 7491(c). II. Section 166 bad debt deduction A. Bona fidé debt Section 166(a)(1) allows as a deduction any bona fide debt that becomes worthless within the taxable year. For nonbusiness bad debt held by a taxpayer other than a corporation, section 166(a)(1) does not apply, and the taxpaye

The designation referred to in this paragraph is a sufficient designation ifit permits a payment or a part thereofto be identified as a payment ofrental allowance as distinguished from salary or other remuneration. Respondent does not contest petitioner's status as a "minister" under section 107(2); rather, respondent argues that the claimed parsonage allowances were not - 7-- properly designated in accordance with the applicable regulations.

See sec: 1368(b)(1) Unlike D'Errico & McCollor and D'Errico & Wedge, D'Errico & Associates was liquidated. Amounts reËeived'by a shareholder in a complete liquidation ofa corporation are treated as full payment in exchange for the shareholder's stock. Sec. 331(a).

The Court acknowledges that petitioners present well-thought-out arguments attempting to distinguish their circumstances from those in previous cases. However, the failure to timely file demonstrates that they did not act in good faith or with reasonable cause while advancing their positions. Consequently, Zvieifel is liable for accuracy-related penalties under section 6662(a) for taxable y¢ars 2001 through 2006, and Crews is liable for accuracy-relatedpenalties under section 6662(a) for taxable

(iii) A description and good faith estimate ofthe value ofany goods or services referred to in clause (ii) * * * Section 170(f)(8)(C) defines a "contemporaneous" acknowledgment as one received on or before the earlier of: (i) the date on which the taxpayer files a return for the year when the contribution was made; or (ii) the due date for that return, including any extensions. Section 170(f)(8)(D) provides thatthe requirement ofa contemporaneous written acknowledgment does not apply ifthe donee

Unlike their U.S. citizen counterparts, non-U.S. citizen employees ofinternational organizations are exempt from U.S. taxation. Secs. 893(a)(1), 1402(c)(2)(C).

Respondent has satisfied his burden ofproduction because the record shows that petitioner understatëd his Federal income tax by $14,243 for 2007, which - 10 - amount exceeds $5,000 and thereby constitutes a substantial understatement within the meaning ofsection 6662(d)(1)(A). See Higbee v. Commissioner, 116 T.C. at 446. The accuracy-related penalty does not apply to any portion ofan underpayment, however, ifthe taxpayerproves that the taxpayerhad reasonable cause for that portion ofthe underpa

Unlike the statutes conferring tax refundjurisdiction (28 U.S.C. secs. 1346(a)(1) and 1491(a)(1)), the statute that confers "innocent spouse"jurisdiction on the Tax Court--section 6015(e)(1)(A)--provides: In addition to any otherremedyprovided by law, the individual may petition the Tax Court (and the Tax Court shall havejurisdiction) to determine the appropriate relief

- 42 - Petitioners do not contend that section 7491(a) (1) applies. In addition, petitioners have not established that they satisfied the requirements of section 7491(a) (2). We hold that section 7491(a) (1) does not apply to shift the burden of proof to respondent.

Petitioners further argue that the additional 10% tax is inapplicable because, they state, the distributions were nontaxable.

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985).

Commissioner, 152 F.3d at 460;-sec. 1.6662-4(g)(4)(i), Income Tax Regs. In the case ofa substantial or gross valuation misstatementwith respect to charitable deduction property, however, the reasonable-cause-and-good-faith exception does not apply unless the taxpayer can show that (1) "the claimed value of the property was based on a qualified appraisal made by a qualified appraiser", sec.

111-5, sec. 1007, 123 Stat. at 317), that special rule does not apply for taxable years beginning in 2008.

"Unlike Rev. Proc. 2003-61, sec.

1(b). The German force is located in the United States, and petitioner, a green card holder, was "ordinarily resident" in the state in which the German force is located, namely, the United States, during the years at issue. Accordingly, she is not a part ofthe civilian component within the meaning ofNATO SOFA, and article X section 1 ofNATO SOFA does not apply to her.

1988-413 (racecar driver's experience gain not an appreciating asset to be considered under section 1.183-2(b)(4), Income Tax Regs.). Because petitioner did not own the horses which Austin Trupp rode, or any other equestrian-related assets, we fmd this factor does not apply in this case.

The allocation contemplated by section 274(c)(1) and its corresponding - 11 - regulation requires that the taxpayer distinguish between time spent on business- related activities and time spent on activities notrelated to the taxpayer's trade or business. The provisions ofsection 274(c)(1) do not apply if(a) the travel outside the United States does not exceed one week, or (b) the portion ofthe time ofsuch travel which is not attributable to the pursuit ofthe taxpayer's trade or business is les

We distinguished Charles Ilfeld Co. on the grounds that the Supreme Court had stated that a double deduction would not be allowed "'in the absence ofa "The parent's basis in the stock ofits subsidiary is adjusted by the difference between the required positive adjustments and the required negative adjustments. Sec. 1.1502-32, Income Tax Regs.

- 14 - Section 6662(a) and (b)(2) imposes a penalty equal to 20% ofthe amount of any underpaymentthat is due to a substantial understatement ofincome tax. An individual substantially understates his or her income tax when the reported tax is understated by the greater of 10% ofthe tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty does not apply to any portion ofan underpayment, however, ifit is shown that there was reasonable cause for the taxpayer

358(a)(1), (d>; .see aho sec. 357(c)(3). Section 351(a) does not apply to the extent that the transferee's stock received in the exchange is NQPS.

The codified doctrine does not apply here pursuant to its effective date.

As a prelimina matter, we note that petitionertreated all his activities as one, having filed one Schedule C, and respondent does not distinguish among petitioner's activities f:>rpurposes ofhis section 195 argument.

Section 6244 made the TEFRA provisions that relate to partnership items and the judicial determination ofpartnership items -91- applicable to subchapter S items.. There is no statute or regulation that makes the S corporation provisions applicable to partnerships. Consequently, the holding in D_ia.1 that the shareholder's basis in the stock ofthe corporation is not a subchapter S item is inapplicable to the issue ofthe extent to which or circumstance in which a partner's outside basis is or may

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985).

Petitioners argue that accuracy-relatedpenalties do not apply because petitioners meet the reasonable cause defense ofsection 6664(c)(1). Pursuantto that section, accuracy-relatedpenalties under section 6662 do not apply to any portion ofan underpayment for which a taxpayerestablishes that he or she: (1) had reasonable cause; and (2) acted in good faith. The reasonable cause exception does not apply, however, in the case ofa substantial or gross valuation overstatementwith respect to property fo

1401. Self-employment income consists ofgross income derived by an individual from any trade or business carried on by the individual. Sec. 1402(a). The self-employmenttax, however, does not apply to compensation paid to an employee.

The effect ofthe easement agreement in this case is indistinguishable from the effect ofsimilar agreements in Kaufman and 1982 East, and our opinions in those cases are squarely on point.

1.152-4(g), Examples (H), (H), Income Tax Regs. (as amended by T.D. 9408, 2008-2 C.B. at 329).1 As the majority acknowledges, however, see op. Ct. note 6 and note 7, this regulation does not apply for the 2007 tax year.

Indeed, the articulation of - 10 - petitioners' argument requires the use ofa term such as "collection", "group", or "whole", all ofwhich serve to distinguish the collection oftractors and trailers from any single tractor or trailer, i.e., any single "item ofproperty". Accordingly, we conclude that each individual tractor or trailer is an "item ofproperty" within the meaning ofsection 1.469-2(f)(6), Income Tax Regs.

Because ofsection 1.6662-2(c), Income Tax Regs., we need not address the applicability ofthe penalty on the ground ofsubstantial understatement ofincome tax for 2007 and 2008. The accuracy-related penalty does not apply with respect to any portion of the underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.

2011), to support the argument that the Danielson rule is inapposite this case.

Unlike the date that principal photography begins, this date is not crucial to the taxpayers' eligibility to make the election. See sec. 1.181-2T(a)(2), Temporary Income Tax Regs., supra.

The Commissioner investigated further and learned that the taxpayers actually had been provided with services by the charitable organization and that the value ofthe services had been - 10 - intentionally misrepresented on the written acknowledgment. As a result, the taxpayers' charitable contribution deduction was disallowed. This case is distinguishable.

However, the instant case is distinguishable from the prior Derivium cases we have considered for a different reason. In none ofthe prior Derivium cases we have considered did the taxpayers attemptto exercise their rights to a return of. their collateral after the maturity dates. Rather, in the prior Derivium cases we have considered: (1) the value ofthe supposed collateral had declined so that the taxpayers either (a) walked away from the loan, see Calloway v.

The codified doctrine does not apply here pursuant to its effective date.

Section 1.274-5A(c)(5), neome Tax Regs., exempts taxpayers from the strict substantiation requirements when there is a loss ofrecords beyond their control. Although petitioner testified that some ofhis records were destroyed as a result ofwater damage to a storage unit, he offered no other evidence (such as photographs, insurance claims, or corroboratingtestimony) that such records were indeed destroyed. We thus finc that section 1.274-5A(c)(5), Income Tax Regs., does not apply in this case.

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985).

See Rule 142(a); INDOPCO, Inc. v. Commissioner, - 503 U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111,. 115 (193 ). Deductions are a matter oflegislative grace, and a taxpayer bears the burden ofp oving that the taxpayer is entitled to any deduction claimed. Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).3 3 Sec. 7491 does not apply in this case to shift the burden ofproofto respondentbecause petitioners neither alleged that sec.

A "passive activity" is any activity involving the conduct ofa trade or business in which the taxpayer - 12 - does not materially participate.3 Sec. 469(c)(1). In addition, with an exception that is inapplicable herein, see sec.

More particularly, section 170 (f) (8) (D) - 10 - provides that the requirement of a contemporaneous written acknowledgment does not apply if the donee organization files a return, on a form and in the manner regulations may prescribe, that includes the information otherwise required to be included in the contemporaneous written acknowledgment.

Petitioner contends, however, that the record shows that the boat was used at least 50 percent for business purposes and that the incidental use exception of section 1.274-2(e) (4) (iii) (a), Income Tax Regs., applies. We disagree. The record does not allow us to conclude that the boat was used at least 50 percent for business purposes, and we conclude that the exception does not apply.

Conversely, petitioner contends that from the first day - 6 - of his disability, his benefits were exclþdable under section 104 because of his disability. Section 104(a) (1) permits the exclusion from gross income of amounts received under worker's compensation acts as compensation for personal injuries. In particular, section 1.104-1(b), Income Tax Regs., limits the section 104(a) (1) eáclusion to certain benefits. That regulation specifies that the section 104(a) (1) exclusion does not apply

We held a hearing on the motion and announced an intention to grant respondent's motion.partially in that the election under section 301.9100-3, Proced. & Admin. Regs., does not apply.

Booth is distinguishable from the instant case as deferred compensation is not in issue here. Moreover, because the Plan is a nonexempt trust, the taxation of an employee on contributions ; made .on his behalf turns on whether the employee's interest is substantially vested. See sec . 1.

Unlike the present case, however, Greene de lt with transfers of regulated futures contracts to a charity. Regulated futures contracts are sec. 1256 contracts.

However, he argues .inexplicably that because his business was on the accrualsmethod the cases respondent,cites not only are inapposite but also - 7 - support his position.2 Perhaps petitioner did not read Rink or he failed to read it carefully.

438, 446 (2001). Once respondent meets this burden, the burden of proof remains with petitioner, including the burden of proving that the penalty is inappropriate because of reasonable cause. See Higbee v. Commissioner, supra at 446-447. The facts of this case lead us to conclude that respondent has met his burden of production with respect to the accuracy-related penalty. Petitioner argues that the accuracy-related penalty does not apply because LLC meets the reasonable cause defense of section

(an authority is not relevant if materially distinguishable on its facts). The taxpayer in Groetzinger gambled 60 to 80 hours a week for 48 weeks during the year at issue and had no other employment. Commissioner v. Groetzinger, supra at 24. Moore, in contrast, worked 40 hours a week as an x-ray technician and gambled during his personal time. Likewise, Moore lacked a reasonable basis for claiming to be a professional gambler. See sec. 1.6662-3(b) (3), Income Tax Regs.

- 18 - provided in section 6662 (b) (2). Negligence includes any failure I to make a reasonable attempt to comply with dhe "provisions of the Internal Revenue Code. Sec. 6662(c). Negli ence also includes any failure by the taxpayer to keep adequate books and records or to substantiate items properly. Sec. 1.6662-Ì3(b) (1), Income Tax Regs. The term ''disregard" includes any careless, reckless or intentional disregard. Sec 6662(c). The section 6662(a) accuracy-related penialty does not apply wher

UFCW Pension' Plan disability retirement benefi s under section 104 (a) (1) , section 104 (a) (2) , or section 105 (c) 1. , The Benefits Are Not Excludable Under Section 104 (a) (1) . S ction 104 (a) (1) provides that gross income does not includ "amounts received under sworkmen' s compensation -acts as compensation for personal injuries or sickness" . The section 104 (a) 1) exclusion does not apply to benefits paid pursuant to a privat contractual relationship.

51 (1988), does not apply to (continued...) -83- "No person shall * * * be deprived of life, liberty, or property, without due process of law".

