Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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7th Circuit Affirms Denial of Accuracy-Related Penalties in Son-of-BOSS Tax Shelter
The Seventh Circuit yesterday affirmed the doistrict court's decision ruling that a taxpayer was not liable for accuracy-related penalties for engaging in a Son-of-BOSS tax shelter because he reasonably relied on the tax opinion of the Altheimer & Gray law firm. American Boat Co. v. United States, No. 09-1109 (th Cir. Oct. 1, 2009): This case…
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Former Paul Hastings Tax Associate Spared Prison for Insider Trading
Following up on my earlier post: New York Law Journal, Former Paul Hastings Tax Associate Spared Prison for Insider Trading: Former Paul Hastings tax associate Eric A. Holzer on Tuesday was spared a prison term for trading on inside information on two corporate transactions in 2005. Southern District of New York Judge Victor A. Marrero…
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Tax Court: CPA’s Google Search Does Not Constitute Reasonable Cause to Avoid Penalty
The Tax Court yesterday held that a Google search did not constitute reasonable cause to excuse a Harvard MBA/ CPA's failure to properly rollover a $150,000 IRA distribution. Woodard v. Commissioner, T.C. Summ. Op. 2009-150 (Sept. 28, 2009): Mr. Woodard asks the Court to accept that his research on the Internet using the Google search engine provided him with reasonable…
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IRS Denies Deduction for Homes Donated to Fire Departments and Burned Down
Following up on my prior post, IRS Burns Kirk Herbstreit's Donation of Home to Fire Department: the Associated Press picks up on the story in Burning Down the House? IRS Nixes Tax Deductions: Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training…
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‘Girls Gone Wild’ Founder Joe Francis Cops Tax Plea
Girls Gone Wild founder Joe Francis plead guilty yesterday to two misdemeanor counts of filing false tax returns (and one count of bribing Nevada jail workers in exchange for food). The plea agreement calls for Francis to pay $250,000 in restitution and receive credit for jail time served. In the agreement, Francis acknowledged omitting over $500,000 in interest income…
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Former KPMG Tax Partner Pleads Guilty in Second Tax Shelter Case
Wall Street Journal: Ex-KPMG Tax Partner Pleads Guilty In Tax-Shelter Case, by Chad Bray: Former KPMG LLP tax partner Robert Pfaff pleaded guilty Wednesday to criminal charges in an alleged fraudulent tax-shelter scheme involving transactions in the U.S. and Saipan. … He faces up to 51 months to 60 months in prison under a stipulated…
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Tax Court OKs D.C. Facade Conservation Easements, But Reduces Charitable Deduction by 61%
The Tax Court yesterday approved charitable deductions for facade conservation easements on two homes located in Washington, D.C., but reduced the valuation. The taxpayer had valued the facade conservation easements at 11% and 13% of the $2.1 million fmv of the homes (within the 10% – 15% range specified on the charity's website), but the Tax Court reduced the…
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Court Denies Tax Lawyer’s $100,000 Medical Expense Deduction for Prostitutes and Porn
Via Joe Kristan: The Tax Court yesterday denied a New York tax lawyer's claimed $100,000+ medical expense deduction for the costs of prostitutes and pornographic material. Halby v. Commissioner, T.C. Memo. 2009-204 (Sept. 14, 2009): During 2004 and 2005 petitioner frequented prostitutes in New York. Petitioner did not visit these prostitutes as part of a…
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FedEx to Challenge IRS Characterization of its Drivers as Employees, Not Independent Contractors
Following up on my prior posts: FedEx Drivers Are Employees, Not Independent Contractors FedEx Defends Treatment of its Drivers as Independent Contractors, Not Employees What Can Brown Do To You: UPS Tax Lawyer Drops Dime on FedEx, Prompts Ohio to Reclassify Drivers as Employees, Resulting in $654k Tax Liability According to the Form 8-K filed…
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Tax Court Denies IRS Worker’s Claimed $49k Loss From Side Business
The Tax Court yesterday denied an IRS worker's claimed $48,778 in losses over a three-year period from side "business" that earned $400. Morrissey v. Commissioner, T.C. Summ. Op. 2009-135 (Sept. 2, 2009) (citation omitted): Joseph E. Morrissey (hereafter petitioner) worked full time for the IRS from 1998 to 2006, initially as a customer service representative…
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Court Allows Former IRS Agent, Fired for Bringing Dagger to Work, to Sue Secretary Geithner
Following up on my previous post, IRS Agent, Fired for Wearing Knife to Work, Sues Claiming Religious Discrimination: U.S. District Judge Sim Lake has dismissed a claim filed by former IRS agent Kawaljeet Tagore under the Religious Freedom Restoration Act against the IRS, the Treasury Department, Secretary Tim Geithner and others after she was fired for wearing a 4-inch…
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Tax Court Rejects NYU Prof’s Request to “Just Google It”
Cunningham v. Commissioner, T.C. Memo. 2009-194 (Aug. 31, 2009): The issues for decision are whether petitioners' reported losses from horse activities are limited by § 469 and whether petitioners have shown reasonable cause for the late filing of their return…. During 2002, Ralph P. Cunningham (petitioner) was employed on the dental faculty at New York…
