IRS Tax Court Cases

Lauren Miller vs. IRS Commissioner – The US Tax Court allows the taxpayer to claim an exclusive use room even though she walked through it to get to her bedroom. The case also is helpful to understand what records to keep when claiming the Internet (when bundled with cable and television), office expenses, uniforms, business meals, and electric bills. This is not a family child care case. (2014)

Cathy Ross vs. IRS Commissioner – The US Tax Court allows Cathy to claim a 98% Time-Space Percentage for providing 24 hour child care. This case is settled before going to trial. (2014)

Jeannie Peoples vs. IRS Commissioner – The US Tax Court allows Jeannie to claim a 93% Time-Space Percentage for providing child care 24 hours a day in her home. They also allow her to deduct tens of thousands of dollars in supplies and repairs. We win 90% of the issues in dispute before a trial. (2013)

Cathy Alcantara vs. IRS Commissioner – IRS denies hours Illinois child care provider works while legally exempt as well as two bedrooms and a bathroom used by the day care children. They also deny large depreciation and repair deductions. We win all issues before trial. (2012)

Shellito v. IRS Commissioner (No. 10-9002; T.C. No.10223-06) – Tenth Circuit court rules that farmer does not have to pay a minimum wage to spouse for their medical reimbursement plan (Section 105) to be valid. This decision supports the Speltz case below. (2011)

Rayden v. IRS Commissioner (T.C. Memo 2011-1) – A den and vestibule are not exclusively used for business when they are used personally once or twice a year.  The Court accepted that a living room was used exclusively for business even though visitors to the home walked through the room on occasion. This case is a good summary of what it means to meet the exclusive use test, even though the case did not involve a family child care provider. (2011)

Lori Malchow-Bartlett vs. IRS Commissioner  (T.C.M. 2010-271) – Illegal family child care provider from Illinois is denied house expenses. (2010)

Derrolyn and Terry Steele vs. IRS Commissioner (T.C. Opinion 2009-45) – Grandparents received $16,000 to care for grandchild under Illinois child care subsidy program. They claimed no business deductions. Court says grandparents were not in a trade or business and don’t owe Social Security taxes, but they do owe income taxes. (2009)

Jonelle Marie Broady vs. IRS Commissioner (T.C. Opinion 2008-63) – Unregulated child care provider can claim business deductions (2008)

Form 3115 and “Fair Market Value”– Unpublished case on the use of Form 3115 to claim previously unclaimed depreciation. (2008)

Peter and Maureen Speltz vs. IRS Commissioner (T.C. Opinion 2006-25) – Provider can establish Section 105 medical reimbursement plan when hiring husband (and doesn’t pay him wages) (2006)

Phyllis Rosales vs IRS Commissioner – Provider claims Section 105 medical reimbursement plan, business use of her garage, master bedroom and own daughter’s bedroom, and 22 hours a week of business work after the children were gone. (2006)

Jeffrey and Cynthia Dumond vs. IRS Commissioner (T.C. Opinion 2005-11) – A self-employer taxpayer (not a family child care provider) hired his own children in his business. The Court said he did not keep proper records and was denied the deduction. (2005)

Scott and Patricia Simpson vs. IRS Commissioner (T.C.M. 1997-223) – Provider showed losses of $42,000 and $56,000 in first two years. Most expenses were disallowed, but Court did allow a loss for both years. Court recognized cable television as a Form 8829 deduction. Includes commentary on case by Tom Copeland (1997)

Hewett v. IRS Commissioner (T.C.M. 1996-110) – “The exclusive use test does not require that the portion of a room used for business must be separated physically from the rest of the room by a wall, partition, or other demarcation.” In this case a piano teacher claimed an exclusive-use room based on the area taken up by her concert grand piano located in her living room. (1996)

Brian and Pamela Uphus and Roger and Lois Walker vs. IRS Commissioner (T.C.M. 1994-71) – Providers can count basement and garage as regularly used even if children are not present in the room. (1994)

Robert and Dorothy Neilson vs. IRS Commissioner (T.C.M. 94-1990) – Provider can count 75 hours a week caring for children and another 15 hours a week on business activities when children are not present. She can also claim lawn care expenses. (1990)

Lind v. IRS Commissioner (T.C.M. 1985-490) – A garage is an exclusive-use room even when family members occasionally walked through it. This is not a family child care case. (1985)

Hughes v. IRS Commissioner (T.C.M. 1981-140) – Walking through a walk-in closet (office) to get to the bathroom does not destroy the exclusive use of the closet. This is not a family child care case. (1981)

Categories: IRS and IRS Audits, Record Keeping & Taxes

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