Attorney accused of carrying on a hobby rather than a business

David Warren Klasing

Case Conclusion Date:January 1, 2010

Practice Area:Tax

Outcome:My client's position was accepted by tax court

Description:A well known Orange County estate planning attorney received a CP2000 notice on a return filed with the IRS disallowing his business losses under the hobby loss rules because he had had losses in the previous two consecutive tax years. He attempted to hand the issue on his own through multiple correspondences with the respective correspondence audit unit. After writing what amounted to a book in letters to the IRS arguing his position, the IRS ignored his arguments and proceeded to assess a tax deficiency under a 90 day notice. Near the end of the 90 day notice period the attorney contacted my office. I filed a tax court petition for him arguing the merits of his case. The petition was so persuasive the IRS attorney assigned to the case conceded the IRS’s position and my client’s return was accepted as filed and all penalties, interest and proposed additional taxes were abated.

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