VG CPA PC- National Tax, Advisory & Assurance Experts

10/23/2026

Big negative K-1 from a donation strategy? Is it really true?

From the opinion:
Investors bought $8,800,100 of units.
Their entity bought 99% of Lontrac.
The offering memo promised $610,791 of benefits per $200K, using a 45% federal-plus-state rate.

My assumptions:
Outside investors held 95% of their entity, as the offering memo planned. With the 99%, that gives them about 94% of the deduction.
Everyone paid the top 2014 federal rate of 39.6%.
Interest uses the same IRS rates as before.

One caveat: the net loss ignores anything investors earned on the tax they didn’t pay over those 11 years. A tax professional may point that out.

A line for the post:

📌 Per $200K invested: promised about $611K in tax benefits. A $1.59M deduction on the K-1. The result: roughly $1.58M owed back in tax, penalty and interest, for an estimated net loss of about $1.15M.

10/23/2026

Is your 5% Streamlined penalty calculated on the right number?

The Streamlined Domestic penalty is 5% of your highest year-end total of unreported foreign assets. That sounds simple, but most errors we see make clients overpay:

❌ Using the FBAR maximum balance → the 5% uses the Dec 31 balance
❌ Using the full joint balance with parents → only your personal share counts
❌ Counting every year as non-compliant → compliant assets and years go in at $0
❌ Including signature-only accounts → exclude them
❌ Picking the highest year in rupees → convert each year to USD first
❌ Including foreign real estate you own directly → it's excluded
And two that make clients underpay (and pay more later):
❌ Leaving out PPF, LIC or demat accounts
❌ Assuming a late Form 3520 removes the asset

Why Dec 31 isn't the whole story:

A December house-sale or inheritance deposit can inflate your base
- FD rollovers can be counted twice
- Rupee swings change the USD value, not your savings
- The 5% falls on principal, often already-taxed money

Inside Streamlined, the formula is fixed. That's why the right path should be chosen before you file: Streamlined, late FBARs with reasonable cause, or another route.

📞 703-880-8412 | ✉️ [email protected]

Source: IRS Streamlined FAQs (June 2026).
Disclaimer: This post is for informational purposes only and should not be used as tax advice. Every client's situation and facts are different.

10/20/2026

Don't Use Your Tax Return to Train AI

AI is a powerful tool. We use technology in our firm every day.

But when it comes to complex tax issues like:

✅ FBAR Reporting
✅ Streamlined Domestic Offshore Procedures (SDOP)
✅ Form 8938 Compliance
✅ PFIC Reporting
✅ Foreign Trusts & Gifts
✅ International Tax Planning

a confident answer is not always a correct answer.

We've seen taxpayers rely on AI, social media groups, YouTube videos, and low-cost preparers only to discover later that:

❌ FBARs were filed incorrectly
❌ SDOP was the proper filing method
❌ Foreign income was missed
❌ Penalty calculations were wrong
❌ Important international forms were never filed

By the time the mistake is discovered, penalties, interest, and IRS notices may already be on the way.

AI learns from mistakes. Taxpayers pay for them.

Before filing an offshore disclosure or making a major tax decision, make sure your facts are reviewed by an experienced tax professional.

📞 VG CPA PC
Tax Planning | IRS Representation | FBAR Compliance | SDOP Filings | International Tax Advisory

10/02/2026

09/16/2026

When Money Moves, Documentation Must Follow

Lesson learn from - Tunkl Tax Court Case (T.C. Memo 2026‑83)

1. If you receive funds and have full control over them, it is taxable income — unless you can prove otherwise. - The Court emphasized that Mr. Tunkl had complete dominion and control over the $16.5 million wired to his S‑corporation. He used the funds freely, including to complete another art purchase. “Mr. Tunkl used the $16.5 million at will and derived economic benefit from it…” This made the funds gross income under IRC §61, regardless of his later claim that it was a deposit or loan.

