In Uncategorized on 04/29/2014 at 17:19

Yes, horseracing continues with Merrill C. Roberts, 2014 T. C. Memo. 74, filed 4/29/14, but also on tap today is another couple entries (hey, Judge Holmes, this one’s for you) in my “best excuses” no-prize sweepstakes, although Judge Paris, while amused, isn’t buying either.

Merry was a nightclubber turned horse trainer, and the case, fact-intensive as they all are, involves four runnings of the Section 183 vs. Section 162 optional allowance races, with Merry taking the last two and IRS winning the first two.

As an extra added attraction, a short course in claiming race tactics can be found at p. 10, footnote 12.

And if you thought that tax cases were only dull regurgitations of statutes and parsings of obscure regulations, here’s a note on how some trainers try to fix a horserace, and how to outwit their skullduggery: “For example, petitioner learned of ruses that unscrupulous racers would use to maximize profit potential. In one case, petitioner heard of racers affixing raw cuts of meat to a horse’s ankles so that the horse would appear to be in poor shape and not be claimed. A racer that is aware of the ruse may claim the horse and profit from the transaction.” 2014 T. C. Memo. 74, at p. 27.

Howbeit, we come to the excuses aforementioned.

Merry lost some records due to his firebrand ex-girlfriend, and tries thereby to excuse one year’s late filing: “Petitioner contends that he had reasonable cause to file his return late because some of his records were burned in a fireplace by a former girlfriend. Petitioner cites a case where a taxpayer was not held liable for a section 6651(a)(1) addition to tax because a hurricane destroyed critical tax documents. The wrath of a former girlfriend may be a formidable force, but it is not analogous to a hurricane-like natural disaster, and it does not constitute a reasonable cause outside petitioner’s control. Further, petitioner did not present any evidence showing the records were actually destroyed or document any attempts to find the lost information.” 2014 T. C. Memo. 74, at p. 48.

And Merry claims he suffered from high anxiety because IRS had audited him: “Petitioner also suggests that the Commissioner’s audits of prior-year returns was a reasonable cause for his delay. He contends that he knew the …tax return would likely be audited, and he spent extra time to make sure the return was correct. Preoccupation with an audit, however, does not constitute a reasonable cause for failing to timely file a Federal tax return.” 2014 T. C. Memo. 74, at p. 48 (Citations omitted).

Well, I’m giving Merry one “Taishoff good try” for the ex-girlfriend story, and he’s entered for the no-prize best-excuse sweepstakes.

Edited to add, 8/23/21: Judge Posner (who else?) reverses Tax Court in Roberts v. CIR, 820 F.3d 247 (CA 7, 2016). But Judge Posner treats Judge Paris a lot nicer than he did poor Judge Wherry_”We mustn’t be too hard on the Tax Court. It felt itself imprisoned by a goofy regulation (26 C.F.R. § 1.183-2, Treas. Reg. § 1.183-2: Activity Not Engaged in for Profit Defined; see, e.g., Faulconer v. Commissioner, 748 F.2d 890 (4th Cir. 1984)) that we feel bound to set forth in its full tedious length….” 820 F. 3d 247, at p. 250.


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