Attorney-at-Law

THE BUSINESS OF BEING A LAWYER – PART DEUX

In Uncategorized on 03/06/2017 at 14:44

I said back in May last year that I thought it was a profession, but I’m old-fashioned that way.

After losing his claim that his law school tuition and fees were deductible, Emmanuel A. Santos, Docket No. 5864-14, filed 3/6/17, tries to wild-card in his health care costs via a shift from Schedule A to Schedule C at the Rule 155 beancount that followed the loss.

I did give EA a Taishoff “good try, third class,” for the law school tuition play. See my blogpost “The Business of Being a Lawyer,” 5/17/16.

EA took the healthcare deduction on line 1, Schedule A of his 1040, but never mentioned healthcare on Schedule C, even though Section 162(l) allows the deduction up to earned income.

IRS never questioned the Schedule A deduction.

EA tries the healthcare shift in objecting to IRS’ numbers at the Rule 155. The problem is, EA never raised the shift in his petition, or at trial, or in his post-trial brief.

Judge Morrison: “At trial, Santos admitted that the only issue to be resolved by the Court was whether he was entitled to deduct $20,275 in law school tuition and fees. He disputed none of the other adjustments in the notice of deficiency. Nor did he assert his entitlement to a deduction under section 162(l)(1). He presented no evidence, documentary or testimonial, regarding his entitlement to such a deduction.

“In his post-trial briefs, consistent with his position at trial, Santos contended only that he was entitled to deduct $20,275 in law school tuition and fees. The briefs mentioned no other deductions. They did not mention his entitlement to a deduction under section 162(l)(1).” Order, at p. 3.

But EA is an inventive fellow.

“Santos argues that during the…audit of his return, the IRS’s revenue agent determined that he was entitled to a $2,994 deduction under section 162(l)(1). Santos contends that he and the revenue agent made a ‘mutual mistake’ in not including his entitlement to the deduction in the ‘original computation’, by which he presumably means the notice of deficiency. In addition, Santos claims that he could not have taken the $2,994 deduction under section 162(l)(1) on his original return because he was barred from doing so by the income limitation of section 162(l)(2)(A). It was only after his Schedule C deductions were disallowed during the course of this litigation, Santos says, was he able to claim a deduction under section 162(l)(1) free of the income limitation of section 162(l)(2)(A).” Order, at p. 4.

EA, I’ll award you a Taishoff “good try, second class.” You’re moving up.

Judge Morrison, oblivious to the standings in the Taishoff good try league, tosses EA’s casuistry.

“If the revenue agent determined that Santos was entitled to a deduction under section 162(l)(1), this determination did not make its way into the notice of deficiency. Nor was any such determination memorialized in a closing agreement, which is the type of agreement which binds the IRS. See sec. 7121(a) and (b); see also sec. 7701(a)(11)(B). In challenging the notice of deficiency, Santos was required to plead his right to such a deduction. See Rule 34(b)(4). He did not. At trial, he introduced no evidence that he was entitled to such a deduction. Thus, the record does not support his entitlement to the deduction. His brief did not address the deduction. In the course of this litigation, counsel for the IRS never agreed that Santos was entitled to a deduction. Nowhere in our Opinion did we express the view that Santos was entitled to a $2,994 deduction under section 162(l)(1).” Order, at pp.4-5. (Footnote omitted, but it says EA never had to fight about his Schedule A deduction, as it was never challenged, and anyway the requirements for the Schedule C deduction are different from the Schedule A variety).

In short, EA is trying a new issue, and Section 155 beancounts are only to figure out what number reflects the Court’s decision.

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