In Uncategorized on 08/21/2019 at 16:01

It seems like another non-substantiation case, but Jasper J. Nzedu and Vivian A. Nzedu, 2019 T. C. Sum. Op. 22, filed 8/21/19, has a couple lessons for us all (hi, Judge Holmes).

It’s Jas’ story. Jas is an attorney who, after white shoeing, ran his own tax software and tax prep operations, under two entities, one a corporation and the other an LLC.

He’d have some good passthrough losses, if he timely filed the Sub S election for the C Corp.

CSTJ Lewis (“What’s in a name? Everything!”) Carluzzo instructs us on the extreme importance of little things.

“Petitioner asserts that he personally prepared a Form 2553 [S election] [covering year at issue] for [C Corp] and then gave it to one of his employees with instructions to mail it to the IRS. According to respondent, petitioner did not make a valid S election until [three years later].

“Respondent’s records do not show that a Form 2553 on behalf of [C Corp] was received…, nor has petitioner provided any persuasive evidence of timely mailing Form 2553….” 2019 T. C. Sum. Op. 22, at p. 7.

Certified mail is cheap, even cheaper if return receipt is not requested (and it doesn’t have to be to satisfy Section 7502). And the USPS website offers track-and-confirm.

Next is the case of the purloined laptop.

Jas claims his laptop, whereon resided all his records for years at issue, was stolen. I don’t doubt Jas’ testimony on that point, and I don’t think CSTJ Lew did either.


“Petitioners explain that the lack of detailed substantiating records is due to the theft of petitioner’s laptop.  According to petitioners, because they have introduced evidence, in the form of petitioner’s testimony and other documents, showing the expenses incurred, they are entitled to the deductions as claimed on the returns.  When a taxpayer’s records have been destroyed or lost because of circumstances beyond the taxpayer’s control, the taxpayer may substantiate his expenses by making a reasonable reconstruction of the expenditures or use.  See sec. 1.274-5T(c)(5), Temporary Income Tax Regs., 50 Fed. Reg. 46022 (Nov. 6, 1985).  A taxpayer is required to reconstruct what records he can.  In this case, however, the evidence presented discloses a tangled web of shared expenses that is difficult to unravel.  We are unable to determine whether expenses reported on the [LLC] Schedules C were already reported and allowed as deductions by respondent by one or the other of petitioner’s other businesses.  Nor is there sufficient evidence in the record to provide a basis for estimating the expenses.” 2019 T. C. Sum. Op. 22, at pp. 12-13. (Citation omitted).

Thus the title of this blogpost. A standalone harddrive with hefty capacity can be purchased for $100 or less. The harddrives of most laptops can be easily stored in a standalone harddrive off-campus, and it doesn’t take a lot of time or tech savvy to do so.

Finally, Jas is way too credentialled to dodge the Section 6662(a) five-and-ten.


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