Haury v. Commissioner, 751 F.3d 867

Haury, a software engineer, did not file a federal tax return for 2007; the IRS issued a notice of deficiency based on a substitute return with taxable wage income of $149,216 and IRA distributions of $434,964.38.
Haury filed a 2007 return reporting $149,217 wage income, $319,964 in taxable IRA distributions, and a $413,156 business bad debt deduction; the Tax Court rejected the rollover and bad debt claims, resulting in a deficiency of $225,284.40 plus penalties and interest.
The Tax Court found that a $120,000 April 30, 2007 IRA contribution was not a qualifying rollover; on appeal, Haury contends it was a qualifying partial rollover under § 408(d)(3)(D).
Haury had made four secured loans to two related corporations (NPS Systems and NPGS) between June 2006 and July 2007, funded partly with IRA distributions; the loans later became worthless in December 2007.
The Tax Court concluded the loans were nonbusiness debts under § 166(a), (d)(1)(A) and Treas. Reg. § 1.166-5(b)(2), applying the Generes “dominant motivation” standard, and held the deduction nonbusiness; the court declined to find clear error in this factual determination.
The Third-Party record showed Haury’s roles in the corporations, including leadership positions and ownership interests, with salaries constituting his sole wage income in 2007.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the April 30, 2007 $120,000 IRA contribution qualifies as a partial rollover.	Haury contends the 60-day rollover window was satisfied for a partial rollover.	IRS argues the partial rollover was untimely or not permitted due to prior rollover constraints.	The partial rollover is valid; the Tax Court’s ruling is reversed.
Whether the loans to NPGS and NPS Systems were business debts proximate to Haury’s trade or business.	Haury maintains dominant business motivation due to salaries and investment interests.	Tax Court’s nonbusiness determination should stand given evidence of nonbusiness motivation.	Tax Court did not clearly err; the loans were nonbusiness debts; deduction denied.

United States v. Generes, 405 U.S. 93 (1972) (proximity and dominant motivation test for business vs. nonbusiness debts)
Litwin v. United States, 983 F.2d 997 (10th Cir. 1993) (context for shareholder-employee distinctions and business debt deductions)
Hormel v. Helvering, 312 U.S. 552 (1941) (equitable consideration for issues not raised below; fairness exception)
Musco Sports Lighting, Inc. v. Commissioner, 943 F.2d 906 (8th Cir. 1991) (affirmed plausible alternative weight in tax court’s factual findings)
Bell v. Commissioner, 200 F.3d 545 (8th Cir. 2000) (clear error review for taxpayer’s nonbusiness debt determination)
Transp. Labor Contract/Leasing, Inc. v. Commissioner, 461 F.3d 1030 (8th Cir. 2006) (requirement to fairly apply tax statutes to pro se litigants; equity in rulings)