Taxing Foreign Investment In U.S. Real Estate

One of the Ps buzzed me about a dividend item on a year-end brokers’ statement.

P:      “What is a Section 897 gain?”

CTG: It has to do with the sale of real estate. It is extremely unlikely to affect any of our clients.

P:      Why haven’t I ever seen this before?

CTG: Because this is new tax reporting.

We are talking about something called the Foreign Investment in Real Property Tax Act, abbreviated FIRPTA and pronounced FERP-TUH. This thing has been around for decades, and it has nothing to do with most of us. The reporting, however, is new. To power it, you need a nonresident alien – that is, someone who is not a U.S. citizen or resident alien (think green card) – and who owns U.S. real estate. FIRPTA rears its head when that person sells said real estate.

This is specialized stuff.

We had several nonresident alien clients until we decided to exit that area of practice. The rules have reached the point of absurdity – even for a tax practitioner – and the penalties can be brutal. There is an encroaching, if unspoken, presumption in tax law that international assets or activities mean that one is gaming the system. Miss something – a form, a schedule, an extension, an election - and face a $10,000 penalty. The IRS sends this penalty notice automatically; they do not even pretend to have an employee review anything before mailing. The practitioner is the first live person in the chain, He/she now must persuade the IRS of reasonable cause for whatever happened, and that a penalty is not appropriate. The IRS looks at the file - for the first time, mind you - says “No” and demands $10,000.

And that is how a practitioner gets barreled into a time-destroying gyre of appealing the penalty, getting rejected, requesting reconsideration, getting rejected again and likely winding up in Tax Court. Combine that with the bureaucratic rigor mortis of IRSCOVID202020212022, and one can understand withdrawing from that line of work.

Back to Section 897.

The IRS wants its vig at the closing table. The general withholding is 15% of selling price, although there is a way to reduce it to 10% (or even to zero, in special circumstances). You do not want to blow this off, unless you want to assume substitute liability for sending money to the IRS.

The 15% is a deposit. The IRS is hopeful that whoever sold the real estate will file a nonresident U.S. income tax return, report the sale and settle up on taxes. If not, well the IRS keeps the deposit.

You may wonder how this wound up on a year-end brokers’ tax statement. If someone sells real estate, the matter is confined to the seller, buyer and title company, right? Not quite. The real estate might be in a mutual fund, or more likely a REIT. While you are a U.S. citizen, the mutual fund or REIT does not know whether its shareholders are U.S. citizens or resident aliens. It therefore reports tax information using the widest possible net, just in case.

Overcontributing To Your 401(k)

 

One of the accountants had a question for me:

A:               I added up the W-2s, but the wages per the software does not agree to my number.

CTG:          Is your number lower?

A:               Yes.

Let’s talk about 401(k)s. More specifically, let’s talk about 401(k)s when one changes jobs during the year. It can be an issue if one is making decent bank.

You are under age 50. How much can you defer in a 401(k)?

For 2021 you can defer $19,500. The limit increased to $20,500 for 2022.

You change jobs during 2021. Say you contributed $14,000 at your first job. The second job doesn’t know how much you contributed at first job. You contribute $12,000 at your second job.

Is there a tax problem?

First, congrats. You are making good money or are a serious saver. It could be both, I suppose.

But, yes, there is a tax problem.

The universe of retirement plans is divided into two broad categories:

·      Defined benefit

·      Defined contribution

Defined benefit are also known as pension plans. Realistically, these plans are becoming extinct outside of a union setting, with the government counting as union.

Defined contribution plans are more commonly represented by 401(k)s, 403(b)s, SIMPLES and so forth. Their common feature is that some – maybe most – of the dollars involved are the employee’s own dollars.

Being tax creatures, you know that both categories have limits. The defined benefit will have a benefit limit (the math can be crazy). The defined contribution will have a contribution limit.

And that contribution limit is $19,500 in 2021 for someone under age 50.

COMMENT: If you google “defined contribution 2021” and come back with $58,000, you may wonder about the difference between the two numbers. The $58,000 includes the employer contribution. Our $19,500 is just the employee contribution. This difference is one of the reasons that solo 401(k)s work as well as they do: they max-out the employer contribution – assuming that the income is there to power the thing, of course.  

Let’s go back to our example. You deferred $26,000 for 2021.

Are you over the limit?