2. Oral agreements and undocumented business arrangements carry enormous tax risk. The Picasso deal had no written agreement, no contemporaneous documentation, and a backdated invoice created months later. “The sparse evidence before us falls woefully short…” Without documentation, the taxpayer could not prove the funds were a deposit or loan.

3. Calling money a “deposit” does not make it a deposit — the relationship and obligations at the time of payment control. The Court found that Mnuchin was not a customer, but a joint investor, and there was no obligation to repay at the time the money was wired. “Mr. Mnuchin was Mr. Tunkl’s joint investor and partner… not his customer.”

4. To qualify as a loan, the obligation to repay must exist at the moment the funds are transferred. The Court applied the Ninth Circuit’s loan‑factor test and found no indicia of a loan:
- No repayment obligation at the time of transfer
- No interest
- No repayment schedule
- No collateral
- No repayments
“No formal obligation to repay existed on January 11, 2018…” The later “Demand Note” did not retroactively convert the funds into a loan.

5. Using business accounts for mixed personal and business purposes weakens credibility. The Court noted that Mr. Tunkl used the S‑corp bank account for both business and personal expenses, undermining his position

6. Failure to repay the funds supports the IRS position that the money was income. Mr. Tunkl repaid only $2.5 million of the $44 million he owed. “Mr. Tunkl has been permitted to keep the entire amount…” This reinforced that the $16.5 million was not a deposit or loan.

7. S‑Corporation shareholders must report all income flowing through the entity. Ganymede (the S‑corp) did not report the $16.5 million, and the shareholder (Tunkl) claimed a loss instead. The IRS properly reclassified the funds as unreported income.

8. Burden of proof is on the taxpayer — and unsupported testimony is not enough. The Court repeatedly rejected Mr. Tunkl’s testimony as: “Unreliable, unsupported, and thoroughly unconvincing.” Taxpayers must provide credible evidence, not just statements.

08/31/2026

2025–2026 Short Term Rental and & Multifamily Tax Red Flags — Hot issues

1. Material Participation Misstatements
Tax Court Citation:
Foradis v. Commissioner (2024) — STR owners could not deduct losses because they failed to prove material participation; reconstructed logs were rejected.
STR Audit Losses (2024–2025) — Four STR hosts lost in Tax Court for using reconstructed time logs instead of contemporaneous records.

Red Flags:
- No contemporaneous logs
- Property managers doing more hours than the owner
- Logs created after audit notice
- No evidence of guest communication

2. Improper Bonus Dep & Cost Seg (STR + Multifamily)
Tax Court :
Smith v. Commissioner (2025) — Dep denied because taxpayer failed to establish dep basis and placed‑in‑service timing.
Red Flags:
- Depreciation claimed before first booking/tenant occupancy
- No engineering‑based cost‑seg study
- No invoices supporting
- “Rule‑of‑thumb” allocations Vs documented basis

3. Fraudulent Tenant Screening Impacting Tax Filings (Multifamily)
Court Citation (Fraudulent Rent Records):
Armstrong v. Dumbo Lofts Rental LLC (2026) — Court found evidence of fraudulent rent‑stabilization deregulation due to missing documentation and improper rent records.
Reichenbach v. Jacin Investors Corp. (2025) — Fraudulent rent spikes unsupported by documentation; court imposed tenant‑favorable remedies.
Red Flags:
- Rent‑roll inflated by fraudulent applicants
- Eviction rates tied to identity fraud
- Bad‑debt write‑offs
- Income verification based solely on

4. STRs Used for Criminal Activity (DOJ 2026 Cases)
(No Tax Court case directly on STR criminal misuse; DOJ indictments used STRs for cash‑collection and identity fraud.
Red Flags:
- Bookings with wrong IDs
- Guests requesting mailbox or package access
- Multiple last‑minute name changes
- STR used for non‑lodging activities

5. Misclassification of STR Income (Avoiding SE Tax)
Tax Court Citation:
Foradis v. Commissioner (2024) — Rental losses disallowed due to passive‑activity misclassification; taxpayer failed to meet participation tests.
Red Flags:
- Using a management company but claiming active participation
- Mixing personal use with rental use without logs
- No calendar showing days rented vs personal use

6. Shell Companies Used to Hide Rental Income (Tax Evasion Cases)
DOJ cases in 2025–2026 involved routing rental income through shell LLCs. Included as a compliance red flag.)

