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Brown v. Comm'r

United States Tax Court

June 10, 2019, Filed

Docket No. 26090-13.

Opinion

MEMORANDUM FINDINGS OF FACT AND OPINION

HOLMES, Judge: We can take judicial notice, because there can be no dispute, that western New York has made outstanding contributions to American  [*2]  cuisine: scrumptious beef on weck,1 delicious Buffalo-style pizza,2 sweet sponge candy,3 and the incomparable spaghetti parm.4 But this case wafted to our Court from the perfumed aroma of the deep fryers of a restaurant in Alamogordo, New Mexico.

The couple in charge of those fryers was Cynthia and Brian Harris. They are natives of Buffalo and missionaries to the Southwest of the Nickel City's most famous local food--the Buffalo wing. In 2008 they opened their restaurant named A Taste of Buffalo with the help of another couple, Mikel and Debra Brown. The local population, however, seemed to prefer food called "Tex-Mex" and  [*3]  something called "Bar-B-Q". The Harrises' wings fell on rocky ground; the restaurant closed.

The Commissioner says that the Browns did not materially [**2]  participate in the restaurant's business and so are not entitled to deduct their share of the restaurant's losses and other expenses. His audit also discovered what he claims is a significant amount of unreported income.

FINDINGS OF FACT

A. Christian Joy Center

A major part of the Browns' tax troubles stems from the breadth of their work: A Taste of Buffalo was not their major activity in the tax years at issue here--2007-09. Their focus was on Christian ministry, and Reverend Mikel Brown is the founder and longtime pastor of an independent church named the Christian Joy Center (CJC); his wife Debra is its administrator. Reverend Brown is well-credentialed, with a doctorate in biblical studies and a degree in social psychology. Before pursuing his vocation as a clergyman, he served six years in the military and founded an insurance agency.

The CJC is headquartered in El Paso, Texas with satellite locations in Alamogordo and Phoenix. These churches are far from each other, and Reverend  [*4]  Brown had to travel from El Paso to southern New Mexico and Arizona to oversee the CJC's network of pastors and elders.

OPINION

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T.C. Memo 2019-69 *; 2019 Tax Ct. Memo LEXIS 71 **

MIKEL A. BROWN, SR., AND DEBRA A. BROWN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Disposition: Decision will be entered under Rule 155.

CORE TERMS

gifts, congregants, expenses, Memo, deposits, church, donations, checks, spent, taxpayer, restaurant, returns, income tax, parsonage, prepare, tax year, contributions, deductions, allowance, logs, parsonage allowance, participating, partnership, designated, amounts, envelope, salary, offerings, regular, lease

Business & Corporate Compliance, Federal Income Tax Computation, Tax Accounting, Accounting Records, Tax Law, Clear Reflection Standard, Federal Taxpayer Groups, Individuals, Exclusions From Gross Income, Exclusions From Gross Income, Gifts & Inheritances, Gross Income, Taxable Income, Business Expenses, Entertainment & Trade Expenses, Losses, Passive Activity Losses, Production of Income Expenses, Audits & Investigations, Burdens of Proof, Burden of Taxpayer, Business Deductions, Deductibility Requirements, Travel Expenses, Tax Credits & Liabilities, Civil Penalties, Accuracy Related Penalty, Burden of Government

Business & Corporate Compliance, Federal Income Tax Computation, Tax Accounting, Accounting Records, Tax Law, Clear Reflection Standard, Federal Taxpayer Groups, Individuals, Exclusions From Gross Income, Exclusions From Gross Income, Gifts & Inheritances, Gross Income, Taxable Income, Business Expenses, Entertainment & Trade Expenses, Losses, Passive Activity Losses, Production of Income Expenses, Audits & Investigations, Burdens of Proof, Burden of Taxpayer, Business Deductions, Deductibility Requirements, Travel Expenses, Tax Credits & Liabilities, Civil Penalties, Accuracy Related Penalty, Burden of Government