Christopher R. Pangelina v. Comm., TCM 2024-5

Christopher Pangelina filed each of his 2010 through 2017 income tax returns between one and six years late. Although 2017 was technically a substitute-for-return prepared by the IRS, Mr. Pangelina did provide a copy of an unsigned 2017 tax return two days before the first scheduled trial date on Feb. 1, 2021. Each of his returns was prepared by a paid preparer. In an examination of the returns, the IRS had disallowed the following expenses:

The proffered substantiation for the disallowed expenses consisted of profit and loss statements that had been prepared in 2020 and bank statements for a business account, but not necessarily either or both for some years. No underlying records to support any amount on the profit and loss statements were provided. Testimony regarding the payees of checks that cleared the business bank account were not corroborated by the bank statements which listed only check number and amount.

The Court included a discussion of Cohan in its opinion but failed to consider allowing any amounts for any expenses due to the lack of any credible or organized records. Accuracy-related penalties were upheld along with failure to file and failure to pay penalties. The taxpayer did not offer any defense against the penalties. Not that he would have had much of a chance given his continuing delinquencies and lack of proper documentation and recordkeeping.

Comment. Mr. Pangelina represented himself. He may have been able to support a different decision had he had been advised to prepare adequate documentation as a foundation to build on at trial.