- Rental income deposited into unrelated LLCs
- No operating agreement
- Transfers labeled as “loans”
- CPA not informed of all income

VG CPA PC — 2026 Compliance Recommendations
- Maintain daily logs for STR participation
- Use engineering‑based cost‑segregation studies
- Implement direct‑source income verification for multifamily tenants
- Document placed‑in‑service dates with photos, invoices, and booking records
- Keep separate bank accounts
- Perform quarterly rent‑roll audits
- Avoid guaranteed‑return real‑estate investments

08/28/2026

SCAM ALERT: Fake IRS Crypto Letters Are Circulating

If you receive a letter claiming to be from the IRS that includes a QR code and tells you to register your cryptocurrency in a “Digital Asset Compliance Portal,” — don’t scan it. Don’t respond.

It’s a scam.
The IRS has confirmed:
This portal does NOT exist
The IRS did NOT send these letters

Scammers are trying to steal your crypto and personal information
The QR code leads to a fake IRS website that may ask for wallet credentials, recovery phrases, or exchange logins — all designed to drain your accounts.

Protect yourself:
- Don’t scan QR codes from unsolicited letters
- Don’t share private keys or recovery phrases
- Go directly to IRS.gov to verify any notice
- Report scams to IRS Criminal Investigation at IRS.gov/SubmitATip
Learn more from the official IRS alert:

08/28/2026

What Taxpayers, CPAs, and Business Owners Can Learn from the Janangelo Tax Court Case

1. Documentation Still Beats Artificial Intelligence

AI tools can organize records, automate bookkeeping, categorize expenses, and improve tax workflow efficiency. However, no AI platform can create valid substantiation when proper records do not exist.

The Tax Court emphasized that taxpayers must maintain adequate books, records, receipts, logs, invoices, and supporting documentation to justify deductions. Self-prepared spreadsheets and unsupported schedules were not sufficient

2. Economic Substance Matters

The Court determined that a purported business lacked a genuine profit motive and economic substance. Businesses should be established to earn income and create value, not merely generate tax deductions.

In the age of AI and automation, the IRS increasingly uses data analytics to identify patterns that may indicate abusive tax strategies or unsupported deductions.

3. Personal Expenses Cannot Become Business Expenses Through Reclassification

The Court rejected various personal expenditures that were characterized as deductible business expenses. Simply changing labels does not change tax treatment. The underlying facts remain critical

4. The IRS Uses Advanced Analytics

Today's IRS environment is very different from a decade ago. Massive data analysis, digital matching systems, automated compliance reviews, and sophisticated examination techniques allow the IRS to identify anomalies more effectively than ever before.

Taxpayers should assume that unsupported deductions, unusual patterns, and inconsistent reporting may attract scrutiny.

5. Professional Credentials Increase Expectations

A significant factor in this case was the taxpayer's professional background. The Court noted that the taxpayer was a CPA, attorney, and IRS revenue agent and therefore possessed substantial tax knowledge and expertise. The Court considered this experience when evaluating fraudulent intent.