Yep.

If you add your two W-2s together, is the sum your correct taxable wages for 2021?

Nope.

Why not?

Because a 401(k) contribution lowers your (income) taxable wages. You went $6,500 over the limit. Your taxable wages are $6,500 lower than they should be.

 What do you do?

There are two general courses of action:

(1)  Contact one of the employers (probably the second one) explain the issue and request that the W-2 be amended by the deadline date for filing your return – that is, April 15. Rest assured, you have just drawn the wrath of someone in the accounting or payroll department, but you have only so many options. 

BTW the earnings on the excess contributions are also taxable to you. Say that you earned 1% on the excess. That $65 will be taxable to you, but it will be taxable the following year. 

In summary,

§  Your 2021 W-2 income goes up by $6,500

§  You will report the $65 earnings on the excess contribution in 2022.

    It is a mess, but the second option is worse.

(2)  You do not contact one of the employers, or you contact them too late for them to react by April 15.

Your 2021 W-2s show excessive 401(k) deferral.

Your tax preparer will probably catch this and increase your taxable W-2 totals by $6,500. This is what created the accountant’s question at the beginning of this post.

Oh well, you say. You are back to the same place as option one. No harm, no foul – right?

Not quite. 

First, your employer may not be too happy if the issue is later discovered. This is an operational plan issue, and there can be penalties for operational plan issues. 

Second, once you go past the time allowed for correction, the money is stuck in the plan until you are allowed take a distribution (or until the employer learns of the issue and corrects the plan on its own power). 

Say you never tell them. Let’s not burn this bridge, right? 

Problem. Take a look at this bad boy: 

                 Section 402(g)(6)  Coordination with section 72 .

For purposes of applying section 72 , any amount includible in gross income for any taxable year under this subsection but which is not distributed from the plan during such taxable year shall not be treated as investment in the contract.

What does this assemblage of mostly unintelligible words mean?    

It means that you will be taxed again when the 401(k) finally distributes the excess contribution to you. 

Yep, you will be taxed twice on the same income. 

That $6,500 got expensive. 

Upon reflection, there really is no option 2. You have to tell your employer and have them correct the W-2.      

Reporting Income Below A 1099 Filing Requirement

 

I am looking at a case that reminded me of a very recent telephone call with a client.

Let’s talk about the client first.

It is tax season here at Galactic Command as I type this. The client sent me the paperwork for the joint return.  She included a note that she had withdrawn from her 401(k) but had not received a 1099.

“Do I have to report it, then?” she asked.

This is a teaching moment: “yes.” The answer is “yes.”

One is required to report his/her income fully and accurately, irrespective of whether one receives a 1099 or other information reporting. I, as a tax CPA, might not even be able to sign as preparer, depending upon the size and consequence of the numbers.

I had her contact the investment company and request a duplicate tax form. It was for the best, as the company had withheld taxes on the distribution.

Let’s look next at the Legoski case.

During 2017 John Legoski (John) had a job and a side gig. His gig was buying stuff online and selling said stuff via drop shipments. He was paid via Amazon Payments. He in turn paid for stuff using PayPal. He received a 1099 from Amazon Payments for $29,501.

Which he did not report.

The IRS caught this, of course, because that is what computerized matching does. That notice does not even go past human eyes before the IRS mails it.

His argument: he thought that his gross receipts did not meet the minimum reporting threshold for third-party payments.

COMMENT: For 2017, a third-party settlement company was required to issue John a 1099-K if (1) gross payments to John exceeded $20,000 and (2) there were more than 200 transactions.

I presume that John had less than 200 transactions, as he certainly was paid more than $20 grand. But it doesn’t matter, as he is required to report all his income whether or not he received a 1099.

The IRS wanted taxes and penalties of $9,251 on the $29,501.

Seems steep, don’t you think?

That is because the IRS did not spot John any cost of goods sold.

Push back, John. Send the IRS your PayPal account activity. That is where you bought everything. It may not be classroom accounting, but it is something.

John … did not do this. He did not provide any documentation to the IRS, to the Court, to anybody.

John, John, … but why?

Bam! The Court disallowed him a cost of goods sold deduction.

Next were the penalties on the unreported income (which was not reduced for a cost of goods deduction).

The Court wanted John to show reasonable cause for filing his tax return the way he did.

