Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024)
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
No NOL means No NOL. (Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024))
Betty Amos appealed a Tax Court decision denying NOL carryforwards claimed in tax years her 2014 and 2015 and negligence penalties assessed for failing to provide documentation to substantiate the NOL deductions.
In 2018, Amos received a notice of deficiency including penalties for tax years 2014 and 2015, disallowing NOL carryforward deductions of $4,220,639 and $4,149,326, respectively, on the grounds that the losses originating in tax years 1999 and 2000 were overstated and not available to be carried over. Tax returns filed for 1999 and 2000 reported $1,870,175 available for carryover to subsequent years, however as found at her trial, her 2008 tax return showed an available carryover NOL in the amount of $5,747,514 with no records produced for the interim years to substantiate the large NOL carryover or show how the original 2000 carryover may have been used in the intervening years.
The Tax Court found that Amos had the burden of proof to show the IRS deficiency notice was erroneous and that she was eligible for the NOL carryovers. The court’s decision stated that Amos had not proven the accuracy of the original NOLs from 1999 and 2000, nor maintained adequate records to provide details of the NOL use in the intervening years. She had failed to introduce a complete set of her tax returns from 2001 to 2013. The “snippets” she provided along with a “Detail NOL Carryover Worksheet” were insufficient to sway the Tax Court or the Circuit Court of Appeals. Her assertion that the IRS had not challenged the tax returns in the intervening years supported her position was rejected by the court.
The negligence penalties were also upheld, because it turns out that Amos, a long-time CPA, was found to lack reasonable cause for her failure to keep accurate records and had not acted in good faith.
Also see.
Martha Smith and George Lakner, et al. v. Comm., TCM 2018-127, aff’d in unpublished opinion by D.C. Circuit, Docket 19-1050, where lack of a concise statement led to loss of NOL deductions and carryforwards.
Robert De Sylva v. Comm., TCM 2018-65, where the only substantiation of the 2012 NOL deduction was copies of unfiled tax returns for 2009-2011.