Commissioner, 124 T.C. 95, 111 (2005). We note here that, with respect to petitioners' basis in the house, the burden of proof is relevant. Petitioners have introduced no evidence with respect to their construction of and improvements to the house, other than very general testimony about costs. Accordingly, we find that sec. 7491(a) does not apply.

Indeed, unlike the 2000 return, which Mues signed as a paid preparer, the 2001 through 2004 returns were signed by Mues on petitioners' behalf.

However, Jonson, involving college expenses, is distinguishable from the instant case, which involves private elementary and secondary school tuition.

The parties spend undue time disputing the applicability of section 183 to Knutsen's doll business and, more specifically, I whether Knutsen had the profit motive described in that section so as not to preclude Knutsen from deducting certain amounts attributable to its doll business. The parties' reliance upon section 183 is misplaced. Section 183 does not apply where, as here, the taxpayer (Knutsen) is a C corporation.

Unlike section 951, various other Code sections expressly characterize certain types o items as distributions or dividends.

Unlike the requirements of section 1.170Å-13(c) (3) (ii) (C), (H), and (I), Income Tax Regs., the requirements of subdivision (ii) (J) and (K) do relate to the substance or essence of the - 36 - contribution and the substantial compliance doctrine therefore does not apply.

There is no legal or linguistic reason to distinguish between the limitation of section 104(a) (2), that damages be received "on account of" personal injuries or sickness, and the limitation of section 104(a) (3), that the "amounts received through accident or health insurance" must be received "for personal injuries or sickness".

Our conclusion is unaffected by the entertainer,.artist, athlete cases that petitioner relies upon because they are inapposite.

1.6662-2(a) (2), Income Tax Regs. The accuracy- related penalty does not apply, however, to any portion of an underpayment for which there was reasonable cause and with respect to which the taxpayer acted in good faith.

R also asserts that P's expenses have an indistinguishable personal component. Held: P's foster-cat expenses qualify as unreimbursed expenditures incident to the rendition of services to a charitable rganization. See sec. 1.170A-1(g), Income Tax R gs.

that has a measurable useful life is distinguishable from residual goodwill and may be amortized over its useful life . See Newark Morning Ledger Co . v . United States , 507 U .S . 546, 566 (1993) .

- 33 - compensatory, section 152(f)(5) is inapplicable to Justyn, and her scholarships must be included in her "support" .

The cases petitioners cite are materially distinguishable . We therefore conclude that petitioners did not have substantia l authority for their tax treatment of ResEnt and R & L Air . I The accuracy-related penalty under section 6662(a) is not imposed with respect to any portion~of the underpayment as t o which the taxpayer acted with reasonable cause and in good faith . Sec . 6664(c)(1) ; Higbee v.

Unlike the taxpayer in Zinsmeister, however, Mr.. Contreras, while arguably jointly liable for the liability on the mortgage note, did not have any financial interest in the Casas Lindas residence during the 2006 tax year .4 Consequently, we find the fact that Mr . Contreras lacked any financial interest in the Casas Lindas residence during 2006 sufficient to distinguish this case from Zinsmeister . On brief respondent refers to section 1 .71-1T(b), Q&A-6, Temporary Income Tax Regs ., 49 Fed.

1, 12 (1989), gaffd. 925 F.2d 348, 353 (9th Cir. 1991); Neely v. Commissioner, $5 T.C. 934, 947 (1985). An "understatement of income tax" is substantial if it exceeds the greater of 10 percent of the tax required to-be shown on the return or $5,000. Sec. 6662(d) (1) (A). The section 6662 accuracy-related penalty does not apply where the taxpayer shows that he or she acted in good faith and with reasonable cause.

- 27 - Petitioner cites several cases as authority for the proposition that section 263(a) (1) does not apply.

152(e) (2); sec. 1.152-4T(a), Q&A-1, -3, Temporary Income Tax Regs., 49 Fed. Reg. 34459 (Aug.-31, 1984). A. Whether M.L. Is a Dependent of Petitioner Petitioner asserts that M.L. is his qualifying child because she resided with him for more than one-half of 2007.8 Respondent contends that M.L. is not petitioner's qualifying child because M.L. resided with Ms. Janvier for the longer period in 2007. Respondent also maintains that the exception in section 152(e) does not apply because Ms.

179 (relating to election to expense certain.depreciable assets) does not apply to any of the capitalized items involved in the instant cases.

expenses but rather primarily personal expenses .8 Characterizing respondent's discussion of the trade, or business requirement of section 162(a) as "inapposite" and thereby implicitly conceding that the DPM nonrental activity wa s not a,trade or business, petitioner contends on brief that DPM's deduction of the .disputed expenses was based not upon section 162(a) butupon section 212(2) .9 Petitioner contends that DPM' s 'Respondent argues alternatively th

Because no party alleges that the relevant facts are different for the 2 years in issue, we shall consider 2002 and 2003 together.

The designation of section 165(d) as a subsection of section 165 (which, unlike section 23 of the 1934 Act and 1939 Code, contains only a few of the kinds of deductions the income- tax law allows) might suggest that section 165(d) does not limit deductions allowable under other sections of the Code (such as section 162) .

We distinguished Inland Steel not only on that ground but also on the ground that the case was governed by the "predominant character" test,'which replaced the "substantial equivalence" test under which Inland Steel .was decided . Texasgulf I, 107 T .C.

Commissionerl is inapposite to the facts herein because it involves the meaning of "tax home" under I.R.C.

179 (relating to election to expense certain.depreciable assets) does not apply to any of the capitalized items involved in the instant cases.

Because a member of an Iowa L .L .C ., unlike a limited partner, was not prohibited by State law from participating in the partnership's business and more closely resembled a general partner, we concluded that a member of an Iowa L .L .C . came within the general partner exception of section 1 .469-5T(e)(3)--(ii), Temporary Income Tax 13 - Regs ., sura .

- 11 - City council does not convert the CBA into legislation because (1) the CBA was modifiable under the terms of Article XXX of the CBA, and (2) unlike the county statute in Rev . Rul . 81-47, supra , there was no showing that the State of Ohio had a statute that required the CBA to be incorporated into the Cleveland City code or charter.

An exception to the 3-year rule is provided in section 6501(c) (1): (1) False Return.- In the rcase of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in.court for collection of such tax may be begun without assessment, at any time. Respondent argues that the period of limitations in section 6501(a) does not apply because petitioner filed false returns with the intent to evade taxes for the years at issue.

1.6662-3(b) (1), Income Tax Regs.' An "understatement of income tax" is substantial if it exceeds the - 26 - greater of 10 percent of the tax required to be shown on the return or $5, 000 . Sec . 6662 (d) (1) (A) . The section 6662 accuracy-related penalty-does not apply where the taxpayer shows that he or she acted in good faith and exercised reasonable cause .

-9- Accordingly, we hold that petitioners are not entitled t o exclude from their gross income the amounts designated settlement interest under section 103 . II . Installment Payment Interes t The second prong of petitioners' argument is that the installment payment interest was not required by law because Pa . II Civ . P . 238 does not apply to eminent domain proceedings .

7491(a) does not apply here because petitioners have not produced credible evidence, nor have they satisfied the other conditions for the application of sec.

- 41 - respect to such portion. This reasonable causë exception generally does not apply in the case of a substantial or-gross valuation overstatement with respect to property for which a - charitable contribution deduction was claimed under section 170 unless the claimed value of the property was based on a a "qualified appraisal" by a "qualified appraiser" and the taxpayer made a goo

An - 25 -- "understatement sof income tax" :Ds substantial if it exceeds the greater of 10.percent of the tax required to be shown on the return or $5,.000. Sec. 6662(d) (1) (A).. - The section 6662 accuracy-related penalty does not apply where the taxpayer shows that he acted in good faith and with reasonable cause.

That certification is not presented in subsection (a) as one of the conditions for the exemption; and, section 893 .does not explicitly provide that the wages shall be 17 - exempt only "if" the Secretary certifies reciprocity ( unlike the social security tax provisions , discussed next) . C . Employment tax statutes The income tax provision in section 893 may be contrasted with the corresponding employment tax provisions . In the 1930s as now, the income tax and employment taxes were distinct ;

Unlike her 100-to-1000-customer businesses, this business served only 10 to 20 customers annually, she said, but she still couldn' t name anyone even from this putatively smaller customer base.

Although section 1 .1272-1(b)(1)(ii) and (4),(iii), Income Tax Regs ., provides reasonableness standards for computing .the length of accrual periods and the amount of OID allocable to the initial accrual periods, section 1 .1272-1(b)(2)(i), Income Tax Regs ., provides that paragraph (b)(1) does not apply to debt instruments subject to section 1272(a)(6) .

Unlike subsections (b) and (c) of section 6015, subsection (f) does not contain a 4 - requirement that relief must be sought within 2 years of the first collection activity .

Some of VERITAS US' unbundled OEM agreements did contain contractual terms pursuant to which OEMs provided APIs and source code information to VERITAS US to assist with adaptation issues, but, unlike the contractual terms set forth in section 1 .482-1(d)(3)(ii)(A), Income Tax Regs ., the contractual terms relating to adaptability were not significant terms that affected the results of the transactions .

§ 1.701-2(b) ." Respondent omitted the word "federal" from the phrase "aggregate federal tax liability" - 19 - reproduced from section 1 .701-2(b), Income Tax Regs . (anti-abuse regulation) . Respondent conceded on the eve of trial that the anti-abuse regulation does not apply to these partnerships formed, in part, to reduce the investors' State tax liabilities .

.) - 15 section 174 expense to constitute "qualified research" under section 41 . See Norwest Corp . & Subs . v . Commissioner, 110 T .C . 454, 489-490 (1998) . Section 174 does not define the phrase "research and experimental expenditures", but, similar to the definition of "supplies" in section 41(b)(2)(C), section 174(c) provides that section 174 does not apply to expenditures for "the acquisition or improvement of property to be used in connection with the research or experimentation and of

-1 of the Internal Reven1provisions ue Code Sec . 6662 ( c) ; sec. 1 .6662-3 (b)(1), Income Tax Regs . But the section 6662(a) per does not apply to any portion of an underpayment of tax if ii is shown that there was reasonable cause for the'taxpayer',s(cid:127)positio n and that the taxpayer acted in good fai h with respect to th a portion .

915 is inapposite, because petitioners argue that LTD benefits were not (and would not be) taxable because of sec .

We found those authorities to be materially distinguishable from the instant cases and - 113 - petitioners' reliance on those authorities to be misplaced .103 On the record before us, we reject petitioners' substantial author- ity argument : We turn now to petitioners' reasonable cause argument' .

In FPL II we declined to “accept petitioner’s characterization of section 1.162-4, Income Tax Regs., as a ‘method of accounting’ distinguishable from petitioner’s method”.

The Court of Appeals distinguished the holdings in Mabry v . Commissioner, T .C . Memo . 1985-328, and Wiedmaier v.

- 11 - The burden of proof shifts to the Commissioner if the taxpayer produces credible evidence with respect to any relevant factual issue and the taxpayer has complied with substantiation requirements, maintained all required records, and cooperated with reasonable requests by the Commissioner for witnesses, information, documents, meetings, and interviews. Sec. 7491(a). Petitioner concedes that section 7491(a) does not apply.13 Consequently, petitioner bears the burden of proof herein.

Miller engaged in the horse breeding activity during 2002, 2003, and 2004 with the actual and honest objective of making a profit and section 183 is inapplicable in this case .

- 10 - conceded, the adjustments in the notice of deficiency that give rise to the deficiency . Respondent has satisfied his burden of production under sec . 7491(c) with respect to the accuracy- related penalty under section 6662(a) determined in the notice of deficiency because the underpayment of tax exceeds $5,000 . The accuracy-related penalty does not apply to any part of an underpayment of tax if it is shown the taxpayer acted with reasonable cause and in good faith .

- 15 - Sec . 6662(a) a (b)(1) . The term "negligence" includes any failure to make a reasonable attempt to comply with the provisions of t e internal revenue laws or to exercise ordinary and reasonable are in the preparation of a tax return . Sec . 6662(c) ; Gowni . Commissioner, T.C. Memo . 2004-154 . The term "disregard" inc udes any careless, reckless, or intentional disregard . Sec 6662(c) ; sec. 1.6662-3(b)(2), Income Tax Regs . The accura y-related penalty does not apply to any part of an

7491 is inapplicable .

66-28, supra, that petitioner should be permitted to rely on the ruling, given respondent's failure to address the ruling and distinguish it. Rev. Rul. 66-28, 1966-1 C.B.

- 29 - 10 percent of the tax required to be shown on the tax return or $5,000. Sec. 6662(d)(1). Section 7491(c) requires the Commissioner to carry the burden of production with regard to penalties. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once the burden of production is met, the taxpayer must come forward with sufficient evidence that the penalty does not apply.

- 12 - preparation of a tax return.” Sec. 1.6662-3(b)(1), Income Tax Regs.; see sec. 6662(c). Furthermore, “any failure by the taxpayer to keep adequate books and records or to substantiate items properly” also constitutes “negligence”. Sec. 1.6662- 3(b)(1), Income Tax Regs. The section 6662(a) accuracy-related penalty does not apply if the taxpayer demonstrates that there was a reasonable cause for the underpayment and that the taxpayer acted in good faith with regard to the underpayment.

