July 27, 2021 - Douglas Myser

Top cases for tax practitioners. In our ongoing coverage of things relevant to Tax Court, we want to highlight some cases that most tax practitioners should be aware of. These cases go into common issues that arise in the course of dealing with taxpayers issues. Being familiar with these cases is essential for understanding the rights of your client. For example, determining when a trade or business begins might hinge on forces beyond the taxpayers control. Due to the Covid-19 pandemic, more of these issues have been brought forward. Many instances of businesses that opened up, and that were then shut down by the government due to Covid, became an issue within the last year. Top cases for tax practitioners.

For example the case of Sears Oil Co., Inc., 359 F .2d 191 (2nd Cir. 1966), where an oil barge was stuck in the ice. Had it been placed in service while it was stuckin the ice ?" To that question, the Second Circuit answered yes, the taxpayer's depreciation period for its new barge began when it was ready and available for use in the taxpayer's business, months before the New York state canal in which it had been trapped thawed.

The Woodsum case, 136 Tax Court 585 (2011), in which the taxpayer was a very high income individual: he had over 100 information return forms. The taxpayer's tax preparer omitted only one of those forms from the taxpayer's return for 2006, but that omission resulted in nearly $3.4 million in income. The penalty assessed was $104,000 and the taxpayer contested on the grounds of reasonable casue criteria for a penalty abatement, stating they relied ont he advice of the tax preparer. The court ruled agaisnt the wealthy couple stating that they had an opportuinty to review the return and it was ultimately up to them to make sure that the return was filed correctly. Advice to taxpayers to alwasy review your tax return.