Legal Definitions - T.C.M.

T.C.M. stands for Tax Court Memorandum.

A Tax Court Memorandum (T.C.M.) is a type of decision issued by the United States Tax Court. Unlike the court's regular opinions, which are published in the official Tax Court Reports and often establish new legal principles or interpret complex areas of tax law, a T.C.M. typically addresses cases that involve applying well-established tax law to a specific set of facts. These decisions are still publicly available and can be cited as legal precedent, meaning they can be used by taxpayers and the IRS to support arguments in future cases, especially those with similar factual circumstances.

Here are a few examples to illustrate:

• Imagine a small business owner, Ms. Chen, who is audited by the IRS. The IRS challenges her deduction of certain home office expenses, arguing they don't meet the "exclusive and regular use" test. After a trial, the Tax Court issues a T.C.M. ruling that, based on the specific evidence presented (like photos of the office and testimony about its use), Ms. Chen did indeed meet the criteria. This decision wouldn't create new tax law, but it would apply existing home office deduction rules to her unique factual situation, and could be cited by other taxpayers facing similar factual disputes over home office deductions.

• Consider a situation where Mr. Davies received a significant sum of money from a distant relative. The IRS claims it's taxable income, while Mr. Davies insists it was a non-taxable gift. The Tax Court hears the case and, after reviewing bank records, correspondence, and testimony about the relationship and intent, issues a T.C.M. concluding that the funds were indeed a gift. This decision wouldn't change the legal definition of a gift versus income, but it would provide a detailed factual analysis that could guide other taxpayers and the IRS in similar disputes involving transfers between family members.

• Suppose a couple, the Millers, are disputing with the IRS over the valuation of a unique piece of artwork included in their deceased parent's estate for estate tax purposes. The IRS and the Millers' appraisers have very different estimates. The Tax Court reviews expert testimony, market comparables, and the artwork's provenance. The court then issues a T.C.M. that determines the fair market value of the artwork based on the specific evidence presented. This memorandum wouldn't alter the general principles of asset valuation for estate tax, but it would provide a specific, citable example of how those principles were applied to a particular, complex asset.