Tax Court In Brief | Showalter v. Comm'r | IRS Adds To Taxable Income Based On Taxpayer Bank Records

• Published date: 07 December 2022
• Subject Matter: Tax, Inheritance Tax, Income Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Freeman Law

The Tax Court in Brief - November 28th - December 2nd, 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 November 28th, 2022, through December 2nd, 2022

• Lipka v. Comm'r, T.C. Memo. 2022-116 | December 1, 2022 | Gustafson, J. |Docket No 11455-20L
• Hallmark Research Collective v Comm'r, 159 T.C. No. 6 | November 29, 2022 | Gustafson | Dkt No. 21284-21
• Reynolds v. Comm'r, T.C. Memo 2022-115 | November 30, 2022 |Wells, J. |Docket No 14433-16
• Heather P. Dunn and Edison Dunn v. Comm'r |T.C. Memo 2022-112 | November 29, 2022 | Wells, J. | Dkt. No. , No. 9996-17

Showalter, v. Commissioner, T.C. Memo. 2022-114 | November 30, 2022 |Lauber, J.| Dkt. No. 13116-18

Short Summary: This case involves whether a taxpayer has additional unreported income based on the deposits in its company's bank account. Richard Showalter (Showalter) is the sole owner of Real Estate Consulting Services, LLC (RECS). RECS has only one bank account. Showalter did not file his 2013 tax return. The IRS issued a substitute for return as provided in 26 U.S.C. ' 6020(b). The IRS determined that Showalter failed to report business income, gambling winnings, and interest. The IRS issued a notice of deficiency assessing him a deficiency of a certain amount, plus addition to tax under sections 6651(a)(1) and (2), and 6654 of the I.R.C. Showalter contended the IRS's deficiency arguing that the IRS did not consider his business expenses as deductions. He offered as evidence RECS' bank account statements. IRS agreed that Showalter was entitled to certain deductions. However, the IRS determined that Showalter excluded other additional income regarding a real estate transaction from the analysis made to RECS bank statement. Showalter considered that the real estate income might be not subject to tax. The Tax Court analyzed all the evidence regarding the additional amount received by Showalter. The Tax Court determined the IRS correctly determined the additional unreported income for 2013.

Key Issues: Whether, Showalter has additional unreported income based on the deposits of RECS' bank account?

Primary Holdings: The Tax Court determined the IRS proved with the appropriate evidence "[t]hat its implementation of the bank deposits method was...