The Tenth Circuit denied a taxpayer’s attempt to force the IRS to bear the burden of proof that an LLC operating as an S corporation was trafficking in a controlled substance that would lead to a denial of most business deductions per IRC §280E in the case of Feinberg, et at v. Commissioner, Case No. 18-9005, CA10. The taxpayer argued that, despite the fact that the burden of proof generally falls on the taxpayer to prove the right to a deduction, to do so in this case would involve a violation of the taxpayers’ Fifth Amendment privilege.
This was the second trip up to the Tenth Circuit for the taxpayers in this exam. While their first trip was ultimately successful in the eventual result, if not 100% in the decision, this second trip was not fruitful for the clients.Read More