1 .183- 2(b)(4), Income Tax Regs . The parties agree that this factor does not apply .

The drip irrigation systems, unlike the trellising, are, to a great extent, buried in the ground. Parts of it may be repaired and maintained like the trellises, but a substantial portion of it is under the ground and will remain there until the vines die or are removed for some other reason. This Court has already decided that grapevines are not “tangible personal property” for purposes of section 179.

(1) The majority opinion fails properly to distinguish the pre-1990 “no-regulation environment” of the cited court opinions from the environment or authority that came into existence upon promulgation in 1990 of section 1.882-4(a)(2) and (3)(i) and (ii), Income Tax Regs.

- 5 - Section 1.104-1(b), Income Tax Regs., provides in pertinent part: Section 104(a)(1) excludes from gross income amounts which are received by an employee under a workmen’s compensation act * * * or under a statute in the nature of a workmen’s compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment. * * * However, section 104(a)(1) does not apply to a retirement pension or annuity to the extent that it is determined by

98-432 (Part 2), at 1498 (1984). To make section 152(e)(2) work as intended, that control must be preserved by insisting on adherence to the requirements of section 152(e)(2) * * * The law is clear that petitioners are entitled to the child dependency exemption for JW in 2002 only if they have complied with the provisions of section 152(e)(2). Petitioners have failed in this regard. It follows, therefore, that the exception set forth in section 152(e)(2) does not apply and that the general rule

54, 65-70 (1978), a case which petitioner contends is indistinguishable from the circumstances we consider here. In that case, this Court held that two parcels of fee simple real property were like kind, under section 1031(a), even though one parcel was subject to 99-year condominium leases.

Discussion Because there are no factual matters in dispute in this case, section 7491 is inapplicable.

- 12 - Moreover, the accuracy-related penalty does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for the underpayment and the taxpayer acted in good faith with respect to the underpayment.

- 11 - The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, that portion.

6001; INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); sec. 1.6001-1(a), Income Tax Regs. Taxpayers generally bear the burden of proving that the Commissioner’s determinations are incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Section 7491 does not apply because petitioner has failed to substantiate his deductions and provide credible evidence.

Because petitioner failed to comply with the requirements of section 7491(a)(2), however, section 7491 is inapplicable.

As relevant herein, an “understatement” is defined as the excess of the tax - 15 - required to be shown on the return over the tax actually shown on the return. Sec. 6662(d)(2)(A). Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations or a substantial understatement of tax, the accuracy-related penalty does not apply to any portion of the underpayment if it is shown that there was reasonable cause for the taxpayer’s position and that the taxp

6001; INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); sec. 1.6001-1(a), Income Tax Regs. Taxpayers generally bear the burden of proving that the Commissioner’s determinations are incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Section 7491 does not apply because petitioner has failed to substantiate his deductions.

“Actual knowledge” for purposes of section 6015(c)(3)(C) is the actual and clear awareness of the item, as distinguished from mere reason to know of the item. Cheshire v. Commissioner, 282 F.3d 326, 337 n.26 (5th Cir. 2002), affg. 115 T.C.

In this case, section 7491 is inapplicable because petitioner did not introduce any credible evidence with respect to the origination of his disability and failed to comply with the substantiation, cooperation, and record-keeping requirements.

111, 115 (1933). Because petitioners did not comply with the requirements of section 7491(a)(2), section 7491(a)(1) is inapplicable here.

6662(d)(1)(A). As relevant herein, an “understatement” is defined as the excess of the tax required to be shown on the return over the tax actually shown on the return. Sec. 6662(d)(2)(A). The accuracy-related penalty does not apply to any portion of an underpayment if it is shown that there was reasonable cause for the taxpayer’s position and that the taxpayer acted in good faith with respect to that portion.

Section 7491 does not apply here because petitioner has failed to substantiate his deductions and provide evidence other than his own testimony.

Commissioner, 116 T.C. 438, 446 (2001). We have sustained, or petitioners have conceded, the determinations in the notice that give rise to the deficiency that respondent determined. In addition, we have rejected petitioners’ position that they are entitled to a casualty loss deduction. Respondent has satisfied his burden of production under section 7491(c) with respect to the accuracy-related penalty under section 6662(a) determined in the notice. The accuracy-related penalty does not apply to

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).11 11 Sec. 7491(a) does not apply in this case to shift the burden of proof to respondent because petitioner neither alleged that sec.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Burrus v. Commissioner, T.C. Memo. 2003-285. Section 7491(a) does not apply in this case to shift the burden of proof to respondent.

We agree with petitioner that brokerage customers are not, per se, distinguishable from newspaper subscribers in any way that would make the circumstances we consider here distinguishable from those in Newark. C. The Value and Useful Life of the Intangibles Petitioner Acquired 1.

Furthermore, unlike in Beech Trucking Co., petitioners in this case, as noted above, attempted to substantiate the drivers’ travel expenses. We must consider whether this evidence meets the requirements of section 274(d). Additionally, petitioners here argue that they are entitled to a 100-percent deduction for the portion of the per diem allowance that they estimate is allocable to nonmeal expenses.

Rule 142(a). Section 7491(a) does not apply in this case to shift the burden of proof to respondent.

Thus, petitioners paid at least two distinguishable taxes on their property: an annual tax based on their interest in the property, and a one-time tax based on the sale of their property. State law makes this distinction and so shall we for purposes of section 164(a)(1).

- 18 - 6662(d)(1)(A).9 Tax is not understated to the extent that the treatment of the item related thereto is based on substantial authority or is adequately disclosed in the return or in a statement attached to the return, and there is a reasonable basis for the tax treatment of such item by the taxpayer. Sec. 6662(d)(2)(B). Moreover, the accuracy-related penalty does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for the underpayment and

We agree with petitioner that brokerage customers are not, per se, distinguishable from newspaper subscribers in any way that would make the circumstances we consider here distinguishable from those in Newark. C. The Value and Useful Life of the Intangibles Petitioner Acquired 1.

Therefore section 7491 does not apply here.

- 14 - Year Tax Reported Required Tax Understatement 1996 $700 $60,297 $59,597 1997 536 64,215 63,679 1998 4,463 34,987 30,524 1999 11,846 39,012 27,166 2000 9,673 22,534 12,681 The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for the taxpayer’s position and that the taxpayer acted in good faith with respect to that portion.

The holding in In re Emerson is readily distinguishable from the holdings in numerous cases that have held that a “termination” occurs at the point of confirmation. The holding in In re Emerson was applied in a procedural context to generally determine the proper venue for a chapter 11 proceeding.

are distinguishable from those here.

Section 7491 is inapplicable here because petitioner has not complied with the requisite substantiation requirements.

As to her personal physical injury, Dobbs compensated petitioner in a separate workmen’s compensation claim brought by her, and we decline to follow petitioner’s tenuous nexus between the discrimination and the personal injury.

Unlike DEFRA section 177(d)(2), both of those enactments provided a fair market value basis for purposes - 22 - of determining both gain and loss.

Because the Court decides this case without regard to the burden of proof, section 7491 is inapplicable.

Section 7491 is inapplicable here because petitioners have not complied with the requisite substantiation requirements.

- 11 - The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, that portion.

concerned reasonable compensation for purposes of section 162(a), it is distinguishable from the instant case, and therefore we are not bound by Golsen v. Commissioner, 54 T.C. 742 (1970), affd.

Given this special circumstance, we do not find the cases involving core deposits distinguishable for the reason that respondent claims. It follows from our previous Opinion regarding the application of DEFRA section 177(d)(2)(A)(ii) that petitioner’s failure to establish a “cost basis” does not prevent it from claiming a higher fair market value basis in its favorable financing.

Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Petitioner does not argue the applicability of section 7491(a), and the record reflects that section 7491(a) does not apply.

However, section 165(h)(2) does not apply here because the Court is satisfied that the claimed loss arose in connection with petitioner’s trade or business.

Accordingly, petitioners’ claim that their entire gain from the sale of the property is taxed at a maximum rate of 20 percent - 10 - is without merit. Petitioners’ claim is made without a clear understanding of section 1(h) and its interaction with section 1250. For the 1997 tax year, the maximum capital gains rate is generally 20 percent on the gain from the disposition of a capital asset held more than 18 months and sold after July 28, 1997. However, the 20-percent rate does not apply to unre

Section 7491 is inapplicable because petitioner has not complied with the requisite substantiation requirements.

Section 7491 is inapplicable here because petitioners have not complied with the requisite substantiation requirements.

1987-566 (“It is often difficult to distinguish a ‘trade or business’ from passive investments held for the production of income.” (citing Higgins v. Commissioner, 312 U.S.

Unlike the taxpayer in Harrison v. Commissioner, supra, petitioner did not keep records contemporaneously with his expenditures, at least not consistently. No calendar for 1996 was introduced into evidence.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).2 1. Schedule C--Gross Receipts A taxpayer’s gross income generally includes “all income from whatever source derived”. Sec. 61(a). A taxpayer is 2 Sec. 7491 does not apply in this case to place the burden of proof on respondent because petitioner neither alleged that sec.

Moreover, unlike the per diem allowances at issue in UAL Corp. v. Commissioner, supra, the per diem allowances at issue here were computed by reference to miles dispatched rather than according to hours on duty or on travel assignment. 15 Petitioner’s argument is inconsistent with Beech Trucking’s treatment of the per diem payments on its tax returns, (continued...) - 18 - argument, petitioner cites section 274(e)(3) and the regulations thereunder.

7491(a) does not apply here.

Because petitioner cites a revenue ruling that is distinguishable from the facts in this case, the necessary circumstances to treat the revenue ruling as a concession are not present.

In the alternative, petitioner - 4 - contends that if the leasing activity is determined to be a passive activity, the passive activity losses can be grouped with his share of income from VBR in accordance with the grouping exception found in section 1.469-4(d)(1)(A), Income Tax Regs. Taxpayers generally bear the burden of proving that the Commissioner’s determination is incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). The record reflects that section 7491 does not apply in this

7491 is inapplicable in this case because petitioners’ examination commenced prior to July 22, 1998.

7491 is inapplicable in the present case because respondent commenced petitioners’ examination before July 22, 1998.

3 Unlike the computation of a deficiency under sec. 6211 or the computation of an understatement for purposes of sec.

Petitioners further contend that, under the U.S.-France Tax Treaty (the Treaty)21 in effect in 1993, withholding tax does not apply under the circumstances present here.

Petitioner is a corporation engaged in the trade or business of selling and - 12 - servicing new and used vehicles. Thus, when petitioner executed the stock sale agreement it indirectly acquired an interest, in the form of stock, in a corporation engaged in a trade or business. Petitioner agrees that section 197 might apply if it had acquired a new trade or business, but it contends that the statute does not apply in the instant case because petitioner continued the operation of its own existin

121(a).1 Petitioner claims that the New Jersey residence was his principal residence from the time that he and his wife purchased it until the date in 1996 when he sold it. Relying upon section 121(a), petitioner argues that any gain realized from the sale of that house is therefore excludable from his income. According to respondent, the exclusion provided in section 121(a) does not apply to the sale of the New Jersey residence because that house was not petitioner’s principal residence for the

Personal injuries are distinguished from “legal injuries of an economic character” such as those arising out of the unlawful deprivation of full wages earned for services performed or the unlawful deprivation of the opportunity to earn wages through wrongful termination. Id. at 239. 1 The Small Business Job Protection Act of 1996, Pub.

Petitioners distinguish the Winmill case by noting that another provision in those regulations provided specifically that “commissions paid in purchasing securities are a part of the cost price of such securities.” Regs. 77, art. 282 (1932).

Commissioner, supra, unlike the sec. 1031 regulations applicable here, contained no explicit coordination with the installment sale provisions of sec.

The Board distinguished Dallas Transfer & Terminal Warehouse Co. v. Commissioner, supra, from the facts before it and concluded that the rationale of United States v. Kirby Lumber Co., 284 U.S. 1 (1931), was applicable to those facts.

- 10 - The negligence penalty does not apply if the taxpayer establishes that he or she relied in good faith upon the advice of a competent and experienced accountant or return preparer in the preparation of the taxpayer’s return.

Although an “intent to compensate” requirement has been applied by the courts in numerous cases, the instant situation is factually distinguishable from the situation in those cases which involved corporate payments to shareholders or employees in positions of control. E.g., Paula Constr. Co. v. Commissioner, 58 T.C. 1055, 1058-1059 (1972), affd.

However, a taxpayer need not be - 5 - the parent of an individual in order for that individual to be the taxpayer’s dependent under section 152(a)(9). Second, as to Dustin and Kristion, respondent argues that petitioner does not meet the requirements of any of the various provisions of section 152(e)(1)-(4). Section 152(e), which contains rules for divorced or separated parents treating one or the other as having provided over half a child’s support, is inapplicable in this case.

Section 72(t)(1) Additional Tax Respondent determined that the distributions made to petitioner out of his IRA’s were subject to the 10-percent additional tax on early withdrawals from an IRA imposed by section 72(t).8 Section 72(t)(1) imposes a 10-percent additional tax on early distributions from qualified retirement plans. A qualified retirement plan includes an IRA. Secs. 408(a), 4974(c)(4). Section 72(t)(2)(A) lists the types of distributions to which the additional tax does not apply.

