TaxProf Blog – Bryan Camp: Lesson From the Tax Court #200: The Great Divide (October 18, 2021)

Bryan Camp has published an article on the TaxProf Blog, titled “Lesson From the Tax Court #200: The Great Divide”, which discusses the case of Carl L. Gregory and Leila Gregory v. Commissioner, T.C. Memo. 2021-115 (Sept. 29, 2021)(Judge Jones). The article begins as follows:

Today’s Lesson is an appropriate one for my 200th post.  While the line separating my 199th from my 201st post is not big—not a great divide—the line does make visible a degree of effort and consistency that might otherwise be obscure.  So, yeah, I’m kinda proud about crossing this line.

The concept of Adjusted Gross Income (AGI) also creates a line, one that confuses my students enormously.  They have trouble understanding that the ability to take a deduction is affected not simply by the statute that authorizes the deduction but also by the statutes that tell you where to take the deduction in the process of calculating taxable income.  And not only does the concept of AGI create a line—dividing deductions taken above the line from those taken below the line—it sometimes creates a great divide.

In Carl L. Gregory and Leila Gregory v. Commissioner, T.C. Memo. 2021-115 (Sept. 29, 2021)(Judge Jones), the taxpayer’s lawyers had the same trouble my students have.  The case teaches a graphic lesson on the great divide that can exist between treatment of deductions taken above the line and those taken below, not to mention the great divide between the really rich and the rest of us.  There, the taxpayers were unable to deduct a penny their yacht hobby expenses.  While §183 allowed over $340,000 of deductions, this amount did not exceed 2% of the Gregorys’ AGI.  Wow.  That fact at least explains why they may have thought it a good idea to pay attorneys to argue that the expenses went above the line.  It does not explain why the attorneys did not advise that such an argument was groundless, bordering on frivolous.  Details below the fold.    

Click here to see the full article: “Lesson From the Tax Court #200: The Great Divide”

Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.

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