Tax Court In Brief | Amos v. Comm'r | Net Operating Loss Deductions Denied; Penalties Proper

• Published date: 15 November 2022
• Subject Matter: Tax, Income Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Freeman Law

Tax Litigation: The Week of November 7th, 2022, through November 11th, 2022

• Green Valley Investors, LLC v. Comm'r 159 T.C. No. 5 | November 9, 2022 | Weiler, J. | Dkt. Nos. 17379-19, 17380-19, 17381-19, 17382-19 (consolidated)
• Fields v. Comm'r, T.C. Summary Opinion 2022-22 | November 10, 2022 | Panuthos, Special Trial J. | Dkt. No 2925-20S (IRS Automated Underreporter, gifts from employer, unreported gross income, and accuracy-related penalty)

Amos v. Comm'r, T.C. Memo. 2022-109 | November 10, 2022 | Urda, J. | Dkt. No. 4331-18

Summary: Petitioner, Betty Amos, "an accomplished" CPA challenged a notice of deficiency relating to disallowed net operating loss ("NOL") deductions claimed on her 2014 and 2015 tax returns and determined accuracy-related penalties. From 1983 through 2011, Amos ran a total of 15 Fuddruckers restaurants, mainly through partnerships and S corporations. In the late-1990s, she ran into legal trouble with her business partner, Nick Buoniconti (a retired NFL Hall of Famer) and ultimately closed all Fuddruckers by 2011. The tax issues involved in the 2014 and 2015 tax returns regarded Amos's carryforward' under 26 U.S.C. ' 172'of NOLs relating to the Fuddruckers enterprise dating back to about 1999. By the time Amos filed her 2008 return, the NOL carryforward was near $6 million, and the NOL carryforward for each of the next three years exceeded $5 million. For 2012 and 2013, the NOL carryforward "dipped" to about $4.7 million. For her 2014 return, she claimed an NOL carryforward deduction of $4.2 million, resulting in negative $4.1 million of adjusted gross income. She claimed that the carryforwards were from losses incurred before 2012. A similar submission was made for the 2015 tax year. In February 2018, the IRS issued a notice of deficiency that determined deficiencies for 2014 and 2015, finding that Amos had not established that she sustained the loss in prior years. The IRS also assessed penalties under 26 U.S.C. ' 6662(a).

Key Issues: Whether or not the IRS's notice of deficiency and penalty assessment were proper?

Primary Holdings: Yes and yes. The determinations in the notice of deficiency to disallow the NOL deductions were upheld as were the section 6662(a) penalties. Amos (1) failed to provide sufficient evidence of the underlying NOLs in 1999 and 2000 and (2) failed to show that any NOL was available to carry forward to the years at issue. As for penalties, the IRS met its prima facie burden, and Amos failed to show...