Taxpayer Fights IRS’s Loss Retooling, $5.5 Million Assessment

The IRS erred in assessing $5.5 million in tax deficiencies and penalties resulting from alleged misreported income, the owner of a mortgage company and consulting business told the US Tax Court.

Roy Clennan, founder of Mortgage Solutions Financial, said the IRS’s decision to disallow his $3 million Schedule E losses and increase his Schedule E income to $13 million in 2021 was arbitrary and capricious.

In 2021, Clennan and his wife had multiple sources of income, but their primary income came from passthrough and and cash distributions from Florida-based Cliffside Consulting LLC, a management consulting business that Roy owns and ...