Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Court: Defendant Must Take Stand to Disprove ‘Willfull’ Tax Evasion
Can an Accused Tax Evader Submit Evidence of a Good-Faith Belief Without Taking the Stand to Testify to It?: Willfully evading federal income taxes is a felony. 26 U.S.C. § 7203. In the context of the tax laws, a “willful” violation is the “voluntary, intentional violation of a known legal duty.” United States v. Cheek,…
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Court Denies Tax Lawyer’s $100,000 Medical Expense Deduction for Prostitutes and Porn
New York Law Journal, Tax Panel Rejects Lawyer's Bid to Deduct Spending for Sex: A state tax appeals board has denied a retired Brooklyn lawyer's attempts to claim hundreds of thousands of dollars he spent on prostitutes, massages, pornography and other sex-related activities as deductions for "medical expenses." Among William G. Halby's disallowed deductions were…
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DOJ Tax Division Chief/Adjunct Tax Prof, Former Student Square Off in D.C. Circuit in Telephone Excise Tax Refund Case
The Blog of the Legal Times, Full D.C. Circuit Digs Into IRS Tax Dispute: A group of taxpayers are trying to revive a suit against the IRS that challenges the procedure the agency set up for the collection of a refund of a tax on phone calls that netted the government billions of dollars. The…
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Smith: Gaps in the 7th Circuit’s Innocent Spouse Opinion in Lantz
Following up on last week's post, Tax Court Refuses to Follow 7th Circuit, Again Invalidates Innocent Spouse Reg (Sept. 23, 2010): Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), Gaps in the Seventh Circuit's Reasoning in Lantz, 128 Tax Notes 1375 (Sept. 27, 2010): Last year the Tax Court invalidated an IRS regulation [Reg. § 1.6015-5(b)(1)] that…
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Willens: Private Rulings Inadmissible as Evidence
Robert Willens (Robert Willens LLC, New York; Adjunct Professor, Columbia), IRS Ruling Inadmissible as Evidence (CFO.com): A federal court decision related to contingent liabilities underscores the limited role an IRS private-letter ruling may play in a legal argument. This month a federal claims court ruled that private-letter rulings (PLRs) issued by the IRS were inadmissible…
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Tax Court Refuses to Follow 7th Circuit, Again Invalidates Innocent Spouse Reg
Following up on my prior posts: Divided Tax Court Invalidates Innocent Spouse Reg (Apr. 8, 2009) 7th Cir. Reverses Tax Court, Upholds 2-Year Deadline on Innocent Spouse Claims (June 8, 2010) A divided (8-5) Tax Court yesterday (in a case in which Tax Prof Ljubomir Nacev (Northern Kentucky) represented the taxpayer) refused to follow Judge…
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Tax Preparer Who Threatened Prosecutor Is Sentenced to 3 to 6 Years
New York Law Journal, Tax Preparer Who Threatened Prosecutor Is Sentenced to 3 to 6 Years: A tax preparer who sent threatening letters to a Manhattan assistant district attorney who had twice prosecuted him was sentenced Friday to three to six years behind bars. Prosecutors arrested Jack Chang, 55, last summer after Gilda Mariani, the…
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A CPA’s Advice for Professors Wanting to Deduct Research Expenses
Following up on my posts (here and here) on last week's Tax Court decision denying a professor's claimed deductions for research expenses: Joe Kristan, Tax Traumas of the Tenured: Some academics are choking on their brie and wine over a case we mentioned last week. The case involved a professor who was not allowed Schedule C deductions for some…
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Court Upholds NYU’s Denial of MBA to PwC CPA Guilty of Insider Trading
The U.S. District Court for the Southern District of New York on Monday upheld NYU's decision to deny an M.B.A. degree from Ayal Rosenthal, a CPA who previously pled guilty to insider trading charges while working for PriceWaterhouseCoopers. NYU also changed his grade in the professional responsibility course to an "F" (Mr. Rosenthal worked as…
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More on the Tax Treatment of Professors’ Research Expenses
Following up on yesterday's post, Tax Court Denies Prof's Claimed Deductions for Research: Stephen Bainbridge (UCLA) asks So Why Are My Scholarly Book Royalties Reported on Schedule C?: Since writing treatises and case books thus is part of my "services as an employee," why does my tax preparer insist on reporting the royalties from those…
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Tax Court Denies Prof’s Claimed Deductions for Research
The Tax Court on Thursday denied a CUNY tenured math professor's $15,397 deduction for expenses related to his research and writing activities (including $2,108 for a Sony Vaio notebook computer): Petitioner has, potentially, two trades or businesses. He is employed as a professor of mathematics, and he is engaged in research and writing on mathematical issues. He "wears…
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Quellos CEO, Tax Attorney Plead Guilty in Tax Shelter Case, to Pay $7m to IRS & Give Ethics Lectures at NYU, UW
ABA Journal, Ex-Quellos Tax Attorney Takes Plea, Will Help Pay $7M, Speak at Law School: The former chief executive officer and tax attorney for the Quellos Group LLC hedge fund have accepted a plea agreement that will require them to pay the IRS up to $7M and cover the estimated $400,000 cost of their prosecution…
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Gerzog: The Price of an FLP Annual Exclusion
