Overview
Tax law is shaped not only by statutes and Treasury regulations, but also by court decisions. When a taxpayer and the IRS disagree, the U.S. Tax Court and other federal courts decide how rules apply to the facts. Some opinions become guiding precedents that affect millions of taxpayers, influence IRS guidance, and alter tax planning choices.
This article summarizes the most important cases and legal principles every U.S. taxpayer or tax practitioner should understand in 2025 — what each decision means in practice, how it changes taxpayer responsibilities, and where to learn more. I draw on more than 15 years of experience as a CPA and CFP® working directly with clients on audits, appeals, and Tax Court matters.
(Authoritative sources: U.S. Tax Court and IRS case guidance — see links below.)
Why a few court cases matter to ordinary taxpayers
- They define the legal meaning of “income,” “deduction,” “ordinary and necessary,” and other tax terms.
- They determine how strictly courts expect documentation and what qualifies as reasonable cause.
- They set procedural rules that affect strategy when appealing IRS assessments.
In my practice, clients who understand these precedents write better appeal letters, choose stronger evidence, and make smarter decisions about representation.
Selected landmark cases and principles (what they say and why they matter)
Below are cases and doctrines that routinely affect individual taxpayers and small businesses. I state the holdings accurately and describe practical implications.
1) Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955)
- What the court decided: The U.S. Supreme Court defined gross income broadly to include “accessions to wealth, clearly realized, and over which the taxpayer has complete dominion.” (348 U.S. 426)
- Why it matters: This foundational test affects whether unusual receipts (for example, punitive damages, cancellations of debt in many contexts, or prizes) are taxable. When in doubt, assume the courts will interpret “income” broadly unless a statute or specific exclusion applies.
- Practical tip: When you receive an unusual payment or cancellation, check statute and case law and document the nature of the payment before assuming it is nontaxable.
2) Golsen v. Commissioner, 54 T.C. 742 (1970)
- What the court decided: The Tax Court will follow the precedent of the federal Court of Appeals that would review a particular Tax Court case, even if other circuits rule differently.
- Why it matters: This rule means outcomes can vary by where you live. A Tax Court opinion may be decided one way in the Ninth Circuit’s geographic area and another way in the Tenth Circuit’s area because the Tax Court follows binding circuit precedent.
- Practical tip: When litigating, consider how the controlling Court of Appeals has ruled on the issue — it can determine likely outcomes and appeal strategy.
3) Mayo Foundation for Medical Education & Research v. United States, 562 U.S. 44 (2011)
- What the court decided: The Supreme Court applied the Chevron deference framework to Treasury Department regulations in tax contexts (i.e., courts should defer to reasonable agency interpretations of ambiguous statutes), although doctrine nuances have evolved in subsequent non-tax precedent.
- Why it matters: Reasonable Treasury regulations often carry weight; taxpayers should evaluate both the statute and Treasury regulations when shaping arguments. However, note that higher-court treatments of administrative deference have evolved; always check recent rulings.
- Practical tip: When a regulation exists on a point where the statute is ambiguous, a regulator-friendly interpretation can be persuasive. Counsel will weigh how recent appellate decisions treat deference.
4) United States v. Boyle, 469 U.S. 241 (1985)
- What the court decided: For certain statutes of limitation and filing deadlines, reliance on a tax return preparer generally does not excuse late filing; taxpayers are responsible for timely compliance.
- Why it matters: “I relied on my tax preparer” is not typically a defense for missing a filing deadline. However, reasonable cause for penalties may still exist in other contexts where the taxpayer acted reasonably and maintained good records.
- Practical tip: Keep copies of engagement letters, return drafts, and communications with preparers. If you miss a deadline, documentation of your communications and any extraordinary circumstances will support a reasonable-cause argument.
5) Welch v. Helvering, 290 U.S. 111 (1933)
- What the court decided: The Supreme Court clarified the distinction between deductible business expenses and nondeductible capital expenditures and provided guidance on what counts as “ordinary and necessary.”
- Why it matters: Courts use these principles when determining whether expenditures are currently deductible. The facts — timing, purpose, and connection to business income — are critical.
- Practical tip: Maintain contemporaneous records that show the business purpose, amount, and expected benefit timing for major expenses.