John, listen to me: you are not an accountant. You are barely a novice gig worker. You didn’t know. This was undecipherable tax law to you. You botched, but you did not do so on purpose.

However, his failure to provide a PayPal activity statement where he paid for EVERYTHING HE BOUGHT FOR RESALE did not put the Court in a forgiving mood.

The Court decided he was responsible for penalties, too.

And I would bet five dollars and a box of Girl Scout Thin Mints that John made little to no money from his gig – heck, he probably lost money - but this escapade cost him over $9 grand.

Let me check. Yep, John appeared before the Court pro se. As we have discussed before, this does not necessarily mean that he showed up in Court without professional representation. From the way it turned out, though, I feel pretty confident that he winged it.

COMMENT: For 2022 the 1099 reporting for this situation has changed. The $20,000/200 transactions requirement is gone. The new law requires a 1099 for payments over $600. Yep, you read that right.

Our case this time was Legoski v Commissioner, T.C. Summary 2021-15.

Taxpayer Wins Refund Despite Using Wrong Form

Let’s look at a case that comes out of Cincinnati.

E. John Rewwer (Rewwer) had a professional practice which he reported on Schedule C (proprietorship/disregarded entity) of his personal return.

He got audited for years 2007 through 2009.

The IRS disallowed expenses and assessed the following in taxes, interest and penalties:

           2007            $  15,041

           2008            $137,718

           2009            $ 55,299

Rewwer paid the assessments.

He then filed a claim for refund for those years. More specifically his attorney filed and signed the refund claims, including the following explanation:

The IRS did not properly consider documentation of my expenses during my income tax audit. I would ask that the IRS reopen the audit, reconsider my documentation, and refund the amounts paid as a result of the erroneous audit adjustments, including any penalty and interest that may have accrued.”

I am not certain which expense categories the IRS denied, but I get it. I have a similar (enough) client who got audited for 2016. IRS Holtsville disallowed virtually every significant expense despite being provided a phonebook of Excel schedules, receipts and other documentation.  We took the matter to Appeals and then to Tax Court. I could see some expenses being disallowed (for example, travel and entertainment expenses are notoriously difficult to document), but not entire categories of expenses. That told me loud and clear that someone at IRS Holtsville could care less about doing their job properly.

Wouldn’t you know that our client is being examined again for 2018? Despite taking the better part of a day faxing audit documentation to IRS Holtsville, we are back in Tax Court.  And I feel the same way about 2018 as I did about 2016: someone at the IRS has been assigned work above their skill level.

Back to Rewwer.

The attorney:

(1)  Sent in claims for refund on Form 843, and

(2)  Signed the claims for refunds.

Let’s take these points in reverse order.

An attorney or CPA cannot sign a return for you without having a power of attorney accompanying the claim. Our standard powers here at Galactic Command, for example, do not authorize me/us to sign returns for a client. We would have to customize the power to permit such authority, and I will rarely agree to do so. The last time I remember doing this was for nonresident clients with U.S. filing requirements. Mail time to and from could approach the ridiculous, and some of the international forms are not cleared for electronic filing.

Rewwer’s claims were not valid until the signature and/or power of attorney matter was resolved.

Look at this Code section for the second point:

§ 301.6402-3 Special rules applicable to income tax.

(a) The following rules apply to a claim for credit or refund of income tax: -

(1) In general, in the case of an overpayment of income taxes, a claim for credit or refund of such overpayment shall be made on the appropriate income tax return.

(2) In the case of an overpayment of income taxes for a taxable year of an individual for which a Form 1040 or 1040A has been filed, a claim for refund shall be made on Form 1040X (“Amended U.S. Individual Income Tax Return”).

Yep, there is actually a Code section for which form one is supposed to use. The attorney used the wrong form.

For some reason, the IRS allowed 2008 but denied the other two years.

The IRS delayed for a couple of years. The attorney, realizing that the statute of limitations was about to expire, filed suit.

This presented a window to correct the signature/power of attorney issue as part of the trial process.

To which the IRS cried foul: the taxpayer had not filed a valid refund claim (i.e., wrong form), so the claim was invalid and could not be later perfected. Without a valid claim, the IRS claimed sovereign immunity (the king cannot be sued without agreement and the king did not so agree).

The IRS had a point.

But the taxpayer argued that he had met the “informal claim” requirements and should be allowed to perfect his claim.

