In Antonio Lepore (T.C. Memo. 2013-135) the taxpayer convinced the Tax Court that he did not receive a Letter 1153, despite the fact that one of his sons signed for it at his home. The IRS contended that the taxpayer should be considered to have received the Letter 1153 because his son signed for it. Receipt of a document by another person in the addressee’s house is sufficient in other contexts. However, no similar rule has been set forth as a construction of Sec. 6330. Under the particular circumstances of this case, the Court held that the taxpayer did not receive the Letter 1153.
There were several issues in Alan J. Powers et ux. (T.C. Memo. 2013-134), but we’ll focus on the denial of losses from pass-through entities. The IRS denied the taxpayers’ losses because they could not show they had sufficient basis in the entities to deduct the losses. The Court noted that because the taxpayers chose to structure their business dealings through a complex web of more than a dozen pass-through entities, any evidence that may resolve the disputed factual issues, such as the taxpayers’ bases in the entities and their income from these entities, will necessarily come from the taxpayers. Complicating the matter is the scarcity of relevant and credible documentary evidence that can substantiate the taxpayers’ claims. Thus, it was ever more so important for the taxpayers to provide credible, persuasive, and detailed testimony to show the IRS’s determinations were erroneous. The taxpayers’ presentation at trial failed in this regard. The Court also noted the difference in determining debt basis between an S corporation and a partnership. The Court sided with the IRS in denying all but a small portion of the losses.
