In Uncategorized on 10/04/2018 at 20:50

Letitia Burns O’Connor and the late Dana Levy (before he became the late Dana Levy) properly reported the capital gain on the sale of “…family heirlooms, including art prints, wood bowls, and a handcrafted wooden rocking chair that Mr. Levy had purchased as a wedding present for his wife.” 2018 T. C. Sum. Op. 48, at p. 4.

Mr. Levy had Medicare and supplemental health insurance. Ms. O’Connor had not, so she availed herself of the much-contemned Affordable Care Act to the extent of $8K of advanced premium credit. Ms. O’Connor based her eligibility on the couple’s previous year’s tax posture.

Mr. Levy had terminal cancer and died during the year at issue. But between his Social Security payments (both the taxed and untaxed portions) and the capital gains (which Ms. O’Connor used to support herself and her son, as Mr. Levy clearly could not work), Ms. O’Connor blew past the 400% poverty lid for ACA advance premium credits.

Judge Goeke: “Petitioners’ [year-at-issue] return was prepared by their longtime return preparer. The return preparer did not prepare Form 8962, Premium Tax Credit (PTC), and petitioners did not attach Form 8962 to their return. Petitioners did not understand that they were required to determine the allowable premium assistance credit (allowable credit) on the basis of their income as reported on their [year at issue] return. They did not understand that they would have to increase their [year-at issue] tax liability if the advance payments of the credit exceeded the allowable credit as determined by their [year-at-issue] income. Petitioners qualified for the premium assistance credit for [the next two years].” 2018 T. C. Sum. Op. 48, at p. 5.

Ms. O’Connor claims she overstated the rocking chair by $3K. IRS says even if she did, she’d still be over the MAGI limit because of her late husband’s untaxed Social Security.

“Petitioners argue that we should exclude the capital gain from the one-time sale of the rocking chair from their modified AGI. They sold their family heirlooms to assist their son in paying his college tuition. The gain from that sale unfortunately made them ineligible for the premium assistance credit. However, section 36B(d)(2) does not provide an exclusion for a sale of a capital asset. Petitioners also argue for equitable relief from repayment of the credit. We are sympathetic to petitioners’ case. However, the Code provides no equitable relief in this instance.” 2018 T. C. Sum. Op. 48, at p. 8.

The ACA has received any amount of obloquy. It’s also received praise. In this place I won’t add more of either, except to say we have to do better than this.


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