Tax News

CCH (cch.taxgroup.com) reports:

  A certified public accountant (CPA) was permanently enjoined from preparing returns claiming that mariners were entitled to deductions for meal expenses while working on board a ship, even though no meal expenses were actually incurred. The injunction was necessary to prevent recurrence because the CPA acted in a manner contrary to the assurances he provided to the government, and continued to claim deductions for deep sea mariners in spite of clear contradictory authority.

  The CPA incorrectly argued that mariners did not have to incur meal expenses in order to claim a deduction because the regulations under
Code Sec. 274 allow certain expenses to be deemed substantiated without documentation. However, the regulations do not eliminate the requirement that expenses must be incurred before they can be deducted. His position regarding the deduction was unreasonable, not supported by substantial authority and had less than a one in three chance of being sustained on the merits.

  The CPA's discussions with government officials regarding deductions for common carrier meals, his interactions with IRS attorneys, his reliance on the advice of other attorneys, and "no change" audit letters issued by the IRS did not support a good faith defense under Code Sec. 6694. The audit letters had no precedential value, and the individuals he contacted did not fall within the definition of a preparer. Further, reliance on their advice was unreasonable because they did not have all the relevant facts.

  Affirming an unreported DC Calif. decision.

M.A. Kapp, CA-9, 2009-1 USTC ¶50,376

Other References:

 
Code Sec. 6694

  CCH Reference - 2009FED ¶39,960.60

 
Code Sec. 7407

  CCH Reference - 2009FED ¶41,668.10

  Tax Research Consultant

  CCH Reference - TRC IRS: 6,156.05
CCH Reference -
TRC IRS: 6,200