Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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NY Court of Appeals Upholds Tax on Non-Resident Telecommuter
Back in September, we blogged the unsuccessful attempt by Cardozo Tax Prof Edward Zelinsky to avoid paying New York state income tax on the portion of his salary attributable to his work in his Connecticut home office. In January, we blogged the oral argument in the New York Court of Appeals in Matter of Huckaby…
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Philadelphia Drops Most Charges in Mylotte Tax Suit
We previously blogged (here) press reports that the city of Philadelphia’s lawsuit against the Mylotte, David & Fitzpatrick law firm for $2.3 million in back taxes, interest, and penalties. Law.com reports that the city has dropped all but three partners as defendants in the lawsuit. (Thanks to reader Steven Sholk for the tip.)
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DOJ Sends Letter to Fifth Circuit in Estate of Strangi Case
The Department of Justice sent this letter to the Fifth Circuit in advance of its oral argument last week in the Estate of Strangi case. The DOJ attacked the non-tax purposes of the partnership and pointed out a recent case suggesting that the asset protection features of limited partnerships may not be absolute. The ABA…
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Supreme Court Issues Opinion in Ballard & Kanter
The Supreme Court this morning issued its 7-2 opinion in favor of the taxpayers in Ballard v. Commissioner (and the companion Estate of Kanter v. Commissioner), holding that the Special Trial Judge’s report must be included in the record on appeal. Justice Ginsburg wrote the majority opinion; Justice Kennedy concurred; Chief Justice Rehnquist and Justice…
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Tenth Circuit Treats Bonus Payment to Employee as Income, Not Gift
One of the hardy classroom perennials in the basic income tax course is whether a payment can be excluded from income as a gift. After the confusion sowed by the Supreme Court in the Duberstein and Stanton cases, Congress stepped in to inject certainty by enacting § 102(c)(1) to deny gift treatment in the employer-employee…
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Washington Supreme Court Invalidates State’s Estate Tax
The Washington Supreme Court yesterday invalidated the state’s estate tax in Estate of Hemphill v. State of Washington (No. 74974-4, 2/3/05): The estate tax scheme in Washington as currently written, though not automatically adopting specific federal law, must be administered complementary to federal law to guarantee that a separate state tax does not burden estates.…
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Unanimous Supreme Court Sides with Government in Contingent Fee Case
The Supreme Court today decided Commissioner v. Banks (No. 03—892) and Commissioner v. Banaitis (No. 03-907). In a unanimous opinion (with Chief Justice Rehnquist not participating), the Court ruled in in favor of the Government. The Court cites at page 10 of the opinion the amicus briefs filed by Tax Profs Stephen B. Cohen (Georgetown)…
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6th Circuit Denies Rehearing in Ohio Investment Tax Credit Case
We previously blogged the Sixth Circuit’s decision in Cuno v. Daimler-Chrysler, Inc., No. 00-07247 (6th Cir. Sept. 2, 2004), holding that Ohio’s investment tax credit is unconstitutional because it grants preferential tax treatment to companies to expand within the state rather than in other states. The Sixth Circuit this week denied the defendants’ petition for…
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Minnesota District Court Denies Gay Man’s Attempt to File a Joint Tax Return with His Partner
In McConnell v. United States (No. 04-271, Dist. Ct. Minn. 1/3/05) (also available on the Tax Analysts web site as Doc 2005-1056, 2005 TNT 11-6), the federal district court in Minnesota held that a gay man could not file a joint income tax return with his partner because he had previously litigated the validity of…
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Tax Court: “Not Everything in Life is Deductible.”
A memorable line in the Tax Court’s first summary opinion of the year: "Not eveything in life is deductible." Walz v. Commissioner, T.C. Summary Opinion 2005-1 (Jan. 3, 2005) (denying deduction for various alleged business expenses of Los Angeles cellist). For further discussion of the case, see Roth & Company.
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NY Court of Appeals to Hear Telecommuter Tax Case
Back in September, we blogged the unsuccessful attempt by Cardozo Tax Prof Edward Zelinsky to avoid paying New York state income tax on the portion of his salary attributable to his work in his Connecticut home office. The New York Court of Appeals is scheduled to hear oral argument this week in Matter of Huckaby…
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CCH: Major IRS Court Losses in 2004
Major IRS Court Losses in 2004 from CCH: Ewing v. Commissioner, 122 T.C. 32 (2004) (equitable innocent spouse relief; court not limited to administrative record) Wright v. Commissioner, CA-2, 2004-2 U.S.T.C. Par. 50,343 ("lost" refund check; IRS loses because its records are bad) Benton v. Commissioner, 122 T.C. No. 20 (2004) (NOLs and…
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Michigan & Texas Differ on Malpractice Liability of Estate Planners
Recent cases from Michigan and Texas illustrate two very different approaches on the issue of the malpractice liability of attorneys whose negligence in drafting estate plans for their clients results in additional estate tax liability: Sorkowitz v. Lakritz, Wissbrun & Associates, P.C., 261 Mich. App. 642, 683 N.W.2d 210 (2004): The…
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Tax Court Upholds Constitutionality of § 152(e)
In Caputi v. Commissioner, T.C. Memo. 2004-283 (12/22/04), the Tax Court yesterday upheld the constitutionality of §152(e) in a challenge brought by a non-custodial parent. Under § 152(e), the dependency exemption is given to the custodial parent unless waived by that parent. Absent such a waiver, in the case of a minor dependent child whose…
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86-Year Old Attorney Denied Business Expense Deduction
In Sax v. Commissioner, T.C. Summary Opinion 2004-171 (12/20/04), the Tax Court denied a $29,000 business expense deduction claimed by an 86-year old Los Angeles attorney for lack of substantiation.
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Science Fiction is Real Literature (for Tax Purposes)
The Maryland Court of Appeals has ruled that the Baltimore Science Fiction Society qualifies for tax-exempt status as an educational institution promoting the general welfare of the people of the state. As a result, the society’s headquarters is exempt from property taxes. According to press reports: A lower court "had been hostile to the concept…
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Court Refuses to Dismiss Malpractice Claim Against Lawyer for Failure to Include Crummey and GST Clauses
In Sorkowitz v. Lakritz, 261 Mich. App. 642, 683 N.W.2d 210 (2004), the beneficiaries of an estate filed a malpractice action against the law firm that provided estate planning services to the decedent, alleging that the firm committed malpractice in not including Crummey and generation-skipping tax clauses in the decedent’s estate plan. The lower court…
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IRS Snitch Must Include Reward in Income
In Ellis v. Commissioner, T.C. Summary Opinion 2004-170 (12/20/04), a Colorado disc jockey received a $7,000 reward from the IRS but did not not include it in income. Not surpisingly, the taxpayer was audited, caught, and forced to include the reward in income: Petitioner does not dispute that during 1998, he received a reward from…
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DOJ Abandons Tax Shelter Case Against xélan
After announcing with great fanfare the TRO it obtained in federal district court in San Diego freezing over $500 million in investment accounts maintained by xélan, Inc. on the ground that over 3,500 San Diego area doctors and dentists participated in fraudulent tax avoidance schemes (see here), the Department of Justice has suffered some severe…
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IRS Settles Hercules Contingent Liability Tax Shelter Case
After losing the Black & Decker (blogged here) and Coltec (blogged here) contingent liability tax shelter cases, the IRS announced today (IR-2004-151) that it has settled a similar case pending in the Tax Court involving Hercules, Inc.: In 1999, prior to the publication of Notice 2001-17, Hercules engaged in a contingent liability transaction and claimed…
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Who You Gonna Call…Not Tax Busters
The Department of Justice’s Tax Division has obtained a preliminary injunction against Jonathan Luman, who sold the Tax Busters Guide to taxpayers in 41 states. DOJ Press Release (12/14/04) Preliminary Injunction (12/9/04) DOJ Press Release (9/9/04) Complaint (9/9/04)
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Ballard and Kanter Follow Up
Appellate Law & Practice blogged our post yesterday on Leandra Lederman’s first-hand report of the oral argument in the companion the companion Ballard (No. 03-184) and Kanter (03-1034) cases, calling her "the only academic that takes tax procedure seriously."
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Lederman Reports on Oral Argument in Ballard & Kanter
The Supreme Court yesterday heard oral argument in the companion Ballard (No. 03-184) and Kanter (03-1034) cases. Leandra Lederman (George Mason) was there and provides us with her first-hand account: Stephen Shapiro of Mayer, Brown, Rowe & Maw argued on behalf of the taxpayers (the petitioners); Thomas Hungar, Deputy Solicitor General, argued on behalf of…
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DOJ on Move Against Tax Scammers
The Department of Justice’s Tax Division is on the move against tax scammers: Florida Louisiana Oregon Mississippi
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Tax Protester Trials Set for Jan. 19
Following up on recent posts concerning the apprehension of tax protesters Joseph Banister and Walter Thompson (here, here, and here): the U.S. District Court in Sacramento has set January 19, 2005 as their trial date. For an account from a sympathetic web site, see here. (Thanks to TaxGuru for the tip.)