Mark D. Jasperson v. Commissioner of Internal Revenue, 658 F. App'x 962

Background

Mark Jasperson, sole owner of S corporation 5215 Development, claimed large losses in 2005–2006 and carried those net operating losses (NOLs) forward to reduce his individual taxable income for 2008–2010.
On his 2008–2010 returns Jasperson claimed NOL carryover deductions but did not attach the detailed schedules or source documents required by regulation to substantiate the NOLs.
The IRS issued deficiency notices disallowing the 2008–2010 NOL deductions and assessed accuracy-related penalties for substantial understatement of tax; Jasperson petitioned the Tax Court.
The Tax Court gave Jasperson extra time to produce documentation, but he failed to produce 2005–2006 tax returns or underlying source documents (invoices, bank records); he offered only secondary accountant-prepared charts and unauthenticated ledgers.
The Tax Court sustained the IRS: (1) Jasperson failed to prove entitlement to carrying forward the 2005–2006 NOLs (including any valid waiver of the carryback requirement), and (2) he failed to show reasonable cause/good faith reliance on tax professionals to avoid penalties.
The Eleventh Circuit affirmed, reviewing facts for clear error and law de novo, and finding Jasperson did not meet his burden to substantiate the NOLs or the penalty exception.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Jasperson validly carried forward 2005–2006 NOLs to 2008–2010	Jasperson contended he had NOLs from 2005–2006 that were properly carried forward and used on 2008–2010 returns	IRS argued Jasperson failed to prove the existence/amount of NOLs, did not show required carryback or proper waiver, and did not attach required schedules	Court held Jasperson failed to substantiate NOLs or show valid carryback waiver; NOL deductions disallowed
Whether Jasperson satisfied the regulatory requirement to attach detailed NOL schedules	Jasperson relied on accountant-prepared summaries and argued reliance justified the deductions	IRS noted no required concise statement/detailed schedule was attached and source documents were absent	Court held regulatory filing requirement not met; secondary summaries insufficient
Whether accuracy-related penalties under § 6662 apply for substantial understatement	Jasperson argued reasonable cause and good faith reliance on accountants excused penalties	IRS argued taxpayer bears burden to show reasonable cause; Jasperson provided no evidence accountants had accurate information	Court held penalties proper; Jasperson failed to show reasonable cause/good faith reliance
Whether reliance on tax professionals can shield taxpayer from penalties	Jasperson claimed reliance on outside accountants who prepared returns	IRS responded that reliance only applies if taxpayer provided accurate, complete information to preparer	Court held reliance defense failed because Jasperson did not show he supplied accurate facts and preparer did not audit numbers

Key Cases Cited

Creel v. Comm’r, 419 F.3d 1135 (11th Cir. 2005) (standard of review: Tax Court findings of fact for clear error, legal conclusions de novo)
Gatlin v. Comm’r, 754 F.2d 921 (11th Cir. 1985) (taxpayer bears burden to produce evidence supporting entitlement to deduction)
Neonatology Assocs., P.A. v. Comm’r, 299 F.3d 221 (3d Cir. 2002) (reliance on tax professional can establish reasonable cause only if based on all pertinent facts)
Gustashaw v. Comm’r, 696 F.3d 1124 (11th Cir. 2012) (taxpayer relying on professional advice must show advice was based on all pertinent facts and circumstances)
Gitlitz v. Comm’r, 531 U.S. 206 (2001) (explanation of S corporation pass-through treatment of income and losses)