The court in Dominion Resources held that the return of excess deferred Federal income tax is a deductible expense, whereas, in WICOR, Inc., the court distinguished Dominion Resources and decided that a mere reduction of future utility rates did not constitute a deductible business expense. See also Florida Progress Corp. & Subs. v. Commissioner, 114 T.C.

- 17 - acknowledge that some of our opinions contain dicta to the contrary. See, for example, Boyd v. Commissioner, 101 TC. 365, 370 (1993), indicating that section 6501(a) does not apply to income tax attributable to partnership items.

Odom stated: “Central has $10 million in undistributed S Corp earnings and would like [to] make a significant distribution to shareholders, but needs its capital for expansion and replacement of aging equipment.” Unlike Colonial, Central did not invest in tax-exempt bonds. Central held passive investments in the form of short-term liquid investments, such as certificates of deposit, because it needed cash and cash equivalents to operate its business. As of yearend 1991 through yearend 1996, Cent

99-313, supra, 1986-3 C.B. (Vol. 3) at 728.] Income of a type generally regarded as portfolio income which is derived in the ordinary course of a trade or business does not fall within the definition of portfolio income. See sec. 469(e)(1)(A); sec. 1.469-2T(c)(3)(i), Temporary Income Tax Regs., 53 Fed. Reg. 5686, 5713 (Feb. 25, 1988). Congress and the Secretary reasoned that “the rationale for treating portfolio- type income as not from the passive activity does not apply [in these instances], s

- 12 - death.5 Petitioner argues that, under this provision of the regulation, the trust did not come into being until the date of decedent’s death, and therefore no prior violation of the CRAT requirements could disqualify the trust. Petitioner’s position overlooks that this provision of the regulation is inapplicable to the trust involved here--an irrevocable trust established and funded by decedent during her lifetime.

The statute and regulations do not define the words “merchandise” or “inventory”, nor do they clearly distinguish between "inventory" and “materials and supplies” that are not actually consumed and remain on hand. We have held that “merchandise”, as used in section 1.471-1, Income Tax Regs., is an item acquired and held for sale.

- 2 - Held: The deficiency notices are timely because F failed to file 1991 and 1992 income tax returns. The provision in sec. 1.6012-1(b)(2), Income Tax Regs., upon which F relies is inapplicable because: (1) F's tax liability for the years was not "fully satisfied" and (2) F claimed overpayments of tax.

Petitioners attempt to distinguish True v. United States, 72 AFTR 2d 93-5660, 93-2 USTC par. 50,461 (D.

- 12 - Pursuant to section 6664(c)(1), a section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith.

We think the cases of Miller, Booher, and Lombardo are all factually distinguishable from the present case. There still may be a question whether the provisions of section 1.6012-1(a)(5), Income Tax Regs., are valid.

Exxon herein relies on the facts and - 23 - circumstances method, and Exxon is required to establish, under all of the relevant facts and circumstances associated with its payment of PRT, what portion, if any, of PRT paid by it to the United Kingdom constitutes taxes, as distinguished from payments in exchange for the license rights it received.6 See sec. 1.901- 2A(b), (c), Income Tax Regs.

- 21 - The accuracy-related penalty does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for such portion of an underpayment and that the taxpayer acted in good faith with respect to such portion.

Notwithstanding the similar facts and circumstances, Aizawa is distinguishable from the instant case on one key matter. In Aizawa, the amount that the lender paid for the property at the foreclosure sale was equal to the fair market value of the property. In Aizawa v. Commissioner, supra at 200- 201, the Court stated: It cannot be gainsaid that the property was sold for $72,700 (an amount which we have no reason to conclude did not represent the fair market value of the property) and that petiti

- 4 - Effective March 30, 1995, St. Charles elected to terminate its S corporation status and reverted to C corporation status. Discussion The parties have locked horns on the impact of sections 469(b) and 1371(b)(1). St. Charles contends that section 469 governs and that section 1371(b) has no application under the circumstances herein. Respondent takes a diametrically opposed position and contends that section 1371(b) controls and that therefore section 469 is inapplicable.

Based on the foregoing, we conclude that these regulations distinguish between present employees and former employees as mutually exclusive categories. As a result, if petitioner’s status is that he is a former employee, then he would not be a present employee and, as a result, he would not be an interested party within the meaning of section 1.7476-1(b)(4), Income Tax Regs.

* * * 6In this context, the term "expense" must be distinguished from an expenditure that is capital in nature. As stated in Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345, 354 (1971), a payment that serves to create a separate and distinct asset is, as an inevitable consequence, "capital in nature and not an expense, let alone an ordinary expense".

Commissioner, supra, are readily distinguishable from the instant case.13 Although neither case 12 As discussed infra, because we conclude that the deductions for the taxes and interest in issue were not taken into account in the computation of the group's CNOL, we do not consider whether the deductions for taxes and interest otherwise qualify as SLL within the meaning

Respondent argues that this case is indistinguishable from Ray v. Commissioner, T.C. Memo. 1996-436.

However, we find the citation to be inapposite.

Unlike the regulations under section 174, which are silent about the means of discovering information, the conference report accompanying the TRA 1986 made it clear that a more structured method of discovery is required with respect to section 41.

Respondent makes no effort to distinguish Example (5), but instead argues that Example (2) of the regulation is more analogous. Section 1.112-1(b)(5), Example (2), Income Tax Regs., provides: .

Nor did the parties in those cases, unlike the parties here, dispute that the employers were entitled to a deduction, challenging only the timing of that deduction. In summary, petitioner has not met the requirements for deductibility under section 83(h), and it has not met the requirements for deductibility under section 1.83-6, Income Tax Regs., either pre- or post-amendment.

[661,] 675-677 (1981); * * * see also Commissioner v. Danielson, 378 F.2d 771, 778 [(3d Cir. 1967)] ("it would be unfair to assess taxes on the basis of an agreement the taxpayer did not make”). Furthermore, the Danielson rule is not applicable if the contract is ambiguous. See North American Rayon Corp. v. Commissioner, 12 F.3d [583,] 589 [(6th Cir. 1993), affg. T.C. Memo. 1992-610] ("the Danielson rule does not apply if there is no contract between the parties or if the contract is ambiguous")

We begin by pointing out that this case is indistinguishable from Milligan v. Commissioner, 38 F.3d 1094 (9th Cir.

For present purposes, we descry no reason to distinguish the two situations. Moreover, these tax law principles antedate petitioner's purchase of the assets of LHJ and are thus appropriately considered by the Court. The Secretary states: These [section 1.338(b)-3T] rules provide for the incorporation of general principles of tax law which are applicable to the determination of the basis of assets acquired in actual asset purchases.

- 11 - amount subject to the limitations of section 163(h)(3) and the provisions of section 1.163-8T, Temporary Income Tax Regs., 52 Fed. Reg. 24999 (July 2, 1987), to the extent applicable. Priv. Ltr. Rul. 89-28-010 (Apr. 6, 1989); see also Priv. Ltr. Rul. 90- 31-022 (May 7, 1990) (concluding that section 1041 does not apply to characterize interest expense on loan proceeds allocable to investment expenditures as personal interest for purposes of section 163(h)).

Additionally, section 1.861-8, Income Tax Regs., does not distinguish period costs from other costs that relate to export sales. Furthermore, section 1.861-8, Income Tax Regs., does not excuse taxpayers from allocating costs to a class of gross income unless the costs are definitely related to another class of gross income.

- 45 - On brief, the parties proceed on the assumption that section 1504(a) applies not only for 1984 but also for 1985 and 1986 and that amended section 1504(a) does not apply for 1985 and 1986.

We find petitioner's reliance on Neill, as it relates to petitioner's business purpose and generally to its business activity, to be inapposite.

Indeed, petitioner does not dispute, and we hold, that it engaged in transactions with a related party for its taxable year ending April 30, 1991, when it contracted with and paid for assembly services by ASAT, Ltd. Petitioner nevertheless maintains that section 6038A is inapplicable for the reasons set forth below.

Petitioner also argues that waivers are permissible if “knowingly and voluntarily” made; however, petitioner fails to - 14 - direct us to any authority that supports the argument that his waiver in the instant cases is valid so long as they were knowingly and voluntarily made. We agree that when the antialienation rule does not apply, any waiver or alienation must be knowingly and voluntarily made.

1622, 83d Cong., 2d Sess. 307-311 (1954). Prior to the enactment of section 481, consistent with rules laid down by the decided cases, adjustments needed to prevent such omission or duplication could be made only if the change in method of accounting was initiated by the taxpayer. Dearborn Gage Co. v. Commissioner, 48 T.C. 190, 200 (1967); S. Rept. 1622, supra at 307-311. The provision does not apply, however, to adjustments attributable to years before 1954 unless the change in method of accoun

Commissioner, supra, is distinguishable from the instant case and is therefore not dispositive of the instant motion.

3342, 3743, we find them to be inapposite.

Moreover, unlike the cases above, the benefits received by petitioner’s members were not directly proportional to the amount of the fees paid, and the members benefited as a group from petitioner’s activities. Payments under the Nonsponsorship Clause In determining whether the payment made by Landmark to petitioner pursuant to the terms of the nonsponsorship and noncompetition clause contained in their 1985 termination - 19 - agreement constituted UBTI, we must first decide whether the income w

Unlike respondent, we do not read the legislative history to foreclose the complete deduction of employee meals in 100 percent of the cases.11 Petitioners’ deduction for their employee meals would not be limited by section 274(n)(1), for example, if section 119 allows all of petitioners’ employees to exclude the value of the meals from their gross income.

314, 677 F.2d 72 (1982), distinguished (sec. 1.901-2, Income Tax Regs., did not apply).

The net-back method of determining gross income from the property proposed by respondent, which is similar to the method required by the Court of Claims in Panhandle, is far more appropriately used here." 27 Petitioners also attempt to distinguish United States v. Henderson Clay Prod., 324 F.2d 7 (5th Cir. 1963), on the ground that it arose under the mining regulations, which specifically provided for the use of the proportionate profits method where an RMFP could not be determined, whereas the

We need not decide whether the burden of proof shifts in the instant case because we decide the issues by a preponderance of the evidence.

3 In view of the dispute the parties have presented to us and our disposition, we express no view on any further interactions between section 199A and section 280E.

Thus, we need not decide whether Mr.

We have reservations about the reliability of the Foundation’s letter, stemming in no small part from Mr.

We need not decide the Youngs’ contention in this regard because our findings and analysis do not depend on which party bears the burden of proof.

We accept this stipulation and accordingly need not decide the issue.

Nevertheless, we need not decide whether the “preponderance of the evidence” or “clear and convincing evidence” standard governs, because we conclude that respondent prevails here under either standard, having shown by clear and convincing evidence that assets were transferred between Mr.

4 If section 6015(e)(7) applies, an issue we need not decide, our scope of review would be limited to “(A) the administrative record established at the time of the determination, and (B) any additional newly discovered or previously unavailable evidence.” The parties stipulated the administrative record, and the trial testimony 4 (2009), superseded in part

It would seem that some of the payments would have violated the BMW program, and we question whether petitioner would have made those payments, considering the consequences that could have resulted.

We are skeptical of Mr.

Given our disposition, we need not decide whether these alleged failures would constitute an independent ground for disallowing the charitable contribution deductions.

14 The distribution and capital account adjustment were made pursuant to the 2009 LLC Agreement’s provisions regarding distributions of clients, but it is unclear whether Benbow PS received in the distribution any assets other than clients.

6 We are not certain from the record whether, for 2015, petitioners intended to take a deduction for car and truck expenses based on the standard mileage rate (because they submitted mileage logs) or actual expense amounts (because the claimed deduction exceeds the standard mileage deduction).

Sonntag testified that he took business partners with him to the spa as a “thank you.” We are not convinced, on the basis of our review of the record as a whole, that this was not a personal trip to the spa.

We need not decide whether petitioner’s employment in Hobbs was temporary.

We question whether labeling is sufficient to satisfy the Code’s prohibition against commingling or whether storage in a safe satisfies the requirement that assets requiring safekeeping be kept in an adequate vault.

Given our disposition, we need not decide that question.

Year in Which Sustained We need not decide in this case the outer limits ofConnecticut criminal law.

7Given our disposition, we need not decide whether Riverside provided in- accurate information concerning "[t]he manner ofacquisition * * * and the date of acquisition ofthe property by the donor," sec.

Given our holding, the Court need not decide the interplay (ifany) between secs.

2020-3, at *15-*23; Belair 7Given our disposition, we need not decide whether Englewood provided inaccurate information concerning "[t]he manner ofacquisition * * * and the date ofacquisition ofthe property by the donor," sec.

2020-3, at *15-*23; Belair 7Given our disposition, we need not decide whether Maple Landing provid- ed inaccurate information concerning "[t]he manner ofacquisition * * * and the date ofacquisition ofthe propertyby the donor," sec.

2020-3, at *15-*23; Belair Woods, 116 7Given our disposition, we need not decide whether Village provided inaccurate information concerning "[t]he manner ofacquisition * * * and the date ofacquisition ofthe property by the donor," sec.

