When “I Did the Work” Isn’t Enough: Lessons from a $470,000 Tax Court Loss

T.C. Memo. 2026-105 (West v. Commissioner), filed October 7, 2026

Andrew B. West managed businesses for Texas businessman Oscar Leo Quintanilla, owned several LLCs of his own, and in 2014 entered a commodities trading partnership in which Quintanilla put up all the capital and West contributed his labor. When the IRS came calling for 2015 and 2016, West found himself defending nearly half a million dollars in deficiencies and penalties—and the Tax Court largely sided with the Commissioner. The case is a masterclass in what goes wrong when business and personal finances blur, and when a taxpayer tries to prove his case after trial rather than at it.

The setup

West’s returns for 2015 and 2016 reported income and deductions across three Schedules C—”Management Services,” “MPC Equipment LLC,” and “ABW Equipment Rentals LLC.” The Court found income and deductions were “not consistently allocated to the appropriate Schedules C,” and the IRS’s bank deposits analysis turned up $162,091 in unreported 2015 income. The examination also disallowed nearly $1 million in deductions across 16 categories.

Then West raised the big argument: he claimed a $6.8 million ordinary loss from the commodities partnership for 2016, carried back to 2015, which he said wiped out the deficiencies entirely.

Four issues, mostly lost

1. Unreported income. West challenged two deposits—a $115,870.52 reimbursement from Quintanilla for a car purchased for Quintanilla’s son, and a $50,000 item he said was a refund from Water Well Services. The car reimbursement argument was correct—but the IRS had already treated that deposit as non-taxable in its analysis, so there was nothing to correct. The $50,000 claim failed because West couldn’t point to any deposit into his accounts matching a Water Well refund; the only check in the record was marked “For Loan pmt.” The $162,091 adjustment stood.

2. Schedule C deductions. This is where the case gets painful. West submitted eight spreadsheets totaling hundreds of thousands in claimed deductions—but:

  • He submitted no spreadsheets at all for eight categories of disallowed deductions (insurance, office expenses, 2016 travel, and others), which the Court sustained without further discussion.
  • His spreadsheets didn’t match his tax returns—in several instances claiming deductions far larger than what he’d originally reported, with no explanation for the discrepancy. The Court found this “undermine[d] the credibility of his position.”
  • Many invoices were missing Bates numbers or absent entirely, and most were generated by Quintanilla’s centralized bill-paying operation—meaning they showed money moving between West and related entities, not payments to actual third parties. As the Commissioner put it, West proved he “took money out of his left pocket and put it in his right pocket.”

On the merits, the Court allowed a handful of items: $11,100 in accounting fees to preparer Timothy Braden, $20,000 to attorney Ricardo Cedillo, $20,000 to “Strasserber,” $5,000 to Smith Robertson, roughly $1,294 in QMC-related fees, $15,565 in repairs (Water Well and Prime Materials), and—notably—a $112,257 repair deduction paid to Q-Haul through the 2015 Asset Purchase Agreement, which the Court found substantiated even though West hadn’t put it on a spreadsheet.

But the travel expenses were fatal. Because they involved a private airplane and helicopter—”listed property” under § 280F—they required strict substantiation under § 274(d): amount, time, place, and business purpose. West had no travel log, calendar, or flight log. Worse, some invoices expressly said “PURPOSE: PERSONAL” (including one noting “Brad doctor appointment”), and others showed costs split with Quintanilla that West claimed in full. The Court allowed none of it beyond what the IRS had already conceded.

3. The partnership loss. This was the centerpiece of West’s case, and it failed on the most basic partnership tax principle: basis. Quintanilla contributed all the capital; West contributed only his time and labor. His basis at formation was zero. West argued his CTA promissory note—under which his 50% share of losses was deemed borrowed from Quintanilla—gave him basis. But the note ran to Quintanilla personally, not to the partnership, and “the contribution of a partner’s own note to his partnership isn’t the equivalent of a contribution of cash.” His at-risk argument failed too: § 465(b)(3)(A) excludes amounts borrowed from a person with an interest in the activity, and Quintanilla was the other 50% partner. The 2015 Asset Purchase Agreement didn’t satisfy the note either—it was a $4.5 million sale, not a repayment of partnership debt.

4. Accuracy-related penalties. With understatements clearly exceeding the statutory thresholds, the § 6662(a) penalty applied. West’s reasonable-cause arguments—that Quintanilla was hostile and withheld documents, that the IRS refused to accept “27 or more boxes” of evidence—went nowhere. As the Court noted, he had the opportunity to present that evidence himself at trial.

The procedural cautionary tale

Perhaps the most instructive part of the opinion is what the Court refused to consider. After trial, West attached 200+ pages of documents to each of his briefs—bank statements, invoices, canceled checks, an unsigned affidavit from a CPA, and a new spreadsheet with columns labeled “Testimony” and “Explanation” where he purported to testify in writing about each expense.

The Court would have none of it. Evidence must be offered at trial; post-trial affidavits and attachments don’t count. The “Testimony” column was “not equivalent to actual testimony.” And when West complained he’d been “cut off” while testifying, the Court effectively said: you had your chance, and you were warned repeatedly—including at the close of trial—that facts asserted in briefs must be supported by evidence given at trial.

Takeaways

  1. Keep business and personal separate. West “intermingled his personal and business expenditures,” and it poisoned his ability to prove anything. The invoices prepared by Quintanilla’s staff at West’s direction showed payments, but not business purpose.
  2. Basis requires an economic contribution. Sweat equity doesn’t create basis. Neither does your own note to your partner. If you want to deduct partnership losses, you need capital at risk—and debt owed to a partner with an interest in the activity doesn’t count under § 465.
  3. § 274(d) is a cliff, not a speed bump. No contemporaneous logs, no deduction—and Cohan estimation is unavailable for travel and listed property.
  4. Your tax return is your first witness. Claiming dramatically more at trial than you reported—with no reconciliation—invites the Court to question everything you say.
  5. Trial is the main event. Evidence not admitted at trial generally can’t be smuggled in through a brief. If you’re representing yourself, the deadline for making your record is the trial itself.

The case will go to a Rule 155 computation, but the shape of the outcome is clear: West substantiated slightly more deductions than the IRS conceded, but lost the unreported income fight, the partnership loss entirely, and the penalty argument. A costly reminder that in tax litigation, documentation and timing aren’t formalities—they’re the case.