Weimerskirch v. Comm'r of Internal Revenue

5 Analyses of this case by attorneys

  1. Tax Court in Brief | Lucas v. Comm’r | Deficiency for Early 401(k) Distribution; 10% Additional Tax; Exclusion for “Unable to Engage in Any Substantial Gainful Activity

    Freeman LawJanuary 23, 2023

    by section 72(t).Key Issues: Whether Lucas’s 401(k) plan account distribution is taxable and subject to the ten-percent additional tax imposed by 26 U.S.C. section 72(t)(1)?Primary Holdings: Yes. Lucas received the distribution, he was not 59 ½ years of age at the time, and the “unable to engage in any substantial gainful activity” exclusion did not apply. Deficiency determination is sustained.Key Points of Law:Burden of Proof. The IRS’s determinations in a notice of deficiency are generally presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In cases involving failure to report income in this jurisdiction (9th Circuit), the IRS must establish “some evidentiary foundation” linking the taxpayer to an alleged income-producing activity before the presumption of correctness attaches to the deficiency determination. Weimerskirch v. Commissioner, 596 F.2d 358, 361–62 (9th Cir. 1979), rev’g 67 T.C. 672 (1977). Once the IRS establishes that, the burden of proof shifts to the taxpayer to prove that he is entitled to an exclusion from gross income. See Simpson v. Commissioner, 141 T.C. 331, 338–39 (2013), aff’d, 668 F. App’x 241 (9th Cir. 2016).Treatment of 401(k) Distribution. Gross income includes all income from whatever source derived except as otherwise provided. I.R.C. § 61(a). This definition includes distributions from employees’ trusts, including 401(k) plans. See I.R.C. §§ 61(b), 72(a)(1), 402(a), (b)(2), 401(k).Section 72(t) Additional Tax. “Distributions from a qualified retirement account (which includes a 401(k) account) to a taxpayer under 59½ years of age at the time of the distribution are subject to a 10% additional tax unless an exception applies.” Robertson v. Commissioner, T.C. Memo. 2014-143, at *5; see also I.R.C. §§ 72(t), 401(k), 4974(c). Section 72(t)(2)(A)(iii) provides one such exception for a distribution “attributable to the employee’s being disabled within the m

  2. Tax Court in Brief | Fields v. Comm’r | IRS Automated Underreporter Program, Gifts from Employer, Accuracy-Related Penalty

    Freeman LawNovember 17, 2022

    s are liable for a section 6662(a) accuracy-related penalty?Primary Holdings: Yes and yes. Jennifer did not prove that the amounts received from Paragon, as reflected on the Form 1099-MISC, were intended as gifts. The underreported amount was substantial and the Fields did not show reasonable cause for the underreporting.Key Points of Law:Burdens of Proof. Generally, the IRS’s determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In order for the presumption of correctness to attach to the deficiency determination in unreported income cases in the U.S. Court of Appeals for the Ninth Circuit, the IRS must establish “some evidentiary foundation” connecting the taxpayer with the income-producing activity or demonstrate that the taxpayer received unreported income. Weimerskirch v. Commissioner, 596 F.2d 358, 361–62 (9th Cir. 1979), rev’g 67 T.C. 672 (1977). Once that occurs, the burden shifts to the taxpayer to show by a preponderance of the evidence that the determination was arbitrary or erroneous. Klootwyk v. Commissioner, T.C. Memo. 2006-130, slip op. at 4–5.Unreported Income. Gross income includes “all income from whatever source derived.” See § 61(a). Payments that are “undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion” are taxable as income unless an exclusion applies. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955). Section 102(a) excludes from gross income the value of property acquired by gift from gross income.Gifts from Employer to Employee. Generally, amounts transferred by or for an employer to, or for the benefit of, an employee are includible in gross income. 26 U.S.C. § 102(c)(1). A gift must proceed from a detached and disinterested generosity, motivated by affection, respect, admiration, charity, or the like. See Commissioner v. Duberstein, 363 U.S. 278

  3. Tax Court in Brief | Dern v. Comm’r | Direct Causation a Must to Exclude from Income Damages for Injury or Sickness, Section 104(a)(2)

    Freeman LawSeptember 24, 2022

    Welch v. Helvering, 290 U.S. 111, 115 (1933); Merkel v. Commissioner, 192 F.3d 844, 852 (9th Cir. 1999), aff’g 109 T.C. 463 (1997).In the 9th Circuit, in a case for failure to report income the Commissioner must first establish “some evidentiary foundation” linking the taxpayer to an alleged income-producing activity before an IRS determination is presumed correct. Weimerskirch v. Commissioner, 596 F.2d 358, 361–62 (9th Cir. 1979), rev’g 67 T.C. 672 (1977). After the foundation is established, the taxpayer has the burden of proving the determination is arbitrary or erroneous.

  4. Tax Court in Brief | Podlucky v. Commissioner | $34M Jewelry in a Secret Room, Constructive Receipt, Innocent Spouse, and Putative Monks

    Freeman LawMay 11, 2022

    Hacker v. Commissioner, T.C. Memo. 2022-16, at *17. In cases of unreported income, the IRS must establish an evidentiary foundation connecting the taxpayer to the income-producing activity, Weimerskirch v. Commissioner, 596 F.2d 358, 361 (9th Cir. 1979), rev’g 67 T.C. 672 (1977), or demon[1]strate that the taxpayer actually received income, Edwards v. Commissioner, 680 F.2d 1268, 1270–71 (9th Cir. 1982). Once the IRS has met that threshold burden, the burden shifts to the taxpayer to show that the IRS’s determinations are arbitrary or erroneous.

  5. The Tax Court in Brief - April 2021

    Freeman LawMay 29, 2021

    The taxpayer must present credible evidence to shift the burden of proof to the Commissioner under section 7491(a).In unreported income cases, the Commissioner must establish “some evidentiary foundation” connecting the taxpayer with the income-producing activity or demonstrating that the taxpayer actually received unreported income. See Weimerskirch v. Comm’r, 596 F.2d 358, 361-62 (9th 1979), rev’g 67 T.C. 672 (1977); see also Edwards v. Comm’r, 680 F.2d 1268, 1270-71 (9th Cir. 1982) (holding that the Commissioner’s assertion of a deficiency due to unreported income is presumptively correct once some substantive evidence is introduced demonstrating that the taxpayer received unreported income).Insight: The Haghnazarzadeh case shows that once the IRS has made a prima facie case that a taxpayer received income, the taxpayer then bears the burden of showing that any deposits made into his or her account represent nontaxable income.Woll v. Comm’r, Bench Opinion| April 29, 2021 | Holmes, J. | Dkt. No. 7024-20OpinionShort Summary: Petitioner Molly Woll was laid off from her employer in 2017, resulting in the termination of her 401(k) savings plan that had a balance of more than $86,000.