In Uncategorized on 04/07/2021 at 20:36

I’ve been looking for a chance to echo Niagara Falls’ gift to the internet gearjammers. I thank Andrew Mitchell Berry and Sara Berry, 2021 T. C. Memo. 42, filed 4/7/21, Andy’s brother Ronald Gene, and their (nonworking) 68 Camaro, for giving me the chance. But ex-Ch J L Paige (“Iron Fist”) Marvel shuts ’em down.

Mostly it’s an indocumentado with the Section 274 overlay. Andy and RG claim that the $250K they got from a client of their construction company to convert an old nursery into condos was trust funds, for which they got oral OKs from said client by telephone to disburse. They did some building, but also disbursed funds to pay for the auto racing.

Except the Camaro never ran in year at issue. So we get the “goofy regulation” hobby loss into the mix.

Andy and RG want a BoP shift, but since they never gave the RA any paper on the audit, they’re out under Section 7491(a)(2).

Andy and RG were sole signatories on the “trust fund” account, there was only a notation on the check that funded the account that it was for the condo project, and ex-Ch J Iron Fist doesn’t buy the telephonic OKs.

At best the racing car was a start-up. The argument that it served to advertise the construction business founders.

“Although petitioners testified that the 68 Camaro featured advertising for [construction business] and that they met business contacts at the racetracks, no company logo or wordmark is visible in the only photograph of the car in the record, and the record lacks any credible evidence that those contacts led to any business for [construction business].” 2021 T. C. Memo. 42, at pp. 14-15. (Footnote omitted, but ya gotta love it).

“The photograph was a side view of the car taken at a race Andrew won in [year after year at issue]. Petitioners first testified that there was a [construction business] sticker on the side of the car but, after viewing the photograph, claimed the sticker was on the car’s rear window.” 2021 T. C. Memo. 42, at p. 14, footnote 6.

I’ve been told I write the most entertaining tax blog. Maybe so, but I must give credit to the Tax Court Bench and the litigants who appear before them. I hope they all keep revving their engines for many years to come.


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