In Uncategorized on 05/12/2016 at 16:17

Johnny Lara, 2016 T. C. Memo. 96, filed 5/12/16, got tax-free educational benefits under the Post-9/11 GI Bill, including the Yellow Ribbon GI Education Enhancement Program. This paid his entire bill at the University of Phoenix.

Johnny handed his tax preparer the Form 1099-T he got from the U of Phoenix. Preparer duly put down Johnny’s other income, took the American Opportunity tax credit (AOTC), filed him as HOH (minor son), but left off the GI benefits.

IRS hit Johnny with a SNOD, because he hadn’t paid, nor was billed, for any qualifying tuition.

Judge Ashford: “Section 25A authorizes an American Opportunity Tax Credit equal to ‘(A) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $2,000, plus (B) 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000.’  Sec. 25A(i)(1) (emphasis added).  Up to 40% of the credit may be refundable.  Sec. 25A(i)(6).” 2016b T. C. Memo. 96, at p. 5. (Footnote omitted.)

But the AOTC must be reduced by the amount of tax-free benefits. And Johnny’s entire educational bill was paid in the form of tax-free benefits.

“This case involves an honest misunderstanding of the law.  Petitioner honestly believed that he was entitled to the American Opportunity Tax Credit for 2011 because of his full-time student status and receipt of a Form 1098-T from the University of Phoenix for 2011.  Although petitioner was indeed an eligible student, the parties stipulated and petitioner again acknowledged when he testified at trial that he paid no qualified tuition and related expenses; but rather, his tuition and related expenses were paid directly to the University of Phoenix by the Department of Veterans Affairs on account of his eligibility for benefits under the Post-9/11 GI Bill, including the Yellow Ribbon GI Education Enhancement Program.” 2016 T. C. Memo. 96, at p. 6.

Credit disallowed, but no penalty.

And I must add a Happy Birthday to a certain young Texan.


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