Tuesday, April 01, 2003
S.W. Depasture owned, with his then wife, Certified Welding Services, Inc. Mr. Depasture is a certified welder, and his wife is a romance novelist. He transferred all of the stock to wife for business reasons. Later, CWS bought a property on which was built the couple�s dream home, which home was then distributed to the couple. The C.P.A. for the couple and CWS, who was later convicted of federal income tax evasion, did not mention the distribution on either return. Later, the couple divorced and all the stock of CWS went to Depasture.
Depasture conceded that the distribution was income, but disputed the IRS�s valuation of the property. Tax Court accepted IRS�s valuation because their expert included a building that Despature�s expert considered worthless, but had been renovated and was used by the couple.
So next, Depasture wants relief from joint liability, because all of the stock of CWS was in wife�s name. Uh, no. Your the welder. She�s a romance novelist. We are not idiots.
Tax Court then allows an accuracy-related penalty, finding that the understatement of tax met the legislated thresholds. Are there any exceptions for good cause, reasonable efforts, et cetera? I thought there were, but tax court does not cite or discuss any such exceptions in this opinion.