Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Former TV Anchor Glad She Challenged IRS
Following up on my earlier post, Tax Court Denies Deduction for TV News Anchor’s Clothing Expense: Columbus Dispatch, Former TV Anchor Glad She Challenged IRS: Even the IRS acknowledged that former television news anchor Anietra Hamper kept meticulous records of the clothes and other items she bought for business use. But detailed receipts weren’t enough.…
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Tax Court: Woman Can Deduct Funds Withdrawn by Abusive Boyfriend
The Tax Court yesterday held that a women could deduct funds withdrawn from her businesses by her abusive boyfriend as theft losses. Herrington v. Commissioner, T.C. Memo. 2011-73 (Mar. 30, 2011); In 1991 petitioner was working two jobs to support herself and her two young children. One job was as the owner of an H&R Block franchise; the…
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Tax Lawyer’s Conviction in Tax Shelter Case Results in Automatic Disbarment
The New York Appellate Division last week held that a tax lawyer’s criminal conviction in a tax shelter case results in automatic disbarment from the New York bar. Matter of Nissenbaum, 2011 N.Y. Slip Op 01847 (N.Y. App, Div. Mar. 8, 2011): According to the petitioner, the respondent “was convicted of conspiring with others to…
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IRS Tries to Bogart Medical Marijuana Club’s Deductions
Marin Independent Journal, IRS Tells Fairfax Medical Marijuana Dispensary It Owes Millions in Unpaid Taxes: The IRS has notified the Marin Alliance for Medical Marijuana in Fairfax that it owes millions of dollars in unpaid back taxes, according to the alliance’s founder and director, Lynnette Shaw. Shaw said the IRS audited the alliance’s tax returns…
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Federal Circuit Exacerbates Split on Overstatement of Basis and 6-Year SOL
The Federal Circuit yesterday exacerbated the split in the circuits in holding that a taxpayer’s overstatement of basis was an omission of income under § 6501(e) and thus triggered the six-year statute of limitations. Grapevine Imports Ltd. v. United States, No. 2008-5090 (Fed. Cir. Mar. 11, 2011). Kristin Hickman (Minnesota): Whereas the Seventh Circuit in Beard found that the statute unambiguously supports the…
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Tax Court: Settlement Payments From Auto Accidents Are Not Casualty Losses
The Tax Court held yesterday that settlement payments resulting from automobile accidents do not constitute deductible casualty losses under § 165(c)(3). Pang v. Commissioner, T.C. Memo. 2011-55 (Mar. 9, 2011): In Whitney v. Commissioner, 13 T.C. 897, 899 (1949), this Court observed that “the losses allowable under § 23(e)(3) [a predecessor to § 165] are specifically limited to…
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The Tax Implications of Obama’s Abandonment of the Defense of Marriage Act
The Department of Justice announced today that the Obama Administration believes that the Defense of Marriage Act in unconstitutional and will stop defending it in court, including in the Windsor v. United States case challenging the constitutionality of limiting the estate tax marital deduction to hererosexual couples. (Hat Tip: Bob Kamman.) From Pat Cain (Santa Clara):…
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Bogdanski: Retained Interests and Estate of Stewart
John A. Bogdanski (Lewis & Clark) has published Upstairs, Downstairs: Retained Interests and Estate of Stewart,130 Tax Notes 911 (Feb. 21, 2011): Section 2036(a) hauls back into a decedent’s gross estate, for federal estate tax purposes, property that she gave away while alive, if the decedent retained at death the income from the property or the right to…
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9th Circuit Reverses Denial of Estate’s § 2053 Deduction for Palimony Claim
The Ninth Circuit yesterday, in a 2-1 decision, held that the district court wrongly concluded that an estate could not deduct the amount paid in settlement of a palimony claim under § 2053. Estate of Shapiro v. Commissioner, No. 08-17491 (9th Cir. Feb. 22, 2011). From the majority opinion: Bernard Shapiro and Cora Jane Chenchark lived together…
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Critiquing the 3d & 7th Circuits’ Approval of the 2-Year SOL Innocent Spouse Reg
Following up on my earlier post, 3d Cir. Joins 7th Cir. in Reversing Tax Court and Upholding Innocent Spouse Reg (Jan. 20, 2011): A. Lavar Taylor, Adjunct Professor at Chapman and Director of the Center for the Fair Administration of Taxes, passed along its motion in the Ninth Circuit for leave to file this amicus brief on behalf…
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Court: NY Can Tax All Income of Owner of NY Vacation Home Used 17 Days/Year
Wall Street Journal, Out-of-State Owners Could Face Tax Bill: Connecticut and New Jersey residents with a Hamptons summer cottage or a Manhattan pied-a-terre are about to get a nasty surprise: New York state wants more taxes from them. A New York court ruled last month that all income earned by a New Canaan, Conn., couple…
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Pennsylvania Supreme Court to Decide Definition of ‘Public Charity’
Howard Bashman reports that the Pennsylvania has agreed to hear an interesting case on the meaning of the phrase "purely public charity" in the Pennsylvania constitution: The specific question that the court has granted review to consider and resolve is: Whether the Pennsylvania Legislature's enactment of criteria in Act 55 for determining if an organization qualifies as a…
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5th Circuit Joins Three Other Circuits: 6-Year SOL N/A to Overstatement of Basis
