Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Recent Department of Justice Tax Prosecutions
Our sister White Collar Crime Prof Blog has a round up of several tax prosecutions announced by the Department of Justice in recent days.
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Complaint Lobs Racketeering and Treason Charges Against Tax Court, IRS
This came in over the transom: a 168-page complaint filed in U.S. District Court for the District of NewJersey (Case No.: 05-cv-2992 ) alleging racketeering, treason, and other wrongdoing by various judges and IRS officials on the ground that: Plaintiff did not derive any income from a business or for profit activity during the 1999/2000…
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More on Deductibility of M.B.A. Expenses
We beat the MSM to the punch last week when we blogged the Tax Court’s decision in Allemeier v. Commissioner, T.C. Memo. 2005-207 (8/31/05), which permitted a saleman of orthodontic appliances to deduct the expenses of obtaining an M.B.A. Recent MSM commentary on the case includes: Yesterday’s Wall Street Journal: Tax Court Ruling Allows Deduction…
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Survivor Winner Richard Hatch Indicted for Tax Evasion for Failing to Report $1m Income
The Department of Justice announced that a federal grand jury in Providence, Rhode Island, yesterday indicted Richard Hatch, the winner of the first CBS Survivor reality show, on charges of tax evasion and fraudulently using charitable donations for personal expenses. In a 10-count indictment, the grand jury alleges that Hatch failed to report about $1,037,000…
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Tax Court Allows Deduction for M.B.A. Expenses
We previously have blogged (here and here) the Tax Court’s refusal to allow the deduction of M.B.A. expenses on the ground that the expenses qualified the taxpayer for a new trade or business under Reg. § 1.162-5. One of the posts quoted Robert Willens (Lehman Brothers) as saying that recent cases virtually foreclose a deduction…
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Expanded Trove of KPMG Settlement Documents
Documents from the KPMG tax shelter settlement: U.S. District Court for the Southern District of New York: Deferred Prosecution Agreement (28 pages) Information (34 pages) Statement of Facts (10 pages) Proposed Order (3 pages) Resolution of KPMG Board of Directors (1 page) Indictment (45 pages) Attorney General Alberto R. Gonzales IRS Commissioner Mark W. Everson…
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District Court Upholds Check-the-Box Regs, Rejects Polsky’s Position in Law Review Article
Kudos to Gregg D. Polsky (Minnesota), whose article on the validity of the check-the-box regulations (Can Treasury Overrule the Supreme Court?, 84 B.U. L.Rev. 185 (2004)) was the focal point in a recent district court case. We previously blogged (here and here) the U.S. District Court for the Western District of Kentucky’s decision upholding the…
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KPMG Settlement Documents
Here are the documents from the KPMG settlement released by the U.S. District Court for the Southern District of New York: Deferred Prosecution Agreement (28 pages) Information (34 pages) Statement of Facts (10 pages) Proposed Order (3 pages) Resolution of KPMG Board of Directors (1 page) Indictment (45 pages)
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Tax Court Allows S Corp Shareholder to Pump Up Basis with Year-End Loan Repaid 3 Days Later
Joe Kristan has a thoughtful analysis of Brooks v. Commissioner, T.C. Memo. 2005-204, decided on Thursday: S corporation shareholders have to have "basis" in either their stock or in loans they have personally made (not just guaranteed!) in their S corporation. The Tax Court [on Thursday] allowed S corporation owners to take losses for year-end…
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NY Judge in Divorce Case Bases Capital Gains Tax Reduction on Husband’s Historical Tax Rate, Not Rate Applicable to Hypothetical Sale
Interesting article on tax valuation in today’s New York Law Journal: Court Relies on Tax Data in Split of $95M Marital Estate. Here is the opening: In calculating one of the largest-ever equitable distributions ordered in a New York divorce case, a Manhattan judge has ruled that reduction of marital assets to account for capital…
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Federal Court Jury Convicts Larken Rose of Willful Failure to File, Rejects § 861 Defense
A federal court jury in Philadelphia on Friday convicted Larken Rose of five counts of willfully failing to file tax returns and rejected his § 861 defense. From the Department of Justice press release: At trial, Rose claimed that he failed to file returns and sought refund claims based on his determination that his income…
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The “Tax Law Is Greek To Me” Defense
Great story from Joe Kristan: Richard Simkanin took out a full page ad in USA Today boasting that he no longer paid taxes or withheld taxes for his employees. He claimed his study of the tax law taught him that the tax laws are invalid, at least with respect to himself. The Fifth Circuit last…
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Web Summary of Tax Court Cases
Small Business Taxes & Management has created a very useful summary of recent Tax Court cases, with links to the full text of the opinions on the Tax Court website for: 2005 Cases 2004 Cases (Hat tip: BenefitsBlog.)
