t c memo united_states tax_court marc white and kelly white petitioners v commissioner of internal revenue respondent docket no filed date betty j williams richard t luoma and matthew d carlson for petitioners nicholas r rosado for respondent memorandum findings_of_fact and opinion pugh judge in a notice_of_deficiency dated date respondent determined the following deficiencies additions to tax and penalties unless otherwise indicated all section references are to the internal continued year deficiency dollar_figure big_number addition_to_tax sec_6651 dollar_figure penalty sec_6662 dollar_figure big_number after concessions the issues for decision are whether petitioners’ business constituted a partnership for tax purposes whether petitioners had unreported gross_receipts for the and tax years and whether petitioners are entitled to deduct expenses reported on schedules c profit or loss from business for the and tax years findings_of_fact some of the facts have been stipulated and are so found petitioners resided in california when they timely filed their petition they were married and filed joint federal_income_tax returns for the taxable years at issue continued revenue code of as amended and in effect for the years at issue rule references are to the tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar on brief petitioners conceded the remaining adjustments to schedule c expenses apart from advertising expenses and rent expenses itemized_deductions pension and annuity income computational adjustments and additions to tax and penalties to the extent of any deficiencies i background petitioner marc white spent most of his career in automobile sales he was employed by the mercedes benz dealership in sacramento california for over years ultimately serving as the manager of the dealership towards the end of after losing his position with mercedes benz mr white was approached by his ex-wife april van patten about forming a mortgage company mrs van patten and her husband kevin van patten had experience in real_estate and mrs van patten held a real_estate broker license in california and also held a mortgage lending originator license regulated by the national mortgage licensing system mr white observed the van pattens’ success in real_estate and believed real_estate and mortgage lending to be a profitable business ii business formation mr white and mrs van patten along with their respective spouses-- petitioner kelly white and mr van patten--ultimately agreed to work together in the real_estate business in late or early this business had two separate components under two separate names mortgage lending services of california was the mortgage lending business and homebuyers resource center was the real_estate_transaction business its business address was california avenue suite c fair oaks california fair oaks address the couples did not reduce the terms of their business relationship to writing a capitalization during the tax_year petitioners withdrew dollar_figure from mr white’s retirement account petitioners used a substantial part of this distribution to support the new business the van pattens did not make similar financial contributions to the business while mr van patten testified that he also made capital contributions to the business we do not find his testimony credible when mr white was asked what contributions the van pattens made he responded i mean they really didn’t have any money i mean to speak of when we all partnered up we found his testimony on this point more credible than mr van patten’s b bank accounts petitioners’ personal checking account with golden credit_union was used for the business’ banking during the first few months of operation the van pattens explained to mr white that they had had problems with bad checks in a prior business and could not open business bank accounts however as we discuss below in section iv the record includes a check written on a bank of america account listing camille straughn dba the van patten group dated date and a check dated date written on a td ameritrade account listing mrs van patten dba mortgage lending services of california a sole_proprietorship at the fair oaks address on date three bank accounts were opened with bank of america a personal checking account ending in opened under mr and mrs white’s names a business savings account ending in and a business checking account ending in records of both business bank accounts listed mortgage lending services of california as the account title and corporation as its legal designation three signatories were authorized for the two business accounts mr white as president mrs white as treasurer and camille straughn as secretary on date mr white opened a fourth bank account with bank of america a business checking account ending in mr white was the only officer listed on the account--as president and secretary after the bank of america accounts were opened a bad_check was written on one of the business accounts and the business was unable to satisfy the financial obligations on that account on date mr white opened three new business accounts with american river bank a business checking account ending in opened under mr white dba mortgage lending services of ca a business checking account ending in opened under mr white dba homebuyers resource center and a business checking account ending in opened under mr white dba mortgage lending services--trust account the american river bank account agreements each list mr white as the sole signatory and the business designation selected for each account was sole_proprietorship with mr white listed as the sole_proprietor iii business operations a responsibilities the two couples had different roles and responsibilities mr white oversaw office operations mrs white oversaw the real_estate agents followed up on agents’ leads tracked agents’ progress in showing homes and wrote offers she also satisfied the requirements necessary to re-establish her real_estate license following the reestablishment of her license she served as a real_estate agent providing backup support for the other real_estate agents and helping show properties herself mrs van patten served as the broker of record because she held the required professional licenses finally mr van patten was responsible for marketing structuring loans and overseeing loan processing at trial respondent orally moved for the court to take judicial_notice of the fact that mrs white had a salesperson license issued in that did not expire until petitioners do not object to a finding that mrs white obtained her license in we therefore find this fact conceded and will deny as moot respondent’s oral motion to take judicial_notice b financial activities the business was run very informally the couples did not consult or employ any_tax professionals while for a time they did employ a bookkeeper who used quickbooks software to maintain the company’s books_and_records as business declined they were unable to pay the bookkeeper those quickbooks files were no longer accessible and petitioners did not call the bookkeeper to testify at trial the business incurred advertising expenses at its inception mr van patten ordered big_number mailers from a-applied mailing service inc to advertise the refinancing and home mortgage lending services and paid dollar_figure for their printing packaging and mailing mr white then reimbursed mr van patten with funds withdrawn from his golden credit_union account the record includes a summary for prepared by mrs white during petitioners’ audit titled rent-- other business property that summary includes the following items dollar_figure for office rent dollar_figure for office furniture dollar_figure for maintenance dollar_figure for business technology and dollar_figure for new office deposit c division of profits petitioners controlled the business’ funds used business accounts to pay personal expenses and personal accounts to pay business_expenses and did not maintain books_and_records tracking these payments they also used funds from the business accounts to pay expenses for the van pattens--such as utility bills and car payments--but the record does not include reliable evidence showing how much they paid with one exception discussed below while petitioners argue that the couples agreed to an equal division of profits mr white acknowledged at trial that this did not occur the record shows irregular cash withdrawals by