E@lert, A Publication of the National Association of Enrolled Agents | July 22, 2016
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Courtney Doby
TAX ADMINISTRATION NEWS
NAEA ID:
403334
A Tax Court Primer
E@lert is spending a long weekend in an undisclosed location and will return
next week, same bat time, same bat channel. In the interim, do not panic. Do
not fret. Do not weep, gnash your teeth, or rend your clothing.
Given that we've been providing readers a fairly regular diet of U.S. Tax Court
cases in the past several months, we thought a short essay on the different
types of cases would serve our readers well. Sherrill Trovato, EA, USTCP,
who is also an NAEA past president, has graciously provided the basis for this
piece. Anything that is scathingly brilliant is hers. Anything in error is E@lert's.
The U.S. Tax Court generally provides one of three types of opinions, referred
to as TC Opinion, TC Memorandum, and TC Summary. Before we discuss
how those opinions differ, an overview is helpful. Each opinion is considered
the decision of the entire Tax Court, rather than that of the issuing judge alone.
In this fashion, the Court acts in a collegiate manner similar to that of an
appellate court (though the Tax Court is not truly "en banc" because the judges
do not sit together to hear arguments).
A draft opinion is prepared after the final reply brief is filed. Usually the judge
(or trial judge) who heard the case prepares the draft opinion, but that's not
Membership Expiration Date:
6/30/2017
In This Issue
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NAEA Calendar of Events
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Why an EA? Video
Multimedia Gallery
EAs are America's Tax Experts
required. Draft opinions do not become opinions of the Tax Court until the
Chief Judge reviews them.
The Chief Judge may choose within 30 days to ask the entire court to review
the opinion, making it a "reviewed opinion." Review by the full court is likely to
happen if the draft opinion invalidates a regular opinion or overrules Tax Court
precedent. If a case of first impression, the full court may review the opinion.
Reviewed opinions may also occur if the issue is likely to come up in another
pending case, if the matter overrules a prior Tax Court decision, or if the Tax
Court was previously reviewed by a Court of Appeals. The Chief Judge selects
a judge to write the reviewed opinion and other judges offer concurring or
dissenting opinions that follow the Court opinion. The Chief Judge determines
which description an opinion will have.
Cutting to the chase (finally), the three types of opinions follow:

TC Opinion: Regular opinions are published in the Reports of the Tax
Court; they are considered to be binding precedent and are cited as
XXX TC XX. These are the highest level rulings and may be cited and
appealed.

TC Memorandum: Memorandum opinions are published
commercially; these usually apply settled law to the facts and
circumstances of the case in question. Importantly, memo decisions do
not set precedent, but the Court does not easily ignore them and they
can become even more important if they were subject to an appellate
review. They are cited TC Memo YEAR-NUMBER. These decisions
may be cited and appealed.

TC Summary: Summary opinions are those issued but not officially
published (and usually rendered in small tax cases). A summary
opinion does not set precedent and may NOT be cited (although they
may still be useful with IRS examination staff). They are referred to as
TC Summary YEAR-NUMBER.
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As an aside, the entry of a decision may be withheld pending a final
computation by both parties. Rule 155 computations may be based on
valuation issues, or may indicate a split between the taxpayer and IRS on
multiple issues. If the parties agree on the amount of deficiency, liability, or
overpayment, each submits a computation and a statement of agreement. To
be clear, agreement with a calculation does not waive appeals rights. The
Court renders a decision when it receives an agreed Rule 155 computation.
If the parties cannot agree on computation, either may file with the Court a
computation of the amount believed to reflect the Court's findings and
conclusions. When parties submit differing computations, they may be allowed
the opportunity to be heard in argument, after which the Court will determine
the correct amount due.
No new issues may be raised during the hearing, which is held strictly on the
question of correct computation. No reconsideration may be requested, though
pure issues of law may be reconsidered and mechanical or math adjustments
are permitted.
Once again, many thanks to Sherrill for sharing her expertise...
But Wait, There's More!
