Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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WSJ: Money-For-Nothing Lawsuits Against Private-Equity Founders Get Boost
Wall Street Journal, Money-for-Nothing Lawsuits Against Private-Equity Founders Get Boost: The founders of giant private-equity firms have been paid billions of dollars over the years. Payouts tied to arcane tax deals that brought nearly a billion more are under scrutiny in a Delaware courtroom. Private-equity titans Apollo Global Management and Carlyle Group CG paid insiders…
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Lesson From The Tax Court: Cannot Use CDP To Contest Trust Fund Recovery Penalty
Unpaid employment taxes are a substantial problem for both the government and taxpayers. From the government’s perspective this Treasury website tells us that “employment tax violations represented more than $91 billion of the gross Tax Gap and, after collection efforts, $79 billion of the net Tax Gap in this country.” From the taxpayer’s perspective, dealing…
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Lesson From The Tax Court: The DOI Downside To Disregarded LLC
According to this Wikipedia entry, the “limited liability company ("LLC") has grown to become one of the most prevalent business forms in the United States.” That is likely because state law gives substantial liability protections to LLCs, similar to traditional corporations, but allows for more flexible ownership and governance structures. That flexibility also creates more…
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IRS Backdating Of Documents Highlights Festering Cultural Rot: ‘If The IRS Doesn’t Play By The Rules, They’re The Mob’
Bloomberg, IRS Backdating Court Order Spotlights Culture, Attorneys Say: An unusual Tax Court order requiring the IRS to report what it knew and when about misstatements in a conservation easement case, as well as mounting claims of backdating forms at the agency, are highlighting what some tax attorneys said are festering IRS cultural problems, years…
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Lesson From The Tax Court: Tax Protesting—A Hobby That Eats
Everyone should have a hobby. Generally, hobbies are good for you, as this Utah State University Mental Health Education post explains. But some hobbies become cancerous, becoming all-consuming. Those hobbies are not good for you. As Benjamin Franklin reportedly put it: beware the hobby that eats. Protesting your taxes is a hobby that eats. Bob…
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2d Circuit: Despite Artist’s Objection, Law School Can Cover Murals Celebrating State’s Role In Underground Railroad And Abolitionist Movement In Response To Student Complaints Of ‘White Savior Complex’
Bloomberg Law, Law School Can Cover Underground Railroad Murals, 2nd Cir. Says: Vermont Law School can permanently cover a pair of controversial 1994 murals depicting the Underground Railroad without violating an artists’ rights law, the Second Circuit ruled [Kerson v. Vermont Law School, No. 21-2904 (2d Cir. Aug. 18, 2023)]. Artist Samuel Kerson argued the…
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Lesson From The Tax Court: Tax Consequence For Discharge Of Non-Recourse Debt
One of the hard concepts to teach students is the different tax treatments for recourse loans and non-recourse loans. It gets especially confusing when the sale of underwater property includes a Discharge of Indebtedness (DOI) as part of the sale. In Michael G. Parker and Julie A. Parker v. Commissioner, T.C. Memo. 2023-104 (Aug. 10,…
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Lesson From The Tax Court: Gotta Get Physical For Casualty Loss Deduction
Individuals generally cannot deduct casualty losses, at least through the end of 2025. §165(h)(5). But Congress continues to permit individual taxpayers to deduct casualty losses if they are attributable to a federally declared disaster. Id. And we are having more and more disasters. Call it climate change, call it a banana, the brutal fact is…
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Lesson From The Tax Court: An Object Lesson On Adequate Business Records
[Author’s Note: this past week I joined the 77.5% of Americans who been infected with COVID. So tired …. zzzzz ** what? So this week’s lesson may reflect my COVID-fogged brain. If you find more errors than usual, I humbly apologize and promise to do better next week.] Some of my Lessons From Tax Court…
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Lesson From The Tax Court: Creating Your Best Administrative Record
When the Tax Court reviews an IRS Collection Due Process (CDP) decision about collection, it always uses an abuse of discretion standard of review. That is, it does not simply substitute its judgment for that of the Office of Appeals Settlement Officer (SO), but instead looks to see whether the SO committed an error of…
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Blue J Predicts: Conflicting Duties And The Trust Fund Recovery Penalty In Cashaw
Benjamin Alarie (Osler Chair in Business Law, University of Toronto; CEO, Blue J Legal) & Christopher Yan (Senior Legal Research Associate, Blue J Legal), A Reexamination of Cashaw, 179 Tax Notes Fed. 2197 (June 26, 2023): [W]e revisit the intriguing case of Cashaw [v. Commissioner, T.C. Memo. 2021-123 (Oct. 27, 2021)]. This case focused on…
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Lesson From The Tax Court: Deducting Graduate School Costs
