Legal Definitions - MEMO

The term T.C. memo. is an abbreviation for a Tax Courtmemorandum decision. It refers to a specific type of ruling issued by the U.S. Tax Court.

When the U.S. Tax Court issues a memorandum decision, it typically means the court is applying existing tax law to the unique facts of a particular case, rather than establishing new legal principles or precedents. These decisions are binding on the parties involved in that specific case but are generally not considered authoritative for future cases in the same way that regular, "published" opinions might be.

Here are some examples of situations where a T.C. memo. might be issued:

• Example 1: Disputed Business Expenses

  A small business owner, Ms. Rodriguez, deducted a significant amount for travel and entertainment expenses. The IRS audited her and disallowed a portion of these deductions, arguing they were not "ordinary and necessary" business expenses. Ms. Rodriguez filed a petition with the U.S. Tax Court to challenge the IRS's decision. After reviewing the evidence presented by both sides, including receipts, itineraries, and testimony, the Tax Court issued a T.C. memo. ruling on whether Ms. Rodriguez's specific expenses met the legal criteria for deductibility under existing tax code provisions.

  This illustrates a T.C. memo. because the court applied established tax law regarding business expense deductions to the specific factual circumstances of Ms. Rodriguez's case, without creating a new legal interpretation of "ordinary and necessary."

• Example 2: Home Office Deduction Challenge

  Mr. Chen, a freelance graphic designer, claimed a home office deduction for several years. The IRS challenged this deduction, asserting that his home office was not used "exclusively and regularly" for business, as required by law. Mr. Chen took his case to the U.S. Tax Court. The court examined photographs of his workspace, his client invoices, and his daily schedule. The resulting T.C. memo. determined whether Mr. Chen's particular use of his home office satisfied the statutory requirements for the deduction.

  This demonstrates a T.C. memo. because the court focused on applying the existing, well-defined legal standard for home office deductions to the unique facts presented by Mr. Chen's specific setup and work habits.

• Example 3: Valuation of Assets for Estate Tax

  Following the passing of a wealthy individual, the executor of their estate and the IRS disagreed on the fair market value of a collection of antique cars, which significantly impacted the estate tax liability. The dispute was brought before the U.S. Tax Court. After hearing expert testimony from appraisers and reviewing market data, the court issued a T.C. memo. establishing the valuation of the car collection for estate tax purposes. The decision relied on established valuation principles applied to the specific assets in question.

  This is an example of a T.C. memo. because the court applied established legal principles for asset valuation in estate tax to the specific, unique facts of the antique car collection, rather than setting a new precedent for how all antique collections should be valued.