petitioners and some payments to the van pattens along with commission payments and draws to other associates these cash withdrawals exceed the documented payments to or on behalf of the van pattens during the tax years at issue petitioners made most of the mortgage payments for the house where the van pattens lived at trial mr white explained the arrangement with the van pattens as follows we had a verbal agreement the house was in my name i moved out of the house because they really wanted to live there because they had a big family so i moved out i moved into a different house and because their credit was bad i had a verbal agreement that if they would pay the mortgage on it until they got squared away and could get good credit that they had to pay me but that i would take-- you know we--together however you want to look at it we were partners and then once their credit got good and they got squared away they would take over the mortgage on the house when they could actually qualify for it petitioners claimed deductions for mortgage interest_paid on the home in which the van pattens lived during both taxable years at issue as petitioners’ financial situation deteriorated the lines between business accounts and personal accounts were blurred even further mr white described the financial difficulties he faced testifying i made payments from every account i had before i went bankrupt i grabbed money from any place that -- i took money out of everywhere the business was never incorporated was never profitable and ultimately failed towards the end of the couples agreed to part ways and the van pattens agreed to buy petitioners’ interests in the business iv income_tax returns petitioners filed joint form sec_1040 u s individual_income_tax_return for and petitioners timely filed their form_1040 and filed their form_1040 on date mr van patten prepared petitioners’ form sec_1040 for and although the returns indicate that they were self-prepared mr van patten also prepared the joint form sec_1040 he filed with mrs van patten mr van patten was not a tax professional and did not have a tax background both couples reported business income on schedules c for the tax years at issue as described below no form_1065 u s return of partnership income was ever filed for the business petitioners attached schedules c and schedules c-ez net profit from business to their and form sec_1040 the schedules c related to mr white’s shares of the business income and expenses and the schedules c-ez related to mrs white’s shares on their schedule c petitioners reported dollar_figure of income and claimed deductions of dollar_figure for advertising expenses and dollar_figure for rent expenses petitioners also reported dollar_figure of income on their schedule c-ez petitioners reported dollar_figure of income on their schedule c and dollar_figure of income on their schedule c-ez the van pattens reported dollar_figure of income for mr van patten’s real_estate marketing activities and dollar_figure of income for mrs van patten’s real_estate activities on their schedules c on their schedules c the van pattens reported dollar_figure of income for mr van patten’s business activities and dollar_figure of income for mrs van patten’s business activities mrs van patten’ sec_2011 wage and income transcript indicates that she was issued six forms 1099-misc miscellaneous income related to her real_estate activities which were sent to the fair oaks address five forms 1099-misc were issued to her and one was issued to her on behalf of mortgage lending services of california mrs van patten’ sec_2012 wage and income transcript indicates that she was issued four forms 1099-misc related to her real_estate activities and sent to the fair oaks address two forms 1099-misc were issued to her one was issued to her on behalf of homebuyers resource center and one was issued to her on behalf of mortgage lending services petitioners did not reconcile mrs van patten’s forms 1099-misc with their business gross_receipts nor could we we could identify only two form 1099-misc payors from mrs van patten’s wage and income transcript in respondent’s bank_deposits analysis we could not reconcile the deposits with the bank statements in the record the gross_receipts the van pattens reported on their schedules c exceeded the total gross_receipts reported to mrs van patten on her forms 1099-misc finally petitioners never explained how the payments reported to mrs van patten were transferred to the business the record does include two checks that may have represented transfers the first check dated date of dollar_figure was made out to mortgage lending services and was issued by a bank of america bank account held by camille straughn dba the van patten group the second check dated date of dollar_figure was made out to mr white and was issued by a td ameritrade bank account held by mrs van patten dba mortgage lending services of california a sole_proprietorship at the fair oaks address v unreported income respondent initially summoned petitioners’ bank records from their bank of america and american river bank accounts while reviewing these bank records respondent identified transfers to petitioners’ golden credit_union account and subsequently summoned petitioners’ bank records from this account respondent began a bank_deposits analysis to compute petitioners’ income but was unable to complete it given the incomplete bank account records received as a result respondent used the specific-item method for and to reconstruct petitioners’ income respondent determined and classified deposit sources from the descriptions of deposited items on petitioners’ account records respondent then excluded as nontaxable all transfers between bank accounts and excluded rental payments pension distributions or unemployment_compensation respondent also excluded as nontaxable all cash deposits given the nature of petitioners’ businesses finally respondent excluded as nontaxable deposits from given the timing this check also may have been the van pattens’ payment to petitioners for the business the van pattens that petitioners indicated to the revenue_agent were loan repayments respondent determined that petitioners’ deposits totaled dollar_figure for and dollar_figure for as a result of the specific-item method reconstruction respondent determined that petitioners had unreported schedule c gross_receipts of dollar_figure for and dollar_figure for opinion i burden_of_proof the taxpayer generally has the burden of proving that the commissioner’s determinations in a notice_of_deficiency are incorrect rule a 290_us_111 see also 596_f2d_358 9th cir rev’g 67_tc_672 petitioners assert that they have provided complete and conclusive documentation and credible testimony to substantiate their income and claimed deductions sufficiently to shift the burden_of_proof under sec_7491 under sec_7491 i f in any court_proceeding a taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any_tax imposed by subtitle a or b the secretary shall have the burden_of_proof with respect to such issue see 116_tc_438 credible_evidence is the quality of evidence which after critical analysis the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted without regard to the judicial presumption of irs correctness quoting h_r conf rept no pincite- 1998_3_cb_747 we do not believe petitioners have continued ii unreported income sec_61 provides that gross_income includes all income from whatever source derived see 348_us_426 a taxpayer is responsible for maintaining adequate books_and_records sufficient to establish the amount of his or her income see sec_6001 if a taxpayer fails to maintain and produce the required books_and_records the commissioner may determine the taxpayer’s income by any method that clearly reflects income see sec_446 92_tc_661 sec_1_446-1 income_tax regs the commissioner’s reconstruction_of_income need only be reasonable in light of all surrounding facts and circumstances petzoldt v commissioner t c pincite a the specific-item method the specific-item method is a method of income reconstruction that consists of evidence of specific amounts of income received by a taxpayer and not reported continued satisfied the requirements for the burden to shift to respondent moreover for issues we resolve on a preponderance_of_the_evidence in the record which party bears the burden is not relevant it is relevant only where there is an evidentiary tie see 