My desire to become a law professor crystalized during the four years I practiced law after my judicial clerkship. My academic mentors told me it would be very difficult to get a job in the legal academy because I had been “contaminated” by … wait for it … wait for it … actually practicing law! …
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Lesson From The Tax Court: Freedom, Taxes, And Hobbies
We have great freedoms in this country. Freedom to express ourselves. Freedom to fish. Freedom to write blog posts. Freedom to pursue any lawful activity to make money. Truly ours is a great civilization well worth tomorrow's celebration. But. To riff on a well worn aphorism: with great freedom comes great responsibility. In particular, as…
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Legal Education’s Reaction To The Supreme Court’s Affirmative Action Decisions
Update: More Legal Education Reaction To The Supreme Court's Affirmative Action Decisions (July 5, 2023) Seattle Law School, Supreme Court Affirmative Action Decisions — Rapid Response Webinar (today at 10 a.m. PT/1 p.m. ET) (registration) (speakers) AALS, Achieving Diversity without Affirmative Action Conference (July 10) (program) (speakers) Will Baude (Chicago), The Unsurprising Affirmative Action Decision in…
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Lesson From The Tax Court: How To Calculate Insolvency For The §108 Exclusion
While not as certain as death and taxes, small businesses failures are highly probable events. This webpage from the Bureau of Labor Statistics goes into the gnarly. When a small business fails, that often means it cannot repay loans. A lender will often write off the loan as a bad debt, discharging the borrower from…
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Lesson From The Tax Court: The Administrative Record Rule In Whistleblower Cases
Law is a slow-moving conversation. I tell my students that one law year is seven human years, kinda like one human year is seven dog years. So it was only a couple of years ago, in 2006, that Congress created the current whistleblower award program in the Tax Reform and Health Care Act of 2006, 120…
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Lesson From The Tax Court: The IRS’s Substantial Justification Defense To §7430 Fee Awards
Getting an award under §7430 is hard, even if the taxpayer totally wins. The major stumbling block is a statutory escape hatch called substantial justification. If the IRS’ shows that its position was substantially justified at the relevant time, the taxpayer is not entitled to fees and costs even if the taxpayer wins on the…
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Lesson From The Tax Court: Temporary vs. Indefinite Commutes
When I worked in downtown Washington D.C. I had a 50+ minute commute from my home in Wheaton Md. But I did not have to drive. I walked 15 minutes to Wheaton metro, had a 30+ minute metro ride to Federal Triangle, and then a 5 minute walk to my office. That was a lovely…
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Lesson From The Tax Court: Substantiating Gambling Losses On Per-Casino Basis
The old saying “you win some, you lose some” is not true for most recreational gamblers. For them, the saying is more like “you win some, you lose more.” But proving that proves a problem. In Jacob Bright v. Commissioner, Docket No. 10095-22 (May 4, 2023), Judge Buch teaches us how taxpayers can use their…
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Lesson From The Tax Court: On Time Is Late
In law, even more than in comedy, timing can be critical. In comedy you just lose a laugh. In law, you lose a case. In Roy A. Nutt and Bonnie W. Nutt v. Commissioner, 160 T.C. No. 10 (May 2, 2023) (Judge Buch), we learn why a petition seemingly submitted on time will be rejected…
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Lesson From The Tax Court: Allocating Between Excludable Child Support and Includable Interest
As inflation rises so does interest in interest. Certainly when my 1-year CD matures next month I will be looking for a rate better than the 2% rate that seemed so great last year! If I get a 4.5% I will be happy … but who knows what my dollars will be worth next year?…
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Lesson From The Tax Court: Exclusion Rules For Disability Payments
A tax break is just another way of saying “government subsidy.” Most folks do not even think about that when they get a medical bill. They are generally just upset about the size of the co-pay! But Congress subsidizes medical care by allowing taxpayers to exclude from income everything the health insurance plans pay the…
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Lesson From The Tax Court: Better Deals With Appeals
One recurring lesson I teach in Tax Practice and Procedure is that you generally serve your client better by resolving their issues at the lowest level. That requires helping them be realistic in understanding the range of potential outcomes. It requires an understanding that IRS offices, such as the Office of Appeals, generally have more…
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Lesson From The Tax Court: Prepare Once, File Twice
Most of us don’t think about what it means to file our tax return. We may rely on software or a hired return preparer to transmit our return to the IRS. The returns are either snail-mailed to the applicable Service Center, or they are e-filed to that amorphous “cloud.” We know it is important to…