Attorney-at-Law

HAVEN’T A CLUE

In Uncategorized on 07/05/2018 at 17:22

That’s IRS’ counter to Robert Manashi and Nahrin Manashi, 2018 T. C. Memo. 106, when Rob and Nah claim IRS should’a could’a seen from their 1120S and 1099s and all that, that Rob and Nah didn’t bother reporting about $2.6 mil in income over four years in their 1040s.

Thus 3SOL.

Nope, says Judge Gale. You ran up 241 days stalling with a motion to quash IRS subpoenas. Plus whatever you put on the 1120S, or whatever was in the 1099s, it didn’t show you were hiding other income.

“Simply put, reporting some amount of gross receipts offers no ‘clue’ that other gross receipts have been omitted.  Nothing on [Rob’s and Nah’s Sub S]’s Form 1120S for each year reasonably alerted respondent that gross receipts had been underreported.  The ‘clue’ must be on the face of the return; respondent is not required to undertake further examination absent a ‘clue’ that would inform a reasonable person.” 2018 T. C. Memo. 106, at pp. 8-9.

Of course, if the 1120S had enough stuff to tip off IRS, then 3SOL.

Rob and Nah got 1099s from their three (count ‘em, three) banks they were running their business income through, and also got 1099s from their customers. Shouldn’t those have tipped off IRS?

No.

“There are no Forms 1099 issued by petitioners’ banks or [Sub S]’s clients in the record and certainly none attached to the returns filed by either petitioners or [Sub S].  Thus, any information from Forms 1099, if they were in fact filed, would not have been ‘disclosed in the return, or in a statement attached to the return’, as required by section 6501(e)(1)(B)(ii).” 2018 T. C. Memo. 106, at p. 9.

Takeaway- Practitioner, the record is your friend. Guard it as you would the dearest friend you are every likely to have. A 1099 or two in the record, even if not attached to the return , would enhance credibility, and maybe set the stage for an appeal.

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