internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc intl br1-plr-100382-99 date date do ty a country b date c date d date e dear a this is in response to your letter dated date c requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s renunciation of u s citizenship did not have for one of its principal purposes the avoidance of u s taxes under subtitle a or subtitle b of the code additional information was submitted in letters dated date d and date e the information submitted for consideration is substantially as set forth below the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a became a u s citizen by reason of his birth in the united_states at birth a also became a citizen of country b by virtue of his birth to a country b citizen a renounced his u s citizenship expatriated on date c on the date of a’s expatriation his net_worth exceeded dollar_figure sec_877 generally provides that a citizen who loses u s citizenship or a u s long- term resident who ceases to be taxed as a lawful permanent resident individuals who expatriate within the 10-year period immediately preceding the close of the taxable plr-100382-99 year will be taxed on u s source income as modified by sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen or former long-term_resident will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceeds certain thresholds see sec_877 sec_2107 and sec_2501 under notice_98_34 an eligible former u s citizen will not be presumed to have a principal purpose of tax_avoidance if that former citizen submits within one year of the date of loss of u s citizenship a complete and good_faith request for a ruling for the secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of u s taxes see sec_877 sec_2107 and sec_2501 notice_98_34 requires that certain information be submitted with a request for a ruling that an individual’s expatriation did not have for one of its principal purposes the avoidance of u s taxes a is eligible to request a ruling pursuant to notice_98_34 because he became at birth a citizen_of_the_united_states and a citizen of another country and continues to be a citizen of such other country in addition a is eligible to request a ruling because following his expatriation a is a citizen of the country in which one of his parents was born a submitted all the information required by notice_97_19 as modified by notice_98_34 including any additional information requested by the service after review of the submission accordingly based solely on the information submitted and the representations made it is held that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 therefore a will not be presumed under sec_877 as having one of his principal purposes for expatriating the avoidance of u s taxes however because the information submitted does not clearly establish the existence or lack of a principal purpose to avoid taxes under subtitle a or b of the code no opinion is expressed as to whether a’s expatriation had for one of its principal purposes the avoidance of such taxes while this ruling rebuts the presumption of tax_avoidance under sec_877 it is not conclusive as to whether a subsequently may be found to have a principal purpose of tax_avoidance under sec_877 sec_2107 and plr-100382-99 a a based on all the facts and circumstances see sec_877 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition no opinion is expressed as to a’s u s tax_liability for taxable periods prior to his renunciation of citizenship or for taxable periods after his renunciation of citizenship under sections of the code other than sec_877 sec_2107 and sec_2501 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter a copy of this letter must be attached to a’s u s income_tax return for the year in which a obtained the ruling whether or not a is otherwise required to file a return this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to a’s representative sincerely w edward williams senior technical reviewer branch office of the associate chief_counsel international cc


internal_revenue_service number release date index number -------------------- ------------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ----------------- telephone number --------------------- refer reply to cc tege eb qp2 plr-t-103115-15 date date ---------------------------------- ---------------------- -------------------------- taxpayer a -------------------------- decedent b ------------------------- custodian c ----------------------------------------- ira d date date dear ------------- this letter responds to your request dated date as supplemented by correspondence dated date and date submitted on your behalf by your authorized representative in which you request rulings that ira d will not be treated as an inherited ira under sec_408 of the internal_revenue_code code and that you will be permitted to roll over the proceeds of ira d to an ira in your own name the following facts and representations were submitted under penalties of perjury on your behalf decedent b established ira d in and did not designate a beneficiary on the adoption_agreement form decedent b was born on date you represent that the adoption_agreement provides that if no beneficiary is designated custodian c shall distribute any remaining balance of the ira to the estate decedent b died testate on date failing to reach age article three of the last will and testament will gave all of the estate to taxpayer a her spouse article six of the will names taxpayer a as sole executor of the will plr-t-103115-15 taxpayer a as surviving_spouse and personal representative of the estate and sole beneficiary of the estate intends to distribute ira d to himself and within days of receipt rollover the proceeds of ira d into an ira in his own name based on the preceding facts taxpayer a requests the following rulings taxpayer a as surviving_spouse personal representative and sole beneficiary of decedent b’s estate will be treated for purposes of sec_408 as the payee or distributee of the proceeds from ira d ira d will not be treated as an inherited ira within the meaning of sec_408 with respect to taxpayer a taxpayer a is eligible to roll over ira d to an ira set up and maintained in his own name pursuant to sec_408 as long as the rollover occurs no later than days after the proceeds are received by taxpayer a in his capacity as personal representative of decedent b’s estate taxpayer a will not be required to include in gross_income for federal tax purposes for the year in which the distribution of ira d is made any portion of the proceeds distributed from ira d that are timely rolled over to an ira set up and maintained in taxpayer a’s name with respect to your ruling requests sec_408 provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 sec_408 provides that sec_408 does not apply to a rollover_contribution if such contribution satisfies the requirements of sec_408 and d b sec_408 provides that sec_408 does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the account is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 plr-t-103115-15 sec_408 provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the one-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in his gross_income because of the application of sec_408 sec_408 provides in pertinent part that in the case of an inherited ira sec_408 shall not apply to any amount received by an individual from such account and no amount transferred from such account to another ira shall be excluded from gross_income by reason of such transfer and such inherited account shall not be treated as an ira for purposes of determining whether any other amount is a rollover_contribution sec_408 provides that an ira shall be treated as inherited if the individual for whose benefit the account is maintained acquired such account by reason of the death of another individual and such individual was not the surviving_spouse of such other individual sec_1_408-8 of the income_tax regulations question and answer provides that a surviving_spouse of an ira owner may elect to treat the spouse’s entire_interest as a beneficiary in an individual’s ira as the spouse’s own ira in order to make this election the spouse must be the sole beneficiary of the ira and have an unlimited right to withdraw amounts from the ira generally if a decedent's ira proceeds pass through a third party eg an estate and then are distributed to the decedent's surviving_spouse the surviving_spouse will be treated as having received the ira proceeds from the third party and not from the decedent’s ira thus generally a surviving_spouse will not be eligible to roll over the ira proceeds into his own ira however the general_rule will not apply where the decedent's_estate is the beneficiary of a decedent's ira proceeds and the decedent's surviving_spouse is the sole executor of the estate and the sole beneficiary of the ira proceeds that pass through the estate under these circumstances no third party can prevent taxpayer a from receiving the proceeds of the ira and from rolling over the proceeds into his own ira therefore with respect to your ruling requests we conclude that taxpayer a will be treated for purposes of sec_408 as the payee or distributee of the proceeds from ira d ira d will not be treated as an inherited ira within the meaning of sec_408 with respect to taxpayer a plr-t-103115-15 taxpayer a is eligible to roll over ira d to an ira set up and maintained in his own name pursuant to sec_408 as long as the rollover occurs no later than days after the proceeds are received by taxpayer a in his capacity as personal representative of decedent b’s estate taxpayer a will not be required to include in gross_income for federal tax purposes for the year in which the distribution of ira d is made any portion of the proceeds distributed from ira d that are timely rolled over to an ira set up and maintained in taxpayer a’s name except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely ingrid e grinde senior tax law specialist qualified_plans branch tax exempt government entities cc