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Gerzog on Estate of Tehan & TAM 200513028
Wendy C. Gerzog (Baltimore) has published It’s Summertime With Iced Tehan a TAM, 108 Tax Notes 603 (Aug. 1, 2005), also available on the Tax Analysts web site as Doc 2005-15229, 2005 TNT 147-26. The article discusses Estate of Tehan v. Commissioner, T.C. Memo. 2005-128, and TAM 200513028, "recent estate tax material you can read…
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Townsend on Judge Posner’s Opinion in Kikalos
John A. Townsend (Townsend & Jones, Houston) has published Judge Posner’s Opinion in Kikalos, 108 Tax Notes 593 (Aug. 1, 2005), also available on the Tax Analysts web site as Doc 2005-14763, 2005 TNT 147-24, which critiques Kikalos v. United States, 400 F.3d 908, dealing with the burden of proof in tax refund suits.
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Danke Schoen, IRS: Wayne Newton’s Tax Court Case
Forbes reports that the IRS is pursuing Las Vegas entertainer Wayne Newton for $1.7 million in taxes and penalties. The notice of deficiency claiams that Newton omitted income and took improper deductions for mortgage interest, maintenance and security at his home. In his Tax Court petition (Newton v. Commissioner, No. 12608-05), Newton claims that the…
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White Collar Criminal Cases Often Include Tax Charges
Interesting post, White Collar Criminal Cases Often Include Tax Charges, on our sister White Collar Crime Prof Blog.
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Maine Court Holds Residency Statute Unconstitutionally Vague
Fascinating story in the local Portland, Maine paper: Law Criticized as Tax Case Dropped: A Superior Court justice dismissed tax evasion charges against two Maine Maritime Academy graduates Tuesday, in what some called a landmark decision for Maine tax law. Michael Falcone and James Jannetti were indicted by the state last year. Prosecutors said they…
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More Developments in the Kanter/Ballard Saga
More developments in the Kanter/Ballard/Lisle saga of special trial judge reports in the Tax Court: In an extraordinary move, Tax Court Chief Judge Joel Gerber released statements from two judges and the special trial judge involved in the Kanter, Ballard, and Lisle cases describing the procedure followed by the Tax Court in adopting its memorandum…
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District Court Refuses To Dismiss RICO Claim Against CARDS Tax Shelter Promoters
The U.S. District Court for the Northern District of California on Tuesday refused to dismiss Reece Jones’ civil RICO claims against the promoters of the CARDS tax shelter. Jones v. Deutsche Bank AG., No. C-04-05357-JW (N.D. Cal. 7/19/05). (Hat Tip: The Tax Prophet)
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5th Circuit Rules for IRS in Strangi II Family Limited Partnership Estate Tax Case
The Fifth Circuit on Friday affirmed the Tax Court’s decision in Strangi II, holding that the taxpayer retained enjoyment of property transferred to a family limited partnership within the meaning of § 2036(a) and did not qualify for the "bona fide sale" exception. Strangi I, 115 T.C. 478 (2000) Strangi I, 293 F.3d 279 (5th…
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Wood on Will the IRS Pursue Attorney Fees Post-Banks?
Robert W. Wood (Robert W. Wood, P.C., San Francisco) has published Will the IRS Pursue Attorney Fees Post-Banks?, also available on the Tax Analysts web site as Doc 2005-14789, 2005 TNT 133-36. Here is the Conclusion: Although the Supreme Court in Banks resolved the split in the circuits, it didn’t answer all extant questions. There…
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Yale on Reexamining Black & Decker’s Contingent Liability Tax Shelter
Ethan Yale (Georgetown) has published Reexamining Black & Decker’s Contingent Liability Tax Shelter, 108 Tax Notes 223 (July 11, 2005), also available on the Tax Analysts web site as Doc 2005-13102, 2005 TNT 132-29. Here is the abstract: In this article, Prof. Yale reviews the contingent liability tax shelter employed by Black & Decker, and…
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Religious Theme Park Exempt from Florida Property Tax
The Holy Land Experience theme park in Orlando, Fla., has won a 4-year legal battle to be exempted from property tax based on its religious nature. According to the UPI story: In her ruling, Circuit Judge Cynthia MacKinnon sided with Zion’s Hope, pointing out that the non-profit company produces and distributes biblical cassettes, videos, books…
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3rd Circuit Drops Hammer on Tax Protester Bell
The Third Circuit yesterday, in United States v. Bell, No. 04-1640 (3d Cir., 7/12/05), upheld a permanent injunction barring Thurston Paul Bell from promoting and selling unlawful tax advice (although the court narrowed the injunction to make clear that Bell is free to criticize the tax system but that he cannot incite others to violate…