The Tax Court sustained a large income adjustment based on Forms 1099 and a bank deposits analysis, rejected unsupported depreciation deductions, and criticized counsel for citing nonexistent cases.
Holding
The Court held that the notice of deficiency was valid, that MedCafe’s gross receipts were substantially understated for 2015, and that the taxpayers failed to substantiate depreciation deductions for two rental properties. The final computation will be entered under Rule 155.
Why It Matters
The IRS may rely on third-party Forms 1099 and a bank deposit method to reconstruct income when records are incomplete.
A notice of deficiency does not require a handwritten signature to be valid.
Depreciation deductions under §167 require proof of basis and placed-in-service dates.
Courts are increasingly scrutinizing briefs that cite fabricated authorities.
Timeline
2015: Peter Clinco and C.M. Barone-Clinco file a late joint return reporting a large Schedule C loss from MedCafe and depreciation on two…
