Attorney-at-Law

“THE JIG IS UP”

In Uncategorized on 07/30/2018 at 15:42

Judge Albert G (“Scholar Al”) Lauber needs demonstrate little of his vaunted classical erudition to establish that, for Kimberly S. Nix, 2018 T. C. Memo. 116, filed 7/30/18, the title of this blogpost is apposite.

“Petitioner has established that she devoted many hours to travel during [years at issue].  But there is no evidence to establish a strong link between this travel and her alleged business.  To the contrary, at least 24 of her trips involved travel to her daughter’s volleyball tournaments, vacations to Disney World and Europe, and reunions with her sorority sisters.  Even if she could plausibly characterize these excursions as ‘marketing trips,’ the travel had obvious personal and recreational aspects.  That in turn suggests the absence of a true profit motive.  See sec. 1.183-2(b)(9), Income Tax Regs.” 2018 T. C. Memo. 116, at p. 12.

I want to give Kimberly’s counsel, whom I’ll herein denominate as Mike, a Taishoff “Good Try, Forlorn Hope Division.“ He’s playing a losing hand as well as might be expected.

“Petitioner’s argument, in essence, is that she engaged in a business for three years, lost money every year, and decided to quit after concluding that the business would never be profitable.  But the sequence of events makes this narrative suspect:  Petitioner terminated her … activity shortly after receiving the IRS notice of deficiency in this case, which suggested that the jig might well be up.” 2018 T. C. Memo. 116, at p. 15.

And today’s blogtitle might well fit a return visitor to this my blog, Estelle C. Grainger, 2018 T. C. Memo. 117, filed 7/30/18. Estelle is a Judge Scholar Al alum; see my blogpost “Don’t Ambush the Pro Se,” 11/15/17.

But Judge Scholar Al’s toss of IRS’ belated attempts to up the deficiency and chop Estelle with the five-and-ten doesn’t save Estelle from the deficiency as determined.

Estelle bought marked-down clothing and contributed it to Goodwill, claiming the pre-markdown price as FMV for a charitable deduction. Nice try, Estelle, but “shop till you drop” doesn’t play at 400 Second Street, NW.

“Contrary to petitioner’s view, the FMV of an item is not the price at which a hopeful retailer initially lists that item for sale.  By the time petitioner purchased her clothing, Talbots had marked down the prices of those items three or four times.  She purchased each item for a small fraction of its original list price.  No rational buyer having knowledge of the relevant facts would have paid for these items a price higher than the price Talbots was then charging.  Petitioner has failed to establish for the donated items an FMV higher than her acquisition cost.” 2018 T. C. Memo. 117, at pp. 9-10. (Footnote omitted, but read it. Even if Estelle proved FMV exceeded purchase price, as soon as she bought she contributed it, so only short-term capital gain, thus Section 170(e)(1)(A) limits Estelle to FMV.)

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