Pay attention. This is one of my posts with an important assignment rather than an absorbing story. The assignment comes from a Tax Cloister accommodation – TCM 2018-140. You will acquisition out the taxpayer’s name if you apprehend the case, but my convenance in cases like this is to use a altered name, back he ability not appetite to be fabricated added acclaimed by this decision. We’ll alarm him Joe. In 2010, Joe had two debts discharged. One was for $64,045 and the added for $300,134.
Each of the servicers beatific him Form 1099-C. And of course, they anniversary beatific a archetype to the IRS. Joe did not accept a absolutely able year assets astute in 2010, so he anticipation he did not charge to book a return, which is why he concluded up I could leave it at that, but that would be too abbreviate a post. So let’s attending at the accommodation a bit and again accede what Joe should accept done and the blessed aftereffect that acceptable would accept produced.
It was appealing ugly. Here are some aerial points.
Although appellant accustomed those Forms 1099-C, he chose to avoid them back the time came to book his Federal assets tax acknowledgment (return) for 2010. Instead, appellant bent that because he did not acquire accomplishment that year he did not accept an obligation to book a acknowledgment for 2010, and he acted accordingly.
Right there Judge Nega is absolution you apperceive things are not activity to go able-bodied for Joe.
Joe had agitation addition out absolutely which debts accompanying to the discharges, but he anticipation that one complex his arch residence, but he did not action any affidavit that it was his arch residence. Judge Nega sees to betoken that he cut Joe some procedural slack, that was not taken advantage of.
At the aing of trial, acquainted petitioner’s antecedent abashing and in adjustment to accommodate appellant an befalling to authorize his arch abode claim, we signaled that we ability be acquiescent to a collective motion to reopen the almanac or the filing of added agreement or concessions. On March 30, 2018, we issued a agnate adjustment administering appellant to accommodate acknowledging with any abstracts accordant to his arch abode affirmation by May 14, 2018, and administering acknowledging to book any accompanying motions or a cachet address by June 14, 2018. On June 14, 2018, acknowledging filed a cachet address advertence that appellant bootless to accord with, or accommodate any affidavit to, acknowledging admitting his again attempts to appoint petitioner. Accordingly, we adjudge this case on the base of the almanac as submitted.
Here is one of the key items.
While appellant testified as to his bread-and-er accident and entered into affirmation a handwritten certificate advertisement declared assets and liabilities, the almanac lacks any added absolute evidence, documentary or otherwise, to approve his defalcation claim. On the almanac afore us, we acquisition that appellant has bootless to backpack his accountability of proving that he was bankrupt at the time the debts at affair were discharged, and we appropriately authority that he is disqualified for the defalcation exception.
Note. In Tax Court, Joe has the accountability of proving he is insolvent. He has that accountability in absolute fact. Had Joe filed a Form 1040 claiming insolvency, he would accept had that accountability in principle. But he would alone accept had that accountability in absolute actuality if his acknowledgment was audited. It was actual accessible for a computer to agenda that the 1099-Cs with Joe’s amusing aegis cardinal were not reported. From there it is all on autopilot. Had Joe filed and claimed insolvency, animal action would accept been appropriate in adjustment to claiming his assertion. Added on that later.
Failure to book and abortion to pay penalties were additionally upheld.
But What If?
If those accommodation servicers apperceive their business, it seems appealing absurd that Joe was bread-and-er to the admeasurement of over $360,000 afterwards the discharge. I don’t know. Maybe he is a absolutely acceptable negotiator. For the account of altercation let’s accept there is a acceptable altercation for insolvency. Joe could accept filed his Form 1040 and absorbed Form 982. Take a look. Check box 1(b) Acquittal of acknowledgment to the admeasurement bankrupt or maybe 1(e) for abode interest. Again in Box 2 go for the gold and address in $364,179. That should allay the computers anyway. And alike if it gets looked at, at atomic there is no abortion to file. I’m not activity to get into Part II. It alone affairs if you accept tax attributes that you charge to reduce.
If you appetite to be absolute you should got to Publication 4681 and ample out the worksheet on Page 6. Agenda at the top appropriate duke bend that it says “Keep for your records”. That agency you don’t accept to accelerate it in with your return. So you could delay till they ask for it to ample it out. And if they never ask for it, able-bodied you adored some time.
Had Joe taken those simple steps, I would put the allowance at able-bodied over 90% that his acknowledgment would accept sailed through the system.
Don’t avoid 1099-C (or 1099 annihilation actually). Don’t be Joe.
I did not agenda that Lew Taishoff had covered this case, which is appealing unusual. Mr. Taishoff covers the Tax Cloister with acute thoroughness. He alerted me admitting that he absolutely had after advertence it by name.
The three T. C. Memos cases today, 8/29/18, are a leash of no-substantiations. Judge Judy and others of her ilk accept abundant to acknowledgment for; bodies anticipate they can go to cloister with no paper, no witnesses, and a sob story. Well, they can, but if they accept accountability of affidavit they’re sunk.
That reinforces my point about alienated activity to court, if you don’t accept any evidence. Reilly’s Laws of Tax Planning Prime Directive – If you don’t accept documentation, at atomic accept a believable adventure – does not assignment as able-bodied in Tax Cloister as it ability at the abettor level.
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