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District Court Rejects $690m Assignment of Future Income Tax Shelter
The U.S. District Court on Friday rejected a $690 million assignment of future income tax shelter in a 91-page opinion. Schering-Plough Corp. v. United States, No. 05-2575 (D. N.J. Aug. 28, 2009) (citations omitted): The Court holds that the 1991 and 1992 swap-and-assign transactions into which Schering-Plough entered should not be respected as sales of future…
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Court: MA Cannot Force NH Vendor to Collect Use Tax From MA Purchaser
Following up on last November's post on Town Fair Tire and the Silliness of the Physical Presence Rule for Use Tax Collection Nexus, 50 State Tax Notes 447 (Nov. 17, 2008): the Massachusetts Supreme Judicial Court yesterday issued its opinion in Town Fair Tire Centers v. Commissioner of Revenue, No. 10360 (Aug. 25, 2009): We consider in…
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Tax Court Rejects Taxpayer’s Attempt to Use Geithner’s TurboTax Defense
The Tax Court yesterday rejected a taxpayer's attempt to use the TurboTax defense successfully employed by Treasury Secretary Timothy Geithner. Hopson v. Commissioner, T.C. Summ. Op. 2009-130 (Aug. 25, 2009) (citations omitted): Petitioners have not met their burden of persuasion with respect to reasonable cause and good faith. Mr. Hopson admitted that he received both…
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Divided Tax Court Refuses to Apply Check-the-Box Regs to Estate & Gift Tax
A deeply divided Tax Court yesterday handed the IRS a significant setback in allowing the taxpayer to claim substantial discounts for lack of marketability and control on the transfer of cash and marketable securities to a single member LLC followed by transfers from the LLC to trusts established for the benefit of her son and granddaughter. The 10-judge majority…
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Tax Profs Criticize UBS Settlement
Following up on yesterday's post, UBS Agrees to Release 4,450 Names to IRS in Tax Evasion Case: Chris Bergin, President and Publisher of Tax Analysts, characterizes the settlement as Justice for All – Well, At Least for the Rich and the Swiss: Three law professors from American University’s law school – Nancy Abramowitz, Andrew Pike,…
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Court Rejects $1.1b Tax Losses Claimed by Andrew Beal in DAD Tax Shelter
In the first distressed asset/debt (DAD) tax shelter case to go to trial, the U.S. District Court for the Northern District of Texas on Tuesday rejected $1.1 billion in losses claimed by D. Andrew Beal, #329 on Forbes list of the 400 Richest Americans. Southgate Masters Fund v. United States, No. 3:06-CV-2335-K (N.D. TX Aug. 18,…
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UBS Agrees to Release 4,450 Names to IRS in Tax Evasion Case
IRS Announcement IRS's UBS Web Page U.S.-Swiss Government Agreement U.S.-Swiss Government Declarations U.S.-UBS Agreement New York Times Wall Street Journal Washington Post
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En Banc First Circuit Reverses Panel, Gives IRS Access to Textron’s Work Papers
The First Circuit today, in a 3-2 en banc decision, reversed the 2-1 panel and held that Textron's tax accrual work papers were not protected under the work product doctrine and thus had to be turned over to the IRS in its tax shelter investigation. United States v. Textron, Inc., No. 07-2631 (1st Cir. Aug. 13, 2009) (en banc). The majority…
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Tax Court: Overstatement of Basis Is Not Omission of Income Triggering 6-Year SOL
In Beard v. Commissioner, T.C. Memo. 2009-184 (Aug. 11, 2009), the Tax Court held that a taxpayer's overstatement of basis is not an omission of income and thus does not trigger the § 6501(e)(1)(A) six-year statute of limitations. For more, see Roth & Co. and Taxable Talk.
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Retired IRS Agent Sentenced to 46 Months for Tax Fraud
From the U.S. Attorney in Kansas City: Thomas W. Steelman, 72, Blue Springs, Mo., has been sentenced to 46 months in federal prison for his part in a tax fraud scheme by a defunct Topeka firm called Renaissance, the Tax People. Steelman also was ordered to pay more than $10.6 million in restitution to the…
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Who Should Get Jack Abramoff’s Tax Refund?
In today's Blog of the Legal Times: Dividing Up Abramoff's Tax Refund: Imprisoned former lobbyist Jack Abramoff is hoping for another big refund from the Internal Revenue Service. This time, though, his family wouldn't get to decide alone how to spend it. Abramoff's lead attorney Abbe Lowell said in a hearing this morning that Abramoff…
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Hickman: D.C. Circuit Delivers a Doozy
Following up on yesterday's post on the D.C. Circuit's remarkable opinion in Cohen v. Commissioner, No. 08-5088 (D.C. Cir. Aug. 7, 2009): Kristin E. Hickman (Minnesota), who is cited four times in the opinion (and whom the dissent calls "the leading academic on this issue), has agreed to share her thoughts on the decision with TaxProf Blog…
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D.C. Circuit Slams IRS, Opens Door to Billions of Dollars Telephone Excise Tax Refunds
In a blistering 2-1 opinion, the D.C. Circuit today reinstated a challenge to the IRS's procedures for issuing billions of dollars of refunds of the long distance telephone excise tax. Cohen v. Commissioner, No. 08-5088 (D.C. Cir. Aug. 7, 2009). Here is the opening of the majority's opinion: Comic-strip writer Bob Thaves famously quipped, “A fool…