Monday, June 25, 2012
Forbes: Sauce for the Gander? Revenue Agent Loses Job for Losing In Tax Court, by Peter J. Reilly:
If you have a money losing side activity, you might consider the tax savings as easing the pain a little bit. ... [But] if you have persistent losses, there is a decent chance that the IRS will challenge your losses. ... Taxpayers and the IRS have mixed results in these cases. Horse breeders frequently win. Amway people almost always lose. Win or lose, though, it is just about the taxes and interest and penalties. Until you get to a case like that of Benjamin O. Agbaniyaka, whose loss in Tax Court in 2007 [Agbaniyaka v. Commkissioner, T.C. Memo. 2007-300] concerned, inter alia, his African arts and crafts sideline. Mr. Agbaniyaka’s loss in Tax Court prompted his employer to fire him. The Appeals Court for the Federal Circuit [Agbaniyaka v. Department of the Treasury, No. 2011-3211 (Fed. Cir. June 19, 2012)] upheld the decision.
How do you lose your day job over an audit of your tax reporting of a side job? Mr. Agbainyaka worked for the IRS as a Revenue Agent. The IRS Restructuring and Reform Act of 1998 mandates termination of any IRS employee found to have willfully understated his federal tax liability, unless such understatement is due to reasonable cause and not willful neglect. The agency determined that Mr. Agbaniyaka had willfully understated his tax obligation for the four-year period and, in the alternative, found that he had violated the agency’s code of ethics. He sought arbitration under the collective bargaining agreement with the National Treasury Employees Union. ... He appealed to the Merit Systems Protection Board, which agreed with the arbitrator. The Circuit Court ... upheld the MSPB decision.