Attorney-at-Law

“LOVE’S LABOUR’S LOST”

In Uncategorized on 09/24/2019 at 05:23

Maybe Wm Shakespeare (or Francis Bacon, or the Earl of Southampton, or Mr. W. H., or whoever else is on the shortlist for writer’s credits for Hamlet, The Scottish Play, King Lear, etc.), has furnished the title for this telling of the sad tale of Massoud Fanaieyan and Ziba Fanaieyan, 2019 T. C. Memo. 124, filed 9/19/19.

It’s Masso’s story. Though retired, he runs a rental real estate operation while Ziba toils as a hairstylist. The family gets the ACA premium credit, the undoing of many, and fail to do the Form 8962 reconciler. Had they done so, they would have discovered that they blew the 400%-of-poverty-line, and had to pay back the $15K of PTC they got.

IRS hit them with a SNOD. Masso petitions. And he gets creative.

“After this case was continued from a previous trial calendar, petitioners provided to respondent a Form 1040X, Amended U.S. Individual Income Tax Return, for [year at issue]. An attached Schedule C, Profit or Loss From Business, reported that Mr. Fanaieyan operated a publishing business that used the cash receipts and disbursements method of accounting, realized income of $731, and incurred expenses of $6,157 for a net loss of $5,426. That loss reduced petitioners’ adjusted gross income reported on the Form 1040X to $95,341.” 2019 T. C. Memo. 124, at p. 3.

The cutoff for the PTC in Masso’s case was $97K, while his AGI pre-1040X was $100K.

Masso claimed he was in the publishing business.

“The publishing business consisted of Mr. Fanaieyan’s efforts beginning no later than 2012 to publish and promote a book written by his sister. She wrote the book–a fictional account of challenges faced by a Baha’i student in Iran–to publicize the plight of a persecuted religious minority in Iran but was not able to publish it there. Mr. Fanaieyan wanted to support his sister’s efforts to bring attention to the issue and hoped that the book would generate enough revenue to cover publishing expenses and provide some income for his sister in Iran. His efforts to promote his sister’s book were spread over several years but did not take up most of his time and had ceased by [year at issue]. 2019 T. C. Memo. 124, at pp. 3-4.

Problem One for Masso is that the expenses he claims were made years before the year at issue. Even if, as Masso claims, they were capital expenditures, and even if he could substantiate them (and Judge Pugh avoids that issue), he claims he was running a business, reporting the publishing activity on Sched C.

Problem Two is Peter Reilly’s Delight, Section 183, home of the “goofy regulation.”

Pursuant thereto, where the activity incorporates both personal pleasure and the pursuit of pecuniary profit, the trier of fact must find the principal motive, based upon objective criteria.

And, like many a pro se before him, Masso on the stand at trial was less than a stellar witness for anyone but IRS.

“He had no history or particular expertise in publishing, and his testimony at trial convinced us that he did not devote most of his time to it. When we characterized the activity as a ‘labor of love’ at trial, he agreed and added that he wanted the book to generate income for his sister. His motives are commendable, but they are not enough to entitle petitioners to deduct any of their reported business expenses.” 2019 T. C. Memo. 124, at p. 10.

The Bard of Avon (or whoever) got it right. Love’s Labour’s Lost.

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