Tax Court In Brief | Vorreyer V. Comm'r | Thoma V. Comm'r | Dowson V. Comm'r | Deductibility Of S Corp Expense Paid By Shareholder

• Published date: 26 September 2022
• Subject Matter: Tax, Income Tax, Property Taxes
• Law Firm: Freeman Law
• Author: Freeman Law

The Tax Court in Brief - September 19th - September 22nd, 2022

Freeman Law's "The Tax Court in Brief" covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

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Tax Litigation: The Week of September 19th, 2022, through September 22nd, 2022

• Goddard v. Comm'r; Lee, Goddard, &amp Duffy, LLP v. Comm'r, T.C. Memo 2022-96| September 19, 2022 | Copeland, Judge | Dkt. No. 22334-17L, 23743-18L

Vorreyer v. Comm'r / Thoma v. Comm'r / Dowson v. Comm'r, T.C. Memo 2022-97| September 21, 2022 | Greaves, Judge | Dkt. Nos. (Consolidated) 27314-16, 27846-16, 2634-19, 2636-19, 2666-19, 2670-19

Summary: Petitioners operated an Illinois family farm individually and through several related entities, including C&J Farms and Prairieland. In 2012 C&J Farms was an S corporation for federal income tax purposes and owned equally by petitioners Chris and John Dowson. In 2014 Prairieland was treated as a general partnership for federal income tax purposes and owned equally by petitioners Lisa Dowson, Chris Dowson, Darrel Thoma, and Amy Thoma. In tax year 2012 C&J Farms owed a total of $108,9654 in property taxes, and $20,866 in utility expenses to a power company. Shareholders Chris and John Dowson directly paid these costs in 2012 on behalf of C&J Farms in proportion to their respective ownership interests in C&J Farms. Both Chris and John Dowson claimed section 162 deductions on their 2012 Forms 1040 Income Tax Return, for their respective payments. In tax year 2014 Prairieland purchased two semi-trucks for a total of $70,126 (truck expenses). Prairieland included the truck expenses as part of its claimed repairs and maintenance expense deduction on Schedule F, Profit or Loss From Farming, of its 2014 Form 1065, U.S. Return of Partnership Income. Following an audit of petitioners' 2012 to 2014 returns, the IRS determined more than $14 million in collective deficiencies in petitioners' income tax and over $2.8 million in penalties. The IRS then issued petitioners notices of deficiency with respect to the determined deficiencies and penalties which, among other things, disallowed the deductions for the property taxes and utility expenses on Chris and John Dowson's 2012 individual returns and the deduction for the truck expenses as a repair expense on Prairieland's 2014 return. Petitioners filed eight...