Given our holding, the Court need not decide the interplay (ifany) between secs.

Given our holding, the Court need not decide the interplay (ifany) between secs.

However, we are not convinced that these losses negate WP Realty's actual and honest intent to profit from the operation ofWhispering Pines.

- 22 - [*22] Finally, we are not convinced that the recovery petitioners sought with re- spect to their insurance claim was so unlikely that they could claim a deduction for 2010.

Therefore, petitioner ostensibly qualifies for child tax credits for the years in issue.5 5In the light ofthe modest amount ofincome that petitioner earned in 2014, it is unclear whether she will receive any child tax credit for that year.

We therefore need not decide the precise extent to which the new regulation applies to the 2004-2008 transactions at issue.4 4We have previously recognized that the "actual economic outlay" doctrine is congruent with the new regulation.

Therefore, petitioner ostensibly qualifies for child tax credits for the years in issue.5 5In the light ofthe modest amount ofincome that petitioner earned in 2014, it is unclear whether she will receive any child tax credit for that year.

We question whether a competent tax professional would prepare a return claiming a loss of this magnitude in the absence ofany documentary evidence establishing the facts surrounding the investment.

435, 440 (1934).8 7Under the circumstances, we need not decide whether Mr.

Because we decide this case on a preponderance ofthe evidence, we need not decide which party has the burden ofproof.

Because we hold that petitioner is not liable for any penalty, we need not decide this question.

We express no opinion regarding CFF's operations for any taxable year other than 2013.

435, 440 (1934).8 7Under the circumstances, we need not decide whether Mr.

Because petitioners did not provide a breakout ofexpenses or supporting documentation for the remainder ofthe unreimbursed volunteer expenses, it is unclear whether each ofthe individual expenses is less than or greater than $250.

Thus, we are not convinced that petitioner made a reasonable attempt to comply with the Code.

ow the instruction set forth in subdivision (i)(D)(3) ofthe governing regulation, namely, that a taxpayer filing a return under these circumstances "must type or legibly print the following statement at the top ofthe first page ofthe Form 1040: 'Filed Pursu- ant to Section 1.911-7(a)(2)(i)(D).'" We need not decide whether this omission, standing alone, would be sufficient to invalidate an otherwise timely FEIE elec- tion.

We need not decide whetherpetitioners are entitled to count the time spent rehabilitating the Sterne propertytowards real estate professional status because we find that petitioners have not adequately substantiated the total time Mr.

Though our holding considers only whether Calvin Moyer had an actual and honest objective ofmaking a profit and not whether he actually engaged in his alleged business activity, we are skeptical than any such activity took place during the year in issue.

studies in which he excelled, we are not convinced that he devoted full-time hours to his real estate activity.

However, neither resided with petitioner at any time during the year, and thus neither was a "qualifying child." It is unclear whether Tiffany was a "child" during 2011; she was 20 years old, and petitioner did not provide any information as to whether she was a student.

Here, the understatement oftax was attributable to erroneous items of petitioner, namely, his underreported Social Security disability income.4 Because petitioner has failed to satisfy the second condition under section 6015(b), we need not decide whether he satisfied the other two conditions under section 6015(b), i.e., whether he lacked the requisite knowledge ofthe understatement and whether equity considerations favor him.

We therefore need not decide whether petitioner satisfied the requirements ofsection 7491(a).

We need not decide whether the memorandum is excluded under this regulation because we conclude for other reasons that it does not constitute substantial authority for petitioners' position.

Because we decide this case on the preponderance ofthe evidence, we need not decide which party has the burden ofproof.

More fundamentally, the IRS argues, the Court need not decide whether the $450,000 payment was made to a welfare-benefit fund or whether it was a payment ofemployee compensation under a plan of deferred compensation because the payment is not deductible as a business expense under section 162.2 We need not resolve all ofthe issues raised by the parties.

The Court need not decide this question today, however, because it goes to the merits ofan RA '78 sec.

¹³Since petitioners did not obtain a "qualified appraisal" as required by sec- tion 6664(c)(3)(A), we need not decide whetherthey "made a good faith investiga- tion ofthe value ofthe contributedproperty" as required by section 6664(c)(3)(B).

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

7We need not decide who bears the burden ofproving the applicability of sec.

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

However, we need not decide whether petitioners satisfy the requirements ofsection 7491(a)(1) and (2) with respect to the remainder ofthe issues in this case because we decide them on the preponderance ofcredible evidence and not on any failure to carry the burden ofproof.

However, because our conclusions are based on the preponderance ofevidence, we need not decide whether petitioners or respondent bears the burden ofproof with regard to petitioners' deficiency.

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

The Court need not decide this question today, however, because it goes to the merits ofan RA '78 sec.

Retained Rights As with the 2003 easement property, we need not decide with respect to the 2005 easement property whether an operating golfcourse is inherently inconsistent with conservation purposes ofpreserving a relatively natural habitat under section 170(h).

Because there is a substantial understatement ofincome tax for 2010, the Court need not decide whetherthe underpayment is due to negligence.

2Because we decide this case on a preponderance ofthe evidence, we need not decide which party has the burden ofproof.

Because we find that Seventeen Seventy received as consideration CPDA's recommendationto the Planning Board to approve the view plane variance and find that CPDA's recommendation had substantial value which was not valued by Seventeen Seventy in determining its charitable contribution deduction, we need not decide whether the Planning Board's approval ofthe view plane variance was also consideration received as part ofthe quid pro quo exchange.

We need not decide whether section 7491(a) imposes the burden ofproofon the IRS.

- 17 - taxpayers a prepayment forum for contesting the application ofsection 905(c)(1) and its predecessors.6 At this point, we need not decide whether we have subject matterjurisdic- tion over all aspects ofthis controversy.

We therefore need not decide whether petitioners have met the conditions ofsection 7491(a)(2) required to shift the burden ofproofto respondent with respectto those issues.

- 15 - [*15] We are not convinced, on this record, that petitioners satisfied the requirements ofsection 469(g) when Fifth Third foreclosed on the Via Capri and Via Murano properties in December 2008.

.Petitioners 6Because respondentmet his burden ofproduction as to a substantial understatement, we need not decide whether respondent has met his burden of production as to negligence.

ment in the entire exterior ofthe property, as required by the plain meaning ofsection 170(h)(4)(B)(1), because the partnership only had rights to the Facade, as defined by the amended declaration.3 3Because we hold that the partnership did not have a right to the entire exterior ofthe property, we need not decide whether, under Illinois State law, an ownership right is required to grant a restrictive easement in the entire exterior of a building.

Any such arrangement was not documented, and we are not convinced that they ever agreed to it.

For instance, we are skeptical that Mr.

Because petitioner cannot show the worthlessness ofthe Landmark note, we need not decide whether it was a nonbusiness debt as defined in section 166(d)(2).

Property Provided to Vibo As stated above, we are not convinced that Vibo made the MSA payments on behalfofProtabaco as a cost ofpurchasing manufactured cigarettes.

Because we hold that petitioner was not engaged in an active trade or business during 2006, we need not decide whether petitioner's Schedule C expenses were substantiated.

Under section 6015(c)(3)(C) we look for "an actual and clear awareness (as opposed to reason to know) ofthe existence ofan item which 5Because ofthis finding, we need not decide whetherpetitioner and intervenor were legally separated at the time ofpetitioner's election.

The issues for decision in this case are legal issues; therefore, the Court need not decide who bears the burden ofproof.

Petitioners contend that the cost of the flight lessons at issue is an education expense directly related to petitioner's - 6 - business as a commercial realtor.' We are not convinced, however, that the flight lessons petitioner·received maintained or improved the skills required to be a commercial realtor.

We are not convinced that he prepared and allowed the submission ofthe false documentto perpetuate a scheme formed at the time offiling his 2000- 04 tax returns to conceal taxable gain.

Because we decide on the preponderance ofthe evidence whether petitioners were engaged in the active conduct ofa trade or business during 2006, we need not decide whether section 7491 applies to this issue.

Because we conclude that he has not done so in this case, we need not decide the child support dispute presented to us by * * * [the custodial parent].

See, e.g., United States s For the same reason, we also need not decide whether Brooks should have reported discharge-of-indebtedness income each year that part of the loan was forgiven.

We need not decide whether petitioners' reported downpayment loss is a section 165 loss or a section 166 nonbusiness bad debt.

6015(f) and therefore need not decide whether petitioner brought her claim for relief within-2 years of the first collection gctivity.

Petitioners therefore contend that because WB Partners controlled the exclusive rights to the services öf Barone and Watkins-and because without those services 3(...continued) venture, we need not decide whether the NTC -joint venture had economic substance.

We need not decide this issue, however, because petitioners defaulted on their loan and have failed either to show that the foreclosure action was illegal pursuant to the deed of trust securing that loan or to substantiate the alleged theft loss.

We are not convinced that the required records we e present on Anyanwu's computer before the failure of his hard disk drive.

We need not decide whether.these post-2004 year are outside our frame ofireference..

Thus it is unclear whether, after 2001, the ownership of these entities was the same as it was at the end of 2001, when Mary Penland owned 100 'percent of the shares of Penco, Penco owned Woodruff as a sole proprietorship, and Penco did not own Sweet Water.

On balance, we are not convinced that during the years in issue petitioner engaged sin the drag racing activity for pr.ofit To the contrary, we believe that petitioner was engaged in this activity because of his long-held interest in drag racing, derived substantial personal pleasure from the activity, and had no good-faith expect

In the light of the statutory regime we are not convinced°that section 832(b) was intended to have the Annual Statement control the treatment of - extracontractual losses for Federal tax purposes.

"Because petitioner has failed to satisfy the exclusive use test, we need not decide whether petitioner's home office was his principal place of business or a place of business used by clients or customers in meeting or dealing with petitioner in the course of his trade or business.

It is unclear whether petitioners placed the item in service, in 2003 or in 2004 after the lease on the Land Rover expired .

Petitioner alleged that even if she is unable to deduct he r rental real estate activity losses under section 469 ,'-she should be entitled to deduct the costs of her rental real estate activity under 'sections 212, 162 and/or 195 .'6 5The'Court need not decide whether she materially participated in her rental real estate activity .

We are not convinced'that petitioner's payment in 2001 is deductible.

We need not decide whether the burden of proof shifts to respondent under section 7491(a) because we decide this case on the basis of the preponderance of the evidence .

But the Court need not decide whether the Court of Appeals for the Fifth Circuit would apply.

] After a review of the objective factors discussed above, we are not convinced that petitioner engaged in his aircraft maintenance activity with the objective of making a profit .

The Court, however, need not decide whether petitioner had a tax home (or its location) for purposes of his "travel away from home" expenditures or whether the expenditures constitute job search expenses .

We are not convinced that petitioners' recordkeeping represented anything other .than an effort to substantiate expenses claimed on their ,returns .

We are not convinced, however, that such a narrow construction is appropriate .

' The Court need not decide whether petitioner computed-her taxable income on the cash method, the accrual method, or some combination of those methods .

We are not convinced that petitioners' recordkeeping represented anything other than an effort to substantiate expenses claimed on their return.

Petitioner has not alleged that section 7491(a) applies ; however, the Court need not decide whether the burden shifted to respondent pursuant to section 7491(a) since the Court's analysis is based on the record before it and not on who bears the burden of proof .

Accordingly, the Court need not decide whether section 7491(a)(1) is applicable in this case.

Given our conclusion, we need not decide whether petitioners substantiated their claimed Schedule C deductions.9 We also need not address section 183(b)(2) because respondent allowed expenses related to the activity to the extent of the activity’s gross income.

Based on our resolution of the third issue for decision infra, we need not decide whether petitioner’s assertion is correct, and we do not address this issue further.

Because we shall grant respondent's motion for partial summary judgment, we need not decide whether the sale of development rights to DALPF constitutes a qualified conservation contribution.

However, because there was no deficiency lurking in this case at all, we need not decide whether an “assertion of deficiency” is synonymous with a “notice of deficiency,” much less an “assessment”, in defining the limits of our jurisdiction under section 6015(e).

Whether a theft occurred, it is unclear whether the theft occurred at the time the funds were wired to Graves, or at some later time.

We question whether Mr.

In addition to the foregoing, we are not convinced that the amounts claimed are even deductible, apart from their lack of substantiation.

Accordingly, the Court need not decide whether section 7491(a)(1) is applicable in this case.

It is unclear whether petitioners ever recognized a loss from the sale or exchange of a capital asset in connection with Tara.

Accordingly, we need not decide whether the general rule of section 7491(a)(1) is applicable in this case.

Accordingly, we need not decide whether section 7491(a)(1) is applicable in this case.

We nevertheless point out that, for the 5As a result of petitioners’ concessions and our findings, discussed below, we need not decide whether the tax shelter provisions are applicable in this case.

Skoller advanced funds to PRA (an issue that we need not decide), the advance was a contribution to capital and not a bona fide debt.

We need not decide petitioners’ contention because our findings and analysis do not depend on which party bears the burden of proof.

However, we need not decide whether the downpayments made by BMP’s customers in this case constitute advance payments or deposits (or a combination of both), for the reasons discussed infra.

Accordingly, the Court need not decide whether current sec.

Second, we are not convinced that petitioners conducted the Amway activity in a businesslike manner.

