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March 16, 2016


The U.S. Tax Court: Is there a lower limit on cases it accepts?

The U.S. Tax Court is an important forum for challenging IRS action in certain cases.

Using its authority under Article I of the Constitution, Congress created the court to have jurisdiction over a number of different areas of tax law.

But is there a lower limit on the size of the tax controversy that the Tax Court will accept? In this post, we will answer that question.

The answer is that for tax deficiencies that are less than $50,000, there is a simplified procedure available to taxpayers. This procedure isn’t as formal and yields quicker results. One potential downside, however, is that the outcome cannot be appealed.

But in appropriate cases, it is a good forum for a taxpayer to make his or her case. For example, in one recent case, a man tried to deduct as business expenses money he paid to a live-in girlfriend to take care of repairs at some rental property, locate furniture and manage his household.

The IRS disallowed these deductions. But the taxpayer challenged that action in the Tax Court and won a partial victory. The Tax Court said that $2,500 of the money he paid the girlfriend was a business expense. The other $6,500 was not.

This is a significant, but not a huge, amount of money. It was therefore a good case for the simplified disposition procedure available in the Tax Court. Of course, in other cases a lot more money could be at stake. Either way, it makes sense to get counsel from a knowledgeable tax attorney.

Tax Controversy