Your client does not have the money to pay the deficiency and file a refund claim. What do you advise her to do?
Question
After you have reviewed the Tax Court videos, post in this Discussion Forum, the advice that you would give to
your client who has the following situation:
A new client has come to you with a statutory notice of deficiency dated July 25, 2016 proposing adjustments as follows to her 2014 1040:
| Medical Expenses | $46,000 | nursing home care for mother (after AGI limitations) |
| Real Estate Taxes | $ 6,250 | Taxes paid on real estate owned jointly with client’s mother-disallowed 50% |
| Charitable Contribution | $15,000 | Conservation easement on their property- deducted without an appraisal or other proof to support the valuation as required under IRC Section 170 |
| Sch C Business Exp | $ 7,000 | Advertising Costs – Web building and monthly fees paid with cashier’s check instead of business check |
| Sch C Gross Receipts | $ 5,000 | Income reported on 1099 Misc that she reported in 2013, the year she actually received the money |
| Sch C Business Exp – novel legal issue | $25,000 | This issue is subject to interpretation under the Code – no regulations or prior litigation |
| Total Adj to Taxable Income | 129,250 | |
| Total Tax at issue | $42,652 | 33% tax bracket |
Your client does not have the money to pay the deficiency and file a refund claim. What do you advise her to do? What type of information is important to explain to her? Share your recommendations and rationale in the discussion forum and reply to 2 of your peer posts.