131_tc_185 schank v commissioner tcmemo_2015_235 at on the taxpayer’s return see 56_tc_297 petitioners failed to maintain accurate books_and_records for the years at issue respondent therefore was justified in using the specific-item method to determine petitioners’ tax_liabilities for the years at issue see id pincite petitioners do not argue that the gross_receipts computed by respondent are from nontaxable sources instead petitioners assert that the gross_receipts were the revenue of a partnership and should have been split among the partners we therefore must determine whether the couples’ business constituted a partnership during the tax years at issue petitioners further argue that because business profits should have been split the gross_receipts petitioners reported on their returns were overstated and should be adjusted downward not upward to account for the amounts attributable to the van pattens and reported on the van pattens’ schedules c for these years b existence of partnership if as petitioners assert the couples’ business was properly classified as a partnership for tax purposes petitioners would be taxable on only their distributive shares of the partnership’s income see sec_702 sec_704 a partner’s distributive_share of income gain loss deduction or credit shall except as otherwise provided in this chapter be determined by the partnership_agreement federal tax law controls the classification of partners and partnerships for federal tax purposes see sec_301_7701-1 proced admin regs see also 327_us_280 a partnership is a business_entity with two or more parties see sec_301_7701-1 sec_301 a and b i proced admin regs the hallmark of a partnership is that the participants carry on a trade business financial operation or venture and divide the profits therefrom sec_301_7701-1 proced admin regs in determining whether a partnership exists the court considers the following factors the agreement of the parties and their conduct in the contributions if any which each party has made to the the parties’ control_over income and capital and the right of each executing its terms venture to make withdrawals whether each party was a principal and coproprietor sharing a mutual proprietary interest in the net profits and having an obligation to share losses or whether one party was the agent or employee of the other receiving for his services contingent_compensation in the form of a percentage of income whether business was conducted in the joint names of the parties whether the parties filed federal partnership returns or otherwise represented to respondent or to persons with whom they dealt that they were joint venturers whether separate books of account were maintained for the venture and whether the parties exercised mutual control_over and assumed mutual responsibilities for the enterprise 42_tc_1067 whether parties have formed a partnership is a question of fact and while all circumstances are to be considered the essential question is whether the parties intended to and did in fact join together for the present conduct of an undertaking or enterprise id we will address each factor in turn agreement of parties and conduct in executing terms petitioners and the van pattens did not reduce the terms of their agreement to writing a partnership_agreement may be entirely oral and informal but the parties must demonstrate that they complied with its terms see strickland v commissioner tcmemo_1986_85 finding that a partnership existed even though no written_agreement existed during the years at issue citing 299_f2d_741 2d cir and 135_f2d_989 9th cir while the couples may have agreed orally to an equal division of profits mr white acknowledged that this division did not occur unlike the taxpayers in strickland petitioners withdrew varying sums of money from the business at irregular intervals see azimzadeh v commissioner tcmemo_2013_169 at the van pattens could not withdraw money directly but instead received irregular payments in amounts different from the withdrawals and payments by petitioners nor can we count petitioners’ mortgage payments for the home occupied by the van pattens as evidence of the van pattens’ right to partnership profits while petitioners argue that the van pattens owned the home petitioners deducted the interest payments on their own joint form sec_1040 petitioners direct us to the van pattens’ returns to show that the van pattens already reported their shares of the business income petitioners however never established that the van pattens did not receive income from other sources moreover petitioners never explained how payments reported on the van pattens’ form sec_1040 and on forms 1099-misc issued to mrs van patten made their way into the business bank accounts or were accounted for otherwise this factor therefore weighs against finding that a partnership existed parties’ contributions to venture we found above that petitioners withdrew dollar_figure from mr white’s ira and used these funds in part to capitalize the business but we have no credible_evidence that the van pattens made any capital contributions see holdner v commissioner tcmemo_2010_175 wl at aff’d 483_fedappx_383 9th cir the record suggests that petitioners and the van pattens each performed services related to the business however we therefore will weigh this factor as favorable see 22_bta_1106 wheeler v commissioner tcmemo_1978_208 control_over income and right to make withdrawals petitioners argue that the van pattens had equal rights to withdraw funds from the accounts but the credible_evidence before us indicates that petitioners had sole financial control petitioners were the signatories on all of the business accounts throughout the business’ existence the van pattens never were we also note that while camille straughn also had signature_authority for one of the initial accounts nowhere in the record do petitioners allege that ms straughn was acting on behalf of the van pattens while the record shows that petitioners made payments to or on behalf of the van pattens no evidence shows that the van pattens had rights to withdraw funds from the accounts aside from mr white’s testimony that the van pattens had debit cards but the account statements do not indicate who made withdrawals nor did petitioners tie any specific expenditures to the van pattens while as we note above the van pattens received some payments related to the business and petitioners paid the mortgage for the van pattens at least for part of the years at issue this evidence is not enough for us to conclude that the van pattens had joint control_over the business’ income this factor therefore weighs against finding a partnership existed coproprietor or nonpartner relationship respondent asserts that the van pattens had a separate business and were independent contractors who were paid commissions petitioners assert that the compensation of the couples was contingent on the proceeds from the business and they did not have fixed salaries the record indicates that the van pattens played a role in the business but the evidence is not sufficient to show that their role was coproprietors rather than independent contractors business owners for example may agree to compensate key employees with a percentage of business income or brokers may be retained to sell property for a commission based on the net or gross sale price see comtek expositions inc v commissioner tcmemo_2003_135 aff’d 99_fedappx_343 2d cir although these arrangements may result in a division of profits neither constitutes a partnership unless the parties become coproprietors id indeed in luna v commissioner t c pincite we held that no partnership existed even though the taxpayer was to receive percentage commissions in exchange for the management services he provided the record shows that payments to independent contractors were labeled commission payments and draws like payments made to the van pattens the only evidence that the van pattens received payments more akin to a partner’s share than an independent contractor’s commission or draw is petitioners’ and the van pattens’ uncorroborated testimony we do not find their story credible this factor therefore weighs against finding a partnership whether business was conducted in joint names as the business’ bank records reflect the accounts were held in either mr white’s name alone or petitioners’ names together and included the names of the businesses the van pattens