In this episode of the Tax Smart REI Podcast, Thomas Castelli and Nathan Sosa dive into a recent Tax Court case that’s turning heads in the tax community.
They break down how a taxpayer’s DIY tax returns spiraled into a full-blown IRS audit, with the IRS reconstructing income through bank deposits, uncovering significant underreported receipts, and disallowing deductions when documentation couldn’t be produced, including depreciation tied to rental properties.
But the wildest part? The defense relied on AI-generated, hallucinated Tax Court case citations that didn’t actually exist. It's an expensive lesson in why AI isn’t ready to be your CPA and why “close enough” recordkeeping can get you crushed when the IRS starts asking questions.
If you’re investing in real estate, running a business, or leaning on AI for tax answers, this episode is a must-listen on why bookkeeping, documentation, and competent representation matter more than ever.
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