t c memo united_states tax_court roger stoewer petitioner v commissioner of internal revenue respondent docket no 2674-o1l filed date roger stoewer pro_se wendy s harris for respondent memorandum opinion pajak special_trial_judge this case is before the court on petitioner’s motion to dismiss for lack of jurisdiction and on respondent’s motion to dismiss for lack of jurisdiction and to strike with respect to the assessed frivolous_return penalty section references are to the internal_revenue_code as amended - - at the time the petition for lien or levy action under sec_6320 or sec_6330 was filed petitioner resided in las vegas nevada on date petitioner filed his form 1040ez income_tax return for single and joint filers with no dependents petitioner’s return listed his address as gray lane apartment c las vegas nevada gray lane address on his return petitioner reported wages and salaries of zero petitioner also reported that his adjusted_gross_income and taxable_income on his return was zero in a two-page document attached to his return petitioner stated in part it should also be noted that i had zero income according to the supreme court’s definition of income see note since in merchant’s loan trust co v smietanka 225_us_509 at pages that court held that the word income must be given the same meaning in all of the income_tax acts of congress that was given to it in the corporation excise_tax act of therefore since i had no earnings in that would have been taxable under the corporation excise_tax act of as income i can only swear to having zero income in on date petitioner filed his form 1040ez petitioner’s return reflected his gray lane address again petitioner reported wages and salaries of zero on his return petitioner also reported that his adjusted_gross_income and taxable_income was zero petitioner attached a two- page document to his return which was essentially identical to the two-page document attached to his return on date respondent mailed to petitioner at his gray lane address two separate notices of deficiency related to petitioner’s and taxable years respectively in one notice_of_deficiency respondent determined an income_tax deficiency of dollar_figure and an accuracy-related_penalty under sec_6662 of dollar_figure with respect to petitioner’s taxable_year in the other notice_of_deficiency respondent determined an income_tax deficiency of dollar_figure and an accuracy-related_penalty under sec_6662 of dollar_figure with respect to petitioner’s taxable_year each notice_of_deficiency stated that the deficiencies could be contested by petitioner’s filing a petition with the tax_court days from the date of the notices of deficiency on or about date petitioner sent two virtually identical letters to respondent one for each taxable_year at issue which contested the authority of the notices of deficiency petitioner did not file a petition with the tax_court with respect to the notices of deficiencies on date respondent assessed the income_tax deficiencies and accuracy-related_penalties against petitioner with respect to his and taxable years on date respondent assessed a sec_6702 frivolous_return penalty with respect to each of petitioner’s taxable years at issue - on date respondent filed a notice_of_federal_tax_lien equal to the amount of taxes and penalties assessed by respondent with respect to petitioner’s and taxable years on date respondent issued to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 with respect to petitioner’s and taxable years on or about date petitioner timely filed a form request for a collection_due_process_hearing appeals_office hearing request in response to the notice of lien on date in response to petitioner’s appeals_office hearing request an appeals officer sent a letter to petitioner in which he provided additional information regarding the validity of the tax and penalty assessments against petitioner the appeals officer informed petitioner that the statutory notices of deficiency were sent to his last_known_address that he failed to act upon the statutory notices and therefore that he was precluded from further challenging the underlying tax_liabilities the appeals officer also informed petitioner that he would schedule an appeals_office hearing on date the appeals officer conducted the appeals_office hearing with petitioner and his representative at the las vegas office of the internal_revenue_service at the hearing the appeals officer provided petitioner with two forms - - certificate of assessments payments and other specified matters certified transcripts which detailed the assessment of the income_tax deficiencies and accuracy-related_penalties with respect to petitioner’s and taxable years forms were also provided to petitioner with respect to the frivolous_return penalties assessed for each of his taxable years at issue the appeals officer terminated the hearing after petitioner declined to discuss any collection alternatives on date respondent’s appeals_office sent petitioner two separate notices of determination concerning collection action s under sec_6320 and or stating respondent’s intention to proceed with collection with respect to petitioner’s and taxable years one notice_of_determination related to the income taxes and accuracy-related_penalties assessed against petitioner and informed him that he would have days to contest the determination by filing a petition with the tax_court the notice_of_determination included findings that all applicable statutory and administrative procedures were met that petitioner failed to present any collection alternatives and that the proposed lien was appropriate the other notice_of_determination related to the frivolous_return penalty assessments and informed petitioner that he would have days to contest the determination by filing a petition with the appropriate united_states district_court - - on date petitioner filed one petition with this court for review of both of respondent’s notices of determination on date petitioner’s motion to dismiss was filed on date respondent’s motion with respect to the frivolous_return penalty was filed sec_6321 imposes a lien in favor of the united_states on all property and rights to property of a person liable for taxes when a demand for the payment of such taxes has been made and the person fails to pay those taxes such a lien arises when an assessment is made sec_6322 sec_6323 requires the secretary to file notice_of_federal_tax_lien if such lien is to be valid against any purchaser holder of a security_interest mechanic’s_lienor or judgment lien creditor lindsay v commissioner tcmemo_2001_285 sec_6320 provides that the secretary shall furnish the person described in sec_6321 with written notice of the filing of a notice of lien under sec_6323 the notice required by sec_6320 must be provided not more than business days after the day of the filing of the notice of lien sec_6320 sec_6320 further provides that the person may request administrative review of the matter in the form of an appeals_office hearing within days beginning on the day after the 5-day period described above sec_6320 provides that the appeals_office hearing generally shall be conducted - consistent with the procedures set forth in sec_6330 d and e sec_6330 prescribes the matters a person may raise at an appeals_office hearing sec_6330 a provides that a person may raise collection issues such as spousal defenses the appropriateness of the commissioner’s intended collection action and possible alternative means of collection 114_tc_604 sec_6330 b provides that the existence and amount of the underlying tax_liability can be contested at an appeals_office hearing only if the person did not receive a notice_of_deficiency for the taxes in question or did not otherwise have an earlier opportunity to dispute the tax_liability id 114_tc_176 pursuant to sec_6330 a within days of the issuance of the notice_of_determination the taxpayer may appeal the determination to the tax_court if the tax_court does not have jurisdiction of the underlying tax_liability the taxpayer may appeal to a u s district_court sec_6330 b initially we address respondent’s motion in respondent’s motion respondent contends that this court does not have jurisdiction over the sec_6702 frivolous_return penalty respondent further asks this court to strike the portion of the petition with respect to the frivolous_return penalty --- - the court’s deficiency jurisdiction is generally limited to the redetermination of income estate_and_gift_taxes 114_tc_171 the court interpreted sec_6330 a and b as not expanding the court’s jurisdiction beyond the types of taxes over which the court generally has jurisdiction id the court has held that we do not have jurisdiction to review the commissioner’s determination to assess the frivolous_return penalty under sec_6702 115_tc_324 in that situation sec_6330 provides that if a court determines that the appeal was to an incorrect court a person shall have days after the court determination to file such appeal with the correct court accordingly we shall grant respondent’s motion to dismiss for lack of jurisdiction and to strike with respect to the frivolous_return penalty in petitioner’s motion petitioner asks the court to dismiss this case for lack of jurisdiction on the ground that the appeals officer failed to verify that the requirements of all applicable law and administrative procedure were met as required by sec_6330 because we lack jurisdiction to review the determination with regard to the frivolous_return penalty we shall not decide whether the hearing requirement under sec_6330 was met with respect to that determination 117_tc_204 thus the remaining issue before the court is whether this court has jurisdiction to review the other determination in this case which relates to petitioner’s liability for income taxes and accuracy-related_penalties the court recently held that for purposes of determining the validity of a notice_of_determination for jurisdictional purposes we shall not look behind a notice_of_determination to consider whether the appeals_office conducted an appropriate hearing 117_tc_159 our holding in lunsford overrules 115_tc_417 to the extent it required the court to look behind a notice_of_determination to discern whether a proper hearing opportunity was given in order to decide whether such a notice was valid lunsford v commissioner supra pincite in the instant case this court is not required to look behind the relevant notice_of_determination which relates to petitioner’s liability for income taxes and accuracy-related_penalties in order to determine the validity of this notice there is nothing in that notice_of_determination which leads us to conclude that the determination was invalid as in lunsford the notice_of_determination clearly embodies the appeals officer’s determination that collection by way of lien may proceed consistent with our holding in lunsford we hold the -- - relevant notice_of_determination was valid for purposes of invoking the court’s jurisdiction and a timely petition was filed accordingly we hold that this court has jurisdiction to review the determination in this case and that petitioner’s motion to dismiss must be denied we have considered all of petitioner’s remaining arguments and find them to be without merit and or irrelevant to reflect the foregoing an appropriate order denying petitioner’s motion and granting respondent’s motion will be issued


