Tax Court In Brief | Powell V. Comm'r | IRS Forms Vs. Statutes ' Net Capital Loss Deduction

• Published date: 04 October 2022
• Subject Matter: Tax, Income Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Freeman Law

The Tax Court in Brief - September 26th - September 30th, 2022

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Tax Litigation: The Week of September 26th, 2022, through September 30th, 2022

• Patitz, Moody v. Comm'r, T.C. Memo 2022-99 | September 27, 2022 | Weiler, J. | Dkt No. 2784-19
• Powell and Iakovenko v. Comm'r, T.C. Summary Opinion, 2022-19 | Sept. 26, 2022 | Copeland, J. | Docket No 20268-19S
• Furrer v. Comm'r, T.C. Memo. 2022-100| September 28, 2022 | Lauber, Judge | Dkt. No 7633-19
• Ashford v. Comm'r, T.C. Memo 2022-101| September 29, 2022 | Vasquez, Judge | Dkt. No. 17590-18, 2492-19 (Consolidated)
• Collins v. Comm'r, T.C. Summary Opinion 2022-20| September 29, 2022 | Paris, Judge | Dkt. No. 14017-17S

Powell and Iakovenko v. Comm'r, T.C. Summary Opinion, 2022-19 | Copeland, J. | Docket No. 20268-19S

Short Summary

Petitioners claimed a $123,822 long-term capital loss deduction on their 2017 return, far in excess of the $3,000.00 per year limit on the net capital loss deduction. Due to this miscalculation, the Petitioners reported $1,001 in AGI for the year. They also received an advance premium tax credit (APTC) in monthly installments during their 2017 tax year under the Patient Protection and Affordable Care. In response, the IRS issued a math error notice limiting the net capital loss deduction to $3,000. The IRS then examined the petitioners return, concluding that household income disqualified the petitioners for the Premium Tax Credit (PTC). Thus, the IRS determined that: petitioners were not entitled to a PTC of $636 previously credited to them; they had an excess APTC of $17,652; and after allowing $4,000 of newly claimed tuition and fee deductions, they had a resulting deficiency of $17,288 for the 2017 tax year.

Key Issue

On appeal, petitioners had one argument. Petitioners argued that pursuant to a textual approach and applying formal logic to interpret line 21 of Schedule D to form 1041, they properly deducted the capital loss of $123,822 because negative $123,822 is mathematically smaller than negative $3,000. The Court interpreted the petitioners claim as one of overpayment and redetermined their income tax liability.

Primary Holding

The IRS properly limited the capital loss deduction to $3,000.00...