A court finds that a country music singer’s club lacked a profit motive. The U.S. Court of Appeals for the Sixth Circuit has held that a taxpayer wasn’t entitled to claim losses from her nightclub because it wasn’t operated for profit. Among other factors, the court found that she hadn’t changed the way she ran the venue despite consecutive years of losses, and she derived personal pleasure from the endeavor. An IRS audit determined that the taxpayer hadn’t adequately substantiated losses and was liable for accuracy-related penalties.
No smooth tax landing for an aircraft captain. Taxpayers may be able to exclude foreign earned income from gross income, if they meet the requirements. One military contractor working in Afghanistan claimed this exclusion for two tax years, and the IRS disallowed it. The U.S Tax Court agreed, finding that he failed the “tax home” test, because his principal home was in the United States. He requested a waiver but the court found that Afghanistan wasn’t on the list of countries eligible for waivers during the two years in question.