Beyoncé Disputes $2.7 Million Liability for Taxes, Penalties

BEYONCE KNOWLES-CARTER,
Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.

UNITED STATES TAX COURT

PETITION

Beyonce Knowles-Carter ("Petitioner") hereby petitions for a redetermination of the deficiency set forth by the Commissioner of Internal Revenue in the Notice of Deficiency, dated January 18, 2023, and as the basis for her case alleges as follows:

1. Petitioner's mailing address is 15821 Ventura Blvd., Suite 370, Encino, CA 91436. Petitioner's residence is located in Los Angeles County, California. Petitioner's federal income tax returns for the taxable years 2018 and 2019 were filed with the Internal Revenue Service by electronic filing.

2. The relevant portion of the Notice of Deficiency for the taxable years 2018 and 2019 (with redactions to protect Petitioner's privacy), is attached hereto. It shows that it was mailed to Petitioner on January 18, 2023, and was issued by the Internal Revenue Service at Laguna Niguel, California.

3. In the Notice of Deficiency, Respondent has determined the following tax deficiencies and additions to tax, all of which are in dispute:

Taxable Year	Deficiency	IRC § 6662(a)
2018	$805,850.00	$161,170.00
2019	$1,442,747.00	$288,549.40

4. The Notice of Deficiency is based on the following erroneous determinations:

(a) On information and belief, Respondent erred in determining that Petitioner failed to report $1,449 in royalty income on Schedule E3 in 2018.

(b) Respondent erred in determining that Other Expenses of $761,455 reported on Schedule C7 in 2018 should be disallowed.

(c) Respondent erred in determining that Legal and Professional Services of $473,738 reported on Schedule C2 in 2018 should be disallowed.

(d) Respondent erred in determining that an Itemized Deduction of $868,766 attributable to a charitable contribution carryover reported in 2018 should be disallowed.

(e) On information and belief, Respondent erred in determining that Qualified Business Income Deductions of $3,581 reported in 2018 and $14 reported in 2019 should be disallowed.

(f) Respondent erred in determining that Other Expenses of $9,801 reported on Schedule E2 in 2019 should be disallowed.

(g) Respondent erred in determining that Utilities of $11,948 reported on Schedule E2 in 2019 should be disallowed.

(h) Respondent erred in determining that Taxes of $54,610 reported on Schedule E2 in 2019 should be disallowed.

(i) Respondent erred in determining that Management Fees of 24,691 reported on Schedule E2 in 2019 should be disallowed.

(j) Respondent erred in determining that Insurance of $33,301 reported on Schedule E2 in 2019 should be disallowed.

(k) Respondent erred in determining that Depreciation of $75,677 reported on Schedule E2 in 2019 should be disallowed.

(l) Respondent erred in determining that Depreciation of $3,326,103 reported on Schedule E1 in 2019 should be disallowed.

(m) Respondent erred in asserting the accuracy-related penalty in 2018 and 2019.

5. Facts upon which Petitioner relies as the basis for her case are as follows:

(a) On information and belief, Petitioner properly reported Schedule E3 royalty income in 2018.

(b) Petitioner properly reported Other Expenses on Schedule C7 in 2018.

(c) Petitioner properly reported the deduction for Legal and Professional Services in 2018.

(d) Petitioner properly reported an Itemized Deduction attributable to a charitable contribution carryover in 2018.

(e) On information and belief, Petitioner properly reported Qualified Business Income Deductions in 2018 and 2019.

(f) Petitioner properly reported a deduction for Other Expenses on Schedule E2 in 2019.

(g) Petitioner properly reported a deduction for Utilities on Schedule E2 in 2019.

(h) Petitioner properly reported a deduction for Taxes on Schedule E2 in 2019.

(i) Petitioner properly reported a deduction for Management Fees on Schedule E2 in 2019.

(j) Petitioner properly reported a deduction for Insurance on Schedule E2 in 2019.

(k) Petitioner properly reported a deduction for Depreciation on Schedule E2 in 2019.

(l) Petitioner properly reported a deduction for Depreciation on Schedule E1 in 2019.

(m) If any tax deficiency is due from Petitioner, the accuracy-related penalty should not apply because Petitioner has acted reasonably and in good faith.

6. The deficiency notice includes correlative adjustments to self-employment tax and the deduction for self-employment tax. These correlative adjustments will be redetermined when the disputed adjustments are resolved.

WHEREFORE, Petitioner prays that this court try the case and:

1. Determine that there are no deficiencies or additions to tax due from Petitioner for the years in issue.

2. Grant Petitioner such other and further relief to which she may be entitled, including the determination of an overpayment if appropriate.

DATED: April 17, 2023

Michael C. Cohen
T.C. Bar No. CM 0402
De Castro, West, Chodorow, Mendler & Glickfeld, Inc.
10960 Wilshire Boulevard, Fourteenth Floor
Los Angeles, CA 90024-3881
Telephone: (310) 478-2541
Email: mcohen@dwclaw.com