Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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D.C. Cir.: IRS Can’t Make Taxpayers Run ‘Obstacle Course’ to Get Refund
Blog of the Legal Times, Divided Appeals Court Rules Against IRS In Tax Refund Dispute: A divided federal appeals court in Washington said a group of taxpayers will be allowed to challenge the procedure the IRS set up to refund billions of dollars collected through an unlawful tax on telephone calls. [Cohen v. United States,…
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Hickman on D.C. Circuit’s Intermountain Decision
Kristin E. Hickman (Minnesota) offers her thoughts on yesterday’s decision in Intermountain Insurance Service of Vail LLC v. Commissioner, No. 10-1204 (D.C. Cir. June 21, 2011): Much like the Federal Circuit, the D.C. Circuit applied Chevron analysis to conclude that § 6501 is ambiguous and that Treasury’s interpretation of that provision is reasonable. Because the statute…
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3d Cir. Rejects Tax Shelter, Blasts Schering-Plough’s ‘Chutzpah’
The Third Circuit today upheld the district court’s rejection of a $690m assignment of future income tax shelter claimed by Schering-Plough. Merck v. United States, No. 10-2775 (3d Cir. June 20, 2011). At the end of its opinion, the Third Circuit blasted Schering-Plough’s “chutzpah”: Schering-Plough further complains that the IRS had inappropriate motives for pursuing…
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Forbes: The IRS’s War Against Charitable Donations of Facade Easements
Forbes: Feds Sue Trust Over Historic Easement Tax Breaks, by Janet Novack: The IRS’s seven year campaign against questionable charitable deductions for the donation of historic building facade easements has ratcheted up another notch. On Tuesday, the Department of Justice filed a lawsuit seeking to enjoin the non-profit Trust for Architectural Easements from practices that…
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Tax Court Rejects Private Equity Manager’s ‘Blame the Accountant’ Defense
The Tax Court yesterday denied the request of Stephen G. Woodsum, founding managing director of Summit Partners, a private equity firm, to waive a $104,000 penalty assessed by the IRS for his failure to report on his return $3.4 million of income from the termination of a swap transaction by Deutsche Bank for which he received a Form 1099-MISC.…
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L.A. Tax Lawyer Sentenced in Hollywood Kickback, Tax Evasion Case
Following up on my prior post, L.A. Tax Lawyer Pleads Guilty to Tax Evasion in Hollywood Kickback Scheme (Dec. 14, 2009): New York Times, $23 Million Payout to I.R.S. in Hollywood Plea Deal: As the criminal case against the former Hollywood tax lawyer Matthew Krane heads to a conclusion — Mr. Krane is to be sentenced after…
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WSJ on the Cat Lady’s Tax Deductions
Following up on last week's post, Attorney Can Deduct Some, But Not All, Expenses of Caring for 70-80 Foster Cats: Wall Street Journal, Stray Cat Strut: Woman Beats IRS, by Laura Saunders: When Jan Van Dusen appeared before a U.S. Tax Court judge and a team of Internal Revenue Service lawyers more than a year…
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Strip Club Liable for $125k Sales Tax; Lap Dances Are Not Tax-Exempt as ‘Musical Performances’ or ‘Theater-in-the-Round’
Albany Times-Union, Court: Lap Dances Aren’t Tax-Exempt: While a lap dance might prompt a strong reaction from an audience, it doesn’t rise to the level of art — at least according to a state appellate court. Thursday’s ruling said entertainers at a local strip club are subject to sales taxes, and their expressions are not considered…
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Zelinsky: New York’s Irrational Income Taxation of Nonresidents
Edward A. Zelinsky (Cardozo), NY’s Irrational Income Taxation of Nonresidents: The Barker Decision (Oxford University Press Blog): As a law professor, I routinely commute from my home in New Haven, Connecticut to Manhattan where I teach my classes at the Cardozo Law School of Yeshiva University. On most days when I don’t teach, I work…
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Supreme Court Denies Cert. in Wesley Snipes’ Tax Appeal
The Supreme Court this morning denied the cert. petition of Wesley Snipes, who is serving his three-year sentence on three counts of willful failure to file tax returns under § 7203. The cert. petition had raised these two issues: Is an accused person deprived of the right under Article III and the Sixth Amendment to be tried only by a jury of…
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Attorney Can Deduct Some, But Not All, Expenses of Caring for 70-80 Foster Cats
The Tax Court on Thursday allowed an attorney to deduct some, but not all, of the expenses of caring for 70-80 foster cats as charitable deductions. Van Dusen v. Commissioner, 136 T.C. No. 25 (June 2, 2011): Van Dusen, a resident of Oakland, California, is an attorney who cared for cats in her private residence…
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Schwidetzky: Musings on Watson and the John Edwards Sub S Tax Shelter
Walter D. Schwidetzky (Baltimore), Musings on Watson and the John Edwards Sub S Tax Shelter: Last December, an Iowa federal district court came out with a decision on the “John Edwards gambit” (Watson v. United States, 107 A.F.T.R.2d 311 (IA D.C. 2010)) TaxProf blog coverage here and here.] Some musings: In Watson, the taxpayer formed…
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More on the ‘John Edwards Sub S Tax Shelter’ Case
Ryan M. Vassar (J.D. 2011, South Texas) has posted Economically Analyzing the Definition of ‘Reasonable Compensation’ as It Relates to Employment-Tax Liability Under the Analysis of David E. Watson, P.C. v. United States on SSRN. Here is the abstract: This note analyzes the “definition” of “reasonable compensation” under the IRS’s revenue ruling and how the Tax Code…
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Senior Manager Files $350m Gender Discrimination Class Action Against KPMG
From the plaintiff’s press release: Aiming to put an end to the systemic gender discrimination at KPMG, a former female Senior Manager filed a $350 million class action discrimination lawsuit against the company today in the U.S. District Court for the Southern District of New York. The Plaintiff, Donna Kassman, lives in New York and worked…
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10th Circuit Adds to Circuit Split Over 6-Year SOL for Overstatement of Basis
The Tenth Circuit yesterday reversed the Tax Court and held that Reg. § 301.6501(e)-1 is entitled to Chevron deference and concluded that overstated asset basis triggers the six-year statute of limitations. Salman Ranch Ltd. v. Commissioner, No. 09-9015 (10th Cir. May 31, 2011). The Government now has won three of the five appellate cases on this issue.…
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Zelinsky: The Inadvisibility of Constitutionalizing Tax Expenditure Analysis
Edward A. Zelinsky (Cardozo) has published Winn and the Inadvisibility of Constitutionalizing Tax Expenditure Analysis, 121 Yale L.J. Online 25 (2011): Tax expenditure analysis, despite its contribution to tax policy debate, is ill-suited as a tool of constitutional decisionmaking. Sometimes tax provisions are, for constitutional purposes, equivalent to direct monetary outlays; sometimes they are not.…
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Smith: Friedland — Did the Tax Court Blow its Whistleblower Jurisdiction?
