In Uncategorized on 04/28/2022 at 15:57

I cannot very well complete the above-captioned in a blogpost meant for reading around the family dinner table.

Tracy Renee Valentine, T. C. Memo. 2022-42, filed 4/28/22, asserts she can exclude the same proportion of her Army retirement pension as her 90% VA service-connected disability rating. Her Army disability pension is of course excluded per Section 104(a)(4) and Section 104(b)(2)(D).

But Tracy Renee can’t prove she was ever in actual combat, and her attempt to claim part of her retirement pension resulted from a retroactive reclassification of her disability rating fails because the reclassification took place in the same year the original classification took effect, so no retroactivity.

Service pension exclusions based upon combat-related injuries encompass those injuries “…incurred ‘(i) as a direct result of armed conflict, (ii) while engaged in extrahazardous service, or (iii) under conditions simulating war; or (B) which is caused by an instrumentality of war.” T. C. Memo. 2022-42, at p. 8, footnote 2, citing Section 104(b)(3). Tracy Renee can prove none thereof.

Tracy Renee’s business expenses (multi-level marketing of something called Legal Shield) mostly evaporate based upon insubstantiation.

Her excuse for late-filing likewise falters. Here’s Judge David Gustafson.

“Ms. Valentine argued that she was unable to file a return because she could not find an accountant familiar with section 104(a)(4) (as it applied to her disability payments and retirement distributions).

“We find this argument unpersuasive. Ms. Valentine does not present any evidence to support that she searched for an accountant diligently, nor any communication (such as emails, notes regarding conversations, lists of accountants contacted) to show that any accountant she did contact was unfamiliar with section 104(a)(4), or that such a search could reasonably take a year and a half to complete. Since this addition to tax accrues at 5% per month for a maximum of 25%, a delay of as little as five months yields the maximum addition. So even if Ms. Valentine could show ‘reasonable cause’ for not filing until October 2018 (when the return was a year overdue), a return filed five months later in March 2019 would still accrue the maximum addition to tax.

“Additionally, given the errors on Ms. Valentine’s return in the reporting of her taxable retirement distributions, it does not appear that the accountant Ms. Valentine found had particular competence in this specific area—making her prolonged search both unfruitful and unreasonable. We hold that Ms. Valentine is liable for the addition to tax under section 6651(a)(1) for failure to timely file.” T. C. Memo. 2022-42, at p. 28.


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