Wendy C. Gerzog (Baltimore) has published The Price of an FLP Annual Exclusion, 128 Tax Notes 1071 (Sept. 6, 2010). Here is the abstract: In Price [v. Commissioner, T.C. Memo. 2010-2], the Tax Court explored once again whether gifts of interests in a family limited partnership qualify for the annual exclusion. All Tax Analysts content is available through…
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SDNY: Law Firm’s Role in BDO Tax Fraud Case Presents Conflict of Interest
New York Law Journal, Law Firm's Role in BDO Tax Fraud Case Presents Conflict, Judge Finds: A federal judge has told attorneys with Sonnenschein, Nath & Rosenthal there is no way the firm can represent both an alleged tax fraud conspirator and a cooperating witness for the government. Southern District of New York Judge William…
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9th Cir.: Reversible Error to Refuse Continuance to Allow Tax Evasion Defendant to See His Dying Son
A divided (2-1) Ninth Circuit yesterday reversed the tax evasion conviction of Garth Kloehn on the ground that the district court abused its discretion in refusing to continue his trial for two days to allow him to see his dying son. United States v. Kloehn, No. 06-50456 (9th Cir. Aug. 30, 2010). Judge Trott dissented, arguing that the ditrict court’s error…
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2d Cir. Upholds KPMG BLIPS Tax Shelter Convictions
The Second Circuit on Friday upheld the convictions former KPMG tax partner Robert Pfaff, former KPMG senior tax manager John Larson, and former Sidley Austin partner Raymond Ruble of tax evasion in connection with the sale of BLIPS tax shelters. The court, however, reduced Mr. Larson’s fine by 50% (to $3 million). United States v. Pfaff, No. 09-1702 (2d Cir. Aug. 27, 2010).…
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Tax Court Cites Monty Python to Excuse Taxpayer From Penalty
Shao v. Commissioner, T.C. Memo. 2010-189 (Aug. 26, 2010): In Shao’s case we don’t find the circumstances that led the Court to penalize Calloway [Calloway v. Commissioner, 135 T.C. ___ (July 8, 2010)] — there is no evidence of a wink-wink-nudge-nudge-say-no-more arrangement with Derivium. See Monty Python’s Flying Circus: How To Recognise Different Types of…
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1st Circuit Upholds Check-the-Box Regs
The First Circuit on Tuesday summarily affirmed Medical Practice Solutions, LLC v. Commissioner, 132 T.C. 125 (2009), joining the Second (McNamee v. Dept. of the Treasury, 488 F.3d 100 (2d Cir. 2007)) and Sixth (Littriello v. United States, 484 F.3d 372 (6th Cir. 2007)) Circuits in upholding the validity of the check-the-box regulations. Medical Practice Solutions v. Commissioner,…
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Lawsuit: IRS Using Bob Jones University to Deny Tax-Exempt Status to Pro-Israel Charity
Politico, Pro-Israel Group Claims IRS Persecution: A hawkish pro-Israel group today filed a lawsuit against the Commissioner of the IRS containing the explosive allegation that the IRS is devoting special scrutiny to pro-Israel groups whose policies conflict with that of the administration. The group Z Street, intended as a conservative Zionist answer to the liberal…
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Johnson: Intermountain and the Importance of Administrative Law in Tax Law
Steve R. Johnson (UNLV) has published Intermountain and the Importance of Administrative Law in Tax Law, 128 Tax Notes 837 (Aug. 23, 2010). Here is the abstract: This report argues that the tax community cannot safely ignore general principles of administrative law. This fact is illustrated by the Intermountain case recently decided by the Tax…
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California AG Jerry Brown Sues ‘Tax Lady’ Roni Deutch for ‘Swindling Thousands of Clients’
California Attorney General (and Democratic gubernatorial candidate) Jerry Brown has filed a $34 million lawsuit against Roni Deutch, claiming that the self-described "Tax Lady" has swindled thousands of customers with tax problems with the IRS. From the press release: Attorney General Edmund G. Brown Jr. today filed a $34 million lawsuit against television's "Tax Lady Roni…
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2d Cir.: Foreign Government UN Missions Are Not Subject to NYC Property Tax
City of New York v. The Permanent Mission of India to the United Nations, No. 08-1805 to 08-1806 (2d Cir. Aug. 17, 2010): Appeal from an opinion and order of the U.S. District Court for the Southern District of New York (Rakoff, J.) granting summary judgment to the Plaintiff the City of New York. The District Court…
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German Court Holds Unconstitutional Higher Inheritance Tax on Gay Couples
Germany's highest court ruled on that same-sex couples are entitled to the same inheritance tax rights as married heterosexual couples. Associated Press Reuters Spiegel (Hat Tip: Jeremy Bearer-Friend.)
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Justice O’Connor Blocks IRS Imposition of ‘Business Death Penalty’ on Tax Preparer
Daily Business Review, O’Connor, 11th Circuit Panel Side With Tax Preparer Against IRS: Tax preparers … are under increasing scrutiny [by the IRS]. Nobody knows this better than Abelardo Ernest Cruz, who found the IRS aiming to shut down his Miami tax preparation service for good. Yet Cruz won a big battle last month that will give…
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District Court: First Amendment Prohibits Complete Ban on Lawyer-‘Huckster’s’ Rendering of Tax Advice
A U.S. district court held that completely barring a tax lawyer who promoted abusive tax shelters from offering tax advice would violate the First Amendment. Instead, the court enjoined the lawyer from advising on certain tax plans, required him to seek IRS approval before advising on other tax strategies, and required him to inform the IRS of any new…