We are not convinced that petitioner had a trade or business within the meaning of section 162(a).

We are skeptical that all data that went into the reports was irretrievably lost.

Because we conclude that he has not done so in this case, we need not decide the child support dispute presented to us by Ms.

Respondent has not raised the issue of whether the litigation costs at issue here were capital expenses, and we express no opinion in this regard.

39 On April 22, 2025, BC Investors filed a supplement to its Opening Brief alleging that Ranch Springs was incorrectly decided and is otherwise not applicable to Beaverdam’s case.

We disagree with respondent on each ground and conclude that the property Edwards installed in Building 200 qualifies as EECBP under section 179D(c)(1).

Furthermore, we do not agree with the characterization ofJFLP's method as a hybrid method, a position petitioners assert for the first time in their briefs.

Perhaps this is a subtle concession by Andersen, but it has no effect on our conclusion because we disagree with his choice ofdepreciation method.

We do not agree entirely with any of those arguments.

We do not agree entirely with any of those arguments.

We do not agree with petitioners' assertion that the disposal ofproperty (and the development rights attached thereto) constitutes cultivating the soil, raising agricultural or horticultural commodities, the handling ofsuch commodities, or tree farming.

We do not agree with petitioners' assertion that the disposal ofproperty (and the development rights attached thereto) constitutes cultivating the soil, raising agricultural or horticultural commodities, the handling ofsuch commodities, or tree farming.

Moreover, we disagree with respondent's suggestion that petitioner should have relied upon the advice ofthe Louisiana official rather than the advice ofhis return preparer.

We disagree with the premise that Evans was in the rental business and that he held the Newport Beach property as part ofhis rental business.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with petitioner's argument for the following reasons.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with respondent's rationale for his disallowance ofthat depreciation deduction.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

We disagree with petitioners' assertion that the Sterling Plan's life insurance benefit is part ofa group term life insurance plan within the meaning ofsection 79.

The public policy concerns that underpin the pre-existing duty rule do not seem to be present here." In addition, we do not agree with respondent that section 1.460-1(b)(2), Income Tax Regs., codifies the preexisting duty rule.

The public policy concerns that underpin the pre-existing duty rule do not seem to be present here." In addition, we do not agree with respondent that section 1.460-1(b)(2), Income Tax Regs., codifies the preexisting duty rule.

Consequently, we cannot agree with petitionerthat the 2008 State and local income tax deduction provided them with no tax benefit, in the light ofthe fact that numerous other deductions were ultimately disallowed.

The proceeds are protected which is the goal ofthe law." We disagree with petitioner's interpretation ofKaufman III.

We disagree with this contention.

Moreover, we disagree with respondent's assertion that Mr.

Iovine is a real estate professional under section 469(c)(7)(B).8 We disagree with petitioners, finding that Mr.

As a result, we disagree with.petitionerthat the requirements ofsection 6664(c)(1) are satisfied because of"confusion" in the interpretation ofsection 163(h)(3)(B)(ii) and (C)(ii).

Consequently, we disagree with respondent - 8 - that petitioner's section 6015(c) elgction is invalid because petitioner had actual knowledge of intervenor's ExamOne earnings.

- 25 - We disagree with petitioner.

For the reasons discussed below, we do not agree.

We do not agree with petitioners' contention thit Mr.

We disagree with their interpretation .

We disagree with petitioner's creative characterization of its treasury shares .

More importantly, even if petitioner submitted evidence of a detailed log or diary of the time spent with his children in 2002, we do not agree that petitioner was the custodial parent for 2002 for purposes of section 152(e).

- 9 - fraud or negligent misrepresentation when he or she reasonably relies on the misrepresentation to hold rather than sell his or her stock.5 We disagree with petitioner.

Although the calendar demonstrates that petitioner’s son lived with petitioner for a greater portion of 1998, we do not agree that petitioner should be treated, for purposes of section 152(e), as his son’s custodial parent for that year.

Secondly, we do not agree with the conclusion of the Tenth Circuit Court of Appeals that FERC’s distinction between gathering and transmission lines necessarily establishes that FERC considers gathering systems as related to production.14 See Duke Energy Natural Gas Corp.

We disagree with respondent that the asset transfer resulted in gross income to the Caracci children.

We do not agree with petitioner that Congress intended to exclude from the definition of a “deficiency” taxes which are determined by respondent for a nonfiling taxpayer.

We cannot agree that the right of first refusal was triggered by the letter of intent.

We disagree with petitioner’s characterization.

Their petition states their disagreement with respondent’s determination in the notice of deficiency solely as follows: We disagree with the adjustment based on Reg.

We disagree with respondent’s analogy.9 First, as mentioned above, respondent makes no assertion that Metrobank’s payment of either fee was related to the purchase of a capital asset.10 Second, Metrobank was already 9 We recognize that title 12 uses the terms BIF member and SAIF member to refer to the participants

We disagree with petitioners’ claim that petitioner’s business was on the accrual method of accounting for 1994.

553(b) and (c).] We disagree with petitioners' assertion that sections 1.469-2(f)(6) and 1.469-4(a), Income Tax Regs., are invalid when applied to a material participant of an activity conducted by a C corporation.

We disagree with each of petitioners’ arguments.

The Court consults those same factors when reviewing the IRS's denial ofrelief(but is not confined to them).

In arriving at this conclusion, we have considered and rejected the IRS's argument that a 2006 amendment to section 167(h)--codified at section 167(h)(5)-- indirectly shows that Congress had intended the treatment ofgeological and geophysical expenses under section 167(h) to be confined to owners ofmineral interests.

An expenditure for medical care is deductible ifit is strictly confined to expenses incurred primarily .·7- [*7] for the prevention or alleviation ofa physical or mental defect or illness.

- 25 - [*25] confined to the year that is the subject ofthe notice that gave rise to that petition.42 The Court may consider the tax for other years but only to the extent necessary to redetermine the amount ofthe deficiency petitioned.43 Therefore, the Court is vested with thejurisdiction to consider Mr.

- 10 - when any cost exceeds that of a normal counterpart, and that cost is solely for the mitigation or alleviation of a disability and one that provides functionality to the disabled, this above normal cost is deductible as a medical expense confined to the limitation that its primary function is not that of normal and ordinary to and from work travel when the principles of this type of deductibility cost are applied in this area.

The term "income" as it is used in section 212 "is not confined to recurring income" but may also apply to gains from the disposition of property.

question petitioners' assumption in their memorandum that "an item on a partner's return can be an affected item if and only if the partner's treatment of that item is dependent, in the first instance, on a partnership item adjustment." (Emphasis added.) Petitioners have cited no authority for this narrow interpretation of the scope of section - 25 - 6231(a)(5), and we have found none.

Section 41 provides several alternative approaches to calculate the research credit.

The FASIT Rules The FASIT rules were enacted pursuant to section 1621(a) of the Small Business Job Protection Act of 1996, Pub.

Unreported gross receipts Section 6001 requires that each person maintain books and records “sufficient to show whether or not such person is liable for tax.” See also DiLeo v.

Section 1341 applies if (1) “an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item,” I.R.C.

Accordingly, we hold that petitioner has not met his burden with respect to the claimed deduction; thus, respondent’s disallowance of petitioner’s depreciation and section 179 expense deduction claimed on Schedule C for taxable year 2017 is sustained.

3 [*3] preparing those documents was a “qualified appraiser.” However, we hold that deductions are nevertheless allowable because the failure to secure qualified appraisals was “due to reasonable cause and not to willful neglect.” See § 170(f)(11)(A)(ii)(II).

Because we hold that the payments she received were not grants (and are therefore not exempt under the Treaty for someone in her situation), we need not reach the “temporarily present” requirement of Article 18(1).

Section 6001 requires taxpayers to establish their entitlement to deductions and substantiate the amounts of their claimed deductions by keeping and providing books of accounts or records sufficient to establish “matters required to be shown by such person in any return of such tax or information.” Treas.

In view of the record before us, we hold that the Indiana payments directed to the home renovation business are recoverable only upon resale of the renovated properties rather than as a loss for 2017.

We hold that the partnerships are entitled to noncash charitable contribution deductions of zero for 2015, because they failed to secure and attach to their returns “qualified appraisal[s]” of the contributed property.

The adjusted basis discussed in section 1011 provides the basis on which depreciation is computed.

14 [*14] Section 161 provides that in computing taxable income, “there shall be allowed as deductions the items specified in this [part VI of subchapter B of chapter 1 of subtitle A of the Code, which includes section 162], subject to the exceptions provided in part IX (sec.

Specifically, section 261 provides: “In computing taxable income no deduction shall in any case be allowed in respect of the items specified in [part IX of subchapter B].” In essence, the Commissioner argues that section 261 broadens the class of deductions disallowed by section 275(a)(4) to include deductions “in respect of” foreig

He has thus failed to carry his burden to prove error in respondent’s determination, and we hold that Robert received and failed to report $907,024 of compensation income from BCH for 2009.

37 In ruling on the parties’ cross-motions, the District Court rejected the Stroms’ argument that each option vesting date should be considered a “purchase” for purposes of applying section 16(b) of the Exchange Act, holding instead that the acquisition date of the options constitutes the purchase date.

Accordingly, we hold Mr.

Thus, on the basis of a plain reading of the statute, we hold section 385(c) inapplicable.7 6 Although the regulations under section 385 are not binding on respondent as the regulation in question was promulgated after the relevant tax period, we still find it persuasive.

We hold that New Shoals had a taxable year December 28 to 31, for which it may claim the easement deduction.

Here, we hold that at least $1,218,320 of the financing costs (which included bond fees) were a but-for cause of the Tate’s construction, given 23rd Chelsea’s decision to finance construction by borrowing from the HFA.

Applying this principle, we hold that petitioners (or Mr.

Section 7491 provides that the burden of proof on a factual issue may shift to the Commissioner if the taxpayer satisfies specified condi- tions.

On August 8, 2023, we filed an Order recognizing that all proceedings in this case were automatically stayed pursuant to 11 U.S.C.

Section 1001 provides rules for determining the amount of and recognition of gain or loss, which for a gain is determined by the excess of the amount realized over the adjusted basis, and for a loss by the excess of the adjusted basis over the amount realized.

Our analysis starts and ends with the preservation of “a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem” pursuant to section 170(h)(4)(A)(ii).

Conclusion For the reasons discussed above, we hold that for tax year 2015 petitioner (1) had $22,492 of unreported income and $123,180 of Schedule C–1 gross receipts as reported on his 2015 Amended Return; 27 See Addis v.

Using our best judgment, we hold that HPPO accurately reported its gross income for 2016.

Based on the language of the statutory provisions and the legislative history of those provisions, we hold that petitioner’s use of the [cash] distributions from his Keogh and IRA’s [sic] to purchase stock which he then contributed to the Smith Barney IRA does not constitute a tax-free rollover contribution under section 402(c) or 408(d)(3), respectively.

Conclusion Considering all the facts and circumstances and weighing the factors analyzed above, we hold that petitioner did not conduct his Ovium activity in a businesslike manner and he did not engage in that activity with the requisite profit objective during the years at issue.

Natural habitat Determining whether the easement met any of the conservation purposes pursuant to section 170 was a fact-intensive inquiry.

Having resolved that factual issue in petitioners’ favor, we hold that petitioners are entitled to the deduction.

We hold (1) that Murfam did not satisfy the reporting requirements of section 170(f)(11), but that its failure to do so was for reasonable cause; (2) that the value of the easement donated by Murfam was $5,637,207 (i.e., about $107,000 less than Murfam claimed on its return); and (3) that reasonable cause

Conclusion We hold that the $2,741,399 was properly includible in Exterra’s amount realized on the sale of the Livermore property.

The PPM described the tax consequences of a conservation easement transaction at length and included a discussion relating to whether the easement deduction would be limited to Glade Creek’s adjusted basis in the easement property pursuant to section 170(e)(1)(A).

We hold that the patronage dividends are taxable to him as determined in the notice of deficiency.

The basis for determining the amount of the deduction for any loss pursuant to section 165(a) is the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of the property.

24 [*24] and 2015, respectively.12 Pursuant to section 163(e)(1), petitioner would normally be able to deduct those amounts as interest accruals unless limited by the rules addressing investment interest.

Accordingly, we conclude that petitioner is entitled to a deduction for each of these three expenses (namely the $500, $120, and $1,295 described above) pursuant to section 162.

Petitioner must satisfy the following three requirements to be entitled to a deduction pursuant to section 163(a) and (h)(2)(D): (1) the indebtedness must be his obligation, (2) he must either be the legal or equitable owner of the property subject to the mortgage, and (3) the residence is his qualified residence.

Served 05/17/23 2 [*2] We hold that Dr.

As a separate component of the sentence, the District Court ordered, pursuant to 18 U.S.C.

Section 461 provides general rules with respect to the proper year for taking deductions, which in turn rest in part on the taxpayer’s method of accounting under section 446.

In Saline Sewer we held that “the failure to report customer connection fees as income, and instead treat them as contributions to capital pursuant to section 118, is clearly not a timing issue.” See id at *9.

Shortly before the 2014 sale, the golf course declaration was amended by Riverwood Land (as declarant) and Champions Retreat (as golf course owner) pursuant to section 1 of Article VII.