internal_revenue_service number release date index number -------------------------------------- ------------------------------------------------- ----------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-130069-09 date date x ------------------------------------------------------------------------------------------------------ ----------------------- state ---------- d1 d2 -------------------------- ---------------------- dear ------------- this responds to a letter dated date submitted on behalf of x by x's authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 it was intended that x elect s_corporation treatment effective for the taxable_year beginning d2 however form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-130069-09 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d2 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d2 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d2 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court edward w clough petitioner v commissioner of internal revenue respondent docket no 21898-05l filed date edward w clough pro_se louise r forbes for respondent memorandum findings_of_fact and opinion marvel judge pursuant to sec_6330 petitioner seeks review of respondent’s determination to proceed with the collection of petitioner’s and federal_income_tax liabilities unless otherwise indicated all section references are to the internal_revenue_code findings_of_fact some of the facts have been stipulated we incorporate the stipulated facts into our findings by this reference petitioner resided in shrewsbury massachusetts when his petition in this case was filed petitioner failed to file federal_income_tax returns for and respondent prepared substitute returns pursuant to sec_6020 and determined deficiencies for all relevant years respondent mailed a notice_of_deficiency dated date for and to petitioner and petitioner received the notice however the record does not disclose whether respondent mailed a notice_of_deficiency to petitioner for petitioner failed to petition this court regarding the notice_of_deficiency for and and on date respondent assessed tax deficiencies against petitioner for and also on date respondent assessed a tax_deficiency against petitioner for for reasons that are not explained in the record in date respondent erroneously abated the deficiencies owed by petitioner for and on date respondent reversed the abatement and reinstated the assessment and on april petitioner attached a copy of this notice to his request for a sec_6330 hearing respondent reversed the abatements and reinstated the and assessments respondent subsequently sent petitioner notices of balance due for the unpaid balances of the and assessments on date respondent mailed to petitioner a final notice_of_intent_to_levy and your right to a hearing under sec_6330 in response petitioner submitted a timely request for a sec_6330 hearing attaching to it a nine-page statement containing mostly frivolous and groundless arguments petitioner’s case was originally assigned to settlement officer s gropack officer gropack after reviewing petitioner’s request for a hearing officer gropack mailed to petitioner a letter dated date indicating that the appeals_office does not provide a face-to-face hearing if the only issues raised are frivolous or groundless the arguments included in petitioner’s hearing request are frivolous or groundless petitioner is not entitled to a face-to-face hearing if the only issues raised are frivolous and groundless and petitioner could have a telephone or correspondence hearing to discuss any relevant challenges to respondent’s proposed collection action officer gropack scheduled a telephone hearing for date but also informed petitioner that if he wanted to have a face-to-face hearing he would have to send a letter to officer gropack describing the legitimate issues he wished to discuss on date petitioner submitted a letter to officer gropack containing frivolous and groundless arguments and a request for a face-to-face hearing at the closest appeals_office to petitioner’s residence respondent transferred petitioner’s case to the boston appeals_office where it was assigned to settlement officer lisa boudreau officer boudreau or hearing officer by letter dated date officer boudreau advised petitioner that he did not qualify for a face- to-face hearing because the arguments he had presented were frivolous officer boudreau reiterated that petitioner would only receive a face-to-face hearing if he presented legitimate issues in the alternative officer boudreau offered petitioner a telephone hearing and the right to discuss by correspondence any relevant challenges to the proposed levy in a letter dated date petitioner continued to assert frivolous arguments refused to participate in a telephone hearing and reiterated his request for a face-to-face hearing on date the appeals_office issued to petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination with respect to petitioner’s outstanding tax_liabilities for the years in issue in the notice_of_determination and an attachment to the notice the appeals_office determined that the proposed levy should be sustained because all statutory and administrative requirements had been met petitioner had raised only frivolous arguments petitioner did not propose a viable collection alternative and the intrusiveness of the enforced collection was necessary to provide for the efficient collection of the taxes owed however in the attachment to the notice_of_determination the appeals office3 stated the following i have not verified whether the taxpayer received a statutory_notice_of_deficiency for form_1040 for the calendar_year ending date and as such he may be able to challenge the existence or amount of the liability neither the notice_of_determination nor the attachment indicates that the appeals_office considered the legal effect on the assessment of a failure by respondent to issue a notice_of_deficiency for to petitioner on date the petition in this case was filed among his arguments petitioner alleges that respondent’s determination is invalid because petitioner never received a valid notice_of_deficiency petitioner was denied an opportunity to challenge the existence of the underlying tax_liability for the years at issue respondent never assessed 3although the attachment was unsigned we infer from the attachment that it was prepared by officer boudreau as it summarizes in the first person what happened during the sec_6330 proceeding petitioner’s alleged tax_liability or delivered notice_and_demand for payment and respondent failed to comply with statutory and regulatory provisions for sec_6330 hearings by refusing to grant petitioner a face-to-face hearing opinion i determination to proceed with collection sec_6330 provides that no levy may be made on any property or right to property of any person unless the secretary has notified such person in writing of the right to a hearing before the levy is made if a taxpayer makes a request for a hearing a hearing shall be held before an impartial officer_or_employee of the internal_revenue_service office of appeals sec_6330 at the hearing a taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6330 a taxpayer is precluded from contesting the existence or amount of the underlying tax_liability at the hearing unless the taxpayer did not receive a notice_of_deficiency for the tax in question or did not otherwise have an earlier opportunity to dispute the tax_liability sec_6330 see also 114_tc_604 following a hearing the appeals_office must make a determination whether the proposed levy action may proceed in so doing the appeals_office is required to take into consideration verification presented by the secretary that the requirements of applicable law and administrative procedures have been met relevant issues raised by the taxpayer and whether the proposed levy action appropriately balances the need for efficient collection_of_taxes with a taxpayer’s concerns regarding the intrusiveness of the proposed levy action sec_6330 sec_6330 grants this court jurisdiction to review the determination made by the appeals_office in connection with the sec_6330 hearing where the underlying tax_liability is properly at issue the court reviews any determination regarding the underlying tax_liability de novo sego v commissioner supra pincite the court reviews any other administrative determination regarding the proposed levy action for abuse_of_discretion id an abuse_of_discretion occurs if the appeals_office exercises its discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 a and notice_of_deficiency petitioner argues that he did not receive a valid notice_of_deficiency for and however petitioner does not dispute that respondent mailed him a notice_of_deficiency dated date for and or that he received