For CPAs, attorneys, EAs, and financial professionals, higher expertise often means greater responsibility

6. Fraud Penalties Are Real

The Court upheld civil fraud penalties after finding intentional efforts to claim deductions not supported by law or facts. Fraud penalties can equal 75% of the tax underpayment attributable to fraud, making improper tax positions extremely costly

08/19/2026

When You Don’t Follow IRS Rules — The IRS Eventually Responds

**Lessons from Percy Squire Co LLC v. Commissioner (T.C. Memo 2026‑72) **

The Tax Court’s decision in Percy Squire Co LLC is a powerful reminder of what happens when a taxpayer repeatedly ignores compliance requirements, misses deadlines, and tries to “play around” with IRS procedures instead of following the law.

For more than a decade, the company failed to make required federal tax deposits, filed payroll tax returns without payment, ignored W‑2/W‑3 filing obligations, and submitted incomplete or improper offers‑in‑compromise. When the IRS initiated levy and lien actions, the taxpayer again attempted to delay the process—without providing the required financials or a valid OIC.

The Court made the consequences crystal clear:
- IRS will sustain levy and lien actions when taxpayers don’t cooperate.
- Appeals officers are not required to wait indefinitely for missing documents.
- Submitting incomplete OICs or using CDP hearings as delay tactics is abuse of process.
- The Court will impose penalties for frivolous or groundless positions.
In this case, the Court imposed a $10,000 penalty under IRC §6673—after years of prior warnings and even a previous sanction.

The takeaway:
Trying to outmaneuver IRS procedures doesn’t stop enforcement. It accelerates it.
Compliance, transparency, and timely action are always cheaper than penalties, liens, levies, and reputational damage.
For business owners, executives, and professionals:
Follow the law. Don’t play games with the IRS. They always catch up.

08/19/2026

When Poor Records Destroy Legitimate Deductions —
Lessons from Sami v. Commissioner (T.C. Memo 2026‑69)

The Tax Court’s decision in Suleiman Sami v. Commissioner (T.C. Memo 2026‑69) is a powerful reminder for business owners, gig‑workers, influencers, and anyone filing a Schedule C: if you don’t keep proper records, the IRS will treat even legitimate business expenses as personal — and disallow them.

Mr. Sami ran a transportation service, ticket‑resale business, and social‑media influencer operation. He incurred real business expenses: vehicle mileage, tolls, celebrity‑related marketing events, credit‑card processing fees, and more. But his recordkeeping was inconsistent, incomplete, and often reconstructed after the fact.

The Court emphasized:
“Mr. Sami did not keep books and records for his business.”
“A taxpayer must maintain records sufficient to enable the Commissioner to determine the correct tax liability.”

And even where expenses were clearly business‑related, the Court repeatedly noted: “The exact amounts of the expenses, however, are murky.”

As a result:

❌ Cost of goods sold disallowed
He couldn’t prove certain ticket purchases were actually resold.
❌ Contract labor disallowed
He paid relatives to drive — but had no documentation.
❌ Many marketing and event expenses disallowed He attended Grammys, Emmys, celebrity meet‑and‑greets — but lacked business‑purpose substantiation.
✔ Some vehicle expenses allowed — but reduced by 20% The Court applied the Cohan rule and cut his deduction because his mileage estimates were incomplete.
✔ Credit‑card processing fees allowed
These were well‑documented.

Key Lesson for Business Owners & Influencers The IRS does not care how legitimate your business is — only how well you document it.

Even when the Court believed Mr. Sami did incur business expenses, it still disallowed them because he failed to maintain:
- mileage logs
- receipts
- proof of business purpose
- records of payments to helpers
- proper separation of personal vs. business charges This case is a textbook example of how poor recordkeeping converts real business expenses into nondeductible personal expenses.

Practical Takeaway for CPAs & Clients
If you operate a Schedule C business — transportation, consulting, gig work, influencer marketing, ticket resale, or anything similar — you must:
- Keep contemporaneous mileage logs
- Maintain receipts and proof of business purpose
- Separate personal and business bank/credit card activity
- Document payments to helpers or contractors
- Use accounting software or a simple ledger Otherwise, the IRS will reconstruct your income, deny your deductions, and impose penalties — just as it did here.