were not listed on any of the accounts further petitioners designated the business as either a sole_proprietorship or a corporation not a partnership and it appears that the van pattens had separate business bank accounts mrs van patten’s check showed april lynn van patten dba mortgage lending services of california a sole_proprietorship at the fair oaks address at least at some point in the business relationship and another check to mortgage lending services lists camille straughn dba the van patten group these checks suggest that the couples both treated the business as their own sole proprietorships--not a joint enterprise--not just on their form sec_1040 but also to financial institutions and potentially check recipients this factor therefore weighs against finding a partnership existed filing of partnership returns or representation of joint_venture as petitioners acknowledge they did not prepare and file a form_1065 for their business for either taxable_year at issue instead they reported the income and expenses on their schedules c and c-ez petitioners assert that they represented to others that they were joint venturers and informed respondent during their examination that they operated a partnership respondent disputes this characterization alleging that petitioners characterized transfers from the van pattens as loan repayments we need not resolve this dispute petitioners’ uncorroborated testimony cannot overcome their reporting of income and expenses on their returns and the bank account records in evidence we find therefore that this factor weighs against finding a partnership maintenance of separate books and accounts petitioners contend that they used quickbooks to maintain separate books_and_records at the entity level petitioners failed to produce any evidence that separate books and accounts were maintained other than their uncorroborated testimony the business bank accounts were held in petitioners’ names either mr white or both mr and mrs white petitioners also admit that they used business accounts for personal expenses and personal accounts for business_expenses this factor therefore weighs against finding that a partnership existed exercise of mutual control and assumption of mutual responsibilities petitioners and the van pattens testified that they each assumed separate roles in the real_estate and mortgage activities and the record supports a finding that they had a business relationship in which they had different roles but the fact that they may have performed separate functions does not convince us that they exercised mutual control and mutual responsibilities indicative of a partnership notwithstanding their conclusory testimony see kazdin v commissioner tcmemo_1969_75 considering the record as a whole applying the luna factors and considering the inconsistencies in the record we conclude that the business is not properly classified as a partnership for tax purposes while the record indicates that petitioners and the van pattens had some sort of relationship the record does not support a conclusion that the business was a partnership petitioners’ explanations for the inconsistencies between their story and the evidence have far too many gaps we understand that petitioners were trying to make ends meet in a challenging time but their story cannot survive all of the gaps and inconsistencies in the record without credible_evidence to back them up moreover even were we to conclude that a partnership existed we have no reliable evidence of the partnership’s total receipts on which we could base an allocation of income different from the amounts respondent calculated using the specific-item method we therefore hold that petitioners have unreported schedule c gross_receipts of dollar_figure and dollar_figure for the and taxable years respectively iii deductions deductions are a matter of legislative grace and a taxpayer must prove his or her entitlement to deductions 503_us_79 292_us_435 taxpayers therefore are required to substantiate expenses underlying each claimed deduction by maintaining records sufficient to establish the amount of the deduction and to enable the commissioner to determine the correct_tax liability sec_6001 116_tc_438 under the cohan_rule where a taxpayer is able to demonstrate that he or she has paid_or_incurred a deductible expense but cannot substantiate the precise amount the court may estimate the amount of the expense if the taxpayer produces credible_evidence providing a basis for the court to do so 39_f2d_540 2d cir sec_162 provides that expenses are deductible if they were ordinary necessary and paid_or_incurred during the tax_year and were directly connected with or proximately resulted from a trade_or_business of the taxpayer see 403_us_345 276_us_145 91_tc_352 a advertising expense petitioners assert that they are entitled to a dollar_figure advertising expense deduction for the tax_year mr white credibly testified that the dollar_figure expense relates to an advertising mailer designed to promote the new business respondent argues that the expense was not for petitioners’ business the record includes a copy of the original invoice and a corresponding debit on an account statement from petitioners’ golden bank account--the account initially used for business expenses--and supports mr white’s testimony we reject respondent’s argument that these expenses were the van pattens’ having found that the bank account was solely for petitioners’ business and that the business was not a partnership we logically find that petitioners may deduct the advertising expense incurred by the business we also find that petitioners substantiated this expense and proved that it was ordinary and necessary to their business we hold therefore that petitioners are entitled to deduct dollar_figure of advertising expenses for the tax_year b rent expense petitioners assert that they are entitled to deduct dollar_figure in rent expenses for the taxable_year respondent allowed a deduction for dollar_figure of rent expenses and claims that this amount is greater than the amount of rent payments shown on the summary prepared by mrs white of dollar_figure we agree with respondent that petitioners are not entitled to a greater amount petitioners did not show that the remaining expenses described on mrs white’s summary as maintenance business technology new office deposit and office furniture are rent expenses for the taxable_year nor did they provide documentation that would support deductibility as another type of business_expense we hold therefore that petitioners are entitled only to the dollar_figure rent expense deduction respondent allowed on their joint_return we have considered all of the arguments made by petitioners and respondent and to the extent they are not addressed herein we find them to be moot irrelevant or without merit to reflect the foregoing an appropriate order will be issued and decision will be entered under rule


internal_revenue_service number release date index number ---------------------- ------------------------------------ --------------------------- ----------------------- -------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc intl plr-135732-04 date date taxpayer legend legend ---------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------- ------- ----------------------- individual a individual b cpa firm --------------- tax_year x tax_year y dear --------------- this replies to your letter dated date in which you request on behalf of taxpayer an extension of time under sec_301_9100-3 to file the annual certification described in sec_1_1503-2 for the entities and tax years listed on schedule a which is attached to and made a part of this ruling letter additional information was submitted in letters dated date and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process plr-135732-04 individual a states in his affidavit that he is the senior tax manager of taxpayer and had the primary responsibility for all applicable years for ensuring that taxpayer complied with applicable federal_income_tax laws for each of taxpayer’s international investments this responsibility included ensuring that all elections and certifications were timely and properly made individual a further states that he was aware of the requirement to file an election and agreement under sec_1_1503-2 and that this election and agreement was included in the tax_return for each year that included dual