it his arguments focus solely on the adequacy of the notice among his arguments petitioner claims that the notice was not delivered by an authorized party was not signed and showed no deficiency petitioner’s assertions however are completely without merit a notice_of_deficiency is validly issued if sent by certified or registered mail to the taxpayer’s last_known_address sec_6212 and b there is no requirement that the notice be specially delivered by an authorized agent the commissioner is also under no obligation to sign a statutory_notice_of_deficiency in order for the notice to be valid sec_6212 see 71_f2d_673 2d cir affg 26_bta_60 50_tc_509 stone v commissioner tcmemo_1998_314 moreover petitioner’s interpretation that the notice he received represented a mere suggestion to pay tax is baseless given the clarity of the language used the notice was clearly labeled notice_of_deficiency stated that additional_amounts were owed and provided a detailed listing of the deficiencies determined by sec_7522 provides insight as to the content required in a notice_of_deficiency by stating that any notice to which this section applies shall describe the basis for and identify the amounts if any of the tax due interest additional_amounts additions to the tax and assessable_penalties included in such notice however sec_7522 also provides that an inadequate description shall not invalidate such notice respondent for the years covered by the notice we reject petitioner’s misguided reading of the notice and hold that respondent complied with all statutory requirements for a valid notice_of_deficiency assessment and notice_and_demand petitioner argues that respondent failed to validly assess petitioner’s tax_liabilities federal tax assessments are formally recorded on a summary record of assessment when they are made sec_6203 the summary record must provide identification of the taxpayer the character of the liability assessed the taxable_period if applicable and the amount of the assessment sec_301_6203-1 proced admin regs sec_6330 does not require the appeals_office to rely on a particular document to verify that it properly assessed the tax_liabilities in question see 118_tc_365 ndollar_figure affd 329_f3d_1224 11th cir kubon v commissioner tcmemo_2005_71 it is now well established that appeals officers may rely on form_4340 certificate of assessments payments and other specified matters to verify because we find that petitioner received a valid notice_of_deficiency for and petitioner is precluded from contesting his underlying tax_liability for and form_4340 certificate of assessments payments and other specified matters constitutes a valid verification that the requirements of any applicable law or administrative procedure have been met under sec_6330 see 119_tc_252 that a valid assessment was made see 118_tc_162 schaper v commissioner tcmemo_2002_203 schroeder v commissioner tcmemo_2002_190 absent a showing of irregularity a form_4340 is sufficient to establish that a valid assessment was made see nestor v commissioner supra pincite 115_tc_35 yazzie v commissioner tcmemo_2004_233 in the present case the forms for and identify petitioner the type of liability assessed the taxable_period and the amount of the assessment because petitioner does not identify any irregularities in the assessment procedure used to assess the and liabilities we must conclude that valid assessments for those years were made petitioner also argues that respondent failed to issue notice_and_demand for payment with respect to the liabilities the appeals officer may rely on form_4340 to verify that a notice_and_demand for payment was sent to the taxpayer see schaper v commissioner supra schroeder v commissioner supra in this case the forms for and show that respondent issued to petitioner notices of balance due for each of the unpaid tax_liabilities petitioner has failed to notices of balance due constitute notice_and_demand for payment within the meaning of sec_6303 see thompson v commissioner tcmemo_2004_204 henderson v commissioner tcmemo_2004_157 standifird v commissioner t c memo continued present any credible_evidence that notice_and_demand was not issued as indicated on the forms consequently we conclude that notices and demands were properly issued to petitioner with respect to the liabilities sec_6330 hearing lastly petitioner argues that he was denied a proper sec_6330 hearing petitioner’s principal argument is that respondent improperly denied him a face-to-face sec_6330 hearing we have held repeatedly that because a hearing conducted under sec_6330 is an informal proceeding instead of a formal adjudication a face-to-face hearing is not mandatory see 115_tc_329 davis v commissioner supra pincite accordingly while a hearing may take the form of a face-to-face meeting a proper sec_6330 hearing may also be conducted by telephone or written correspondence katz v commissioner supra pincite sec_301_6330-1 q a-d6 proced admin regs once a taxpayer is given a reasonable opportunity for a hearing and fails to avail himself of that opportunity this court has sustained respondent’s determination to proceed with collection based upon an appeals officer’s review of the case file see eg bean v continued affd 72_fedappx_729 9th cir commissioner tcmemo_2006_88 ho v commissioner tcmemo_2006_41 leineweber v commissioner tcmemo_2004_17 petitioner repeatedly asserted frivolous and groundless arguments regarding all of his unpaid tax_liabilities throughout the sec_6330 hearing process and at trial the appeals_office offered petitioner the right to conduct his sec_6330 hearing by telephone and or through written correspondence the appeals_office also advised petitioner on several occasions that it would grant petitioner’s request for a face-to-face hearing if petitioner identified relevant issues he wanted to discuss in lieu of identifying relevant issues petitioner continually responded with more frivolous arguments and refused to participate in a telephone hearing at no time did petitioner identify any relevant issue he would discuss if granted a face- to-face hearing with respect to petitioner’s and liabilities we hold that respondent did not err in refusing to grant petitioner a face-to-face hearing and we sustain respondent’s proposed collection action b sec_6330 provides that a hearing officer during a sec_6330 hearing shall obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met the obligation imposed upon a hearing officer by sec_6330 is mandatory the hearing officer’s obligation to obtain verification that applicable legal and administrative procedures have been met attaches whenever a taxpayer has made a timely request for a hearing see sec_6330 if a person requests a hearing under subsection a b such hearing shall be held by the internal_revenue_service office of appeals when a taxpayer makes a timely request for a sec_6330 hearing the hearing must be offered and it must be conducted in accordance with sec_6330 we examine the record to decide whether the hearing officer complied with sec_6330 in the notice_of_determination the appeals_office refers petitioner to an attached statement which shows in detail the matters we considered at your appeals hearing and our conclusions about them and concludes that the issuance of the final notice and the proposed levy action are fully sustained in the attachment to the notice_of_determination the hearing officer states that she did not verify whether petitioner received a statutory_notice_of_deficiency for in the hearing officer’s activity record which was introduced as an exhibit by respondent the hearing officer made the following entry for date per the form_4340 for contains no reference to a notice_of_deficiency being issued for that year and the record does not contain a copy of a notice_of_deficiency for the documents that were requested for these are not the snod requested dln of the tc checked ics no ics history for this t p the activity record also shows that the hearing officer made the following entry on date to date i have been unable to verify a snod for for liability issues are precluded from consideration for they may not be but the t p has not brought up any relevant arguments just frivolous arguments the relevant parts of the record summarized above establish that the hearing officer did not receive verification during petitioner’s sec_6330 hearing that respondent had issued a notice_of_deficiency for to petitioner before assessing petitioner’s deficiency moreover the record contains no indication that the hearing officer or the appeals_office considered the effect on the assessment of a failure by respondent to verify that a notice_of_deficiency for was mailed to petitioner 9although the entries in the activity record are not always intelligible due to the coding and numbering utilized by respondent’s employees we understand the term snod to be an acronym for a statutory_notice_of_deficiency if the secretary10 determines that there is a deficiency in income_tax he may send a notice_of_deficiency to the taxpayer by certified mail or registered mail sec_6212 the notice must be sent to the taxpayer’s last_known_address sec_6212 within days or days if the notice is addressed to a person outside the united_states after the notice_of_deficiency is mailed the taxpayer may file a petition with the tax_court for a redetermination of the deficiency sec_6213 sec_6213 expressly prohibits the secretary except in the case of termination and jeopardy assessments made under sec_6851 sec_6852 and sec_6861 from assessing a deficiency and attempting to collect a deficiency before a notice of 10the term secretary means the secretary_of_the_treasury or_his_delegate sec_7701 and the term or_his_delegate means any officer employee or agency of the treasury_department duly authorized by the secretary_of_the_treasury directly or indirectly by one or more redelegations of authority to perform the function mentioned or described in the context sec_7701 deficiency is sentdollar_figure see 125_tc_14 as we previously noted sec_6330 requires an officer who is presiding over a sec_6330 hearing to obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met the record before us clearly establishes that the hearing officer in this case did not receive verification that a critical legal requirement for a valid assessment had been met she did not personally verify or receive any verification from the secretary or his designee that a notice_of_deficiency had been sent to petitioner for absent such verification it was impossible for the hearing officer to properly conclude as required by sec_6330 that applicable legal and sec_6213 provides in pertinent part except as otherwise provided in sec_6851 sec_6852 or sec_6861 no assessment of a deficiency and no levy or proceeding in court for its collection shall be made begun or prosecuted until such notice has been mailed to the taxpayer nor until the expiration of such day or 150-day period as the case may be nor if a petition has been filed with the tax_court until the decision of the tax_court has become final notwithstanding the provisions of sec_7421 the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court including the tax_court and a refund may be ordered by such court of any amount collected within the period during which the secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection administrative requirements had been met with respect to the assessment of the deficiency although petitioner made numerous frivolous and groundless arguments including arguments that he is not required to pay income_tax and that no law authorizes the internal_revenue_service to make substitute returns and generally engaged in irresponsible behavior during the sec_6330 hearing process and at trial his conduct does not obviate the responsibility of a hearing officer under sec_6330 to obtain verification that the legal and administrative requirements for a proper assessment and related collection activity have been met because it is clear from the record that the hearing officer did not obtain or receive verification that respondent had issued a notice_of_deficiency for to petitioner we must conclude that the requirements of sec_6330 were not met and that the appeals office’s conclusion to the contrary was erroneous see freije v commissioner supra pincite because it is clear that the appeals_office reached its conclusion regarding the sec_6330 requirement without a sound basis for the conclusion in either fact or law we hold that the appeals_office among his arguments petitioner asserts that there is no statutory authority for imposing liability in connection with the income taxes at issue and that no statute requires him to pay the taxes assessed abused its discretion in sustaining respondent’s levy action with respect to the liability ii sec_6673 sec_6673 authorizes this court to require a taxpayer to pay to the united_states a penalty not to exceed dollar_figure if it appears that the taxpayer has instituted or maintained a proceeding primarily for delay or that the taxpayer's position is frivolous or groundless sec_6673 applies to proceedings under sec_6330 see 115_tc_576 in proceedings under sec_6330 we have imposed the penalty on taxpayers who raised frivolous and groundless arguments with respect to the legality of the federal tax laws see eg roberts v commissioner t c pincite eiselstein v commissioner tcmemo_2003_22 yacksyzn v commissioner tcmemo_2002_99 in a motion for summary_judgment and to impose a penalty under sec_6673 respondent warned petitioner that his unfounded allegations constituted a frivolous appeal subject_to monetary sanctions under sec_6673 although we denied the motion before trial because we were not convinced that summary_judgment was appropriate petitioner continued at trial to assert meritless arguments regarding the validity of the notice_of_deficiency his obligation to pay taxes and other matters petitioner's conduct to date as summarized in this opinion demonstrates that petitioner's arguments challenging respondent's collection action with respect to petitioner's liabilities were frivolous and or groundless we shall require petitioner to pay to the united_states a penalty under sec_6673 in the amount of dollar_figure our conclusion that it is appropriate to impose a sec_6673 penalty on petitioner is the direct result of petitioner's arguments we believe that our conclusion is warranted even though we have also held that the appeals_office abused its discretion regarding petitioner's liability our holding regarding the liability is not the result of any argument that petitioner made rather it stems from the rather obvious failure of respondent as shown by the record to present verification to the hearing officer that he issued a notice_of_deficiency for to petitioner before he assessed the deficiency our authority to impose a sec_6673 penalty in this case arises from sec_6673 and is invoked by petitioner's frivolous and groundless arguments regarding his liabilities there is nothing in sec_6673 to suggest that our authority to impose a sec_6673 penalty is constrained in any way by the fact that petitioner was lucky enough to obtain a favorable ruling regarding respondent's proposed collection action with respect to the liability we have considered the remaining arguments of both parties and to the extent not discussed above conclude those arguments are irrelevant moot or without merit to reflect the foregoing an appropriate decision will be entered


t c memo united_states tax_court reza and connie m rezazadeh petitioners v commissioner of internal revenue respondent docket nos filed date reza rezazadeh pro_se james e schacht for respondent memorandum opinion couvillion special_trial_judge these consolidated cases were heard pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 unless otherwise indicated section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure respondent determined the following deficiencies in petitioners' federal income taxes and penalties penalty year deficiency sec_6662 dollar_figure big_number big_number dollar_figure after concessions by the parties the issues remaining for decision are whether petitioners are entitled to a business_bad_debt deduction for under sec_166 for unpaid loans to a corporation in which reza rezazadeh petitioner was an employee shareholder and for attorney's_fees incurred in attempts to collect the loan whether petitioners are entitled to deductions under sec_162 for travel_expenses incurred by connie m rezazadeh mrs rezazadeh during whether petitioners' deduction for under sec_162 of inventory petitioners claimed on their and federal income tax returns deductions for unreimbursed employee_expenses in the amounts of dollar_figure and dollar_figure respectively in the notice_of_deficiency respondent disallowed dollar_figure and dollar_figure of the amounts claimed respectively in a stipulation of settled issues stipulation petitioners conceded the entire disallowance for and dollar_figure of the disallowance for accordingly with respect to the deduction claimed for dollar_figure of the disallowance remains at issue which is issue number above on their return petitioners also claimed a deduction of dollar_figure for sales_taxes paid on an automobile in the notice_of_deficiency respondent disallowed the deduction in its entirety in the stipulation petitioners conceded this adjustment storage space is subject_to the provisions of sec_280a and whether petitioners are liable for the accuracy-related_penalties under sec_6662 for negligence or disregard of rules or regulations for the years at issue the remaining adjustments in the notices of deficiency for and relating to the taxable_portion of petitioners' social_security income is computational and will be resolved by the court's holdings on the contested issues some of the facts were stipulated and those facts with the annexed exhibits are so found and are incorporated herein by reference petitioners husband and wife were legal residents of platteville wisconsin at the time their petitions were filed petitioner is highly educated possessing degrees in aeronautical engineering and european and islamic laws a juris doctorate a master of laws in international law and economics a doctorate of juridical science in comparative law and a doctorate of philosophy in political science and economics petitioner speaks five languages since petitioner has been employed in various political science-related positions by the university of wisconsin-platteville the university at platteville wisconsin during the years through petitioner was chairman of the political science department at the university in petitioner relinquished the chairmanship but remained employed as a full-time professor in petitioner retired as professor emeritus by the mid-1970's petitioner was disenchanted with academic life felt that he was highly underemployed and was utilizing only a small fraction of his knowledge in teaching political science courses in petitioner decided to look for an executive position with several international corporations with the expectation that he could use his multidisciplinary background to achieve higher employment status and a higher salary while the corporations petitioner contacted were impressed with his background petitioner was unable to secure employment because he was approaching the age of by petitioner decided to form his own corporation in an effort to achieve his goals in date petitioner and another individual peter takos jr mr takos formed international management and investment corp the corporation an iowa corporation to find appropriate properties in the united_states for overseas investors investors would be charged commissions and fees for the services rendered petitioner and mr takos contributed dollar_figure each as initial corporate capital petitioner was executive vice president and secretary of the corporation while mr takos served as president and treasurer petitioner and mr takos agreed that the day-to-day management of the corporation would be handled by mr takos since he was locally based as a real_estate agent in dubuque iowa these duties required only a nominal portion of mr takos' time petitioner was