Carlton M. Smith (Cardozo) has published Friedland: Did the Tax Court Blow its Whistleblower Jurisdiction?, 131 Tax Notes 843 (May 23, 2011). Here is the abstract: This article analyzes Friedland [T.C. Memo. 2011-90 (Apr. 25, 2011)], a recent Tax Court memorandum opinion, and concludes that in light of recent Supreme Court opinions, the Tax Court was…
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Supreme Court to Decide If Underreporting Income Merits Deportation
The Supreme Court on Monday granted certiorari in Kawashima v. Holder, 615 F.3d 1043 (9th Cir. 2010). The question presented is: Whether, in direct conflict with the Third Circuit, the Ninth Circuit erred in holding that Petitioners’ convictions of filing, and aiding and abetting in filing, a false statement on a corporate tax return in…
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Does Arizona Christian School Doom Challenge to Pastors’ Housing Allowance?
Christianity Today, Standing on Shaky Ground: Pastor Tax Break Threat Lessens: Legal scholars say a recent Supreme Court decision upholding Arizona’s tax credits for scholarship donations could contain the seeds of defeat for a pending California challenge to the housing allowance enjoyed by pastors. … The ruling sends a signal that the Freedom From Religion…
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Daugerdas, Three Others Convicted in Criminal Tax Shelter Case
Former Jenkens & Gilchrist tax partner Paul M. Daugerdas [right, featured in The American Lawyer December 2003 cover story, Helter Shelter] and three others (Donna M. Guerin, Denis M. Field, and David Parse) were convicted yesterday in a criminal tax shelter case. They remain free pending sentencing on October 14. DOJ Press Release ABA Journal Bloomberg…
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No $120k Internet Poker Loss Deduction for Lawyer Denied BigLaw Partnership
Canadian Lawyer, Tax Court Nixes Lawyer’s Attempt to Write Off Internet Poker Losses: A Toronto lawyer who left Bay Street in 2006 in an abortive attempt to make it as a professional Internet poker player has failed in a bid to write off the $120,000 loss he ran up that year before slinking back to…
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TP Has $28k Income on Paying $45k on $20k Student Loan ($73k With Interest)
Martin v. Commissioner, T.C. Summ. Op. 2011-62 (May 19, 2011): Petitioner attended college in the early 1980s. Petitioner borrowed $19,986.72 from the Connecticut Student Loan Foundation (CSLF) in order to finance his college education. At some point petitioner became delinquent in his loan payments. In 1988 CSLF filed a complaint in the Connecticut Superior Court.…
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6th Cir: IRS Tax Lien Has Priority Over Mortgage Lien Filed in Wrong County
Mortgage Electronic Registration Systems Inc. v Tammy Church, No. 09-2513 (6th Cir. May 19, 2011): It sometimes pays to check a map. The mortgage lender in this case did not, and as a result it recorded an interest in Tammy Church’s property in the wrong county. Luckily for the public fisc, the IRS, which also placed…
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Taxpayer With Tax LL.M. Lacked Substantial Authority for Tax Return Position
Brown v. Commissioner, T.C. Memo. 2011-83 (Apr. 12, 2011): In 2005, Bruce Brown held a life insurance contract with Northwestern Mutual Life Insurance Company. On December 18, 2005, Northwestern terminated the contract, using its entire cash value of $37,365.06 to pay policy debt. Petitioners (the Browns) did not report any gain or loss on their…
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Supreme Court Adds Fuel to Tax Expenditure Debate
Bloomberg, Court Backs Separation of Tax and Spending in Church-State Case, by Richard Rubin: The U.S. Supreme Court, in a case involving separation of church and state, provided rhetorical backing for congressional Republicans who argue that government grants and tax credits aren’t equivalent. The court yesterday upheld an Arizona program that gives taxpayers a credit…