Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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law.com on Lattera (3d Cir.): Sale of Lottery Winnings Produces Ordinary Income, Not Capital Gain
Last week, we blogged the Third Circuit’s decision in Lattera v. Commissioner, No. 04-4721 (3d Cir. 2/14/06), which affirmed the Tax Court’s [T.C. Memo. 2004-216] ruling that a lottery winner must report ordinary income, rather than capital gain, on the sale of the right to the future payments. This morning’s law.com has an article about…
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Tax Court: L.A. Tax Attorney-CPA Can Deduct Travel Costs to Do Research in Chapman Law School Library; Court Rejects IRS’s Argument That There Were Adequate Law Libraries in L.A.
In Berge v. Commissioner, T.C. Summ. Op. 2006-29 (2/21/06) the Tax Court today permitted an L.A. tax lawyer-CPA to deduct the cost of driving to the Chapman Law Library (approximately thirty-five miles away) to do tax research, despite the IRS’s argument that the trips were for personal purposes to visit his family because there were…
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Tax Court Rejects Turbo Tax Defense
An interesting aspect in an otherwise nondescript Tax Court opinion released on Thursday, Maxfield v. Commissioner, T.C. Summary Opinion 2006-27 (2/16/06): We have no difficulty in finding that petitioners are guilty of negligence for both years before the Court. They claimed deductions that are clearly improper and made no attempt to keep satisfactory records as…
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Tax Court Denies Attorneys’ Fees in Allemeier MBA Expense Case
We previously blogged the Tax Court’s decision in Allemeier v. Commissioner, T.C. Memo. 2005-207 (8/31/05), which permitted a salesman of othodontic appliances to deduct the expenses of obtaining an M.B.A. at Pepperdine. The Tax Court yesterday refused to award the taxpayer attorneys’ fees in the case. Allemeier v. Commissioner, T.C. Memo. 2006-28 (2/16/06): In Allemeier…
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Gerzog on 8th Circuit’s Senda FLP Decision
Wendy C. Gerzog (Baltimore) has published Return to Senda: Order Determinative for FLPs Discounts, 110 Tax Notes 791 (Feb. 13, 2006), also available on the Tax Analysts web site as Doc 2006-1385, 2006 TNT 30-40. The article discusses the Eighth Circuit’s recent Senda decision, in which the court held that the taxpayers’ stock transfers to…
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3d Circuit: Sale of Lottery Winnings Produces Ordinary Income, Not Capital Gain
In Lattera v. Commissioner, No. 04-4721 (3d Cir. 2/14/06), the Third Circuit affirmed the Tax Court [T.C. Memo. 2004-216] ruling that a lottery winner who, after receiving several annual installments of a lottery prize, sells for a lump sum the right to their remaining payments must report ordinary income rather than capital gain on the…
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6th Circuit: Chrysler Cannot Deduct Future Warranty Claims in Year Cars Shipped
The Sixth Circuit yesterday, in Chrysler Corp. v. Commissioner, No. 03-1214 (6th Cir. 2/09/06), affirmed the Tax Court (T.C. Memo. 2000-283) in finding that under the "all events" test applicable to accrual method taxpayers, Chrysler could not deduct $865 million in estimated future warranaty claims in the year it shipped the cars to its dealers:…
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District Court Invalidates Sales Tax Exemption for Bibles
In Budlong v. Graham, No. 1:05-CV-2910 (2/6/06), the U.S. District Court for the Northern District of Georgia held that a Georgia law that grants sales tax exemptions for "[t]he sale or use of Holy Bibles, testaments, and similar books commonly recognized as being Holy Scripture regardless of by or to whom sold" (O.C.G.A. §§ 48-8-3(16))…
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Sheppard on Swallows Holding
Lee A. Sheppard (Contributing Editor, Tax Analysts) has published Tax Court Flunks Brand X, 110 Tax Notes 585 (Feb. 6, 2006), also available on the Tax Analysts web site as Doc 2006-1997, 2006 TNT 25-14. The article critiques the Tax Court’s recent decision in Swallows Holding, Ltd. v. Commissioner, 126 T.C. No. 6 (Jan. 26,…
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Intuit Files Counterclaims Against H&R Block
We previously have blogged (here and here) the lawsuit between Intuit (the maker of TurboTax) and H&R Block (the maker of TaxCut) over television and radio commercials run by Intuit. Reuters reports this morning that Intuit has filed fraud and false advertising counterclaims against H&R Block, charging it with making inconsistent statements regarding how many…
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Fourth Circuit Issues Black & Decker Opinion: TP Wins on §§ 357 & 358, IRS Wins on Sham Transaction
In an important tax shelter opinion released today, the Fourth Circuit (1) affirmed the district court’s denial of the IRS’s summary judgment motion on the §§ 357 and 358 issue, holding that Black & Decker is not required to reduce its basis in the BDHMI stock by the amount of the liabilities transferred to BDHMI;…
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Briefs in DaimlerChrysler v. Cuno
Cuno v. DaimlerChrysler, Inc., 386 F.3d 738 (6th Cir. 2004), cert. granted, Nos. 04-1704 & 04-1724, is scheduled for oral argument in the Supreme Court on March 1, 2006. The case involves the constitutionality of Ohio’s investment tax credit (as well as the procedural question of Respondents’ standing). I previously posted (here) the merits briefs…
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NLJ on KPMG Deferred Prosecution Deal