responsible for carrying out the basic functions of the corporation his services to the corporation included traveling twice to europe in and to conduct a market study regarding the aims of the corporation and establishing a process for finding appropriate clients or investors establishing contacts with reputable real_estate agencies throughout the united_states toward seeking and selecting appropriate properties visiting selected properties making feasibility studies and preparing a portfolio for sales presentations traveling to europe for consultations and sales presentations with selected agents and customers and resolving a variety of international problems relating to each client such as visas immigration commercial treaties etc petitioner generally worked about hours per week for the corporation during the academic year and hours per week during the summer months petitioner maintained his employment with the university as a professor during petitioner's first trip to europe in it became clear that the europeans would not deal with the corporation unless the corporation established creditworthiness when the corporation was unable to borrow from any of the local banks petitioner loaned dollar_figure to the corporation so that the corporation would have adequate working_capital and could establish credit the loan was evidenced by an investment certificate dated date showing an initial maturity_date of date with a right of renewal and for the payment of interest pincite percent per annum petitioner made two additional advances to the corporation dollar_figure on date and dollar_figure on date as it became necessary to sustain and expand the corporation's property transactions both of these advances were also evidenced by investment certificates which provided initial maturity dates of year after the date of the certificate a renewal option and interest pincite percent per annum in all petitioner advanced dollar_figure to the corporation through the investment certificates petitioner and mr takos decided that until the corporation was financially able to establish regular salaries for the two officers each officer would receive in place of a stated salary percent of the net_proceeds from commissions and fees received annually by the corporation up to a maximum of dollar_figure per year per officer from to the corporation enjoyed some success the total commissions and fees received during these years were dollar_figure dollar_figure and dollar_figure respectively petitioner received as hi sec_50 percent of the net_proceeds dollar_figure in dollar_figure in and dollar_figure in no payments were made by the corporation on the dollar_figure investment certificates sometime in upon his return from a european business trip petitioner discovered that mr takos had sold all of the corporation's inventory of local properties and absconded to the state of florida with the proceeds and most of the corporate records petitioner filed a shareholder's derivative suit against mr takos on behalf of the corporation on date a state court in iowa rendered a judgment against mr takos and his wife judgment debtors in favor of the corporation for dollar_figure in actual damages dollar_figure in punitive_damages and reasonable attorney's_fees pursuant to iowa law a receiver was appointed to collect the assets of the corporation including the judgment against mr takos and his wife and to liquidate the corporation the receiver soon determined by date that there were no assets of the judgment debtors in the state of iowa nor did the judgment debtors have any significant assets in florida on which the judgment could be satisfied furthermore the attorney in florida who had been employed to examine the judgment debtors stated i don't believe that further collection efforts will be worthwhile in his application to terminate receivership and final report dated date the receiver reported that there were no corporate assets in the corporation other than the judgment and that in his opinion the judgment was virtually worthless upon the receiver's recommendation the receiver was discharged and the judgment of the corporation was transferred to petitioner in consideration of petitioner's payment of all attorney's_fees related to the suit the receivership and the collection efforts made in florida from to petitioner paid a total of dollar_figure in attorney's_fees to the law firm that handled the suit and also served as the receiver once the judgment was transferred to petitioner he retained the same counsel in florida to continue efforts to collect the judgment in the florida attorney informed petitioner that the judgment was not collectible because the judgment debtors had no assets there is no evidence in the record to show that there was ever any likelihood of collection of the judgment between and at this point petitioner was out dollar_figure consisting of the dollar_figure investment certificates and the dollar_figure he spent in attorney's_fees to have the judgment transferred to him and to attempt collection against the debtors petitioner concluded in that the dollar_figure constituted a worthless business debt therefore beginning in and through the years at issue petitioners claimed on their federal_income_tax returns as business bad_debts an amount that would reduce their federal_income_tax for the respective years to nearly zero more specifically petitioners deducted dollar_figure in dollar_figure in dollar_figure in and dollar_figure in petitioners intended to continue claiming bad_debt deductions on their federal_income_tax returns until the deductions equaled the dollar_figure respondent did not audit petitioners' return in the notices of deficiency respondent disallowed the claimed bad_debt deductions for tax years through respondent determined that the deductions were not allowable because it has not been established that you incurred these losses as business bad_debts if it should be determined that you did incur these bad_debt losses in the respective years then you would be entitled to non-business bad_debts only the facts relating to other adjustments that remain at issue are discussed later in this opinion the determinations of the commissioner in a notice_of_deficiency are presumed correct and the burden_of_proof is on the taxpayer to show that the determinations are incorrect rule a 290_us_111 in general sec_166 allows a deduction for any debt that becomes worthless during the taxable_year to qualify for a worthless_debt deduction the taxpayer must show that a debtor- creditor relationship was intended between the taxpayer and the debtor that a genuine debt in fact existed and that the debt became worthless within the taxable_year sec_1_166-1 income_tax regs 54_tc_239 the court is satisfied that there was a debtor-creditor relationship and that the corporation owed a genuine debt to petitioner the first question is the year in which the dollar_figure debt became worthless respondent contends that the debt became worthless in petitioner contends the debt became worthless in the court agrees with respondent in the corporate receiver reported there were no assets of the judgment debtors upon which the judgment could be collected and that collection efforts would not be worthwhile the receiver was of the opinion that the judgment was virtually worthless based on the receiver's opinion the receivership was terminated and the judgment was transferred to petitioner the court finds that when the receiver established in that the corporation had no assets other than the worthless judgment the debt owing by at trial counsel for respondent asserted for the first time that petitioner's advances of dollar_figure constituted capital contributions to the corporation the court rejects that contention the court is satisfied that the investment certificates constituted loans and were not capital contributions with respect to the dollar_figure in legal expenses paid_by petitioner the court concludes that those expenses were so closely related to the advances petitioner made to the corporation that such expenses assume identical characteristics as the dollar_figure advances so that the two components of petitioner's claimed deductions are accorded identical treatment see blauner v commissioner tcmemo_1967_156 see also 47_tc_592 the corporation to petitioner also became worthless at that time it was clear that the debt to petitioner would never be repaid petitioner argues that the debt became worthless in when the florida attorney informed him that the judgment was not collectible because of lack of assets held by the judgment debtors however petitioner did not present any evidence to demonstrate what circumstances if any existed between and to suggest that there was any chance of recovering the judgment accordingly the court holds that the debt of dollar_figure owed to petitioner became worthless in the second question is whether the indebtedness to petitioner was a business or a nonbusiness indebtedness sec_166 distinguishes between business bad_debts and nonbusiness bad_debts sec_166 sec_1_166-5 income_tax regs business bad_debts may be deducted against ordinary_income and are deductible whether such debts become wholly or partially worthless during the year nonbusiness bad_debts may be deducted only as short-term_capital_losses and only if the debts become wholly worthless in the year claimed sec_166 a bad_debt is characterized as business rather than nonbusiness if the debt bears a proximate relationship to the taxpayer's trade_or_business sec_1_166-5 income_tax regs in determining whether such relationship exists the proper measure is the taxpayer's dominant motivation a significant motivation is not sufficient 405_us_93 the relationship between a debt and the taxpayer's trade_or_business is a question of fact 725_f2d_945 3d cir affg in part and vacating in part tcmemo_1982_98 in other words the determination of the taxpayer's dominant motive is a factual one 882_f2d_1271 7th cir affg tcmemo_1986_229 the question of dominant motive is ascertained as of the time the loan or guaranty is made 590_f2d_884 10th cir the loss