Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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“The Kingdom of God Is Not Run on GAAP” — But This World Is
A federal jury last week convicted co-pastors Anthony and Harriet Jinwright of multiple counts of tax evasion and fraud. From the Charlotte Observer: [C]hurch finance expert Dan Busby, who heads the national Evangelical Council for Financial Accountability, reviewed the trial and called it "one of the most egregious cases" of pastoral misconduct that he's seen. Jinwright…
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Tax Court Imposes Mandatory e-Filing, Effective July 1, 2010
The Tax Court announced yesterday that it will make e-filing mandatory for most parties represented by counsel, effective for petitions filed on or after July 1, 2010: After completion of this transition to mandatory eFiling for represented parties, the requirement to eFile in the Tax Court will be substantially in accord with eFiling policies applicable…
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District Court Rejects FOCus Tax Shelter
The U.S. District Court for the Southern District of Mississippi on Friday rejected a KPMG-marketed “family office customized” (FOCus) tax shelter used to evade taxes on $18 million in capital gains through foreign currency straddles and a three-tiered partnership structure. Nevada Partners Fund LLC v. United States, Nos. 3:06cv379 to 3:06cv390 (S.D. Miss. Apr. 30, 2010): FOCus,…
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2d Cir. Rejects Firm’s ‘Bold Attempt’ to Contest IRS Levy
New York Law Journal, 2nd Circuit Rejects Firm's 'Bold Attempt' to Contest IRS Levy: A law firm partner's advances on partnership profits are subject to administrative levies imposed by the IRS, the 2nd U.S. Circuit Court of Appeals ruled Thursday. The circuit found that the advances, or partner "draws," at personal injury firm Moskowitz, Passman…
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Forbes: Can Tax Court Force IRS to Check Out Whistleblower’s Claim?
Forbes, Can IRS Be Forced To Check Out Informant’s Tip?: In related lawsuits with broad implications for the new tax whistleblower law, the U.S. Tax Court is set to rule on a bounty-seeking informant’s request that the IRS be ordered to investigate his tips. The matter involves the estate of Dorothy Dillon Eweson, one of…
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District Court Rejects Merck’s Request for New Trial in $690m Assignment of Future Income Tax Shelter
I previously blogged the district court's rejection of a $690 million assignment of future income tax shelter in Schering-Plough v. United States, 651 F.Supp.2d 219 (D.N.J. 2009). The district court today rejected the taxpayer's motion for a new trial. Merck & Co., Inc. v. United States, No. 05-2575 (D.N.J. Apr. 28, 2010) Hat Tip: Richard Jacobus.)
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Court: Pole Dancing Does Not Qualify for Artistic Exception to Sales Tax
New York Law Journal, Pole Dancing Is Not Art, N.Y. Tax Appeals Panel Rules: The gyrations of a pole dancer may be difficult to execute, but that does not make them art, a New York state tax appeals board has concluded in rejecting an administrative law judge's finding that the exotic dancing qualifies for a…
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Tax Court: Mortgage Disqualifies Charitable Deduction for Conservation Easement
The Tax Court yesterday denied a claimed charitable contribution deduction for a façade easement granted to a tax-exempt organization be cause the property was subject to a mortgage and thus "the conservation purpose [was not] protected in perpetuity" within the meaning of § 170(h)(2)(C) and § 170(h)(5)(A) and Reg, § 1.170A-14(a). Kaufman v. Commissioner, 134 T.C. No. 9 (Apr. 26, 2010).
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Textron Files Reply Brief in Tax Work Papers Case
I previously blogged the eleven amicus briefs filed in January in the U.S. Supreme Court (No. 09-750), supporting Textron's certiorari petition seeking review of the First Circuit's 3-2 en banc decision in United States v. Textron, Inc., No. 07-2631 (1st Cir. Aug. 13, 2009), which reversed the 2-1 panel decision and held that Textron's tax accrual work…
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Forbes: Family Swindled By Madoff Fights $61 Million IRS Estate Tax Bill
Forbes, Family Swindled By Madoff Fights $61 Million IRS Bill, by William P. Barrett: First the family of Norman F. Levy, the late New York City real estate tycoon, was swindled out of hundreds of millions of dollars by close friend Bernard L. Madoff, forcing the closing of two Levy charities. Then Levy heirs coughed up…
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Tax Court: IRS Agent Liable for Taxes (and Penalties) on Unreported Income From Thousands of eBay Sales
The Tax Court yesterday held that an IRS agent was liable for taxes (and penalties) on her unreported income from thousands of eBay sales. Orellana v. Commissioner, T.C. Summ. Op. 2010-51 (Apr. 20, 2010): Petitioner has been employed by the IRS since 2001. During the years at issue and at the time of trial petitioner was…
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Tax Court Rejects “Geithner Defense,” Says Reliance on TurboTax Does Not Excuse Taxpayer From Penalty for Errors on Tax Return
The Tax Court yesterday rejected the taxpayer's use of the "Geithner defense" and held that blaming TurboTax for errors on her return did not excuse her from penalties. Lam v. Commissioner, T.C. Memo. 2010-82 (Apr. 19, 2010): Petitioners' 2004 and 2005 joint Forms 1040 … were prepared by Ms. Lam using TurboTax. In 2004 and 2005, she reported…
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Government Files Brief Opposing Cert. in Textron Tax Work Papers Case