Interesting article in today’s National Law Journal: Deferred Prosecution Deal Raises Objections; Attorneys for Indicted KPMG Employees Say Deal Limits Ability to Build Defense, by Leonard Post: A flurry of motions filed by 19 indicted tax and estate professionals — most formerly with auditing giant KPMG — accuses the government of stacking the deck against…
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Tax-Exemption for Church Parking Lots
Howard Bashman has a round-up of newspaper articles about a recent split Pennsylvania Supreme Court decision, Wesley United Methodist Church v. Dauphin County Board of Assessment Appeals, No. 105-MAP-2004 (Pa. 12/30/05), permitting a church to treat its parking lot as tax-exempt property for local property tax purposes: Appellant contends this Court’s decision in Second Church…
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Camp on Posner and Easterbrook’s Disagreement on the Meaning of “Tax Return” in Payne
Bryan T. Camp (Texas Tech) has published The Function of Forms, 110 Tax Notes 531 (Jan. 30, 2006), also available on the Tax Analysts web site as Doc 2006-979, 2006 TNT 20-39. Here is part of the Introduction: Judges Posner and Easterbrook [disagreed] in the case of In re Payne, 2005 U.S. App. LEXIS 27243…
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WSJ on 6th Circuit’s Dow Chemical COLI Decision
On Tuesday, we blogged the Sixth Circuit decision in Dow Chemical v. United States, No. 03-2360 (6th Cir. 1/23/06), which held that Dow Chemical’s corporate-owned life insurance (“COLI”) policies on the lives of thousands of its employees lacked economic substance and thus disallowed deductions for interest incurred on loans used to pay the COLI premiums…
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Sixth Circuit Concludes that Dow Chemical’s COLI Lacked Economic Substance
The Sixth Circuit yesterday issued its opinion in Dow Chemical v. United States, No. 03-2360 (6th Cir. 1/23/06). The majority for the 2-1 panel agreed with the IRS that Dow Chemical’s corporate-owned life insurance (“COLI”) policies on the lives of thousands of its employees lacked economic substance and thus disallowed deductions for interest incurred on…
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Intuit (TurboTax) Agrees to Pull Ad that H&R Block (TaxCut) Claimed was Misleading
On Tuesday, we blogged the litigation between the two biggest tax preparation software programs — TurboTax (Intuit) and TaxCut (H&R Block) — over Intuit’s remarks about H&R Block in a $25 million national advertising campaign. The Associated Press reports that Intuit has agreed to pull the ads which claimed that "more returns were prepared with…
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Update on TRAC’s Claim of IRS Withholding of Data
Last week, we blogged the motion filed by the Transactional Records Access Clearinghouse (TRAC) of Syracuse University claiming that the IRS has violated a longstanding court order by stopping to provide TRAC with detailed statistics about how the agency enforces the nation’s tax laws. Here are some updates: NY Times Editorial (1/17): What Is the…
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6th Circuit Affirms Conviction in Bizarre Tax Case
Interesting decision from the 6th Circuit today: United States v. McBride, 04-4347 (6th Cir., Jan. 17, 2006). Here’s the summary from Bob Loblaw’s Decision of the Day blog: This sentencing appeal involves a creative tax protest by defendant James McBride. After his girlfriend was convicted of tax evasion, McBride used a checking account that he…
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Intuit-TurboTax and H&R Block-TaxCut Square Off in Court
The publishers of the two biggest tax preparation software programs — TurboTax (Intuit) and TaxCut (H&R Block) — are embroiled in dueling lawsuits over Intuit’s remarks about H&R Block in a $25 million national advertising campaign: H&R Block alleged in its complaint that TV ads for TurboTax contained statements that "are literally false, deceptive and…
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Turley on Law Schools and the Solomon Amendment
Interesting article in today’s National Law Journal by Jonathan Turley (George Washington), Issue of Hypocrisy: In Fighting the Solomon Amendment, Are Law Schools Just Assuming the Appearance of Principle While Avoiding Its Costs?: This case has presented a difficult question for academics who generally support gay rights. Last year, this issue was presented to my…
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Tax Horoscope for Libras
Here is today’s horoscope for you Libras (born Sept. 23-Oct. 23): Duality is the order of the day. Darkness informs the light just like light informs the darkness. Still, you’re better off choosing love and the pursuit of happiness over death and taxes.
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TRAC Files Motion Claiming IRS Is Withholding Tax Data
The Transactional Records Access Clearinghouse (TRAC) of Syracuse University, through their counsel the Public Citizen Litigation Group, has filed a motion in the United States District Court for the Western District of Washington claiming that the IRS has violated a longstanding court order by stopping to provide TRAC with detailed statistics about how the agency…
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Florida Supreme Court’s School Voucher Decision Imperils Business Tax Credit for Scholarships
An op-ed by Andrew J. Coulson (Cato Institute) in today’s Wall Street Journal, War Against Vouchers, notes that the Florida Supreme Court’s decision last week in Bush v. Holmes, No. SC04-2323, raises questions about the constitutionality of Florida’s Corporate Income Tax Credit Scholarship Program: [T]he ramifications of Bush v. Holmes are monumental. Florida has three…