Individual Income Tax (Tax Memo)

TO: Client Name

FROM: XYZ Tax Consultants

……………

SUBJECT: Individual Income Tax

This memo provides a summary of Galbraith v. thecommissioner of internal revenue case. Galbraith, the lobbyist,claims that while he worked as a traveling salesman sellingmaintenance parts such as power tools, nuts and bolts, and someelectrical items, the internal revenue sector made several deductionsfor his work. However, Galbraith’s record keeping is not good. Themain problem comes from poor logging of the mileage of his fourvehicles during the 2009 tax year since he admits that he cannotaccount for the discrepancies. Although the lobbyist claims thatvarious deductions were made from his 2009 tax return, thecommissioner of internal revenue, who is the respondent in the case,does not find Galbraith’s claims convincing (John R.Galbraith, et ux., TC Memo 2016-168, Code Sec(s). 162 274 280A6662 7491, 09/12/2016).Also, the respondent identifies a tax deficiency of more $20,000 andrecommends that the petitioner should pay a penalty of $5,000.

The numerous deductions that the requester claimswere made from his 2009 tax return fall into two categories, namelysection 274 expenses and non-section 274 costs. The section 274expenses include car and truck, travel, meals, entertainment, andcell phone costs. The non-section 274 expenses include depreciation,insurance, office expenses, repairs and maintenance, utilities,non-transcribed expenses, as well as other expenditures. Thecommissioner of internal revenue found out that during the 2009 taxyear, Galbraith had an underpayment of tax, and therefore, herecommended that he had to pay not less than $20,000, as well as apenalty of $5,000 (John R. Galbraith, et ux., TC Memo2016-168, Code Sec(s). 162 274 280A 6662 7491, 09/12/2016).The commissioner followed Section 6662 (a) Penalty, which requiresthat one should be subjected to a twenty percent of the taxunderpayment.

References

John R. Galbraith, et ux., TC Memo 2016-168, Code Sec(s). 162 274280A 6662 7491, 09/12/2016.