The Fifth Circuit today sided with the Fourth (Home Concrete & Supply LLC v. United States, No. 09-2353 (4th Cir. Feb. 7, 2011)), Ninth (Bakersfield Energy Partners LP v. Commissioner, 568 F.3d 767 (9th Cir. 2009)), and Federal (Salman Ranch Ltd. v. United States, 573 F.3d 1362 (Fed. Cir. 2009)) Circuits, holding that the extended six-year statute of…
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4th Circuit Joins 9th & Fed. Circuits: 6-Year SOL N/A to Overstatement of Basis
The Fourth Circuit today reversed the district court and sided with the Ninth (Bakersfield Energy Partners LP v. Commissioner, 568 F.3d 767 (9th Cir. 2009)) and Federal (Salman Ranch Ltd. v. United States, 573 F.3d 1362 (Fed. Cir. 2009)) Circuits and the taxpayer, holding that the extended six-year statute of limitations of § 6501(e)(1)(A) did not apply to…
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Court: Blackwater Contractor in Iraq Cannot Exclude Compensation Under § 112
The Tax Court yesterday held that a Florida man who earned $98,400 in 2005 working for Blackwater (since renamed Xe) providing security services to the U.S. Army in Iraq could not exclude the compensation from income under § 112 as “combat zone compensation of members of the Armed Forces.” Holmes v. Commissioner, T.C. Memo. 2011-26 (Jan. 31,…
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‘You’ve Got a Buddy in the Tax Fraud Business’
The former Cincinnati-based in-house counsel for the former 30-store retail chain Buddy’s Carpet — which carpet-bombed local media with advertising with the tag line “You’ve Got a Buddy in the Carpet Business,” a play on the late former owner Burton B. “Buddy” Kallick’s name — was sentenced to 18 months in federal prison for his role in a…
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Tax Court Rejects Doctor’s Attempt to Avoid 15.3% Employment Tax
Joe Kristan has a great post on Monday’s Tax Court decision rejecting a doctor’s attempt to structure his practice to limit the 15.3% self-employment tax (and upholding an accuracy-related penalty). Robucci v. Commissioner, T.C. Memo 2011-19 (Jan. 24, 2011).
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7th Circuit: Overstatement of Basis Is Omission of Income, Triggering 6-Year SOL
The Seventh Circuit handed the IRS a big victory today in a Son-of-BOSS tax shelter case, reversing the Tax Court (Beard v. Commissioner, T.C. Memo. 2009-184 (Aug. 11, 2009)) and treating a taxpayer’s overstatement of basis as an omission of income under § 6501(e), triggering the six-year (not three-year) statute of limitations. Beard v. Commissioner, No. 09-3741…
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Johnson: More on Mannella
Following up on last week’s posts: 3d Cir. Joins 7th Cir. in Reversing Tax Court and Upholding Innocent Spouse Reg (Jan. 20, 2011) Hickman: Dismayed by Mayo? Check Out the Mannella Dissent (Jan. 20, 2011) Steve Johnson (UNLV), More on Mannella: The most fun part of Mannella to ruminate about is Judge Ambro’s dissent. He agreed…
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Court Gives IRS Rare Win in ‘John Edwards Sub S Tax Shelter’ Case
Wall Street Journal, The IRS Targets Income Tricks, by Laura Saunders: [A] recent U.S. district court case [was] won by the IRS against David Watson, a CPA in West Des Moines, Iowa. At issue: a common tax-cutting maneuver available to the owners of millions of closely held businesses. The case, David E. Watson P.C. v.…
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Hickman: Dismayed by Mayo? Check Out the Mannella Dissent
Following up on my prior posts (links below) on Mayo Foundation for Medical Education & Research v. United States, No. 09-837 (U.S. Jan. 11, 2011); and . Mannella v. Commissioner, No. 10-1308 (3d Cir. Jan. 19, 2011): Kristin Hickman (Minnesota), Dismayed by Mayo? Check Out the Mannella Dissent: The majority opinion in Mannella offers a rather straight-forward…
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3d Cir. Joins 7th Cir. in Reversing Tax Court and Upholding Innocent Spouse Reg
A divided Third Circuit yesterday followed the Seventh Circuit (Lantz v. Commissioner, No. 09-3345 (7th Cir. June 8, 2010)), and rejected the Tax Court (Manella v. Commissioner, 132 T.C. No. 10 (Apr. 13, 2009)), in upholding the requirement in Reg § 1.6015-5(b)(1) that claims for innocent spouse relief (Form 8857) be made within two years of the IRS’s…
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Greenaway: Mayo Foundation Cures Tax Myopia
Following up on last week’s commentary on the Supreme Court’s unanimous opinion in Mayo Foundation for Medical Education & Research v. United States, No. 09-837 (Jan. 11, 2011): Kristin Hickman (Minnesota), Goodbye National Muffler! Hello Administrative Law? (Jan. 11, 2011) Steve Johnson (UNLV), The Demise of Tax Exceptionalism (Jan. 12, 2011) Thomas Greenaway (KPMG, Boston), Mayo Foundation Cures…
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More Mayo: Johnson on the Demise of Tax Exceptionalism
Following up on yesterday’s post on the Supreme Court’s unanimous opinion in Mayo Foundation for Medical Education & Research v. United States, No. 09-837 (Jan. 11, 2011), from Steve Johnson (UNLV): Mayo does several good things. First, it clarifies that Chevron provides the analytical standard for judging general authority tax regs under § 7805 (a)…
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7th Circuit Nixes DePaul Law Prof’s Lawsuit Against Geico Over Car Repairs
Courthouse News Service, Court Nixes Class Action on Geico Insurance Fraud: The 7th Circuit dismissed a man’s prospective class action, accusing Geico of omitting necessary repairs from its collision-damage estimates, because the plaintiff had donated his car to charity after the crash without performing repairs. Steven Greenberger, a professor at DePaul University College of Law,…