Boree v. Commissioner

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Petitioners challenge the Tax Court's decision sustaining the Commissioner's determination of deficiencies in petitioners' 2007 income tax return due to an improper characterization of income from the sale of property as a capital gain rather than as ordinary business income. The Tax Court also imposed a 20% penalty for substantial understatement of income under I.R.C. 6662. The court concluded that the Tax Court correctly determined that petitioners were liable for the deficiency and affirmed as to this issue. However, the court found clear error in the Tax Court’s determination that petitioners failed to establish that they acted with reasonable cause and in good faith. In this case, there is no indication in the record that petitioners withheld any information from their accountant, and the Commissioner conceded at oral argument that petitioners did not provide any false information. Accordingly, the court reversed the Tax Court’s assessment of the substantial understatement of income tax penalty. View "Boree v. Commissioner" on Justia Law