consolidated losses however individual a also states that he was not aware of the requirement to file the annual certification under sec_1_1503-2 and that it was not included in any_tax return as filed with respect to tax_year x after taxpayer filed its consolidated federal_income_tax return taxpayer engaged cpa firm to review that return as filed and to make taxpayer aware of any issues including elections or statements that might not have been included with respect to the consolidated federal income for tax_year y the engagement letter required cpa firm to review the return and to sign the return as the paid preparer individual b a partner in the cpa firm was the engagement partner responsible for the review of the tax_year x and y tax returns individual b states in his affidavit that he inadvertently failed to discover that the annual certifications were not included in the tax returns as filed taxpayer represents that the income_tax laws of each country in which the entities listed on schedule a was a resident does not deny the use of losses expenses or deductions of entity to offset income of another person because the dual_resident_corporation is also subject_to income_taxation by another country on their respective worldwide income or on a residence basis sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith within the meaning of sec_301_9100-3 subject_to the conditions set forth in sec_301_9100-3 and the grant of relief will not prejudice the interests of the government within the meaning of sec_301_9100-3 plr-135732-04 in the present situation the annual certification described in sec_1 g vi b is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards for relief as set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies the standards for relief as set forth in sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the annual certifications described in sec_1_1503-2 for the entities and tax years listed on schedule a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the annual certifications sec_301_9100-1 for example a taxpayer that is subject_to mirror legislation enacted by a foreign_country may be ineligible to file election agreements pursuant to sec_1_1503-2 a copy of this ruling letter should be associated with the annual certifications this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented sincerely associate chief_counsel international by s richard l chewning richard l chewning senior counsel office of the associate chief_counsel international enclosures schedule a copy for purposes


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 b04 plr-122394-18 date date re ------------------------------------- legend decedent spouse date - --------------------- - ---------------------------------------------------- - ------------------------ dear ----------------------------------- this letter responds to a letter dated date submitted on behalf of decedent’s estate requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election decedent’s estate is requesting to make an election under sec_2010 of the internal_revenue_code a portability election to allow the estate of decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the information submitted for consideration is summarized below decedent died on date survived by spouse it is represented that based on the value of decedent’s gross_estate and taking into account any taxable_gifts decedent’s estate is not required under sec_6018 to file an estate_tax_return form_706 united_states estate and generation-skipping_transfer_tax return it is further represented that there is an unused portion of decedent’s applicable_exclusion_amount and that a portability election is required to allow spouse to take into account that amount the dsue amount a portability election is made upon the timely filing of a complete and properly prepared estate_tax_return unless the requirements for opting out are satisfied see sec_20_2010-2 of the estate_tax regulations for various reasons an estate_tax_return was not timely filed and a portability election was not made after discovery plr-122394-18 of this spouse’s representatives submitted this request for an extension of time under sec_301_9100-3 to make a portability election law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 provides the basic exclusion amount available to the estate of every decedent an amount to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_20_2010-2 provides that the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been obtained under sec_20_2010-2 an extension of time under sec_301_9100-3 to make a portability plr-122394-18 election may be granted in the case of an estate that is not required to file an estate_tax_return under sec_6018 as determined solely based on the value of the gross_estate and any adjusted_taxable_gifts and without regard to sec_20_2010-2 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in this case based on the representation as to the value of the gross_estate and any adjusted_taxable_gifts the time for filing the portability election is fixed by the regulations therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for decedent’s estate to elect portability provided decedent’s estate establishes it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information and representations submitted on behalf of decedent’s estate explain the circumstances that resulted in the failure to timely file a valid election based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied therefore we grant an extension of time of days from the date of this letter in which to make the portability election the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void see sec_20_2010-2 plr-122394-18 we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express no opinion as to the dsue amount to be potentially taken into account by spouse any claimed dsue amount will be included in the applicable_exclusion_amount of spouse only to the extent that spouse can substantiate such amount and will be subject_to determination by the director’s office upon audit of relevant federal gift or estate_tax returns see sec_20_2010-3 and d 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 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives sincerely associate chief_counsel passthroughs special industries by leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter 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 eoeg teb presp-150100-06 date date dear -------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the projects described in appendix a attached hereto are qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------- ---------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure--------------- ------------------------------------------------------------------------------------------------------------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the projects described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ---------or -----------------------------of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call 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 presp-150100-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-150100-06 borrower name appendix a project type project location ------------------------------- ------------- --------------------------- solar_energy_facility solar_energy_facility ---------------------------------- -------------------------------- --------- -------------------------------- --------------------- total amount allocated dollar_figure----------- dollar_figure-------------- dollar_figure---------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------