The Supreme Court has allowed imperfect claims to be treated as informal claims when:

(1) The claim is written

(2)  The claim adequately tells the IRS why a refund is sought, and

(3)  The claim adequately tells the IRS for what year(s) the claim is sought.

The point to an informal claim is that technical deficiencies with the claim can be remedied – even after the normal statute of limitations - as long as the informal claim is filed before the statute expires.

As part of the litigation, Rewwer refiled years 2007 and 2009 on Forms 1040X, as the Regulations require. This also provided opportunity to sign the returns (and power of attorney, for that matter), thereby perfecting the earlier-filed claims.

Question: did the Court accept Rewwer’s informal claim argument?

Answer: the Court did.

OBSERVATION: How did the Court skip over the fact that the claims – informal or not – were not properly signed? The IRS did that to itself. At no time did the IRS deny the claims for of lack of signatures or an incomplete power of attorney. The Court refused to allow the IRS to raise this argument after-the-fact to the taxpayer’s disadvantage: a legal principle referred to as “estoppel.”  

Look however at the work it took to get the IRS to consider/reconsider Rewwer’s exam documentation for 2007 and 2009. Seems excessive, I think.

Our case this time was E. John Rewwer v United States, U.S. District Court, S.D. Ohio. 

COMMENT: If you are wondering why the “United States” rather than the usual “Commissioner, IRS,” the reason is that tax refund litigation in federal district courts is handled by the Tax Division of the Department of Justice.

An Attorney Learns Passthrough Taxation

 

I have worked with a number of brilliant attorneys over the years. It takes quite a bit for a tax attorney to awe me, but it has happened.

But that law degree by itself does not mean that one has mastered a subject area, much less that one is brilliant.

Let’s discuss a case involving an attorney.

Lateesa Ward graduated from law school in 1991. She went the big firm route for a while, but by 2006 she opened her own firm. For the years at issue, the firm was just her and another person.

She elected S corporation status.

We have discussed S status before. There is something referred to as “passthrough” taxation. The idea is that a business – an S corporation, a partnership, an LLC – skips paying its own tax. Rather the tax-causing numbers are pushed-out to the owners – shareholders, partners, members – who then include those numbers on their personal return and pay the taxes thereon personally.

Why would a rational human being do that?

Sometimes it makes sense. A lot of sense, in fact.

I will give you one example. Say that you have a regular corporation, one that the tax nerds call a “C.” Say that there is real estate in there that has appreciated insanely. It wouldn’t hurt your feelings to sell the real estate and pocket the money. There is a problem, though. If the real estate is inside a “C,” the gain will be taxed to the corporation upon sale.

That’s OK, you reason. You knew taxes were coming.

When you take the money out of the corporation, you pay taxes again.

Huh?

If you think about, what I just described is commonly referred to as a “dividend.”

That second round of income taxes hurts, unless one is a publicly-traded leviathan like Apple or Amazon. More accurately, it hurts even then, but ownership is so diluted that it is unlikely to greatly impact any one owner.

Scale down from the behemoths and that second round of tax probably locks-in the asset inside the C corporation. Not exactly an efficient use of resources, methinks.

Enter the passthrough.

With some exceptions (there are always exceptions), the passthrough allows one – and only one – round of tax when you sell the real estate.

Back to Lateesa.

In 2011 the S corporation deducted salary to her of $62,388.

She reported no salary on her personal return.,

In 2012 the S deducted salary to her of $73,448.

She reported salary of $47,171.

In 2011 her share (which was 100%, of course) of the firm’s profits was $1,373.

She reported that.

Then she reported the numbers again as though she was self-employed.

She reported the numbers twice, it seems.

The IRS could not figure out what she was doing, so they came in and audited several years.

There was the usual back-and-forth with documenting expenses, as well as quibbling over travel and related expenses. Standard stuff, but it can hurt if one is not keeping adequate records.

I was curious why she left her salary off her personal return. I have a salary. Maybe she knew something that has escaped me, and I too can run down my personal taxes.

She explained that only some of the officer compensation was salary or wages.

Go on.

The rest of the compensation was a distribution of “earnings and profits.” She continued that an S corporation shareholder is allowed to receive tax-free distributions to the extent she has basis.

Oh my. Missed the boat. Missed the harbor. Nowhere near water.  Never heard of water.

