Politico, Josh Gerstein and Cory Bennett: “The U.S. government confirmed a potentially wide-ranging breach of classified information Wednesday, raising serious questions about the steps federal agencies and contractor Booz Allen Hamilton took to prevent leaks in the wake of the Edward Snowden’s seismic revelations about National Security Agency surveillance…
UK Guardian: “Yahoo last year secretly built a custom software program to search all of its customers’ incoming emails for specific information provided by US intelligence officials, sources have told Reuters. The company complied with a classified US government directive, scanning hundreds of millions of Yahoo Mail accounts at the behest of the National Security Agency (NSA) or FBI, according to two former employees and a third person who knew about the program. Some surveillance experts said this represents the first known case of a US internet company agreeing to a spy agency’s demand by searching all arriving messages, as opposed to examining stored messages or scanning a small number of accounts in real time…”
Via WatchBlog: ” Our new Center for Enhanced Analytics has 4 primary goals:
- enhance access to data sources
- assess, customize, and help deploy new technologies
- promote novel analytic approaches
- strengthen analytical skills
Via LLRX.com – Yes, Dragon NaturallySpeaking has been worth the trouble for faster writing – David H. Rothman writes about the multiple uses of voice recognition software from the perspective of an expert writer, speaker and typist. Rothman also advises readers on the requisite microphone and boom to enhance the use of voice recognition technology.
Day-trading chiropractor falls on all the prongs. Judge Mark Holmes writes like no other Tax Court judge, and his opinions are usually entertaining. A California day trader may be excused for being unentertained by a Judge Holmes opinion yesterday. It can’t be entertaining to be assessed $211 million in additional taxes.
The chiropractor, a Dr. Reynoso, did well by his craft. Judge Holmes outlines his business model:
Dr. Ramon Reynoso is a self-employed chiropractor in Hayward, California. During 1997 through 2004 — the years at issue — Dr. Reynoso was licensed in California, and was a qualified medical examiner for the state. He was also an aggressive self-marketer — listed in the yellow pages when that meant something and a big spender on television and radio ads. Most of the patients he attracted were victims of personal injury, and his income was almost entirely from insurance companies though he did receive some directly from at least one attorney who represented some of his patients. Dr. Reynoso also bought and sold securities during the years at issue.
The Judge accepted the IRS computations, and given the lack of records and the criminal history, he didn’t use the “Cohen rule” to estimate business expenses.
The day trading was a big part of Dr. Reynoso’s excuse for not filing. He “testified that it was his belief that he didn’t have to file because his losses exceeded his income.” But we all know that capital losses are only deductible to the extent of capital gains, plus $3,000 per year.
There is one way you can deduct day trading losses as ordinary: if you are a trader who makes a Sec. 475(f) election to “mark-to-market” your accounts by April 15 of the year for which you want that treatment. The doctor insisted he made such an election:
Dr. Reynoso claims that he filed the appropriate mark-to-market forms, but that through no fault of his own, they were lost. He claimed during trial that when he got his documents back after the investigation they were in disarray, and on brief he accuses the government of losing them “when they raided him at gunpoint.”
So he didn’t file his tax returns, but he filed an obscure tax election? Judge Holmes was unconvinced:
To make an election for the 1997 tax year, as Dr. Reynoso insists he did, would have required a very sophisticated understanding of the Code. If it were the case that Dr. Reynoso had a sophisticated understanding of the Code, it would not be the case that he thought he didn’t have to file his tax returns for eight years in a row.
So no losses, beyond $3,000 annually. That leaves only the fraud penalty. Here Judge Holmes introduces a new word to the language:
This is an area of law that has become hyperprongified, so we’ll list our usual badges of fraud, which include…
That is, this week’s opinion. Congratulations, Judge Holmes, for adding to the richness of the English language. And condolences to the doctor, who ends up being assessed $158 million in civil fraud penalties on top of his taxes.
Cite: Reynoso, T.C. Memo 2016-185
Gals and guys at Google are fond of Judge Holmes - Search Google for “hyperprongified” it is now part of the Google History!
Joe Kristan and his brilliant blogging ...
Marilyn Geewax, Is It Fair That Businesses Get To ‘Carry Forward’ Their Losses? (Iowa Public Radio).
Experts say the tax code is indeed riddled with tricky ways to dodge taxes through sophisticated uses of trusts, partnerships, S corporations and so forth…Even if Trump uses it.
But they also say that one tax rule Trump may have used — the “net operating loss carryforward” — is not a loophole. In fact, they say, it is a commonly used accounting tool that evens out gains and losses to impose taxes more fairly.
David Henderson, The New York Times Overpaid. “For two excellent analyses of this issue, see Megan McArdle, ‘Trump’s 1995 Return Shows Good Tax Policy at Work‘ and Robert P. Murphy, ‘Thoughts On Trump’s 1995 Tax Return.'”
Renu Zaretsky, Transparency, Tax Returns, and Tax Reform: An Open and Shut Case? (TaxVox). “Every October, the Norwegian government posts a summary of each taxpayer’s income (after deductions), his net worth, and how much tax he pays.” Fascinating stuff, including this: “In 2014, Norway made one change in its transparency law: No longer could people search returns anonymously. Norwegians now know who is looking at their returns, and searches have plummeted by 90 percent.”
Kay Bell, Trump’s taxes likely to be a topic of tonight’s VP debate
Robert D. Flach, IS TRUMP SMART FOR PAYING NO FEDERAL INCOME TAX – PART II. “The Net Operating Loss concept is not a special tax preference, nor is it an inequity in the otherwise mucking fess that is our US Tax Code, that needs to be changed, reformed, or removed.”
Russ Fox, On 1099 Due Dates in 2017. “What this means is that only 1099-MISC’s for independent contractors (nonemployee compensation) must be filed by January 31st, whether you file by paper or electronically.”
Robert Wood, Genius: Trump’s $916 Million Tax Loss Lasts 20 Years, Yet IRS Audit Period Is Only 3. But as we have noted, the IRS can challenge the computation of your carryforwards as long as you are using them.