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Another Waste of the Court's Time - By John R. Bullis

Updated: May 10, 2023

Gregory MacDonald represented himself (he acted as his own attorney) in a U.S. Tax Court proceeding. He disputed the IRS finding he was not entitled to an earned income credit of $438 and he claimed he was entitled to the special recovery rebate credit of $400. He filed form 1040-EZ for 2008 as a single person with only $5,800 of income on line 1 (for wages, salaries and tips). After the standard deduction and his exemption, he had taxable income of -0-. He should have reported that income on page 1, line “Other income”. He did not understand the rules on earned income credit. Since the $5,800 was his only income and it was from a one-time sale of tools and machinery, he did not earn income from a trade or business. He was not involved in the activity with continuity and regularity to earn income or a profit. The Court said, “…A sporadic activity, a hobby, or an amusement diversion does not qualify as a trade or business…”. So, he did not have any earnings from self employment and he did not have any wages or other income. That meant he did not have any earned income and was not eligible to receive the earned income tax credit. The $400 special recovery rebate tax credit that he expected was not allowed either. The Congress provided that credit was only to be paid to an eligible individual for the lesser of his net income tax liability (he had -0-) or $600. It was only paid to those with “qualifying income” (earned income, Social Security benefits and a pension). He did not have any qualifying income so his rebate tax credit was zero. Of course there currently is no rebate tax credit, it expired back in 2008. He claimed he did not receive the 2007 rebate tax credit. However IRS showed he did receive the $300 rebate tax credit for 2007 by direct deposit to his bank account June 9, 2008. The result was he was not entitled to any refunds and he got nothing for all his time going to Court. Isn’t it a shame it took until Dec. 13, 2016 for this matter to be settled and concluded? Maybe this is the year Congress will finally significantly change and really simplify our tax code. It seems to be another illustration of sometimes it is not advisable to represent yourself in Court. Did you hear “Epitaph on a pessimist’s headstone: “I expected this.”

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