Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Fed. Cir. Invalidates Reg. § 1.752-6
The Court of Federal Claims on Thursday invalidated the retroactive application of Reg. § 1.752-6, which required a partner to reduce her outside basis for contingent obligations transferred to a partnership. Murfam Farms LLC v. United States, No. 06-245T (Fed. Cl. July 30, 2009): Plaintiffs argue that Treas. Reg. § 1.752-6 is invalid because (1)…
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Ex-BDO Partner Pleads Guilty in Tax Shelter Case
U.S. Attorney Press Release Information Bloomberg Going Concern New York Post New York Times
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Fed. Cir. Rejects Application of 6-Year SOL to Overstatement of Basis in Tax Shelter
The Government suffered a major tax shelter setback yesterday when a divided (2-1) Federal Circuit reversed the Court of Federal Claims and held that the extended six-year statute of limitations for issuing a final partnership administrative adjustment under § 6501(e)(1)(A) did not apply to the omission of more than 25% of gross income from the return of a Son of BOSS tax shelter…
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Tennessee Supreme Court Holds “Crack Tax” Unconstitutional
I previously blogged the Tennessee Court of Appeals' decision invalidating the state's "Crack Tax" (an excise tax on marijuana and cocaine dealers, not on plumbers). A divided (3-2) Tennessee Supreme Court on Thursday affirmed the decision, thus holding the law unconstitutional as applied to Steven Waters who was found with 1,000 grams of cocaine. Waters v. Farr, No. E2006-2225 (Tenn. July…
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IRS Burns Kirk Herbstreit’s Donation of Home to Fire Department
It is increasingly common for wealthy people to buy an existing home in a desirable neighborhood and immediately tear it down and build a larger "McMansion" on the property. But did you know that it may be possible to get a tax deduction for the value of the existing home by donating it to the local…
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Teenage Mutant Ninja Turtle Tax Evasion
The American Lawyer: Indicted Lawyer Slaps Haim Saban With Sensational Civil Suit, by Brian Baxter: A civil suit filed in Los Angeles Superior Court on Tuesday reads like a script for a big screen Hollywood legal thriller. It's a case of the truth being stranger — and far more complicated — than fiction. Hollywood tax lawyer…
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Court: LLCs Not Subject to Limited Partnership Passive Loss Disallowance Rule
Section 469(h)(2) treats a limited partnership interest as presumptively passive for purposes of the passive loss rules, with the result that partnership losses cannot offset the limited partner's salary or investment income. The Court of Federal Claims yesterday, in Thompson v. United States, No. 06-211 T (Fed Cl. July 20, 2009), followed the Tax Court's decision last…
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Tax Court Rejects Gay Activist’s Attempt to File Joint Return With Long-Term Partner
From my prior post, Charles Merrill Raises First Amendment Challenge to DOMA in Tax Court: Charles Merrill has filed papers with the U.S. Tax Court objecting to the Defense of Marriage Act (DOMA) based on the 1st Amendment Establishment Clause of the U.S. Constitution. He objects to not getting all the same benefits as other…
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Settlement Near in US – UBS Tax Shelter Case?
ABC News Bloomberg Financial Times New York Times Wall Street Journal Update: U.S. District Judge Alan S. Gold this morning granted the parties' joint motion to stay the trial pending settlement negotiations and rescheduled the trial for August 3 (with a telephone conference on July 29). Order Joint Motion for Stay
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NY: Widow Cannot Sue Husband’s Attorney for Estate Planning Malpractice
New York Law Journal: Widow Lacks Standing to Sue Husband's Lawyers Over Mishandled Will, Judge Finds, by Mark Fass: A widow who claims that the mishandling of her husband's will by his attorneys will cost her $9 million may not pursue a malpractice claim against them, a Manhattan judge has ruled. Supreme Court Justice Marilyn Shafer…
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Former BDO Seidman Partner Pleads Guilty in Criminal Tax Shelter Case
Robert Greisman, a CPA and tax lawyer, former partner in BDO Seidman's Chicago office, pleaded guilty yesterday to three counts of conspiracy to defraud the United States in connection with tax shelter transactions marketd by his firm and the Jenkens & Gilchrist law firm. United States v. Daugerdas, No. S109CR581 (S.D.N.Y. July 9, 2009). U.S. Attorney's Press Release Indictment Plea Agreement…
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Tax Protesters Ed and Elaine Brown Are Convicted on All Counts
I previously blogged (here, here, here, here, and here) the case of tax protesters Ed and Elaine Brown who, after being convicted of evading $1.9 million in taxes on her dental practice, holed up in their New Hampshire mountaintop home for months, vowing to die fighting rather than surrender. The Associated Press reports that they were convicted yesterday on weapons charges…
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Tax Court: LLCs Not Subject to Limited Partnership Passive Loss Disallowance Rule
