That’s been a good move for travelers, we’ve discovered, as we enjoy the end of our stay in Vienna and prepare for the trip to Munich.

And it’s also a good move for Jose Espaillat and Mirian Lizardo, 2015 T. C. Memo. 202, filed 10/15/15.

Jose got involved with Rocky Scrap Metal, Inc. (Rocky Scrap Metal), a scrap metal C corp owned and operated by brother Leoncio. Rocky was rocky, all right. Leoncio put Rocky into bankruptcy, taking with it $285K that Jose put into that business.

Jose had a landscaping business that did just fine, but when he tried to take the $285K as a capital loss, or maybe a worthless security (he was supposed to get stock but apparently he never did), or maybe a bad debt, to offset his landscaping income, IRS said “none of the above,” and Judge Buch agreed.

There’s much detail about how working for a corporation, or providing capital, doesn’t give rise to individual deductions.

Jose’s claim of partnership with the corporation doesn’t work, and his bad debt/worthless security gambit fails on timing. Jose can’t show whatever he had, be it stock or loan, became worthless in the year at issue. Just because a corporation is bankrupt doesn’t mean its stock is worthless. And Leoncio kept the place going after bankruptcy.

“On each of their joint Federal income tax returns…, Mr. Espaillat and Ms. Lizardo included a Schedule C for [landscaping] and also a second Schedule C. The [landscaping] Schedule C for [year at issue] reflects a successful landscaping and maintenance business…. The second Schedule C… relates to a business named ‘Jose Espaillat’, which is characterized as a ‘second hand metal dealer’ and for which Mr. Espaillat and Ms. Lizardo claimed a $359,000 loss deduction for 2008. The loss is reported as ‘Other expenses’ on line 27 of the Schedule C. All other lines on the ‘Jose Espaillat’ Schedule C are blank.” 2015 T. C. Memo. 202, at p. 3. This loss more than offset Jose’s landscaping gains.

Of course, it set off the alarm bells at the IRS. Why am I not surprised?

As aforedescribed, Jose’s deduction, however denominated, gets blown up. IRS even gets to conform pleadings to proof and disallow the $3K short-term capital loss it gave Jose when it thought he might have a bad debt claim.

My point? There is one, and it is the reason for the title of this sad tale.

IRS wants the 20% negligence chop. But Judge Buch will have none of that.

While Jose was good at gardening, he was no tax whiz.

“For the years in issue Mr. Espaillat and Ms. Lizardo enlisted Mr. Golomb, their C.P.A. of over a decade, to prepare their returns. Mr. Golomb had Mr. Espaillat and Ms. Lizardo each fill out a questionnaire before preparing their return for each year. He testified that Mr. Espaillat and Ms. Lizardo provided all the requisite information and were otherwise thorough in completing the questionnaires. Mr. Golomb credibly testified that he held a conversation discussing the facts of the situation with Mr. Espaillat and Ms. Lizardo about the different places to report their loss on the returns and that he thought a Schedule C was ‘the best place to put it.’

“While the facts at hand do not lend themselves to such a position, Mr. Espaillat and Ms. Lizardo have retained Mr. Golomb for at least 10 years without incident. Mr. Golomb is a C.P.A. with over 30 years of experience. Moreover, because Mr. Espaillat and Ms. Lizardo had always used a Schedule C in relation to [landscaping], they had every reason to believe that a Schedule C was the appropriate place to report their financial dealings with Rocky Scrap Metal. While Mr. Espaillat and Ms. Lizardo’s trust in Mr. Golomb was misplaced, they believed in good faith that he was accurately and correctly preparing their returns.” 2015 T. C. Memo. 202, at p. 28.

So stick to your Schedule. It might well save you money. Even if your Schedule isn’t the “right place to put it.”