from a direct loan to a corporation or from the guaranty of a loan is evaluated under the same dominant motive standard b b rider corp v commissioner supra pincite when the creditor or guarantor of a corporate debt is a shareholder investor and also an employee mixed motives for the loan and guaranty are present and the critical issue becomes which motive is dominant united_states v generes supra pincite investing is not a trade_or_business 373_us_193 the rewards of investing are expectative that is the rewards result from appreciation and earnings on the investment rather than from personal effort or labor united_states v generes supra pincite one's role or status as an employee is a business_interest id pincite its typical nature is the exertion of effort and labor in exchange for a salary id therefore in order to show that a loss is created or acquired in connection with a trade_or_business the taxpayer must show that the loan was made either to protect the employment of the taxpayer or as part of an established business of financing corporations bernstein v commissioner tcmemo_1989_422 citing 511_f2d_185 6th cir in determining the dominant business or nonbusiness motive of a shareholder lending money to a corporation in which the shareholder is also an employee courts look primarily to three objective factors the amount of the loan with the taxpayer's investment in the corporation the amount of the taxpayer's after-tax salary and other sources of gross_income available to the taxpayer at the time of the loan united_states v generes supra 68_tc_714 65_tc_1092 the larger the taxpayer's investment the smaller his salary and the larger his other sources of gross_income the more likely the courts are to find a dominant nonbusiness motive for the loan united_states v generes supra on this issue as to whether the debt constituted a business or nonbusiness_bad_debt the record is clear that petitioner was not in the business of lending money to corporations therefore in order to deduct the loans to the corporation as a business_bad_debt petitioner had to show that the dominant motive in making the loans was to protect his employment as opposed to an investment in the corporation petitioner made a significant contribution to the corporation as a result of his efforts it appears the corporation was on its way to becoming a successful venture the total commissions and fees earned by the corporation from to were dollar_figure dollar_figure and dollar_figure respectively while petitioner received in and approximately percent of these net_proceeds in lieu of a stated salary in petitioner received only dollar_figure as salary because petitioner and mr takos decided to limit the amount they received from the corporation to dollar_figure each until the corporation was successfully established the court does not believe that petitioner would have been able to survive financially on this limited salary if petitioner had not maintained his full-time job at the university during the years to considering the limited salary petitioner received from the corporation the fact that petitioner received a full-time salary from the university while the corporation was in business and the fact that petitioner made a significant initial capital_contribution of dollar_figure to the corporation the court concludes that at the time petitioner made the loans to the corporation the dominant motive in making the loans was to protect petitioner's investment 405_us_93 while the court is satisfied that petitioner's ultimate goal was for the corporation to earn sufficient income whereby he could retire from the university and have a higher standard of living at the time the loans were made petitioner was in the process of nurturing the corporation had petitioner not made the loans to the corporation the corporation would not have survived and petitioner's substantial investment of dollar_figure would have been at risk although petitioner had a significant motive for protecting his employment the dominant motive was to protect and enhance his investment in the corporation petitioner argued on brief that the dollar_figure judgment rendered by the iowa court in favor of the corporation represented a trade_or_business asset of the corporation and since the judgment was transferred to petitioner the trade_or_business characteristics of that judgment also transferred to petitioner thus petitioner argues the debt was a business_bad_debt the court rejects that argument the tax characteristics of the judgment are not before the court the tax characteristics of petitioner's advances to the corporation are at issue in the transfer petitioner received an asset a judgment which unfortunately turned out to have no value the debt owing to petitioner from the corporation always remained as a debt and its characteristic was not changed by the transfer of the judgment to petitioner in support of his argument that the debt was a business debt petitioner cited numerous cases in which advances to corporations by employees and or shareholder-employees were found to constitute business bad_debts fitzpatrick v commissioner tcmemo_1967_1 litwin v united_states aftr 2d ustc par big_number d kan affd 983_f2d_997 10th cir baldwin v commissioner tcmemo_1993_433 291_f2d_669 2d cir revg 34_tc_910 376_f2d_623 9th cir revg tcmemo_1965_314 kelson v united_states ustc par c d utah 292_fsupp_59 d n j revd 420_f2d_461 3d cir jaffe v commissioner tcmemo_1967_215 litterio v commissioner tcmemo_1992_524 affd without published opinion 21_f3d_423 4th cir the court has considered these cases and concludes these cases are not inconsistent with the holding in this case the cases cited by petitioner recite the same principles set forth in this opinion that a debt will be characterized as a business debt rather than as a nonbusiness_debt if the debt bears a proximate relationship to the taxpayer's trade_or_business and that the determination of such a relationship is a question of fact this court is satisfied that the facts of this case are distinguishable from the facts of the cases relied on by petitioner the second issue relates to travel_expenses incurred by mrs rezazadeh during petitioner was scheduled to present in his capacity as a political science professor at the university a paper on local_government in the nation of colombia in date at the third world studies 14th national conference held at the university of nebraska at omaha nebraska preparing such a paper required extensive research in bogota colombia due to other commitments petitioner was unable to travel to bogota to conduct the necessary research petitioner asked his wife mrs rezazadeh who is of colombian origin to travel to bogota to do the research for the paper mrs rezazadeh has a doctoral degree in psychology degree having written an extensive dissertation to complete the degree mrs rezazadeh was knowledgeable of the research process furthermore being of colombian origin and having relatives in bogota mrs rezazadeh was very familiar with local offices and institutions in colombia mrs rezazadeh traveled to bogota on date and returned to the united_states on date for a total travel period of days the case of 292_fsupp_59 d n j revd 420_f2d_461 3d cir relied on by petitioner on brief was the opinion of the u s district_court that held that the debt in question was a business_bad_debt interestingly that holding was reversed by the court_of_appeals for the third circuit petitioner did not cite nor discuss the court of appeals' reversal her research was used by petitioner at the omaha nebraska conference on their federal_income_tax return petitioners claimed unreimbursed employee business_expenses of dollar_figure for the travel_expenses incurred by mrs rezazadeh for her research trip to bogota more specifically the expenses claimed included the standard mileage rate for automobile travel from petitioners' home in platteville to the airport in chicago illinois and back to platteville the round-trip airfare from chicago to bogota miscellaneous meals and lodgings in chicago parking at the chicago airport meals in bogota and the bogota airport departure tax expenses for lodging in bogota were not claimed because mrs rezazadeh stayed with her relatives in the notice_of_deficiency respondent disallowed the claimed employee business_expenses determining that the primary purpose of the trip was for pleasure not business at trial respondent acknowledged that mrs rezazadeh did spend some time doing research while she was in bogota sec_162 allows a deduction for all ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business such deductions include traveling expenses_incurred while away from home in the pursuit of a trade_or_business including amounts expended for meals_and_lodging sec_162 if travel_expenses are incurred for both business and other purposes the travel_expenses are deductible only if the travel is primarily related to the taxpayer's trade_or_business sec_1_162-2 income_tax regs if a trip is primarily personal in nature the travel_expenses are not deductible even if the taxpayer engaged in some business activities at the destination id whether travel is related primarily to the taxpayer's trade_or_business or is primarily personal is a question of fact sec_1_162-2 income_tax regs the amount of time during the period of the trip that is spent on personal activity compared to the amount of time spent on activities directly relating to the taxpayer's trade_or_business is an important factor in determining whether the trip is primarily personal id the taxpayer must prove that the trip was primarily related to the trade_or_business rule a at trial petitioners presented evidence indicating that mrs rezazadeh spent of the days she was in bogota including weekends and holidays doing research which included collecting studying organizing and tabulating over pages of material while mrs rezazadeh did spend some time visiting relatives while she was in bogota the court is satisfied that her trip to bogota was primarily for business and not personal purposes accordingly petitioners are entitled to deduct those