Quatloos!

Petitioner had still not complied with the Court’s December 28, 2011, order [to answer interrogatories or produce documents] when his case was called for trial on February 6, 2012, and had not cooperated with respondent to prepare for trial in accordance with the Court’s standing pretrial order. When his case was called on February 6, 2012, petitioner orally moved for a continuance, which was denied. The Court set the case for trial on February 8, 2012. Petitioner promised to submit a pretrial memorandum “in the next day or two” and to exchange documents with respondent’s counsel.

When the case was recalled for trial at 3:05 p.m. on February 8, 2012, petitioner informed the Court that he still was “not ready for trial”, he had not provided respondent with all of the documents that he intended to rely on for preparation of a stipulation of facts, and he had not cooperated or complied with respondent’s requests for information. Petitioner still had not submitted the pretrial memorandum that he had promised to submit on February 6, 2012. Petitioner stated that he was not ready for trial because “I had obligations in my law practice and with clients”.

There followed this colloquy:

THE COURT: You didn’t make any allowance five months ago that the trial was going to be this week and rearrange appointments?

[PETITIONER]: Your Honor, I apologize. I have no excuse for that. I received correspondence. I didn’t give it the proper attention that it deserved. I have no excuse, but I’m doing my very best right now.

Petitioner admitted that he had not even reviewed his own exhibits.

Petitioner again orally moved for a continuance. There followed this colloquy:

THE COURT: I mean, I think I’m perfectly justified in dismissing your case at this point.

[PETITIONER]: I think you probably are, Your Honor, except the prejudice to me would be huge and I would really have never had an opportunity. We really have not had an opportunity to discuss--

THE COURT: Well, that’s not true. You had the opportunity. You just didn’t take advantage of it.

Respondent contends that the underpayments of tax are attributable to either negligence or substantial understatements of income tax. Respondent’s contentions necessarily reflect alternative grounds for imposing the section 6662 penalties because only one section 6662 accuracy-related penalty may be imposed with respect to any given portion of any underpayment, even if the underpayment is attributable to more than one of the types of listed conduct. See New Phoenix Sunrise Corp. v. Commissioner, 132 T.C. 161, 187 (2009), aff’d, 408 Fed. Appx. 908 (6th Cir. 2010); sec. 1.6662-2(c), Income Tax Regs.

For purposes of section 6662, the term “negligence” includes any failure to make a reasonable attempt to comply with the provisions of the Code, and the term “disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c); see also Neely v. Commissioner, 85 T.C. 934, 947 (1985) (negligence is lack of due care or failure to do what a reasonably prudent person would do under the circumstances); sec. 1.6662-3, Income Tax Regs. Negligence also includes any failure to exercise ordinary and reasonable care in the preparation of a tax return or any failure to keep adequate books and records and to properly substantiate items. Sec. 1.6662-3(b)(1), Income Tax Regs.

Petitioner claimed deductions for self-employed health insurance expenses for the years at issue. However, petitioner failed to substantiate that he had health insurance coverage and that he paid for any health insurance. Failure to properly substantiate deductions constitutes negligence under section 6662(b)(1). See Cook v. Commissioner, T.C. Memo. 2012-167, 2012 Tax Ct. Memo LEXIS 167, at *8-*9; sec. 1.6662-3(b)(1), Income Tax Regs.

Petitioner also deducted personal expenses as business expenses. For example, petitioner reported nonpassive losses of $62,350 and $94,875 on Schedules E for the taxable years 2005 and 2006, respectively. These amounts, which were actually paid before the years at issue, related to litigation with petitioner’s ex-wife and include attorney’s fees, past due income support, and other payments to petitioner’s ex-wife. Petitioner claimed that these amounts were “ordinary and necessary” business expenses under section 162. Petitioner’s attempt to deduct personal expenses in contravention of the plain language of section 2626 constitutes negligence. See WSB Liquidating Corp. v. Commissioner, T.C. Memo. 2001-9, 2001 Tax Ct. Memo LEXIS 9, at *23.

Petitioner claimed charitable contribution deductions on Schedules C for amounts paid to political campaigns, despite section 162(e)(1)(B) explicitly disallowing such deductions. Petitioner’s claiming of deductions that are explicitly disallowed by the Code constitutes negligence.

We find that respondent has met his burden of production with respect to negligence. Respondent introduced evidence that petitioner failed to properly substantiate deductions, deducted personal expenses, and failed to comply with the plain language of the Code.

webhick wrote:He should sue his strawman for malpractice. Or would his strawman sue him?

AndyK wrote:

webhick wrote:He should sue his strawman for malpractice. Or would his strawman sue him?

The MAN ON THE LAND sues the strawman in a legitimate Constitutional court with a jury composed of his peers (High school education is a mandatory disqualifier). That way, the MOTL, notarized judgement in hand, can collect from the trust fund (created by monetizing his birth certificate) held by the Department of the Treasury. The specific Treasury office is located in Washington Dc (Domestic Corporation) at the confluence of the Archimedes spiral generated from the locations of the Freemason's hall, the National Cathedral, and the last remaining White Castle restaurant.

However, he must be sure that every dollar collected has the magic stamp on it to prevent it becomong taxable income.

Famspear wrote:....But the strawman writes the words "refused for cause" on every document served on him......

AndyK wrote:You have not been paying attention. .....we've been over this again and again for at least the last five years......

Mider wrote:We have had some strange and dubious deductions for business expense on Schedule C, but this is the first time I have seen someone deduct his own personal legal problems. I hope he he was including his hourly rate for billing when doing his own thing, but he was doing it pro bono. We had a lawyer last year try to deduct his World of Warcraft subscription as dues and subscription and another try to do the same as employee benefits.

AndyK wrote:When I worked for one of the Big 8 accounting firms, one of the partners deducted her subscription to Sports Illustrated as a business expense.

She actually won the audit of that item, explaining that she needed to be current on sports to converse with her male clients.

webhick wrote:

AndyK wrote:When I worked for one of the Big 8 accounting firms, one of the partners deducted her subscription to Sports Illustrated as a business expense.

She actually won the audit of that item, explaining that she needed to be current on sports to converse with her male clients.

By that logic, she should be able to expense transgender procedures.

AndyK wrote:To summarize, petitioner was allowed to deduct his/her costs of gender correction therapy and hormone therapy. Petitioner was not allowed to deduct the accompanying breast augmentation procedures as they were ruled to be cosmetic surgery.

Cathulhu wrote:There was a famous tax law case (tax court, I think) Cynthia Heisman vs. Commissioner or something like, argued by Mark Manning on the IRS side. She was a stripper who managed to keep her depreciation deduction for her augmented boobs. And created much innocent hilarity in formerly dull tax law meetings.

LaVidaRoja wrote:I found it amusing(?) that at points, on direct questioning by the judge, he admitted his own negligence!