Schedule C expenses Pursuant to section 162(a), a taxpayer may deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”.

We hold that petitioner did not have 1 Unless otherwise indicated, all statutory references are to the Internal Reve- nue Code, Title 26 U.S.C.

Article III, section 1 provides: After the death of the grantor [i.e., Sandra], the trustee may, in the trustee’s sole discretion, pay out of the remaining principal of the trust estate any or all legal debts, any or all expenses of administration of the grantor’s probate estate and any or all of the expenses of the grantor’s las

After concessions, the sole issue for consideration is whether tax depreciation methods for inventory production assets can be used under either section 263A or section 471 when section 280E is applied.1 1 The parties have stipulated the amounts needed to compute a deduction pursuant to section 199.

Accordingly, we hold that the Servances are not entitled to exclude Mr.

Pursuant to section 152(e), when certain criteria are met, a child may be treated as a qualifying child of the noncustodial parent (here, petitioner) rather than of the custodial parent (petitioner’s former spouse).

Dern’s attorney, that petitioners had unreported nonemployee compensation of $324,000.4 Petitioners timely filed a Petition with this Court alleging that the settlement payment was received for “personal physical injuries and personal physical sickness” and thus not taxable under section 104(a)(2).

§ 78u(d)(2)], for five (5) years from the date of entry of the Final Judgment, from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C.

Accordingly, we hold that the Morley stock was not subject to a substantial risk of forfeiture under section 83, and we sustain respondent’s determination on this matter.

We hold that evidence is sufficient to show that the IRS complied with the requirements of section 6751(b).

Wolpert is liable for an accuracy-related penalty under section 6662(a) with respect to taxable year 2017.2 We hold that Mr.

Easement Deed and Attachments The LLC granted and recorded a conservation easement over the 41.201-acre parcel (encumbered parcel) on December 27, 2007, to Liberty County, Georgia, a political subdivision of the State of Georgia and a qualified organization pursuant to section 170(h)(3).

We hold that there was.

Wolpert is liable for an accuracy-related penalty under section 6662(a) with respect to taxable year 2017.2 We hold that Mr.

Basis in S corporation stock is increased by income passed through to the shareholder under section 1366(a)(1) and decreased by, inter alia, distributions not includable in the shareholder’s income pursuant to section 1368; items of loss and deduction passed through to the shareholder under section 1366(a)(1); and certain nondeductible, noncapital expenses.

- 6 - units) pursuant to section 1.163-10T(p)(4)(i) and (ii), Temporary Income Tax Regs., 52 Fed.

Whether an expense is deductible pursuant to section 162 is a question of fact to be decided on the basis of all relevant facts and circumstances.

We hold that she may exclude only $6,980 of the payment.

We hold that petitioner is not entitled to a foreign tax credit against the net investment income tax under the treaty provisions on which she relies.

Monroe provided no explanation for the difference between incentive payments he reported on his return for 2014, $37,360, and the amount Hyundai reported to the IRS, $38,862; and thus, we hold he received the higher amount as reported by Hyundai.5 B.

Accordingly, we hold that the payments were unreported income and sustain respondent’s inclusion of $29,501 for 2017 in petitioner’s gross income.

Because petitioner wife did not - 8 - file a complaint based on physical injury or sickness and the settlement agreement did not state that the payment was in lieu of damages for physical injury or physical sickness, the $69,650 settlement payment is not excludable pursuant to section 104(a)(2).

Section 6001 requires every person subject to income tax to maintain books and records sufficient to establish the amount of gross income and deductions shown on its income tax return.

On this record, applying either the test of this Court or that of the Court of Appeals for the Ninth Circuit, we hold that Mr.

Pursuant to section 1 Petitioners resided in Georgia when they filed their petition.

Conclusion We hold that the disputed legal expenses that Mylan incurred during the years at issue to prepare paragraph IV notice letters must be capitalized pursuant to section 263(a), whereas expenses incurred to litigate Section 271(e)(2) suits are - 48 - currently deductible pursuant to section 162(a).

(Water Warehouse), for a theft loss deduction pursuant to section 165 or, in the alternative, a deduction for nonemployee compensation and (2) liable for an addition to tax for failure to timely file a return pursuant to section 6651(a)(1) for 2016.

We hold that transfers after 2007 were not loans but rather distributions valued at the face amounts of the funds transferred.

Background on F Reorganizations Section 1001 requires taxpayers to recognize any gain or loss realized on the sale or exchange of property unless an exception exists.

After respondent’s concessions of the accuracy-related penalties, the issues for consideration are whether petitioners are: (1) entitled to deductions for expenses as reported on Schedules C, Profit or Loss From Business, for the years in issue, (2) entitled to a theft loss deduction pursuant to section 165 for 2015, and (3) liable for additions to tax pursuant to section 6651(a)(1) for the years in issue.1 FINDINGS OF FACT Some of the facts are stipulated and are so found.

Section 6001 requires taxpayers to maintain records sufficient to establish the amount of each deduction.

Accordingly, we hold that the debts were all recourse debts and sustain respondent's inclusion ofthis cancellation ofindebtedness as part ofMs.

Accordingly, we hold that the debts were all recourse debts and sustain respondent's inclusion ofthis cancellation ofindebtedness as part ofMs.

Pursuant to section 152(e), a child will be treated as a qualifying child ofthe noncustodial parent rather than ofthe custodial parent when the following - 15 - [*15] requirements are met: (1) the custodial parent signs a written declaration, in the manner and form prescribed by regulations, stating that she will not c

Record-keeping Section 6001 requires that "[e]veryperson liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe." (Emphasis added.) A taxpayer is thus require

Accordingly, we hold that the July 2, 2014, notice ofdeficiency was timely.

- 19 - [*19] Because Stephen Thielking's appraisal did not satisfy the independence and collateral requirements ofsection 1.170A-13(c)(5)(i)(A), (B), and (C), Income Tax Regs., we conclude that petitioner's stock held by the ESOP was not valued by an "independent appraiser", and we hold that the ESOP fails to meet the requirements ofsection 401(a)(28)(C).

We hold that the IRS properly disallowed the deduction in full because the conservation purpose underlying the easements was not "protected in perpetuity" as required by section 170(h)(5)(A).

Pursuant to section 152(e), a child will be treated as a qualifying child ofthe noncustodial parent rather than ofthe custodial parent when the following - 15 - [*15] requirements are met: (1) the custodial parent signs a written declaration, in the manner and form prescribed by regulations, stating that she will not c

Because we hold that timely ap- proval was not secured for any penalty, we need not address petitioner's concerns.

Likewise, we hold that petitioner's principal place ofbusiness, and thus his tax home, was in San Jose, his home base and the location ofhis gateway travel airport, SJC.

Accordingly, the 2009 FSP * * * distributions are subject to self-employment tax pursuant to section 1401.

We hold that the Abregos are liable for the tax subject to limitations; and 2.

We hold that the claimed charitable contribution deduction is disallowed for lack ofsubstantiation as required by section 170 and section 1.170A-13, Income Tax Regs.

The values at the time ofthis Conservation Easement shall be those values used to calculate the deduction for federal income tax purposes pursuant to § 170(h) ofthe Code.

R Pursuant to section 170(h)(5)(A) the conservation purpose must be "protected in perpetuity." However, Congress did not address specifically the allocation ofextinguishment proceeds.

R Pursuant to section 170(h)(5)(A) the conservation purpose must be "protected in perpetuity." However, Congress did not address specifically the allocation ofextinguishment proceeds.

- 6 - [*6] (Trading S Corp), a Texas for-profit corporation that elected treatment as an S corporation pursuant to section 1362; Standish Investments, Ltd.

2010 Schedule A miscellaneous expenses For 2010 a taxpayer may claim an unreimbursed employee business expense as a miscellaneous deduction on Schedule A, pursuant to section 162(a).

The values at the time ofthis Conservation Easement shall be those values used to calculate the deduction for federal income tax purposes pursuant to § 170(h) ofthe Code.

Pursuant to section 163(h)(4)(A)(ii)(II), ifa married couple does not file ajoint return for the taxable year, each ofthem "shall be entitled to take into account 1 residence unless both individuals consent in writing to 1 individual taking into account the principal residence and 1 other residence." The record does not

In sum, we hold that with respect to the Oak Hill property, petitioners are entitled to deduct Schedule E repair expenses of$608, $1,199, $466, and $313 for tax years 2010, 2011, 2012, and 2013, respectively.

On these issues we hold for the IRS.

Conclusion On the basis ofthe record before us, we hold that Ms.

Pursuant to section 152(d)(1), the term "qualifying relative" means an individual: (A) who bears a qualifying relationship, defined in section 152(d)(2), to the taxpayer; (B) whose gross income is less than the exemption amount defined in section 151(d); (C) for whom the taxpayerhas provided more than one-halfofthe 4 Th

However, he provided no details about the circumstances or timing ofthe loss.6 Therefore, we hold that petitioner has not established entitlement to any casualty loss for 2014.

Pursuant to section 183(d), an activity is presumed to be engaged in for profit ifthe activity produces gross income in excess ofdeductions for any three of the five consecutive years which end with the taxable year, unless the - 11 - [*11] Commissioner establishes to the contrary.

Consistent with the foregoing, we hold that petitioner was not operated exclusively for one or more exempt purposes within the meaning ofsection 501(c)(3) and that respondent did not err in determining that petitioner is not eligible for an exemption from taxation under section 501(a).

Cutting Horse Activity Breeding, raising, training, and showing horses may be an activity entered into for profit pursuant to section 162.

In relevant part, section 1 provides for the imposition ofan income tax on all "taxable income", which is defined as "gross income" minus the deductions that the chapter allows.

We hold that the notice is valid and that we havejurisdiction.

We hold, therefore, that MCMIM is entitled to deduct its section 165(a) loss with respect to its worthless partnership interest in Companies for the tax year in issue.

Section 6001 requires taxpayers to maintain sufficient records to allow the IRS to determine their correct tax liability.

We hold that the diverted gross receipts were the unreported taxable income ofBCO for the years in issue.

To the extent petitioners are seeking to advocate a position contrary to these settlements, we hold that their arguments are not supported by the record and their stipulations with respondent are binding.

Petitioners reported no tax liability for 2012 or 2013, and we hold for the reasons stated above that petitioner's earnings from Jettrade must be included in their income and taxed accordingly.

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: The instant case involves determinations ofdeficiencies in self-employmenttaxes pursuant to section 1401(a) of$155,931 and $110,670, and section 6662(a) penalties of$31,186 and $22,134, for petitioner's tax years 2010 and 2011, respectively.

In the light ofthe evidence in the record, we hold that petitioner is entitled to deduct $3,319 for this item.

In addition, we hold that even ifScott Ronning was an accrual-method taxpayer, there is insufficient proofthat he is entitled to an interest expense deduction.

We hold that the diverted gross receipts were the unreported taxable income ofBCO for the years in issue.

Section 6001 requires taxpayers to maintain sufficient records to allow the IRS to determine their correct tax liability.

Pursuant to section 183(a), ifan activity is not engaged in for profit, no deduction attributable to that activity is allowed except to the extent provided by section 183(b).

We hold that he is not entitled to reliefunder any of these three subsections.

To the extent petitioners are seeking to advocate a position contrary to these settlements, we hold that their arguments are not supported by the record and their stipulations with respondent are binding.

Section 701 provides that a partnership is not liable for Federal income tax; instead, its partners are liable in their individual capacities for the income tax arising from the partnership's operations.

Accordingly, we hold that petitioner is entitled to an unreimbursed employee business expense deduction totaling $1,140 for each oftax years 2014 and 2015.

To the extent petitioners are seeking to advocate a position contrary to these settlements, we hold that their arguments are not supported by the record and their stipulations with respondent are binding.

We hold, therefore, that petitioners have failed to meet the substantiation requirements ofsection 1.170A-13(a)(1), Income Tax Regs.

A shareholder's stock basis is also decreased by distributions received from the S corporation that are not includible in income pursuant to section 1368.

We hold that they are not.

Although section 31 provides that the amount withheld by an employer as tax from an employee's wages "shall be allowed to the recipient ofthe income as a credit" against his income tax liability for that year, this credit is available only "[i]fthe tax has actually been withheld at the source." Sec.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction claimed.

Applying the foregoing principles to the facts ofthis case, we conclude that the $43,868 in LTD benefits petitioner received in 2011, which are taxable income to her pursuant to section 105(a) and (c), must be recognized by her for that year under the claim-of-right doctrine.

Consequently, remaining for resolution are the following three issues: (1) whether Marlin may deduct, pursuant to section 166, allegedly bad debts arising from Brazilian consumer receivables of$4,850,000 for 2004; (2) whether Derringer 5Mr.

We hold, therefore, that petitioners' 2008 State income tax refund constituted taxable income for the 2008 tax year.

We hold the amount is $21,194.01, which is the amount the IRS conceded.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

Pursuant to section 152(e), a child will be treated as a qualifying child ofthe noncustodial parent rather than ofthe custodial parent when certain requirements are satisfied.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction claimed.

Accordingly, we hold that interest expenses paid or incurred during the production period must be capitalized.