6) Procedural and evidentiary rules (burden of proof and penalties)
- Key point: The Taxpayer Bill of Rights, court decisions and rules (including those in the Tax Court’s rules) affect who bears burdens, how penalties apply, and what proof is required. For example, the IRS’s burden under certain circumstances (e.g., when IRS introduces evidence) may shift; courts also evaluate whether a taxpayer acted with reasonable cause for penalty relief.
- Practical tip: If you receive a CP3219B Notice (Notice of Deficiency) or similar demand, act promptly. See our guide on CP3219B notices for details and timelines: CP3219B Notice: Notice of Deficiency with Right to Petition Tax Court (https://finhelp.io/glossary/cp3219b-notice-notice-of-deficiency-with-right-to-petition-tax-court/).
How these cases change planning and dispute strategy
- Documentation beats anecdote. Courts repeatedly rely on contemporaneous records when applying legal tests.
- Know the controlling circuit. The Golsen rule means appellate precedent in your circuit matters — don’t assume a national outcome.
- Use regulations alongside statutes. Regulations can be persuasive (see Mayo) but watch for recent appellate decisions that alter deference doctrines.
- Timelines matter. Filing a timely petition with the U.S. Tax Court after a Notice of Deficiency preserves litigation rights.
If you need the step-by-step process to bring a Tax Court petition, see our how-to guide: How to Petition the U.S. Tax Court (https://finhelp.io/glossary/how-to-petition-the-u-s-tax-court/).
Practical examples from practice (common fact patterns)
- Unusual receipt: A client received a one-time settlement. Applying Glenshaw Glass, we evaluated whether a specific statutory exclusion applied and documented the settlement terms before concluding taxability.
- Business expense vs. capital: For a small business client, we assembled invoices and a use-log to show repair vs. capital improvement status under Welch and related guidance.
How to read and cite cases for your situation
- Start with the opinion text on the U.S. Tax Court website or a reputable legal site. See U.S. Tax Court opinions and rules: https://www.ustaxcourt.gov
- Check whether your issue is governed by a Court of Appeals decision that will bind the Tax Court (Golsen). Use the Tax Court’s published opinions and note the appeals court where the decision would be reviewed.
- Compare statutes and Treasury regulations on the subject (see IRS and Treasury pages at https://www.irs.gov and https://home.treasury.gov).
Common mistakes taxpayers make
- Relying on fictional summaries or secondhand blog claims without reading the opinion or the controlling circuit’s law.
- Assuming a Tax Court ruling in one case will automatically apply in a different circuit.
- Waiting to consult a professional until after statutory deadlines expire.
Where to get help and additional resources
- U.S. Tax Court: https://www.ustaxcourt.gov for opinions, rules and filing procedures.
- IRS site for forms, notices and guidance: https://www.irs.gov
- Practical, reader-focused guides on FinHelp: see Using Tax Court: When It’s Appropriate to Litigate (https://finhelp.io/glossary/using-tax-court-when-its-appropriate-to-litigate/) and How Tax Court Precedent Affects Individual Taxpayers (https://finhelp.io/glossary/how-tax-court-precedents-affects-individual-taxpayers-a-primer/ “note: use site search if URL changes”).
Final professional tips
- Preserve evidence now: receipts, contracts, communications and contemporaneous notes are the single most important assets if a dispute reaches the Tax Court.
- Discuss appeal strategy early: the right litigation approach depends on the likely binding precedent in your circuit (Golsen doctrine).
- When in doubt, get written advice and keep it. Written, dated analysis from a qualified tax professional is useful both to prevent future mistakes and to support reasonable-cause defenses.
Disclaimer
This article is educational and does not constitute legal advice. Tax law changes and court decisions can shift legal outcomes; consult a qualified tax attorney or CPA for advice about your specific situation. Author is a CPA and CFP® with more than 15 years of experience; examples are illustrative and not case-specific legal citations.
Authoritative sources
- U.S. Tax Court, Rules and Opinions: https://www.ustaxcourt.gov
- IRS: https://www.irs.gov
- Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955)
- Golsen v. Commissioner, 54 T.C. 742 (1970)
- Mayo Foundation for Medical Education & Research v. United States, 562 U.S. 44 (2011)
- United States v. Boyle, 469 U.S. 241 (1985)