t c summary opinion united_states tax_court phyllis shaw petitioner v commissioner of internal revenue respondent docket no 10969-12s l filed date phyllis shaw pro_se beth a nunnink for respondent summary opinion thornton chief_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by all section references are to the internal_revenue_code in effect for the relevant times and all rule references are to the tax_court rules_of_practice and continued any other court and this opinion shall not be treated as precedent for any other case petitioner seeks review pursuant to sec_6320 and sec_6330 of respondent’s determination sustaining the filing of a notice_of_federal_tax_lien with respect to her and federal_income_tax background the parties have stipulated some facts which are so found when she filed her petition petitioner resided in tennessee in petitioner owned and operated a pet grooming business called dog gone good grooming throughout her principal_place_of_business for dog gone good grooming was at a shopping center in date petitioner purchased a house as her personal_residence in date she moved her principal_place_of_business for dog gone good grooming from the shopping center to her personal_residence on date respondent received petitioner’s form_1040 u s individual_income_tax_return reporting tax due of dollar_figure on this return petitioner claimed a dollar_figure standard_deduction in lieu of claiming itemized continued procedure all monetary amounts are rounded to the nearest dollar deductions attached to this return was a schedule c profit or loss from business sole_proprietorship for petitioner’s pet grooming business it showed dollar_figure of gross_receipts and dollar_figure of total expenses on date respondent assessed the tax shown on petitioner’s return as well as a dollar_figure sec_6651 addition_to_tax for late filing and a dollar_figure sec_6651 addition_to_tax for failure to pay timely on date petitioner filed a form 1040x amended u s individual_income_tax_return amended_return for her taxable_year reporting tax due of dollar_figure on this amended_return petitioner claimed dollar_figure of itemized_deductions which according to an attached schedule a itemized_deductions consisted of dollar_figure of taxes paid dollar_figure of interest_paid and dollar_figure of charitable donations she also attached to her amended_return a schedule c for her pet grooming business which reported dollar_figure of gross_receipts and dollar_figure of total expenses exclusive of expenses for business use of her home in addition she reported on line of her schedule c a dollar_figure expense for business use of her home respondent did not process petitioner’s amended_return during these proceedings respondent conceded that petitioner is not liable for the sec_6651 addition_to_tax we do not address this issue further the following table shows i the amounts shown on petitioner’s schedule c attached to her original return ii the amounts shown on petitioner’s schedule c attached to her amended_return and iii the amounts respondent has conceded item gross_receipts insurance other than health interest other legal and professional services office expense repairs and maintenance supplies other--donations and charitable_contributions other--janitor and waste pickup other--bank charges expenses for business use of home original respondent’s concessions amended dollar_figure dollar_figure --- --- big_number dollar_figure --- --- big_number --- big_number big_number big_number --- --- big_number big_number big_number big_number --- big_number --- the following table shows the amounts petitioner claimed on her schedule a attached to her amended_return and the amounts respondent has conceded petitioner is entitled to deduct subject_to certain limitations item medical_expenses state and local general taxes real_estate_taxes personal_property_taxes home mortgage interest points not reported on form_1098 charitable_contributions claimed on schedule a --- dollar_figure big_number big_number respondent’s concessions dollar_figure determined by tax_tables big_number --- respondent concedes that petitioner is entitled to a deduction for schedule a general_sales_tax based on the optional sales_tax tables see sec_164 see also figures v commissioner tcmemo_2012_296 at because petitioner’s sales_tax deduction will be based in part on her adjusted_gross_income taking into account respondent’s concessions and our findings and holdings herein the actual amount of petitioner’s deduction will be determined pursuant to the parties’ rule_155_computations on brief petitioner contends that the dollar_figure she reported on her schedule a as charitable_contributions is the same dollar_figure she reported on her schedule c as other--donations and charity contributions as discussed more fully below petitioner argues that this dollar_figure should be reported on her schedule c rather than her schedule a petitioner timely filed returns for her and tax years reporting tax of dollar_figure dollar_figure and dollar_figure for each tax_year respectively respondent assessed these amounts at various times petitioner entered into installment agreements with respondent to pay her and tax but respondent eventually terminated the installment agreements because of petitioner’s nonpayment on date respondent sent petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 lien notice for her and taxable years petitioner timely filed a written response to the lien notice requesting an appeal on date the internal_revenue_service office of appeals sent petitioner a letter acknowledging it had received her case for consideration by letter dated date petitioner sent correspondence to the office of appeals including a copy of her return a copy of her amended return and notes explaining why she believed the figures on her amended_return were correct petitioner raised no issues about her or tax years on date settlement officer thomas erwin so erwin sent petitioner a letter indicating that he had received her request for a collection_due_process_hearing and scheduling a telephone conference for date pincite a m the letter also indicated that so erwin would be unable to consider any collection alternatives unless petitioner provided certain documentation on or before date petitioner did not send any of the requested documentation nor did she call at the designated time of her scheduled telephone conference on date so erwin sent petitioner a last chance letter indicating that he would make a determination by reviewing the administrative file and any information she had previously submitted he advised her that if she wanted to provide additional information she should do so no later than date on date so erwin recorded in his appeals log that he had received no reply or documentation from petitioner and that he had determined to sustain the collection action with respect to the lien on date the office of appeals issued a notice_of_determination concerning collection action s under sec_6320 determining that the filing of the tax_lien notice was appropriate discussion i statutory framework sec_6321 imposes a lien in favor of the united_states on all property and property rights of a person who is liable for and fails to pay tax after demand for payment has been made the lien arises when assessment is made and continues until the assessed liability is paid sec_6322 for the lien to be valid against certain third parties the secretary must file a notice_of_federal_tax_lien within five business days thereafter the secretary must provide written notice to the taxpayer sec_6320 sec_6323 within days commencing after the end of the business days the taxpayer may request an administrative hearing before an appeals officer sec_6320 sec_301_6320-1 proced admin regs at the hearing the taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6320 sec_6330 a taxpayer may challenge the existence or amount of the underlying tax_liability unless the taxpayer received a notice_of_deficiency or otherwise had an earlier opportunity to dispute the tax_liability sec_6330 see also 114_tc_604 the underlying tax_liability includes the tax_deficiency additions to tax and statutory interest see 138_tc_295 aff’d 723_f3d_790 7th cir 115_tc_329 following the hearing the appeals officer must determine whether to sustain the filing of the notice_of_federal_tax_lien in making that determination the appeals officer is required to verify that the requirements of any applicable law and administrative procedure have been followed consider the relevant issues raised by the taxpayer and consider whether the filing of the notice of lien appropriately balances the need for efficient collection_of_taxes with the taxpayer’s concerns regarding the intrusiveness of the proposed collection action sec_6330 and once the appeals officer issues a notice_of_determination the taxpayer may seek review in this court sec_6320 sec_6330 if the validity of the underlying tax_liability is properly at issue we review that issue de novo see 134_tc_280 sego v commissioner t c pincite other issues a taxpayer properly raises are reviewed for abuse_of_discretion wadleigh v commissioner t c pincite sego v commissioner t c pincite