- 10 - [*10] underpayment oftax due to: (1) negligence or disregard ofrules or regulations or (2) a substantial understatement ofincome tax.7 Because we hold for petitioners as to the section 469 passive activity loss limitation, petitioners have no underpayment and hence no accuracy-related penalty.8 In reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or

Accordingly, we hold that interest expenses paid or incurred during the production period must be capitalized.

Startup expenses, although not deductible during the pre-opening phase, may generally be deducted or capitalized and deducted over time upon a taxpayer's becoming actively engaged in business pursuant to section 195.

Petitioners contend that petitioner husband's business was a trade or business pursuant to section 162 and not an activity not engaged in for profit pursuant to section 183 and that the expenses were ordinary and necessary.

In sum, we hold that Memcorp HK's distribution of$12,307,591 oftaxable 962 E&P to petitioners was not QDI under section 1(h)(11)(B) but rather consti- tuted an ordinary dividend taxable at ordinary-income rates.

Duberstein draws an important distinction--a gift made out ofgenerosity or charity is not taxable under section 102, but one made out ofgratitude, particularly gratitude stemming from a prior economic or commercial relationship, is taxable.

Pursuant to section 162(a) a taxpayer may deduct unreimbursed employee expenses as an ordinary and necessary business expense.

We hold, on the basis oftheir deemed admissions, that petitioners are not entitled to the American Opportunity Credit for any ofthe tax years at issue.

Accordingly, we hold that petitioners are entitled to a deduction of$109 for tax preparation fees.

Petitioners did not offer any evidence at the trial in this case that establishes that they are entitled for their taxable year 2011 to their claimed NOL deduction.22 Based upon our examination ofthe entire record before us, we hold that petitioners have failed to carry their burden ofestablishing that they are entitled for their taxable year 2011 to deduct $21,940 with respect to a claimed net oper- ating loss carryover.

Consequently, remaining for resolution are the following three issues: (1) whether Marlin may deduct, pursuant to section 166, allegedly bad debts arising from Brazilian consumer receivables of$4,850,000 for 2004; (2) whether Derringer 5Mr.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

We hold that petitioners are liable for the section 6662(a) and (b)(1) penalties for negligence.

Petitioners contend that petitioner husband's business was a trade or business pursuant to section 162 and not an activity not engaged in for profit pursuant to section 183 and that the expenses were ordinary and necessary.

We hold that petitioners are liable for the section 6662(a) and (b)(1) penalties for negligence.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

Section 6001 requires taxpayers to maintain records sufficient to establish the amount ofeach deduction.

Pursuant to section 1015(a), petitioner's basis in the 4Respondent agrees that petitioner's cost basis in the McCloskey Road property is $234,312, the amount that he paid for his interest in that property when he and the Fiscalinis purchased it in 1993.

Baron included with petitioner's tax return (1) a schedule indicating that she had received other income of$104,500 from Home Depot and (2) a separate statement that she had sustained "sexual abuse injuries" at Home Depot, and, therefore, she considered the settlement payment to be nontaxable under section 104(a).

Conclusion Considering all the facts and circumstances, we hold that petitioner did not conduct the CPB activity in a businesslike manner and he did not engage in the - 15 - activity with the requisite profit objective during the taxable year 2013.

Section 6001 requires taxpayers to maintain records sufficient to establish the amount ofeach deduction.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction.

Consequently, we hold petitioners have failed to satisfy their burden of proof.

We hold they are; 8.

Sahadi from being claimed as petitioners' dependent pursuant to section 152(b)(2).

Accordingly, pursuant to section 1.195-1(b), Income Tax Regs., petitioners are deemed to have made the election to amortize startup expenditures under section 195(b) for 2012.

With respect to cash contributions ofless than $250 made since 2006, as indicated above, a bank record or written communication is required pursuant to section 170(f)(17).

Section 951 requires a U.S.

Section 261 provides that "no deduction shall in any case be allowed in respect ofitems specified in this part." "[I]tems in this part" refers to part IX ofsubchapter B ofchapter 1, entitled "Items Not Deductible", and this includes section 280E, "Expenditures in Connection With the Illegal Sale ofDrugs".

Pursuant to section 168(a), the depreciation deduction for any tangible property generally is to be determined by using the applicable depreciation method, the applicable convention, and the applicable recovery period.

We hold that she is not.

Bates' back injury) and thus excludable from income pursuant to section 104(a)(2).2 See Commissioner v.

- 21 - [*21] We hold, therefore, that petitioners are not entitled to a theft loss deduction under section 165.

On September 11, 2014, respondent issued petitioners a notice ofdeficiency for 2011 that (1) disallowed Schedule C expense deductions pursuant to section 183 and (2) determined petitioners were liable for an accuracy- related penalty under section 6662(a).

Accordingly, we hold that petitioner is not entitled to an interest expense deduction for 2010.

We hold they are; 8.

Under section 263(a), we hold petitioners were not pennitted to deduct the car expense for 2010.

The tax matters partner ofSalt Point Timber, John Hood, timely filed a SERVED Dec 11 2017 - 2 - [*2] petition for a readjustment ofpartnership items under section 6226(a).¹ We havejurisdiction under section 6226(f).2 We hold that no deduction is allowable because the conservation easement is not a "qualified conservation contribution" as defined in section 170(h)(1).

Consequently, we hold petitioners have failed to satisfy their burden of proof.

Accordingly, we hold that the away city hotels constituted part ofthe Bruins' business premises for the years in issue.

Pursuant to section 1.468B-4, Income Tax Regs., whether a distribution from a designated settlement fund, like the QSF, is includible in a payee's gross income is generally determined by reference to the claim in respect ofwhich the distribution is made and as ifthe distribution were made directly to the payee by the tr

Section 261 provides that "no deduction shall in any case be allowed in respect ofitems specified in this part." "[I]tems in this part" refers to part IX ofsubchapter B ofchapter 1, entitled "Items Not Deductible", and this includes section 280E, "Expenditures in Connection With the Illegal Sale ofDrugs".

Section 14 requires the plan administra- tor as a fiduciary to discharge his or her duties "with respect to the Plan and the Trust solely in the interests ofParticipants." Section 7.1 provides that an indi- vidual account shall be created in the name ofeach participant, and section 1.3 provides that the amounts in these accounts are held and invested by the trustee.

Therefore we hold that it is nontaxable.

Section 14 requires the plan administra- tor as a fiduciary to discharge his or her duties "with respect to the Plan and the Trust solely in the interests ofParticipants." Section 7.1 provides that an indi- vidual account shall be created in the name ofeach participant, and section 1.3 provides that the amounts in these accounts are held and invested by the trustee.

Petitioners, in contrast, claim these payments were gifts and thus nontaxable pursuant to section 102(a).

On the basis ofher testimony, and considering the nature ofthese expenses in the context ofher business, we hold that her testimony is sufficient to satisfy the requirements ofsection 162 and to support the claimed deduction.

We hold that section 481 adjustments are required, and we leave the application ofsection 481 in these cases to the parties' agreement or a Rule 155 computation.

- 19 - [*19] decline in value to be considered a casualty loss, the Coateses' adjusted basis in property A must be at least $210,000.8 We hold that the Coateses' adjusted basis in property A is at least $210,000.

We hold that they are not except as set forth in this opinion with respect to certain landfills;4 2.

We hold that petitioners are not entitled to an NOL carryforward deduction for 2011.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction claimed.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction claimed.

We hold that Charles Sisson is liable.

Held: Ps' deductions are denied in full because ofPs' failure to include a qualified appraisal with their 2007 return. See I.R.C. sec. 170(h)(4)(B)(iii)(I). 2. Held, further, because Ps failed to include a qualified appraisal with their 2007 return as required by I.R.C.

We hold that it is not.

We hold that it does not.

Section 151 provides as a deduction an exemption from taxable income ($3,800 for 2012) for each "dependent" as defined in section 152.

We hold that they are not except as set forth in this opinion with respect to certain landfills;4 2.

In addition, section 6001 requires a taxpayerto maintain sufficient records to allow the determination ofthe taxpayer's correct tax liability.

Each ofpetitioner's operating companies elected to be treated as a small business corporation pursuant to section 1362.

We hold that he did to the extent provided herein; (2) whether petitioner received income in the form ofcancellation of indebtedness in 2009.

We hold that petitioner is not entitled to the American Opportunity Tax Credit for 2011, and we thus sustain respondent's disallowance ofthis credit.

- 3 - [*3] OPINION A taxpayer is, pursuant to section 162(a), entitled to deduct all ordinary and necessary unreimbursed business expenses paid or incurred in carrying on a trade or business.

Consequently, we hold that petitioner is liable for the section 6662(a) accuracy-relatedpenalty for 2011.

Section 6001 requires taxpayers to 3On the record, the parties agree that petitioners bear the burden ofshowing their entitlement to the contribution deductions under consideration.

Therefore we hold that section 7491(a) does not apply to shift the burden ofproofto respondent.

Section 151 provides an exemption from taxable income for each depend- ent as defined in section 152.

Petitioner is, pursuant to section 167, entitled to depreciation deductions relating to the garage, gantry crane, and welding equipment and has established the cost, useful life, and previously allowable deductions relating to these items.4 See Cluck v.

We hold that she is not.

For these reasons, we hold that the $4,025,039 and $7,300,916 petitioner paid as officer compensation in 2003 and 2004, respectively, were reasonable and therefore deductible under section 162(a)(1).

We hold that they are not except as set forth in this opinion with respect to certain landfills;4 2.

1.152-1(b), Income Tax Regs., to questions arising (continued...) -12- (a) Downing At trial, the IRS conceded that Downing was a dependent ofMorris pursuant to section 152(d)(2)(H).

Petitioner claims that he can substantiate a portion ofthe expenditures with bank statements and that he is entitled to substantiate the remaining expenses through a reasonable reconstruction pursuant to section 1.274-5T(c)(5), Temporary Income Tax Regs., supra, because his records were lost through circumstances beyond his control.

In sum, we hold that petitioners failed to meet their burden ofproofto show respondent's disallowance ofthe deduction petitioners claimed for unreimbursed employee expenses to be in error.

Accordingly, we hold that petitioner is entitled to a $13,000 deduction for State income taxes paid, but she is not entitled to deduct alleged overpayments she claims she made for prior years that have been carried forward to 2011.

For the reasons set forth below, we hold for respondent.

Backemeyerwould still have been entitled to the deduction; and since section 1001 requires a taxpayerto recognize gain only to the extent sale proceeds exceed basis, no gain is recognized since there is a section 1014 basis step-up.

Section 6001 requires taxpayers to maintain records sufficient to establish the amount ofeach deduction.

Section 6001 requires taxpayers to maintain records sufficient to establish the amount ofeach deduction.

Accordingly, we hold that petitioner is entitled to deduct $2,400 as an ordinary and necessary employee business expense for 2010.

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

We hold for the Commissioner on this issue.

We hold that section 481 adjustments are required, and we leave the application ofsection 481 in these cases to the parties' agreement or a Rule 155 computation.

Pursuant to section 1.274-5(g), Income Tax Regs., the Commissioner may prescribe alternative methods ofsubstantiating certain expenses, including per diem allowances.

We hold that petitioner's EMBA degree tuition - 10 - education expenses are deductible as unreimbursed employee expenses under section 162.

300, 307 (1983), we hold that the above-stated amounts are not gross Income to petitioner.

Presumably she never released her - 9 - claim to exemption pursuant to section 152(e)(2), as petitioners never attached to their return any Form 8332 or similar written statement.

The company's Modified Second Amended Plan ofReorganization and Information Pursuant to 11 U.S.C.

Section 1221 provides that a capital asset is "propertyheld by the taxpayer (whether or not connected with his trade or business)".

Respondent believes that petitioner's second Schedule C activity, his sports memorabilia activity, was not an activity he - 11 - [*11] engaged in for profit, so that, pursuant to section 183, described infra, he may not deduct his losses from that activity in excess ofhis profits from the activity.

Section 6001 requires the taxpayerto maintain records sufficient to establish the amount ofeach deduction.

- 4 - defining deductible business expenses pursuant to section 162 and the interrelationship ofthat section with section 262, defining nondeductible personal expenses.

Accordingly, we hold that Palmer is liable for the section-6651(a)(2) addition to tax for the 2009 tax year,9 subject to post-opinion computations under Tax Court Rule ofPractice and Procedure 155 confirming that the correct amount oftax for 2009 is a positive number (after application ofsection 6651(b)(2)).

On the basis ofthese facts and circumstances, we hold that Mr.

_ 9 _ We hold that the amounts reported on petitioners' 2009 and 2010 Schedules C are startup expenses and may not be deducted pursuant to section 162(a).

413, 417 (1997) ("[D]eductions solely permitted pursuant to § 183(b)(2) are miscellaneous itemized deductions."); sec.

1, 10-11 (2013) (holding, pursuant to section 170(h)(2)(C), that an easement is not a qualified real property interest ifthe boundaries ofthe property subject to the easement may be modified), supplemented by T.C.

- 7 - In summary, we hold that petitioner is entitled to a $2,810.54 moving expense deduction under section 217, as follows: Item Amount Transporting personal property $1,632.54 Rental oftrailers 1,000.00 Storage ofpersonal property 178.00 Total moving expense deduction 2,810.54 To reflect the foregoing, Decision will be en