I previously blogged the eleven amicus briefs filed in January in the U.S. Supreme Court (No. 09-750), supporting Textron's certiorari petition seeking review of the First Circuit's 3-2 en banc decision in United States v. Textron, Inc., No. 07-2631 (1st Cir. Aug. 13, 2009), which reversed the 2-1 panel decision and held that Textron's tax accrual work…
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Murphy Redux? Commentators Decry Federal Circuit’s Harmless Error Rule
Jeremiah Coder (Contributing Editor, Tax Analysts), Did the Federal Circuit Just Issue Another Murphy?, 127 Tax Notes 143 (Apr. 12, 2010): When an appellate court is universally denounced for its legal reasoning, a hasty retreat and a withdrawn opinion usually follow. Everyone remembers the D.C. Circuit’s original opinion in Marrita Murphy v. IRS, holding that…
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Avi-Yonah: Xilinx Revisited
Reuven S. Avi-Yonah (Michigan) has published Xilinx Revisited, 126 Tax Notes 1621 (Mar. 29, 2010). Here is the abstract: In this article, Avi-Yonah argues that the original Xilinx panel decision was correct and that the new one was the result of the government's refusal to accept the rationale of that decision. However, he also believes…
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Court Rejects NYLS Grade Complaint
Following up on my prior post, Court Refuses 2L's Request to Change "C" Grade or to Order NYLS to Adopt Pass/Fail Grading System: the Appellate Division has affirmed the dismissal of the student's complaint. Keefe v. New York Law School, 2010 NY Slip Op 02477 (A.D. 1st Dep't. Mar. 25, 2010). Above the Law Adjunct Law Prof
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7th Circuit Denies WellPoint Deduction for $115m Paid to Settle State Lawsuits Over Acquisition of Health Insurance Companies
The Seventh Circuit yesterday affirmed the Tax Court (T.C. Memo. 2008-236 (Oct. 27, 2008)) in denying a current deduction to WellPoint for $113,837,500 paid to settle lawsuits brought by Connecticut, Kentucky, and Ohio challenging its acquisition of Blue Cross Blue Shield insurance companies in those states, as well as $827,595 in legal fees, as “ordinary and necessary” business expenses under §…
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Infanti: Dissecting O’Donnabhain
Anthony C. Infanti (Pittsburgh) has posted Dissecting O'Donnabhain, 126 Tax Notes 1403 (Mar. 15, 2010), on SSRN. Here is the abstract: In O'Donnabhain v. Commissioner [134 T.C. No. 4 (Feb. 2, 2010)], a sharply divided Tax Court allowed a medical expense deduction for some costs related to sex reassignment surgery. This short commentary examines the opinions…
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Federal Circuit Affirms Gov’t Victory in Son of BOSS Tax Shelter Case
Following up on my prior post, Government Wins First Son of BOSS Case to be Tried (Dec. 27, 2007): the Federal Circuit yesterday upheld the Court of Federal Claims decision in a Son of BOSS (bond option sales strategy) case that Jade Trading's $450,000 investment that generated more than $40 million in tax losses lacked economic substance. Jade Trading LLC v.…
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9th Circuit Reverses Itself, Affirms Tax Court in Xilinx Transfer Pricing Case
The 9th Circuit yesterday reversed itself and affirmed the Tax Court in the Xilinx transfer pricing case. Xilinx v. Commissioner, No. 06-74246 (9th Cir. Mar. 22, 2010). From Susan Morse (Santa Clara): The Xilinx litigation deals with the treatment of stock option costs in cost sharing arrangements before those regs were amended to explicitly require the…
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AALS, ABA, SALT Support UC-Hastings Over CLS in Supreme Court Case
American Lawyer, Law School Groups Back Hastings in High Court Case: Law school organizations are lining up behind the University of California Hastings College of the Law in the upcoming Supreme Court argument pitting the school against the Christian Legal Society. The Association of American Law Schools (AALS) and the Society of American Law Teachers…
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3rd Circuit: IRS and H&R Block Cannot Be Sued Over E-Filing Fees
3rd Circuit: IRS and H&R Block Cannot Be Sued Over E-Filing Fees (The Legal Intelligencer): The fees charged by H&R Block and other tax preparers for electronic filing of federal tax returns are not illegal and the IRS's agreement with the preparers didn't violate antitrust laws, the 3rd U.S. Circuit Court of Appeals has ruled.…
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District Court Rules on Government’s Challenge to Expert Testimony of David Weisbach & Ethan Yale in Son of BOSS Tax Shelter Case
A federal district judge in Texas yesterday ruled on the Government's motion to disqualify Tax Profs David Weisbach (Chicago) and Ethan Yale (Virginia) from testifying as expert witnesses in a Son of BOSS tax shelter case involving billionaire investor Andrew Beal, Belmont Investments, LLC v. United States, No. 4:07cv9 (Mar. 5, 2010): Having considered theUnited States’ Motion to Exclude Expert Testimony…
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Damages Received by Customer Abused by Car Dealer Are Not Excluded From Income Under § 104(a)(2)
Following up on my prior post, Why Are We Bailing Out These Guys?: the Sixth Circuit yesterday affirmed the Tax Court (Stadnyk v. Commissioner, T.C. Memo. 2008-289 (Dec. 22, 2008)) in holding that $49,000 received by a customer abused by a car dealer after purchasing a used Geo Storm that broke down on the ride home from the lot is…
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1st Circuit Denies Sperm Donor’s Claimed Medical Expense Deduction
Following up my prior post: the First Circuit has summarily affirmed the decision of the Tax Court (Magdalin v. Commissioner, T.C. Memo. 2008-293 (Dec. 23, 2008)) denying a sperm donor's claimed medical expense deduction, even though the Service allows (per Priv. Ltr. Rul. 2003-18-017 (Jan. 9, 2003)) the expenses of egg donation as deductible medical expenses: Petitioner William…