ii petitioner’s tax_liability a schedule c expenses during her appeals hearing petitioner challenged only her tax_liability respondent concedes that petitioner is entitled to dispute her underlying tax_liability in this proceeding the burden_of_proof is on petitioner to because she failed to properly raise the issue at her appeals hearing we decline to address petitioner’s argument raised for the first time in her posttrial memorandum that she is entitled to dollar_figure of capital losses for each year through and dollar_figure for with respect to a mobile home she purportedly used see 129_tc_107 see also sec_301_6320-1 a-f3 proced admin regs show error in respondent’s determination as to her underlying liability see rule - - a a taxpayer may deduct ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business if the taxpayer maintains sufficient records to substantiate the expense sec_162 sec_6001 sec_1 a income_tax regs the taxpayer bears the burden of substantiation 65_tc_87 aff’d 540_f2d_821 5th cir generally no deductions are allowed for personal living or family_expenses sec_262 if a taxpayer establishes that deductible expenses were incurred but fails to establish the amount we generally may estimate the amount allowable 39_f2d_540 2d cir there must be evidence in the record however that provides a rational basis for our estimate 85_tc_731 petitioner does not contend and the record does not establish that the burden_of_proof as to any factual issue should shift to respondent pursuant to sec_7491 insurance expenses other than health insurance petitioner contends that she is entitled to a dollar_figure deduction claimed on her schedule c for insurance expenses that she paid in respondent concedes that petitioner is entitled to deduct dollar_figure claimed on her schedule c for insurance but argues that the remaining dollar_figure should be reported on her schedule a as a personal medical expense subject_to the limitations found in sec_213 at trial petitioner conceded that this dollar_figure was a personal medical expense interest the parties disagree as to whether petitioner is entitled to a dollar_figure deduction for interest_expenses she claims to have paid with respect to three credit cards she purportedly uses for business purposes petitioner’s credit card statements show purchases from various merchants in but she was unable to produce invoices or receipts showing a detailed description of the items she purchased she testified that certain of the purchases were for blade sharpeners grooming scissors supplies and other items necessary to a dog grooming business petitioner’s credit card statements also show several purchases however that we find were for personal rather than business purposes bearing for example the credit card statements show purchases for peopledata com reunion com and a notation from petitioner that indicates she continued heavily against petitioner whose inexactitude is of her own making we conclude that she is entitled to deduct of her claimed interest_expense or dollar_figure see cohan v commissioner f 2d pincite legal and professional services petitioner contends that she is entitled to a dollar_figure deduction for legal and professional services expenses that she paid for legal proceedings with respect to her personal chapter bankruptcy filing in she contends that she made four separate payments of dollar_figure each to her legal_representative and that of these expenses should be allowed as business_expenses on her schedule c respondent concedes that petitioner is entitled to deduct of her legal expenses but argues that her profit and loss statement and bank statements show only three dollar_figure payments to her legal_representative in petitioner has not introduced any evidence other than her self-serving testimony to substantiate the alleged fourth dollar_figure payment pursuant to respondent’s concession we hold that petitioner is entitled to deduct dollar_figure of fees for legal and professional services continued used a credit card to pay her personal income_tax office expenses petitioner contends that she is entitled to a dollar_figure deduction for office expenses that she claims she paid in in support of this contention she introduced copies of receipts and invoices as well as her profit and loss statement for many of these copies are illegible petitioner testified that she had the original copies of these documents at her home but she failed to introduce them into evidence or to explain why she was unable to produce them at trial respondent concedes that petitioner is entitled to deduct dollar_figure in office expenses as reflected on receipts from staples showing payments of dollar_figure dollar_figure and dollar_figure the record also contains an additional staples receipt dated date for dollar_figure petitioner credibly testified that this dollar_figure purchase was for business purposes we hold that petitioner is entitled to deduct dollar_figure for office expenses repairs and maintenance petitioner contends that she is entitled to a dollar_figure deduction for repairs and maintenance_expenses that she paid in respondent concedes that petitioner is entitled to deduct dollar_figure of these expenses at trial petitioner testified that her claimed repairs and maintenance_expenses included payments for new flooring light fixtures bathtubs a dividing wall shrubbery and the like petitioner also testified that many of these expenses included payments for purported repairs and maintenance she made to her personal_residence in even though she moved her pet grooming business from the shopping center to her personal_residence in sec_263 prohibits any deduction for amounts paid for permanent improvements that increase the value of property see also sec_1_263_a_-2 income_tax regs additionally a taxpayer is generally not permitted to deduct expenses for business usage of a home unless an exception under sec_280a applies petitioner has failed to show that her claimed deductions are not capital expenses and that she is entitled to deduct these expenses for petitioner has also failed to show that her claimed deductions with respect to expenses she paid for her home fall under an exception in sec_280a we sustain respondent’s determination on this issue and hold that petitioner is entitled to no greater deduction for repairs and maintenance_expenses than respondent has allowed generally a taxpayer may deduct expenses with respect to the portion of a home that the taxpayer uses exclusively and on a regular basis as the principal_place_of_business for a trade_or_business as a place of business which is used by patients clients or customers in meeting or dealing with the taxpayer in the normal course of a trade_or_business or in the case of a separate structure which is not attached to the taxpayer’s home in connection with a trade_or_business see sec_280a c a b and c supplies on her amended_return and schedule c petitioner claimed a dollar_figure deduction for supplies expenses that she allegedly paid in her profit and loss statement however shows only dollar_figure of expenses for supplies in petitioner has failed to explain the discrepancy respondent concedes that petitioner is entitled to deduct dollar_figure of these expenses petitioner introduced voluminous copies of receipts from wal-mart dollar general lowe’s joanne stores and home depot many of these copies are illegible and certain ones that are legible bear dates in additionally many of petitioner’s lowe’s and home depot receipts are dated date or later after petitioner purchased her personal_residence on the basis of our careful review of the record we conclude that petitioner is entitled to an additional supplies deduction of dollar_figure beyond that which respondent has allowed or a total supplies deduction of dollar_figure the additional dollar_figure represents purchases that we are persuaded were for business purposes as reflected in ex 38-p charitable_contributions petitioner contends that she is entitled to a dollar_figure charitable_contribution_deduction claimed on her schedule c respondent contends that petitioner is not entitled to this deduction claimed on her schedule c but concedes that the dollar_figure deduction should be allowed on her schedule a petitioner has failed to show that these expenses were ordinary and necessary expenses of her pet grooming business see bentley v commissioner tcmemo_2012_294 gage v commissioner