business-related travel_expenses that have been properly substantiated generally with respect to the substantiation of expenses if the record provides sufficient evidence that the taxpayer has incurred a deductible expense but the taxpayer is unable to adequately substantiate the amount of the deduction to which he or she is otherwise entitled the court may estimate the amount of such expense and allow the deduction to that extent 39_f2d_540 2d cir however in the case of travel_expenses including meals_and_lodging while away from home sec_274 overrides the so-called cohan_rule 50_tc_823 affd per curiam 412_f2d_201 2d cir sec_1_274-5t temporary income_tax regs fed reg date under sec_274 no deduction may be allowed for expenses_incurred for travel on the basis of any approximation or the unsupported testimony of the taxpayer sec_274 imposes stringent substantiation requirements to which taxpayers must strictly adhere thus that section specifically proscribes deductions for travel_expenses in the absence of adequate_records or sufficient evidence corroborating the taxpayer's own statement at a minimum the taxpayer must substantiate the amount of such expense the time and place such expense was incurred and the business_purpose for which such expense was incurred at trial the only evidence petitioners presented was a copy of mrs rezazadeh's round-trip airline ticket to bogota the ticket indicated the dates and destination of travel and the dollar_figure cost of the round-trip flight petitioners have properly substantiated their entitlement to a travel expense deduction for the amount of the flight with respect to the other expenses claimed petitioners have not satisfied the strict substantiation requirements of sec_274 and therefore are not entitled to deduct the remaining travel_expenses claimed with respect to the third issue petitioner has authored and published several books conducting this activity in a portion of sec_274 provides generally that in the case of an individual who travels outside the united_states away from home in pursuit of a trade_or_business or an activity under sec_212 no deduction shall be allowed under sec_162 or sec_212 for that portion of the expenses of such travel otherwise allowable under such sections that under regulations prescribed by the secretary is not allocable to such trade_or_business or to such activity sec_274 provides certain exceptions to the applicability of sec_274 one of which is where the portion of the time of travel outside the united_states away from home that is not attributable to the taxpayer's trade_or_business or a sec_212 activity is less than percent of the total time on such travel in this case the travel time spent by mrs rezazadeh on activities not attributable to petitioner's trade_or_business was considerably less than percent of her total travel time moreover the record does not show that any of the expenses_incurred by mrs rezazadeh not attributable to petitioner's trade_or_business would have otherwise been allowable under sec_162 consequently the provisions of sec_274 are not applicable to this issue petitioners' personal_residence on their federal_income_tax return petitioners filed a schedule c in which the income and expenses of this activity were reported as a trade_or_business among the expenses claimed were expenses related to an office in the home in which petitioners claimed one-eighth of the expenses of their home as being attributable to this business activity the one eighth portion of the home_office expenses claimed were the following dollar_figure utilities dollar_figure property taxes dollar_figure house depreciation dollar_figure total petitioners claimed only dollar_figure of this amount as a deduction pursuant to sec_280a which limits the home_office deduction to the amount of income from the activity that in petitioners' case was dollar_figure for however petitioners additionally claimed a deduction of dollar_figure that is described on the schedule c as storage of inventory cost one-eighth of the total space calculated as above in the notice_of_deficiency respondent did not question petitioners' entitlement to a deduction of expenses for an office in the home but disallowed the dollar_figure claimed for storage of inventory cost because the claimed storage expenses related to the same business activity the writing and publishing of books and was also subject_to sec_280a the substantiation of the amounts claimed is also not at issue as previously stated sec_162 allows a taxpayer to deduct all the ordinary and necessary expenses paid_or_incurred in carrying on any trade_or_business sec_280a in general denies deductions with respect to the use of a dwelling_unit that is used by the taxpayer during the taxable_year as a residence sec_280a however allows the deduction of expenses allocable to that portion of a dwelling_unit that is exclusively used on a regular basis as the principal_place_of_business for any trade_or_business of the taxpayer sec_280a furthermore sec_280a allows the deduction of expenses allocable to the portion of the dwelling_unit used on a regular basis as a storage unit for the inventory of the taxpayer held for use in the taxpayer's trade_or_business of selling products at rental or wholesale but only if the selling unit is the sole fixed location of such trade_or_business respondent determined in the notice_of_deficiency that sec_280a limits the deductibility of the amount claimed for both the home_office and inventory storage to the amount of income earned by the activity accordingly respondent determined that of the total of dollar_figure claimed by petitioners on their return for the home_office and inventory storage dollar_figure dollar_figure the deduction is limited to the dollar_figure income earned by the activity petitioners contend that pursuant to internal_revenue_service publication business use of your home only the deductibility of the portion of the home used as a home_office is limited by sec_280a and there is no limitation on the deduction for inventory storage accordingly petitioners claim they are entitled to deduct their inventory storage costs regardless of the amount of income generated by the activity during the taxable_year sec_280a specifically limits the deduction for both an office in the home and for inventory storage to the gross_income derived from such use for the taxable_year since petitioners used the home_office and inventory storage for the same business activity petitioners' total deduction for both of these spaces in their residence is limited to dollar_figure the income earned from the activity during with respect to petitioners' reliance on publication while the publication is not completely clear with respect to the applicability of the sec_280a income limitations to deductions for inventory storage regardless of the interpretations or conclusions reached by petitioners from this publication it is well settled that authoritative tax law is contained in statutes regulations and judicial decisions and not in informal publications zimmerman v commissioner 71_tc_367 affd without published opinion 614_f2d_1294 2d cir 59_tc_456 internal_revenue_service publications like the one on which petitioners relied are merely guides published by the service to aid taxpayers 381_us_68 petitioners may not rely on such publications to the extent the information in them conflicts with the law respondent is sustained on this issue the final issue for decision is whether petitioners are liable for the sec_6662 accuracy-related_penalties for negligence or disregard of rules or regulations sec_6662 provides for an addition_to_tax equal to percent of the portion of the underpayment to which the section applies under sec_6662 'negligence' includes any failure to make a reasonable attempt to comply with the provisions of this title and the term 'disregard' includes any careless reckless or intentional disregard negligence is the lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances 85_tc_934 however under sec_6664 the penalty under sec_6662 shall not be imposed 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 respondent determined that for tax years and petitioners were liable for the sec_6662 penalty with respect to the claimed business_bad_debt deductions for tax_year the penalty relates only to unreported taxable social_security income in the amount of dollar_figure with respect to the claimed bad_debt deductions for and since facts and circumstances determine whether an indebtedness is business or nonbusiness the court finds that petitioner in good_faith believed that the debts were appropriately characterized as business bad_debts and that the debts became worthless in the court holds on this record that petitioners did not claim the bad_debt deductions in a negligent manner accordingly with respect to the sec_6662 penalties for and petitioners are sustained with respect to the negligence_penalty related to the unreported social_security income for the court holds for petitioners as evidenced by their calculation on the worksheet accompanying their income_tax materials as to the amount of taxable social_security_benefits for petitioners concluded that the dollar_figure in social_security_benefits received by them during was nontaxable upon concluding that none of the social_security_benefits received in was taxable petitioners reported on line 21b of their return as the taxable_amount of the social_security_benefits petitioners failed to report on the face page of their tax_return the actual amount of social_security_benefits they received that year based on their reported income and expenses petitioners properly calculated that none of the social_security_benefits received in was taxable the worksheet however is not filed and is not part of the tax_return the court does not find that petitioners' failure to report on the face of their return the amount of social_security_benefits received constitutes negligence or represents a disregard of rules or regulations accordingly with respect to the penalties for petitioners are sustained decisions will be entered under rule