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Legal Developments and Tax Cases
D A Y T R A D E R T A X . C O M
Your one stop website for online trading tax laws

Compilation of Recent Tax Court Cases
December 31, 2017

Our Tax system is based upon three separate and distinct levels of government. It will be helpful for you to understand the hierarchy.

First, Tax law is debated and written within the legislative branch. Specifically within the House Ways and Means Committee , and the Senate Finance Committee. Often times the nature of the tax law being discussed is directed by the Executive Branch (i.e. the President), but not always. Sometimes tax law is initiated by the president (i.e. Obama's new stimulus package and bail out plans) and sometimes not, sometimes its initiated by the political party in control of each house of Congress.

Second, once tax bills are passed into law they are administered by the Internal Revenue Service. The IRS has the responsibility of actually writing the Code Sections, and issuing further regulations and interpretations on their meaning, and of course enforcing the code section where applicable, through audits and collection actions.

Finally, when there is a disagreement between a taxpayer and the Internal Revenue service over the enforcement of a particular code section or collection action, the taxpayer bill of rights allows the taxpayer to seek to have his case heard before the tax or district court. If the taxpayer owes the IRS money as a result of the pending case, then it must go to Tax Court. If the taxpayer chooses to pay the assessed tax so that he does not owe it any longer, he can then choose to sue the IRS in District Court for a refund of the tax. That's the distinction between the two. Tax Court if you are contesting an assessed and yet unpaid tax, District Court if you are contesting an assessed and paid tax, hoping for a reversal and subsequent refund. Both Courts routinely hear tax cases.

The rulings of both the Tax Court and the District Court are the final authority when it comes to tax law and are used extensively by the IRS in determining future execution of their administration of the tax code. In other words, if you are audited, and you can find a tax case that supports your position, then game over, you won. That's how the system works, and that's how important tax cases are. Conversely, if you are audited and you find a tax court case supporting the IRS position, you also should know that it's game over and you may want to cut your losses.

There have been surprisingly few tax cases that are pertinent specifically to daytraders, and the mark to market election. In this publication we have made a compilation of three recent cases that may provide some insight into the types of issues that come up in audits of taxpayers specific to trading in securities and the mark to market election. We also give reference to two additional cases that you may want to reference if interested. We provide a brief summary of each of the two additional cases but do not provide as much analysis because of the nature of the cases.

All of the cases we did outline provide useful and relevant information and will provide you with insight into the types of issues that get people into trouble to begin with, how to avoid these type mistakes, and what the IRS response will probably be in the event of an audit.

We are making this available to you at a cost of only $40.00. If you decide after reading the cases there is something you'd like to discuss with us about your specific situation and possible solutions, please visit our telephone conference section and purchase a consultation. We look forward to hearing from you.

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Mann & Company CPA's P.C.
Paul S. Mann CPA


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