Tag Archive for US Tax Court

Tax Court Decision Gives Whistleblowers Additional Reward

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In what is being hailed as a landmark decision, the U.S. Tax Court recently sided with a pair of whistleblowers who provided information that assisted the U.S. government in a high-stakes tax evasion investigation. The decision allowed the whistleblowers for the first time to collect a percentage of the taxpayer’s criminal penalties and civil forfeitures, in addition to the unpaid taxes recovered by the IRS.

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§ 165(e) Loss Claimed On Theft of Money/Investment

Daniel Erasmus3

I am pleased to announce another successful settlement for a client.

IRS denied a big deduction based on a Ponzi type investment stating the taxpayer had claimed the deduction in the wrong year. It must be the year it came to his attention and only up to the amount lost especially if there is a chance to recover some in the future.

The matter was set to go to trial in Miami, but I reached agreement he would deduct 80% in the year the loss was claimed and 20% in the year in which there was certainty he had lost everything. That year is still open to claim the 20%. Protective filings were made by his accountant.

The turning point was making clear the evidence we would present to back-up the client’s claim. This convinced the Read more

What Is A US Tax Court Practitioner?

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Recently I had a discussion with an individual about US Tax Court Practitioners in order to learn about this designation. What I discovered was this category of Court Practitioner was created to allow special dispensation to Non-US Lawyers (such as Enrolled Agents, CPAs and International Tax Attorneys) to gain access to the US Tax Court to represent taxpayers. As a member of the US Tax Court, US Tax Court Practitioners have the ability to litigate matters before the US Tax Court on behalf of their taxpayer clients. In order to qualify as a US Tax Court Practitioner you must pass a very difficult US Tax Court Bar Exam set by the Judges of the US Tax Court which takes place once every second year. What is not generally known is that since its inception in 1942, less than 300 US Tax Court Practitioners have ever passed and qualified to be admitted as a US Tax Court Read more

Timely Filed Petition? Miami Tax Court

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Miami Tax Court Report Back

Judge Ronald L. Buch – timely filed petition?

IRS filed a motion to dismiss for lack of jurisdiction. The USPS click and ship process was used by a representative of the taxpayer. She printed the label with payment from the USPS site at 11:48 pm. Petition had to be timely filed by 12 – 12 minutes later. IRS averred that it was impossible for her to print, stick and deliver the petition to the USPS in Jupiter, FL within 12 minutes as the petitioner’s address was about 20 minutes from the USPS. What IRS did not know, as testified, was that the petitioner had moved, and lived 3 minutes from the USPS. This evidence was led in court. So it was possible to timely mail Read more

Professional Golfer Sergio Garcia “Whiffs” Tax Case regarding US Tax on “Image Rights”

The US Tax Court has ordered professional golfer Sergio Garcia to pay tax on endorsement income he had claimed was tax-free under the US-Switzerland tax treaty.
The court decided Garcia’s contract with his sponsor TaylorMade had attributed too much of the money to royalty payments for image rights, which the treaty exempts from US tax.

Garcia entered into a seven-year endorsement agreement with sponsor TaylorMade Golf Co. (TaylorMade), allowing TaylorMade to use his image, name, and voice – “image rights” in advertising and marketing campaigns worldwide.

Garcia also agreed to perform personal services for TaylorMade including using its products in all his golf play, posing and acting for advertisements, and making personal appearances for the company.

In return for his services and use of his image rights, TaylorMade agreed to pay Garcia a base compensation of $7 million during the years at issue.

The original endorsement didn’t specify the percentage of remuneration attributable to personal services or “image rights.” In a later amended agreement provide for 85% of the compensation to be allocated to royalties for his “image rights” and 15% to personal services.

Garcia paid no U.S. tax on the royalty payments and paid lower tax rates under Swiss law. He did, however, pay U.S. tax on the U.S.-source personal service payments, of which he reported a portion on Forms 1040-NR.

IRS challenged the 85%-15% allocation between royalty and personal service payments, claiming that the royalty portion was overstated and issued Notice of Deficiencies in the amount of $930,249 and $789,518 for tax years 2003 and 2004, respectively.

The court held that:

1. Compensation paid by TaylorMade under the endorsement agreement is allocated 65% to Royalties and 35% to Personal Services.
2. None of the Royalty compensation is taxable to petitioner in the United States, but
3. All of the U.S. source Personal Service compensation is taxable to petitioner in the United States based on his failure to timely raise the issue of whether the golfer’s U.S.-source personal service income was exempt from U.S. tax.

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