Section 469(h)(2) treats a limited partnership interest as presumptively passive for purposes of the passive loss rules, with the result that partnership losses cannot offset the limited partner's salary or investment income. In Garnett v. Commissioner, 132 T.C. No. 19 (June 30, 2009), the Tax Court held that LLC interests are not subject to § 469(h)(2), with the result…
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District Court: Failure to Retain Tax Expert Constitutes Ineffective Assistance of Counsel
The U.S. District Court for the Northern District of Illinois has vacated the two-year prison sentence given to a CPA who plead guilty to obstructing and impeding the administration of the federal tax laws on the ground of ineffective assistance of counsel because her lawyer did not retain a tax expert. Baxter v. United States, No. 1:04-cr-00371 (N.D.…
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11th Circuit Grants Wesley Snipes Oral Argument in Appeal of His Tax Fraud Conviction
Ellen Podgor (Stetson) of our sister White Collar Crime Blog reports that the 11th Circuit has granted actor Wesley Snipes oral argument in the appeal of his conviction on three misdemeanor tax fraud counts. Oral argument is scheduled for November 2009, so Mr. Snipes should remain free on bail until well into 2010. Ellen notes that…
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Tax Court Disallows Deductions for Unsubstantiated Expenses of Thomson-West Sales Rep
In Kyne v. Commissioner, T.C. Summ. Op. 2009-98 (June 25, 2009), the Tax Court upheld the IRS's disallowance of a Thomson-West sales rep's deductions for medical expenses, charitable contributions, and miscellaneous itemized deductions (including car expenses, parking fees and tolls, home office expenses, meals and entertainment expenses, and cell phone expenses) because he failed to provide…
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5th Circuit Upholds Civil Liability of Lawyer Who Wrote Tax Opinion in Jenkens & Gilchrist Tax Shelter
The Fifth Circuit has upheld a district court's finding that a Louisiana lawyer (William E. Bradley ) who wrote a tax opinion (for which he was paid $25,000) supporting a Jenkens & Gilchrist tax shelter was civilly liable to an investor in the tax shelter, but reversed the district court's RICO award of $6.43 million. Ducote Jax…
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First UBS Client Pleads Guilty to Offshore Tax Evasion
The Department of Justice and IRS announced that the first UBS client pleaded guilty today to tax evasion. Steven Michael Rubinstein, a Boca Raton accountant, pleaded guilty to filing a false 2004 tax return by failing to disclose the existence of a Swiss bank account maintained by UBS of which he was the beneficial owner and failed to report…
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NY Times: DOJ to Drop UBS Case; DOJ: No We’re Not
New York Times: Settlement Anticipated in UBS Case, by Lynnley Browning: The Justice Department may drop a closely watched legal case aimed at forcing the Swiss bank UBS to divulge the names of 52,000 wealthy American clients suspected of offshore tax evasion, a United States official briefed on the matter said Monday. The move, which…
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Can States Force Out of State Border Businesses to Collect Sales Tax?
City Journal: Interstate Confiscation Clause: Massachusetts Wants Even More Tax Revenue—From New Hampshire: Should New Hampshire businesses have to collect Massachusetts sales taxes from border-crossing shoppers? That’s the issue in Town Fair Tire v. Massachusetts, a case before the Bay State’s Supreme Judicial Court with ramifications for commerce and constitutional law well beyond New England.…
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7th Circuit Affirms District Court in Valero Tax Workpapers Case
The 7th Circuit today resoundingly affirmed the district court in Valero Energy Corp. v. United States, No. 08-3473 (7th Cir. June 17, 2009): In this appeal, Valero Energy Corporation asks us to take a close look at the tax practitioner-client privilege. Valero sought to protect several documents under this privilege, and the result was a mixed…
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Stanford Law Grad-Call Girl Lacks Resources to Satisfy Guilty Plea in Tax Evasion Case
I previously blogged (here and here) the case of 2001 Stanford Law Grad Cristina Schultz (now Cristina Warthen after her marriage to David Warthen, co-founder of the online search engine Ask Jeeves, now known as Ask.com), who pled guilty in January 2009 in California federal district court to failing to pay taxes on $133,717 she earned…
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UCLA Body Parts Trafficker Sentenced to 10 Years for Tax Evasion
More fodder for the it always comes down to taxes file: a former mortuary worker convicted of carving up and selling cadavers donated to the UCLA medical school was sentenced to 10 years in prison Thursday and ordered to pay more than $1.7 million. Jurors last month had found Ernest Nelson, 51, guilty of eight…
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Tax Court Follows Murphy, Denies § 104 Exclusion for Settlement Proceeds of Reverse Discrimination Claim
Kevin F. Hennessey, a white Air Force officer, lost his position in 1993 because of congressionally mandated personnel reductions in the Armed Forces. He received a $27,900 settlement in a class action lawsuit claiming that the Armed Forces improperly favored minorities and women in implementing the personnel reductions. Petitioners stipulated that the lump-sum payment Mr. Hennessey…