What we are talking about is a tax deduction, not a distribution. The S corporation took a tax deduction for salary paid her. To restore balance to the Force, she has to personally report the salary as income. One side has a deduction; the other side has income. Put them together and they net to zero. The Force is again in balance.

Here is the Court:

Ward also took an eccentric approach to the compensation that she paid herself as the firm’s officer.”

It did not turn out well for Ms. Ward. Remember that there are withholdings and employer-side payroll taxes required on salary and wages, and the IRS was already looking at other issues on those tax returns. This audit got messy.

There was no awe here.

Our case this time was Lateesa Ward v Commissioner and Ward & Ward Company v Commissioner, T.C. Memo 2021-32.

A Failure To Keep Records

You have to keep records.

Depending upon, this can be easy. Say that you have a job and a money market account – two sources of income. At year-end you receive a W-2 and a 1099-INT. File them with your individual tax return and you have kept records.

Dial this up to business level and the recordkeeping requirement can be more substantial.

Maybe you do not need a bookkeeper or accountant, but you can open a separate business bank account, running all deposit and disbursements through it. You can buy an expanding file – one with a pocket for each month – and keep invoices and receipts throughout the year. That might not be sufficient were you a regional contractor, with equipment and employees and whatnot, but it may be more than enough for what you do.

Why do this?

Because of taxes.

There is a repetitive phrase in tax cases - I have read it a thousand times:

Deductions are a matter of legislative grace, and the taxpayer must prove his or her entitlement to deductions.”

To phrase it another way:

Everything is taxable and nothing is deductible unless we say it is deductible.

One of the things the IRS says is that you must keep records. You can extrapolate what the IRS can do to you concerning deductions if you do not.

“But they can’t eat me, right, CTG?” you ask.

No, but here is what they can do.

Sam Fagenboym was a 50% owner of Alcor Electric, which provided electrical installation for midsize commercial projects. Alcor was a sub to a general contractor. Alcor in turn had suppliers and its own subs.

With the possible exception of the second round of subs, this is pretty routine stuff.

Alcor was an S corporation. It allocated Fagenboym a loss of approximately $110,000 on his 2015 Schedule K-1.

The IRS examined Alcor’s 2015 business return.

Alcor could not document over a quarter million dollars of purchases from a supplier.

Half of that audit adjustment went to Fagenboym, as he was a 50% owner.

The IRS next looked at Fagenboym’s personal return.

So much for the loss he had claimed from Alcor.

Fagenboym went to Tax Court. He went pro se, generally meaning that he was without tax representation.  As we have discussed before, that technically is not correct, as I could represent someone in Tax Court and they would be considered pro se.

Fagenboym argued for Cohan treatment of Alcor’s business expenses.

COMMENT: I would have expected Alcor to fight this issue during its business audit, but here is Fagenboym doing the fighting during his individual audit.    

Cohan is old tax case, going back to 1930 and involving someone who was known for entertaining but not for keeping receipts and records. The Court considered his situation, reasoning there was no doubt that Cohan had incurred expenses. It would be inequitable to disallow all expenses, so the question became: how much to allow?

Cohan has triggered tax changes ever since. It was responsible for the hyper-technical rules concerning meals and entertainment, for example, as well as business use of a vehicle.

Fagenboym wanted some of that Cohan.

I presume there truly were no records. There is no way that I would lead with Cohan if I had any other argument.

Why?

Think about it from the Court’s perspective.

(1) The Court will require a rational basis to estimate the expenses, and

(2)  The Court will consider the taxpayer’s culpability in creating this situation.

Perhaps if there were extenuating circumstances: illness of a key employee, a data loss, a pandemic, something that compromised the taxpayer.  The more one is responsible for causing the mess, the less likely the Court will be to clean-up the mess.

Fagenboym tried. He presented the Court with estimates of job profitability. He then subtracted labor and other known expenses to arrive at what the missing purchases should have been. He submitted four pages of handwritten analysis, but he did not or could not support it with business bank statements or other records, such as an accounts payable history for the supplier in question. Despite how earnest he seemed and how well he understood the business, there were no records backing him up.

Fagenboym could not overcome the two factors above. Even if the Court allowed some leniency on his culpability, it decided it could not independently arrive at a reasonable estimate of the costs involved.

