Tax News & Views Three's Company Roundup

Joe Kristan
June 4, 2024
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Key Takeaways

  • Tax Court says Suzanne Somers Estate owes for disallowed 2001 tax shelter losses.
  • IRS touts summertime tax savings tips.
  • Navajo Nation starved for tax help.
  • FTX pays $200M of $24B IRS tax claim.
  • ERC claims still not being processed.
  • Bitcoin billionaire reaches deal with D.C.
  • In the car 18 hours a day?
  • National Cheese Day.

Three's more than company when the IRS is in the party. Suzanne Somers achieved pop culture fame in the Three's Company sitcom. She built on that with the profitable "Thighmaster" product.

She also has achieved a little notoriety in the tax world, as the Tax Court reminded us yesterday. Chandra Wallace of Tax Notes explains in Former TV Star Can’t Be Incognito With the IRS ($):

Alan Hamel and his wife Suzanne Hamel, also known as Suzanne Somers, petitioned the Tax Court in 2021, protesting $2.8 million in tax deficiencies and penalties. They argued that statutes of limitations prevented the IRS from assessing deficiencies or penalties. Somers died in October 2023, and her estate was substituted as a petitioner in her place.


The adjustments at issue arose from the Hamels’ participation in a tax avoidance scheme involving offsetting option pairs, known as a son-of-BOSS transaction.

In 2009, the Tax Court determined that entities owned by the Hamels — Palm Canyon X Investments LLC and the S corporation that owned it, AH Investment Holdings Inc. — were used to engage in the tax avoidance strategy. The IRS adjusted the tax returns of those entities to disallow the noneconomic losses generated by the strategy.

In yesterday's Tax Court opinion, Judge Weiler ruled against the taxpayers' argument that the statute of limitations for assessing the tax had expired, holding that procedural missteps by the taxpayers kept the statute of limitations open. 

Given that the taxes at issue are for 2001 - 23 years ago - a statute of limitations argument seems plausible. The amount of time spent litigating these adjustments from an old "Son of BOSS" partnership tax shelter shows why Congress changed the rules for auditing partnerships in 2015. This also shows that the temporary tax gain of participating in flaky tax shelters can cause decades of tax headaches.


Summertime news, Navajo tax troubles, FTX pays some taxes.

Summer activities that could affect people’s tax returns next year - IRS:

The IRS has information to help taxpayers take advantage of potential tax benefits for home improvements. If taxpayers make qualified energy efficient improvements to their home after Jan. 1, 2023, they may qualify for a tax credit up to $3,200. They can claim the credit for improvements made through 2032.

These types of improvements include Energy Efficient Home Improvement Credits for things like water heaters, exterior windows and doors and heating and air conditioning installations. Residential Clean Energy Credits are available for taxpayers who install solar water heaters, fuel cells and battery storage or solar, wind and geothermal power generation. Taxpayers can visit the Home Energy Tax Credits page on to learn more.


Scarce Resources Leave Navajo Nation With Few Tax Options - Lauren Loriccio, Tax Notes ($):

In addition to paying hundreds of dollars in fees — and much more if they avail themselves of popular refund anticipation products — people living on the nation’s largest Native American reservation are finding themselves with another problem: tax trouble caused by a lack of preparers who understand the interaction between Navajo law and state law and the cultural differences for tribal members that don’t easily fit into the boxes on IRS tax forms.


These taxpayers lose out on some of the benefits they’re entitled to, like the earned income tax credit and the child tax credit, which help lift people out of poverty. And when issues arise with their tax returns, IRS policies and a lack of local help leave them with few options.

Quality tax help in the Navajo Nation and Indian Country is scarce, according to tax professionals, and low-income taxpayers on the Navajo reservation who need legal help to resolve a dispute with the IRS have little recourse.

Using the tax law to deliver social services has drawbacks.


FTX Settles $24 Billion Tax Claim With IRS in Bankruptcy Court - Evan Ochsner, Bloomberg ($). "The IRS will receive a $200 million claim in FTX’s bankruptcy to be paid within 60 days of when the company’s proposed restructuring plan goes into effect. The agency will also receive a $685 million lower priority claim, “payable on a subordinated basis to customers and other creditors” and “to the extent funds are available,” according to a Monday filing in the US Bankruptcy Court for the District of Delaware."


ERC woes, Tax Court vacancies

Frustrations Mount Over ERC Processing Delays - Lauren Loricchio, Tax Notes ($):

The IRS implemented a moratorium on processing new ERC claims in September 2023 to handle an influx of claims it believed were ineligible for the credit. In April the IRS said the pause would continue but that it may decide “in late spring” when to resume processing.

The IRS said in a statement that it continues to process ERC claims submitted before the moratorium began but “with more scrutiny and at a much slower rate than before the agency’s approach changed last year” and that the moratorium is allowing it to focus on reviewing ERC inventory with “strong, new measures to protect against improper claims.”

Related: IRS Puts Temporary Hold On New ERC Claims


Congress Moves Forward on Tax Court, IRS Funding - Naomi Jagoda, Bloomberg ($):

The Senate Finance Committee will hear Tuesday from three of President Joe Biden’s six picks—Rose Jenkins, Kashi Way, and Adam Landy—moving Congress one step closer to filling half of the vacant Tax Court seats.

