In Uncategorized on 08/26/2019 at 15:54

All y’all (going to Texas next week, so I’ve got to warm up) will remember Denise Celeste McMillan, 2019 T. C. Memo. 108, filed 8/26/19, who has twice appeared in this my blog. You don’t? Well, see my blogposts “Who Would These Burdens Bear,” 6/12/15, and “Sad Tales,” 11/3/15.

Denise has a never-say-die approach. She’s been litigating in Tax Court five times before this case, And Judge Mark V Holmes schedules them all.

“Ms. McMillan’s litigation experience also includes five previous cases in the Tax Court.  She and the Commissioner settled three of those cases, but the other two went to trial with one going to appeal and then to the Supreme Court.  See McMillan v. Commissioner (McMillan II), T.C. Memo. 2015-109 (finding no trade or business in horse activity in which petitioner’s one horse had died); McMillan v. Commissioner (McMillan I), T.C. Memo. 2013-40 (finding no trade or business in horse activity in which petitioner’s one horse had neither been bred nor competed in eight years), aff’d, 697 F. App’x 489 (9th Cir. 2017), cert. denied, 138 S. Ct. 1010 (2018).” 2019 T. C. Memo. 108, at p. 9.

She’s a dab hand at correcting defective trial transcripts, too, “…such as when she wrote ‘should be “breeding,” not “breading” — was Spellcheck broken?”. 2019 T. C. Memo. 108, at p. 13. I’ve often had the same feeling when I see some deposition and trial transcripts here, although I’m a wee bit more douce in my corrections.

She’s the kind of unit owner that makes Board of Managers members cringe. She got a $70K settlement for noise and mold, which she excluded from income, but her physical harm argument loses, especially when her CPA warns her.

“While cross-examining Ms. McMillan the Commissioner’s attorney established that she didn’t consult any of her attorneys about her return position.  She did, however, admit that she asked a CPA she’d retained in the 1990s whether the exclusion for pain and suffering awards was still in place, and he told her that it’s now more ‘narrowly defined’ and applies only when someone is ‘physically ill.’  Rather than suggest reasonable reliance that might excuse a section 6662(a) penalty, see sec. 6664(c)(1); Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 98 (2000), aff’d, 299 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(b)(1), Income Tax Regs., this testimony shows that Ms. McMillan knew that the exclusion she was relying on was limited, that she had reason to question whether she qualified for it, and that she didn’t follow up to make sure her position was reasonable.  It’s also another reason to question her testimony about her physical symptoms–of which there’s no contemporaneous evidence and the treatment for which she could not remember.  The Commissioner therefore met his burden of showing that Ms. McMillan did not reasonably rely in good faith on professional advice, and that she had neither reasonable cause nor good faith in failing to report her settlement with the HOA.” 2019 T. C. Memo. 108, at pp. 48-49. But IRS counsel can’t come up with the Section 6751(b) Boss Hoss sign-off for the additional deficiencies IRS laid on Denise, so she avoids the chops.

My colleague Peter Reilly, CPA, a fan of hobby loss cases, will find little joy with Denise’s horse breeding/showing business. Denise shipped the late Goldrush, her last horse, to Australia in 2008, where the late Goldrush became the late Goldrush, and never replaced him. Since this case is appealable to 9 Cir, Judge Holmes walks through the Section 183 “goofy” regulations, even though Judge Posner in 7 Cir would have let him take a holistic approach.

Either way, Denise is beating a dead horse.

Denise tried the home-office deduction, but the office was the livingroom in her 800 sq ft unit, and Judge Holmes has four reasons for disallowing that deduction, the chiefest of which is “(E)ven if her lawsuits and websites were somehow trades or businesses–and we find that they weren’t–she still couldn’t take the deduction if she used her living room for anything else, and her testimony that she never used any part of it for anything other than business is simply impossible for us to believe.” 2019 T. C. Memo. 108, at p. 42.

I’m sure Denise will be back in Tax Court. Petitioners like her is what keeps bloggers writing.



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