August 27, 2010
Tax Court Cites Monty Python to Excuse Taxpayer From PenaltyShao v. Commissioner, T.C. Memo. 2010-189 (Aug. 26, 2010):
In Shao’s case we don’t find the circumstances that led the Court to penalize Calloway [Calloway v. Commissioner, 135 T.C. ___ (July 8, 2010)] -- there is no evidence of a wink-wink-nudge-nudge-say-no-more arrangement with Derivium. See Monty Python’s Flying Circus: How To Recognise Different Types of Trees From Quite a Long Way Away (BBC television broadcast Oct. 19, 1969). Shao had legitimate, nontax motivations for wanting to structure her deal as a loan instead of a sale -- she wanted to reduce risk and use some of the stocks’ value without selling her nest egg. Her naivete, but not (we expressly find) her negligence, is especially prominent in her renewal of the loan at a steep price after three years. Unlike Calloway, Shao treated her transaction like a loan throughout its existence, proving her good faith.
We therefore find that Shao acted in good faith upon an honest misunderstanding of the law that was reasonable in her circumstances. She has proven her defense to the accuracy related penalty.
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But wait until they go to meet with IRS and are greeted with the "I'm here for an argument" routine.
Posted by: mike livingston | Aug 27, 2010 9:47:25 AM
I can't wait for the first decision dealing with the taxation of thingy.
Posted by: guy helvering | Aug 27, 2010 11:06:36 AM
After the IRS gets its last drop of blood, the taxpayer says, "It's only a flesh wound."
Posted by: Woody | Aug 27, 2010 10:52:45 PM