No Tax Court judges have been added to the bench so far during Biden’s term, though if all six of his nominees are confirmed, the busy court’s 19 seats will once again be filled. Finance Chair Ron Wyden (D-Ore.) has vowed to move quickly on the picks, which in the past haven’t been as controversial as judges picked to serve on other federal courts.



$40 Million D.C. residency dispute tax settlement

Bitcoin billionaire, firm to settle D.C. tax fraud suit for $40 million - Michael Laris, Washington Post.

Billionaire bitcoin investor Michael Saylor and the software company he founded have agreed to pay $40 million to settle a lawsuit by D.C.’s attorney general alleging he defrauded the city of millions in taxes by falsely claiming he lived in Virginia or Florida, according to a copy of the agreement.


Under the agreement, Saylor and MicroStrategy, the business software firm he founded in 1989, deny they violated District law and admitted no wrongdoing.


MicroStrategy and Its Founder to Pay $40 Million in Tax Fraud Lawsuit - Lauren Hirsch, New York Times:

The Washington tax lawsuit, brought by Karl Racine, the district’s former attorney general, was the first of its kind after an amendment in 2021 to the federal antifraud law, the False Claims Act, gave whistle-blowers the power to report on tax fraud in the city. That year, a whistle-blower filed a lawsuit against Mr. Saylor, and Mr. Racine followed up with the district’s own lawsuit in 2022.


In response to the investigations, MicroStrategy produced spreadsheets recording Mr. Saylor’s daily physical location from 2015 to 2020. They showed that Mr. Saylor “spent a majority or plurality of each year physically present in the district.”

Proof is critical when claiming residency in a low-tax jurisdiction. In addition to the spreadsheets, D.C. tax authorities noted a Facebook post that seemed to indicate a D.C. presence. Remember, tax authorities can read your social media.

Related: Telecommuting Workers in Refuge States Complicate State Taxes 


Blogs and Bits

5 tax moves to make this June - Kay Bell, Don't Mess With Taxes:

Pay your estimated taxes. Millions of us must make these extra tax payments each year. The payments cover income we get that’s not subject to withholding, such as earnings from gig work or other self-employment jobs, prize or gambling winnings, or investment income. Some Social Security recipients also face estimated taxes.

The June deadline for all these folks usually is June 15, but this year it’s pushed to Monday, June 17, because the 15th is on Saturday.

IRS Can Deny Charitable Tax Deductions When You Get Something Back - Robert Wood, Forbes. "There are numerous rules for substantiating donations. Cash contributions of $250 and up must be supported by a statement by the charity showing whether the charity provided any goods or services in exchange for the gift."

Winning the Stanley Cup Is More Taxing Than Ever - Laine Higgins, Wall Street Journal. "As the NHL playoffs near their conclusion, it’s becoming increasingly clear that teams from low-tax states have a sneaky advantage"


Capital Gains Taxes Are Hurting The Fine Art Market, But Not The Way You Think - Howard Gleckman, TaxVox. "This system creates enormous incentives for art aficionados to avoid selling assets to finance their next Warhol and, once they buy it, to find ways to monetize its value without ever selling it. In the high-end art world, triggering capital gains tax is as tacky as hanging a $20 travel poster in your dining room."

Simplifying Saving and Improving Financial Security through Universal Savings Accounts - William McBride, Huaqun Li, Garrett Watson, and Alex Durante, Tax Foundation. "Since the 1970s, saving policy in the U.S. has primarily revolved around boosting retirement savings, leaving many categories of saving at a disadvantage and subject to double taxation through the income tax. The policy approach has also favored high-income households and workers at large companies that offer 401(k)s and other saving options, despite complicated rules aimed at limiting the benefits for high earners. The requirement to lock up savings for years or decades or risk various penalties is also a deterrent for many taxpayers, especially those facing emergency expenses or other short-term liquidity needs or those otherwise more focused on short-term benefits. The complex rules and proliferation of various tax-advantaged accounts targeting narrow categories of saving beyond retirement, such as for health care and education, have also served to benefit more sophisticated planners and high-income taxpayers."


Go big or go home.

Suburban Chicago man sentenced to federal prison for overstating business expenses and charitable contributions in tax returns - IRS (Defendant name omitted, emphasis added):

A federal jury earlier this year convicted Defendant, of Des Plaines, Ill., of making false statements in his personal income tax returns for the tax years 2019 and 2020. Defendant, who worked as a salesperson for an Illinois-based electronic sweepstakes kiosk operator, falsely claimed to have driven more than 474,000 miles on business-related travel for those two years. He also falsely claimed to have incurred more than $263,000 in business-related meal expenses during those years. Defendant’s false claims about his charitable contributions involved alleged donations of more than $63,000 to a Catholic church in Chicago. Financial and vehicle records presented at trial revealed that the mileage and meal expenses were vastly overstated, and a church representative testified that Defendant was not a parishioner and that the church had no record of any donations by Defendant in those years.

Let's look at the math. We will assume a hard-working taxpayer working five days a week with no vacations for the two years. 474,000 miles is about 911 miles each day. To do that in Chicago and the suburbs, averaging 50 miles per hour, would require 18 hours a day in the car. That's a real road warrior. To do that while incurring $453 daily meal costs and attending church regularly is, well, incredible. 


What Day is it? 

It's National Cheese Day! Pass the crackers.

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.

Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.