Paul L. Caron
Dean
Pepperdine Caruso
School of Law
New Cases
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Jewish Couple Back in Tax Court Seeking to Deduct Their Children’s Tuition Under Scientology Precedent
After losing in both the Tax Court (T.C. Memo. 2000-118) and the Ninth Circuit (283 F.3d 610), Michael and Marla Sklar returned to Tax Court on Monday seeking to deduct their children’s private school tuition. According to press reports: A lawyer for an Orthodox Jewish couple claimed Monday that the Internal Revenue Service has violated
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Supreme Court Hears Oral Argument Today in Pasquantino v. U.S.
The Supreme Court hears oral argument today in Pasquantino v. United States (No. 03-725). Our sister blog, White Collar Crime Prof Blog, explains the importance of this case: This is a wire fraud case emanting from the Fourth Circuit. The defendants "were convicted of using interstate wires for the purpose of executing a scheme to
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IRS Loses GE and Coltec Tax Shelter Cases
TIFD III-E Inc. & Castle Harbour LLC v. United States, Nos 3:01cv1839 & 3:01cv1840 (D. Conn. Nov. 1, 2004): • New York Times: I.R.S. Loses Another Ruling on Tax Shelters: A federal judge has dealt another blow to the Internal Revenue Service in its battle against questionable tax shelters, ordering the agency to refund to
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“If the IRS Agents Glare, the Trial’s Not Fair”
October’s “Shop Talk” column in the Journal of Taxation has an interesting item on U.S. v. Rutherford, 371 F.3d 634 (9th Cir. 2004). The Ninth Circuit vacated a married couple’s tax evasion conviction on the ground that the jury was prejudiced because a large number of IRS and government agents sat directly behind the prosecution
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Tax Court: Prisoner Not Eligible for EITC
In Rogers v. Commissioner, T.C. Memo. 2004-245 (10/27/04), a prisoner earned $1,700 in wages and claimed an earned income tax credit of $128. Although § 32(c)(2)(B)(iv) provides that “no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account” in determining a
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Taxpayers in Banaitis & Banks Ask Supreme Court to Dismiss Cases
The Supreme Court is scheduled to hear oral argument next Monday (Nov. 1) in Commissioner v. Banks (No. 03-892) and Commissioner v. Banaitis (03-907). The taxpayers have filed a joint supplemental brief requesting that the Court dismiss the writ of certiorari in light of the President’s signing on Friday of the Jobs Creation Act of
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District Court Grants Summary Judgment to Black & Decker in Tax Shelter Case
The District Court yesterday granted summary judgment to Black & Decker and rejected the IRS’s attempt to disregard the form of Black & Decker’s transfer of $560 million in contignet employee health care claims to a newly-created healthcare management subsidiary (“BDHMI”). Black & Decker Corp. v. United States, No. WDQ-02-2070 (D. MD. Oct. 20, 2004).
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Beck on Anderson v. Commissioner
Tuesday, October 5, 2004 Richard Beck (New York Law School) offers these thoughts on Anderson v. Commissioner, T.C. Summary Opinion 2003-169 (12/18/03): TP lets friend use his credit card with understanding that friend will pay her own bills. She doesn’t, and TP is left holding the bag. TP negotiates a reduction of the debt with
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Supreme Court Opens Term Today with 2 Tax Cases on Docket
Monday, October 4, 2004 The Supreme Court today opens its 2004-05 Term with two tax cases on its docket scheduled for oral argument : • Monday, Nov. 1, 2004: Commissioner v. Banks (No. 03-892) and Commissioner v. Banaitis (03-907). For a description of the case from the Oyez web site, see here. For prior TaxProf
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District Court Dismisses Lawsuit Claiming African-Americans Not Subject to Income Tax
Sunday, October 3, 2004 In May, we blogged the complaint filed by African-American attorney William Wright in federal district court in Georgia claiming that the income tax violates African-Americans’ rights to equal protection and due process. Wright sought recovery of the $25,000 in income taxes he paid to the IRS from 1963-1995. On Thursday, the
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Tax Court Holds That Sale of Right to Future Lottery Winnings Produces Ordinary Income
Friday, September 24, 2004 The Tax Court yesterday, in Lattera v. Commissioner, T.C. Memo. 2004-216 (9/23/04), confirmed that the sale of the right to future lottery winnings produces ordinary income and not capital gain under Davis v. Commissioner, 119 T.C. 1 (2002).