Given that E@lert is worried you'll suffer for reading material, we're providing a
bonus-no additional charge, no shipping and handling, no nothing! You'll see
below an example of each type of case: a TC Opinion, a TC Memorandum,
and a TC Summary (again, with thanks to Sherrill for picking out three
interesting cases).
Is compensation for the donation of eggs includable in income?
In Perez (144 TC 4 (1/22/15)), the taxpayer received $20,000 in exchange for
undergoing painful procedures to donate her unfertilized eggs to infertile
couples. Under her contracts the sums she received were designated as
compensation for pain and suffering, and she did not report these amounts on
her 2009 income tax return. Judge Holmes in this instance concluded Donor
Source did not exceed the scope of the taxpayer's contractual consent; as
such compensation for pain and suffering from the consensual performance of
a service contract is not "damages" under §104(a)(2) and must be included in
gross income (take note: NAEA included this case in our top-ranked "Is This
Income?" course at IRS' 2015 Nationwide Tax Forum).
NOTE: Judge Holmes also looked to the possible interpretations that could
occur if the Court ruled differently - that a professional boxer could argue that
part of his fee was payment for bruises, nosebleeds and cuts, or that a hockey
player could argue that a portion of his salary was allocable to chipped teeth,
and football players could allocate part of their earnings for brain injuries. The
risk is known and is part of what they agree to before beginning their work,
which is what makes it taxable income and not excludable.
It's not a joint return when it's signed under duress ... in Hiramanek (TC
Memo 2016-92 (5/10/16)), taxpayer's ex-wife previously sought relief from joint
liability for the 2006 tax year and reached a settlement with the IRS that since
she signed under duress, it wasn't a joint tax return and she had no liability for
the deficiency (the Tax Court trial came to the same conclusion). While the first
case was pending, the taxpayer filed his own request for relief under §6015,
which was denied (it isn't possible to have two innocent spouses). Taxpayer
th
appealed the decision in the first case to the 9 Circuit and lost, and attempted
to appeal to the Supreme Court, which denied the writ for certiorari. Taxpayer
filed Form 8857, Request for Innocent Spouse Relief, for 2006 (the same tax
year).
NAEA appreciates the
How does equitable ownership allow the taxpayer to deduct mortgage
interest? In Phan (TC Summary 2015-1 (1/12/15)), the taxpayer moved onto a
three acre ranch in California to help his mother. In 2010, the legal title was
held by Phan's mother, brother and father - the brother and father did not live
at the property, and the mother was divorcing the father. Phan could not buy
the property himself, but had an oral agreement with his mother and siblings
that he would pay the mortgage loan and the property taxes, and those
payments would increase his equity interest. His name was added to the title in
2013. In 2010, Phan claimed a $35,880 mortgage interest deduction, which the
IRS denied. The taxpayer may become the equitable owner if he or she
assumes the benefits and burdens of ownership. Phan resided at the property
and made mortgage payments plus property tax and insurance, paid the cable
bill, and made improvements to the property. Taxpayer was entitled to the
support of its advertisers:
interest deduction as claimed.
Also, please note the cover sheet, which states, "Pursuant to Internal Revenue
Code Section 7463(b), this opinion may not be treated as precedent for any
other case."
PUBLIC AWARENESS
"Tennessee to Become Income-Tax-Free State No. 8" in Forbes and on MSN
quotes NAEA member Friday Burke, EA.
Tony Frezza, EA, the new Treasurer for FSEA, is getting EAs into the news. Is
there a "People on the Move" section in your local newspaper? This is a great
place to promote your affiliate or chapter...and familiarize your area with the
term "enrolled agent." Check out this great mention in the Orlando Sentinel.
Good work, TxSEA, getting your conference in partnership with the Texas
Small Business Development Centers and the Internal Revenue Service into
the news! Every affiliate that sends its meeting listing in to the local paper
educates a few more people about enrolled agents and what they do.
NAEA gets a strong endorsement, and enrolled agents are lumped with CPAs
and tax attorneys as the elite and pricier group in "Tips for Finding a Tax
Preparer."
"Life Estate Trusts and Deeds" is the title of Ed Loughrey, EA's latest article for
Bluffton Today.
Coming to the NAEA Conference? We Want to See Your Pix!
In addition to Tweeting out your conference photos with the hashtag
#NAEANatCon and posting them to Facebook, be sure to enter NAEA's photo
competition! You can help the PR committee assemble great pix for use in
promoting the profession and the association by entering. Send us a photo
you've taken at the NAEA National Conference, an IRS Tax Forum, or at any
NAEA affiliate event that illustrates that it's a great day to be an EA - or a
member of NAEA, for that matter. Please get those photos to
[email protected] no later than August 31. The winner will receive a photo
frame, courtesy of NAEA. Note: contestants must be willing to allow NAEA
unlimited use of the photo image.
Sign on to NAEA Social Media
NAEA has a social media group for you. Our Facebook public-facing page is
educating the public about enrolled agents and tax professionals about NAEA.
Our Twitter feed (@Tax_Experts) reaches out to the general public with
Infographics and information on enrolled agents. Our LinkedIn group is a place
where members can share tax information and reach out to their peers for
advice and assistance. The members-only Facebook page is another place
where members can find peer-to-peer tax advice, plus association news. And
don't forget the NAEA member Forums! There's something for everyone there.
If you use social media, support your association as we support the EA
profession by joining us in cyberspace! The National Conference hashtag is
#NAEANatCon.
ASSOCIATION NEWS
Member Get a Member Campaign: Tips and Tricks
The NAEA Member Get a Member campaign has launched! We're on a
mission to recruit the next generation of NAEA members and need your help!
Interested in having a conversation with a peer who would benefit from an
NAEA membership but not sure how to start the conversation? Have no fear we've developed some tips and tricks for engaging in an impactful, inspiring
conversation. What are you waiting for? Get out there and get a member!
Educating America
Northeastern State University, Broken Arrow is going to offer a special
enrollment examination course during the fall semester. Here is the schedule:
Online Orientation: Monday 8/22 (1 hour)
Classes Days & Times: Saturdays from 9am to 3pm, with lunch from 12pm1pm
EA Part 1 (4 classes): Saturdays. 8/27, 9/10, 9/17 & 9/24 (skipping 9/3)
EA Part 3 (2 classes): Saturdays. 10/1 & 10/8
EA Part 2 (5 classes): Saturdays. 10/29, 11/5, 11/12, 11/19, & 12/3 (skipping
11/26)
Stay Connected!
We are very excited about this for NAEA, OSEA and the profession. Know
someone who might be interested in signing up? Refer him or her to Mike
Pugliese at [email protected].
IRS Tax Forum Discount Code
Don't spend more than you have to! This year's NAEA discount code for the
IRS Tax Forums is NAEA2016-$10$
We hope to see you at this year's Forums! Stop by the booth and say
hello!
New Orleans, LA
July 26-28
National Harbor, MD
August 23-25
Orlando, FL
August 30-September 1
San Diego, CA
September 13-15
Coming to the 2016 NAEA National Conference?
If you're in on Sunday, be sure to stop by the Pre-Conference Seminar.
OfficeTools: Automating Tax Office Management
Sunday, July 31, 4:00 - 5:00 pm, Gracia 3
Today more than ever, firms are trying to find a differentiator, an edge, a
unique brand that elevates them over their competition. A new set of
automated processes can be just the thing to set them apart, since simply
offering tax return processing doesn't make your firm unique. Instead, tax firms
wanting an edge are automating their office management with new technology
that gives clients a unique brand experience. This session will cover the
myriad of options in new technologies, processes and methods of empowering
tax practices.
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Learn what's coming to the market place specifically for tax workflow
improvement.
Find new ways to differentiate your firms brand with client focused
improvements
Quote
"Though much is taken, much abides; and though
We are not now that strength which in old days
Moved earth and heaven, that which we are, we are,
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek to find, and not to yield."
--Alfred Lord Tennyson (1809-1892), British poet
JOB OPPORTUNITIES
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We are looking for full-time, highly motivated EAs, CPAs, and attorneys. Our
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