No Cohan. No tax deduction. Bad day in Court for Fagenboym.

Mean It When You Elect S Corporation Status

I am looking at an odd case.

I see that the case went to Tax Court as “pro se,” which surely has a great deal to do with its general incoherence. Pro se generally means that the taxpayer is representing himself/herself. Technically this is not correct, as I could represent someone in Tax Court and the case still be considered pro se. There was no accountant involved here, however, and it shows.

We are talking about Hong Jun Chan. 

He founded a restaurant named Younique Café Inc (YCI) in August, 2010.

In March, 2011 he filed an election with the IRS to be treated as an S corporation. All the owners have to agree to such an election, and we learned that Chan was a 40% shareholder of YCI.  

Let’s fast forward to 2016.

Chan and his wife filed a joint tax return for 2015, but they did not include any numbers from YCI. That does not make sense, as the purpose of an S corporation is to avoid corporate tax and instead report the entity’s tax numbers on the shareholder’s individual/separate return.

A year later the Chan’s did the same with their 2016 joint tax return.

This caught the attention of the IRS, which started an audit in 2019. The revenue agent (RA) found that no business returns had ever been filed.

Standard procedure for the IRS is to contact the taxpayer: perhaps the taxpayer is to visit an IRS office or perhaps the audit will be conducted via correspondence. The IRS did not hear from Chan. Chan later explained that they had moved to Illinois and received no IRS correspondence.

The RA went all Kojak and obtained YCI’s bank records. The RA added up all the deposits and determined that the Chan underreported his taxable income by $1,139,879 and $731,444 for 2015 and 2016 respectively.

Yep, almost $2 million.

Off to Tax Court they went.

Chan had a straightforward argument: YCI was not an S corporation. It was a C corporation, meaning it filed its own tax returns and paid its own taxes. Let’s be fair: the restaurant had gone out-of-business. It is unlikely it ever made money. Unless there was an agency issue, the business tax could not be attributed to Chan personally.

Got it.

ISSUE: YCI filed an S election. The IRS had record of receiving and approving the election. YCI was therefore an S corporation until it (1) was disqualified from being an S, (2) revoked its election, or (3) failed an obscure passive income test.

PROBLEM: YCI was not disqualified, had no passive income and never revoked its election.

But …

Chan presented C corporation tax returns for 2015 and 2016. They were prepared by a professional preparer but were not signed by the preparer.

COMMENT: That is odd, as a paid preparer is required to sign the taxpayer’s copy of the return. I have done so for years.

The IRS of course had no record of receiving these returns.

COMMENT: We already knew this when the RA could not find a copy of the business return. Any search would be based on YCI’s employer identification number (EIN) and would be insensitive to whether the return was filed as a C or S corporation.

Hopefully Chan mailed the business return using certified mail.

Chan had no proof of mailing.

Of course.

At this point in the case, I am supposed to believe that Chan went to the time and trouble of having a professional prepare C corporation returns for two years but never filed them. Righhhttt ….

But maybe Chan thought the preparer had filed them, and maybe the preparer thought that Chan filed them. It’s a low probability swing, but weird things happen in practice.

This is easy to resolve: have the preparer submit a letter or otherwise testify on what happened with the business returns.

Crickets.

The IRS in turn was not above criticism.

It added up deposits and said that the sum was taxable income.

Hello?? This is a RESTAURANT. There would be food costs, rent, utilities and so forth. Maybe the RA should have spent some time on the disbursement side of that bank statement.

Then the IRS charged 100% of the income to Chan.

Hold on here: didn’t Form 2553 show Chan as owning 40% - not 100% - of YCI?

We don’t believe that, said the IRS.

Both sides are bonkers.

Chan went into Tax Court without representation after the IRS tagged him with almost $2 million of unreported income. This appears a poor decision.  

The IRS - relying on a Form 2553 to treat Chan as a passthrough owner – could not keep reading and see that he owned 40% and not 100%.

Can you imagine being the judge listening to this soap opera?

The Court split its decision:

(1) Yep, Chan is an S corporation shareholder and has to report his ownership share of the restaurant’s profit or loss for 2015 and 2016.

(2)  Nope, both sides must go back and do something with expenses, as well as decide Chan’s ownership for the two years.

Our case this time was Hong Jun Chan and Suzhen Mei v Commissioner, T.C. Memo 2021-136.