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Court Awards $10,000 for Emotional Distress Inflicted by IRS
Friday, September 17, 2004 This month’s “Shop Talk” column in the Journal of Taxation has an interesting item about In re Rivera Torres, 309 B.R. 643 (1st Cir. Bankruptcy App. Panel 2004), in which the court awarded a taxpayer $10,000 for “emotional distress” inflicted by the IRS. After the bankruptcy court discharged a married couple’s
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Tax Court Determines Reasonable Compensation of Controlling Shareholder
Friday, September 17, 2004 The Tax Court yesterday decided Menard, Inc. v. Commissioner, T.C. Memo. 2004-207 (9/16/04), bringing to mind Judge Posner’s warning in Exacto Spring Corp. v. Commissioner, 196 F.3d 833, 835 (7th Cir. 1999), that the Tax Court in reasonable compensation cases too often acts “as a superpersonnel department for closely held corporations,
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Tax Court: 10% Tithe Not Taken Into Account in Determining Ability to Pay Tax
Thursday, September 16, 2004 The Tax Court yesterday held, in Pixley v. Commissioner, 123 T.C. No. 15 (9/15/04), that although a 10% tithe paid by a minister to his church as a condition of employment is allowable in determining the minister’s ability to pay outstanding tax liabilities, the taxpayer in this case failed to substantiate
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Tax Court: Sale of 1,000-Acre Parcel Constituted Capital Gain, Not Ordinary Income
Thursday, September 16, 2004 The Tax Court yesterday held, in Phelan v. Commissioner, T.C. Memo. 2004-206 (9/15/04), that the taxpayer’s sale of a 1,000-acre parcel resulted in capital gain from property held for investment rather than ordinary income from a real estate development business.
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District Court Stops Sale of “Tax Toolbox”
Friday, September 3, 2004 In U.S. v. Gleason, No. 3-03-0311 (M.D. Tenn. Aug. 25, 2004), the district court ordered Daniel Gleason to stop selling the “Tax Toolbox,” which claimed that buyers could deduct various personal expenses for travel, meals, golf, cars, and children’s allowances as home-based business expenses. For the Department of Justice press release,
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6th Circuit Invalidates Ohio Investment Tax Credit
Friday, September 3, 2004 The Sixth Circuit yesterday held 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. Cuno v. Daimler-Chrysler, Inc., No. 00-07247 (6th Cir. Sept. 2, 2004): “[W]hile we may be sympathetic to efforts by the City
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Third Circuit Affirms Tax Court’s Application of § 2036 in Estate of Thompson Family Limited Partnership Case
Thursday, September 2, 2004 The Third Circuit yesterday affirmed the Tax Court’s application of § 2036 to the pre-death transfer of $2.8 milllion of securities to two family limited partnerships in Estate of Thompson v. Commissioner, No. 03-3173 (3rd Cir. Sept. 1, 2004). Interestingly, 2 of the 3 judges on the panel filed a long
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Tax Court Denies Bodybuilder’s Deduction for Buffalo Meat and Nutritional Shakes
Thursday, September 2, 2004 In Wheir v. Commissioner, T.C. Summary Opinion 2004-117 (Aug. 30, 2004), the Tax Court denied a bodybuilder’s § 162 deduction for the 3 pounds of buffalo meat he ate each day, as well nutritional milk shakes, because “[s]uch items may well be consumed not only by bodybuilders but also by others
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SDNY Refuses To Dismiss Suit Against Sidley Austin Over COBRA Tax Shelter
Thursday, September 2, 2004 In Seippel v. Jenkins & Gilchrist, No. 03 Civ. 6942 (SAS) (S.D.N.Y. Aug. 25, 2004), the district court refused to dismiss a taxpayer’s fraud and recission claims against Sidley Austin over its role in recommending the COBRA tax shelter. Other district courts have dismissed tax shelter cases on ripeness grounds. For