One of my favorite topics - Operating Agreement tax allocation language!

Maybe one of the biggest things to get right when talking about partnership tax returns is the allocation of income and loss. It's not as straight forward as many think it is.

In Ogden v. Commissioner (from 1985), the taxpayer had the majority of her loss taken away after the Court saw the operating agreement didn't have the right language.

Enjoy!

A sheriff in Alabama gets caught "embezzling" from inmate food funds.

But the argument is made that she only made a bad investment (she did) - and she avoids paying tax on the majority of the money taken.

A wild story with few twists and turns - enjoy!

A desperate LinkedIn accounting job posting + a 40 year old treasure box + mall kiosks = a wild story.

This case highlights how IRS auditors approach auditing small businesses, and what not to tell an IRS agent to get every entity in the org. chart audited.

It winds up with a $3.8 million income hit to the taxpayers.

Our first landmark court case to review: the Business Purpose Doctrine.

Gregory set up a separate company and shifted assets just to avoid tax. This case is commonly referenced in tax court cases dealing with entity and transaction structuring.

We also run through other types of "grey areas" like sale-leasebacks, contingent liability planning, and TICs.

A retirement plan fiduciary embezzles $5 million of other people's retirement assets. 

He wastes it on home renovations, cars, Costco trips, and trying to buy a golf course.

He gets convicted of wire fraud and sentenced to jail - but now has a $3.7 million tax bill he is fighting.

We cover the backstory and what kind of income is taxable and not.

Deducting $1 million in renovations on a 15k sqft second home - what could go wrong?

A lot. Witasick was an attorney who mostly served Arizona clients. He bought this 56 acre monster home and for two years renovated it - while deducting a majority of the costs as business expenses.

The Court called it fraud and he served jail time. We dig into repair and maintenance, business / personal use, and unreimbursed partner expenses.

S-Corps gone wild.

A taxpayer forms more S-Corps than he needs and loses out on millions of dollars in deductions from:

- S-Corp basis limitations

- Bad record keeping

- Missed tax elections

Buy here pay here car dealership, bad accounting record access, and an aggressive IRS agent all combine for a few million dollars in tax assessed.

But the good guys get a win in this case and Aboui gets major tax relief mostly from some IRS missteps.

We talk about:

- Cohan rule (what happens when accounting is bad)

- S-Corp taxation on distributions

- Types of audit techniques the IRS will use

On Episode 1, we get into 7 US Tax Court cases from 2024 with some solid lessons learned: