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San Mateo, CA: The information source where you get your tax advice may be critical when dealing with the IRS.
A recent US Tax Court case, M c Namara, TC Summary Opinion 2023-22 , announced on June 26, 2023, serves as another warning for those taxpayers who rely solely on administrative guidance found in IRS publications during tax court cases. The logic of the ruling can easily be extended to IRS audits and administrative hearings before the IRS. This decision is keeping in line with solid US Tax Court precedent.
In the McNamara case, the taxpayer disputed a tax assessment based on mortgage interest deductions claimed on his 2019 tax return. The taxpayers testified that they relied on guidance from IRS publication 936, Home Mortgage Interest Deductions, that seemed to support their position in deducting the mortgage interest on their two homes. However, when the case came before the Tax Court, the reliance on the IRS publication was not persuasive to US Tax Court Special Trial Judge Choi.
Court's Findings:
The Tax Court's decision in McNamara stated that while IRS publications can be helpful resources for taxpayers and tax professionals in preparing tax returns, they are not authoritative sources of law. Administrative guidance provided in IRS publications do not carry the same weight as the Internal Revenue Code (IRC), Treasury Regulations, or judicial precedents.
The court pointed out that taxpayers cannot rely solely on the information contained in IRS publications to substantiate their tax positions.
Message for Taxpayers:
- Use IRS publications as a starting point in your “quest for the right answer.” While IRS publications can provide valuable insights and general guidance, they should not be considered definitive sources of tax law when stepping into court or IRS administrative arenas.
- If you, as a taxpayer, are taking a position on your tax return which seems “novel” or “out of the ordinary”, make sure to go beyond the information provided IRS publication. Relying solely on IRS publications without substantiating legal authorities can lead to unfavorable results.
Always contact a tax professional if you are not sure the tax return position you are taking on your tax return or when dealing with the IRS. This case serves as a reminder that relying solely on the "simple" administrative guidance from an IRS publication can turn out bad for you.
Kevin Rego
Law Office of Kevin Rego
650.933.5222