tcmemo_2002_72 sec_1_162-15 income_tax regs we sustain respondent’s determination disallowing the deduction for these expenses claimed on petitioner’s schedule c janitor and waste expenses petitioner contends that she is entitled to deduct dollar_figure for janitor and waste expenses for respondent concedes that petitioner is entitled to deduct dollar_figure of these expenses most of petitioner’s receipts for these expenses are illegible many of the receipts that are legible show purchases of personal items including paper plates and cutlery arthritis cream toothpaste fritos and mary in her brief petitioner concedes that the dollar_figure charitable_contribution_deduction she claimed on her schedule a of her amended_return is the same dollar_figure that she claimed on her schedule c as an expense for other--donations and charity contributions she argues this dollar_figure should properly be claimed on her schedule c however and not her schedule a jane candy we hold that petitioner is not entitled to deduct more janitor and waste expenses than respondent has allowed banking charges petitioner contends that she is entitled to deduct dollar_figure of banking charges for her profit and loss statement for her pet grooming business shows bank charges totaling only dollar_figure and she failed to explain the discrepancy respondent concedes that petitioner is entitled to deduct dollar_figure of these expenses but argues that she is not entitled to deduct the remaining banking fees because she used the bank accounts for both business and personal reasons we hold that petitioner has failed to establish that she is entitled to a greater deduction for banking charges than respondent has conceded expenses for business usage of personal_residence petitioner contends that she is entitled to deduct dollar_figure of expenses with respect to the business usage of her personal_residence during her taxable_year respondent contends that petitioner failed to prove that in her personal_residence was her principal_place_of_business as required under sec_280a we agree with respondent we have found that petitioner’s principal at trial petitioner conceded that she used both bank accounts for personal and business purposes place of business in was at a shopping center and that she moved her business to her personal_residence in petitioner has failed to show these expenses fall under any other exception in sec_280a accordingly we sustain respondent’s determination b schedule a deductions--home mortgage interest and points not reported on form_1098 at trial petitioner contended that she had deductible mortgage interest and points of dollar_figure respondent concedes that petitioner is entitled to deduct dollar_figure in her posttrial memorandum petitioner contends that her deductible mortgage interest and points total dollar_figure petitioner has failed to direct this court’s attention to any evidence to substantiate her claim petitioner is entitled to deduct on her schedule a only dollar_figure for home mortgage interest and points c sec_6651 addition_to_tax respondent determined that petitioner is liable for an addition_to_tax under sec_6651 for failure to timely file her federal_income_tax return sec_6651 provides for an addition_to_tax for failure_to_file a return by the date prescribed unless the taxpayer establishes that the failure is due to reasonable_cause and not willful neglect the commissioner bears the burden of production with respect to whether it is appropriate to impose the sec_6651 addition_to_tax see sec_7491 and the burden_of_proof is on the taxpayer to establish reasonable_cause 469_us_241 petitioner’s tax_return was due on date and at trial she conceded that she filed her tax_return late on date respondent has met his burden of production petitioner failed to show reasonable_cause for not filing her tax_return on time we sustain respondent’s determination to impose a sec_6651 addition_to_tax iii abuse_of_discretion in sustaining collection action petitioner challenges the appropriateness of the filing of the notice of tax_lien and requests that it be withdrawn during her appeals hearing petitioner offered no collection alternative failed to submit the requested financial information to so erwin and failed to contact so erwin at the scheduled time for their telephone conference or respond to his last chance letter petitioner has failed to show that respondent abused his discretion in sustaining the filing of the notice of tax_lien see stanwyck v commissioner tcmemo_2012_180 and cases cited therein having carefully reviewed the record we conclude that respondent has satisfied the requirements of sec_6320 consequently we sustain respondent’s filing of the notice_of_federal_tax_lien subject_to the recalculation pursuant to rule of petitioner’s underlying liability for to reflect the foregoing and the parties’ concessions decision will be entered under rule


internal_revenue_service number release date ---------------------------------- ---------------------------------------- ---------------------------------------------------------- ------------------------------------------------------------ ------ 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 b01 plr-117485-16 date date x country -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ---------------------- z -------------------------------------------------------------------------------------- ----------------------- -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- ------------------------- date date dear------------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed under the laws of country on date as of date x was owned by z a u s_corporation x intended to be treated as a disregarded_entity for federal tax purposes effective date however x plr-117485-16 inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes law sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be plr-117485-16 treated as a disregarded_entity for federal tax purposes effective date x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form this ruling is contingent on the owner of x filing within days of this letter all required returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns 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 this ruling is directed only to the taxpayer requesting it sec_6110 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 x's authorized representative sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index numbers ------------------------------------------------------------- ------------------------- ----------------------------------- ---------------------------------- --------------------------- --------------------------- 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 b03 plr-118654-08 date date legend x y ----------------------------------------------------------------------------------------------------- ------------------------- ----------------------------------------------------------------------------------------------------- ------------------------- state ------------------- date1 --------------------------- date2 ------------------------ dear ----------------- this letter responds to the letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be treated as an association_taxable_as_a_corporation for federal tax purposes under sec_301_7701-3 facts x was formed on date1 as a state limited_liability_company upon formation x was treated as a partnership for federal tax purposes on date2 y became the sole owner of x y intended that x be treated as an association_taxable_as_a_corporation for federal tax purposes effective date2 however x inadvertently failed to timely file a form_8832 entity classification election plr-118654-08 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 entity classification election with the service_center designated on form_8832 sec_301_7701-3 provides that an election under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-118654-08 conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date2 the election should be made by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the election except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code 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 a power_of_attorney on file with this office we are sending a copy of this letter to x's authorized representatives sincerely s william p o'shea associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc