Background Introduction
The paper explores four court cases where IRS has won two of these cases and the taxpayers an equal two cases. The main area of focus is on gains, losses and investments resulting directly or indirectly from these cases. The cases have been examined to establish the elements that influenced the decisions made. Also, the quality of the decisions made has also been discussed as per the tax returns laws and the IRS implementation of the same. Existing studies show that the agency has more likelihood of winning in cases where it has been pitted against the taxpayers in matters of tax revenue obligation filing. The cases represent a varied sample of individuals versus IRS, corporate vs. IRS and individual entities versus IRS and the government. With such a varied sample and exploration, the results obtained present a valid and reliable sample in examining the gains, losses and investments in IRS and taxpayers litigations.
IRS Wins – Gates v. IRS
In this particular case, the IRS successfully overcame a court case in which they were being petitioned to exclude taxpayer’s gains from a sale of a house in their income report. David Gates and spouse Santa Barbara had purchased a house in California. The two had lived in the house for more than two years before demolishing it and building a new one in its place. The couple then sold the new three bedroom property after demolishing the original one. The two never however resided in the house after it was built and instead sold it making a $591,406 profit gain (Beaver 1).
The amount was not reported by the couple in their subsequent 2000 income returns filing. The IRS contended a deficiency in the filed returns. The Gates maintained they were entitled to exclude the amount under Section 121. Their petition for redemption of the deficiency was opposed by the IRS claiming the sold residence did not fit the ‘Principal Residence’ classification. The IRS focused on the term ‘principal’ while the Gates focused on the term ‘residence’ to interpret the sale of residence gains obligation. The court ruled for IRS arguing under the application of ‘accepted principles of statutory construction to establish the intent of the Congress. As a result, the court found Gates and Barbara were not entitled to exclude the gain from the Santa property in their 2000 income reporting (Beaver 1).
IRS Win – Evans v. Commissioner
The case involved Jeffery Evans, who intended to purchase and then develop, sell or rent residential properties. In one case, he bought a residence property in New Port Beach Property, which led to some loses in the development preparation in 2006. The loss from paying architectural design drawing of the two unit house he was developing. Other costs incurred came from electrical, mechanic and additional permit, property and interest taxes. Later, in 2008, Evans sold the Newport Beach residence. The property was sold in a foreclosure sale and led to a loss of $1,000,000. In his tax return reports, Evans cited the loss under ordinary deduction. The IRS contended the reporting claiming it was the capital loss (Current federal tax developments 1).
The agency argued that the money was not held in commercial business or trade ties. The Tax Court found fort the litigant IRS and the loss was declared capital. The decoration was that Evans might have had the intention to sell the property for commercial business purposes, but he lacked a history of sales. From such a one-time purchase and sale, the taxpayer could not be treated as ordinary business course loss recipient. In other words, Evans was involved in sporadic property sale, which did not suffice to be termed as commercial business development. Having a vague and unreliable reporting of property worked against Evans, and he lost the sale of residence case to IRS (Current federal tax developments 1). Intention and validity of the commercial business sale of residence, therefore, need history backing with similar ventures pursued.
Taxpayer Win - Youssefzaedeh v. Commissioner
In the case of Youssefzaedeh vs. Commissioner (No. 1468-14-L/T.C. Nov.6, 2015), the taxpayer successfully defeated IRS in a tax court case (Todd 1). Through summary judgment, the court ruled that the tax return of the taxpayer was not in any way frivolous as the IRS claimed. The IRS had argued that there had been frivolous tax return filing by the taxpayer.
Such was concluded in the evidence of resistance to provide the tax return information and filing returns. The taxpayer in this case, however, argued that his tax application was not filed with any intent to impede the administration of tax. The facts of the case were that the taxpayer had refused to answer some of the questions on Schedule B of the tax return filing. Also, he had also failed to fill in some interest sources and values in the same schedule.
In winning the case, the taxpayer had invoked his Fifth Amendment privilege. In his argument, he said the answers omitted could have led to self-incrimination. The gain of this case was the protection of the taxpayer from having his Fifth Amendment claim being infringed. He also obtained insulation from self-incriminating in the FBAR report filing. Such information would have been used against him to determine whether he had filed his FBAR or not. By desisting from completing the information in the file return, he had protected his investments from being in danger of criminal prosecution. The loss of IRS was in the inability to judge in substantial correctness about the taxpayer’s document. The investment here was in the cause of compelled protection from real and appreciable self-incrimination danger (Todd 1).
Taxpayer Win - Roberts vs. IRS
The other case where a taxpayer won against the IRS was in the Roberts vs. IRS case. Roberts was charged with dependency deductions and, household status and earned income credit tri factor. The IRS case was defeated due to the deficiency notice was not sufficient. The arrangement of the household head, Roberts was also in a written agreement with a benefactor; Ms. Moody instead of an informal arrangement. There was also the matter of Roberts moving to a new address where a temporary arrangement of one year was effected. The loss of the deficiency stood at $8,274 (Reilley 1).
The gain was in the agreement of bearing full costs of meals and paying 75%, if the rent under the agreement between Roberts and Ms. Moody (Reilley 1). What favored Roberts was that his grandchildren qualified as children of a taxpayer. For one, there was the specified relationship to Roberts; there was the sharing of abode for over one and a half (taxable) year. Also, the children met the specified requirement of the age without providing own one half tax support for a year. Such led the IRS to lose the case after dropping the deficiency notice at the onset of the trial.
Analysis
The study found the administration won more than six times out of ten in high court situations. The IRS has a higher hand in winning legal battles against the taxpayers due to the proximity to government aegis. Such context was where the IRS contended that partnerships effectively mishandled the expense code. For basic legal leadership of the law, most of the IRS submissions have been inconsistent and unusual. According to the study, these reports have been said to attract clarification in court interpretation and judicial summation. In instances where courts have adhered to a meaningful boundary amongst legitimate conducts, there have been expense codes that have not been clear. The study further states that its discoveries can be misconstrued by both government and corporate lawyers engaged in the taxpayer claims and IRS tax recovery cases.
Available statistics continued to show a higher likelihood of IRS wining cases where there is contention between the agency and taxpayers. In the statistics report, the administration won 61 of the 137 cases heard by the Supreme Court from 1909–2011 (AccountingWeb.com 1). Interestingly, these included claims by the government of injurious expense inspired exchanges by companies.
Such can be related to the ability of the legal representation afforded by the plaintiff and defendant. The administration's odds of winning increment in occurrences when a partnership claims it is owed a discount, however, has not been evaluated under any contingent metric by the IRS. The proximity of one of two variables seems to give such entities a due advantage in the cases. Organizations that are specifically required in the financial aspects of the questioned exchanges or complex exchanges, which contain huge financial returns, feature prominently in this context.
Works Cited
Accounting WEB. "Study Finds The Odds Favor IRS In Supreme Court Tax Cases". AccountingWEB. N.p., 2012. Web. 23 June 2016. http://www.accountingweb.com/tax/irs/study-finds-the-odds-favor-irs-in-supreme-court-tax-cases
Beavers, James. "Taxpayer Denied Exclusion For Gain On The Sale Of A Principal Residence". The Tax Adviser. N.p., 2010. Web. 23 June 2016. http://www.forbes.com/sites/anthonynitti/2016/01/12/irs-continues-to-whipsaw-taxpayers-sales-of-land-generate-ordinary-income-capital-loss/#438491085aca
Current federal tax developments. "Real Property Taken in Foreclosure Sale Was a Capital Asset, Ordinary Loss Disallowed — Current Federal Tax Developments." Current Federal Tax Developments. N.p., 13 Jan. 2016. Web. 24 June 2016. <http://www.currentfederaltaxdevelopments.com/blog/2016/1/13/real-property-taken-in-foreclosure-sale-was-a-capital-asset-ordinary-loss-disallowed>.
Reilley,. "Forbes Welcome". Forbes.com. N.p., 2016. Web. 23 June 2016. http://www.forbes.com/sites/peterjreilly/2014/09/15/grandfather-beats-irs-in-tax-court-without-lawyer/#3ad87882b373
Todd, T. "Forbes Welcome". Forbes.com. N.p., 2016. Web. 23 June 2016. http://www.forbes.com/sites/timtodd/2015/11/16/a-win-for-the-5th-amendment-at-the-tax-court/#48baf9f23d60
