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Rotondo was the sole owner of Apex, which wholly owned four limited liability companies (Directional Entities). Apex and the Directional Entities provided services, such as human resources, to different clients. Rotondo sold the Directional Entities’ key asset, customer lists, to AES, which agreed to pay Rotondo a share of its gross profits in the form of “Consulting Fees.” Two entities sought to collect Rotondo’s Consulting Fees: Akouri loaned money to one of Rotondo’s other companies and had a security interest in Apex’s assets and a judgment against Rotondo and Apex for $1.4 million. Rotondo also owes the IRS $3.4 million. The IRS filed several notices of tax liens against Rotondo, Apex, and the Directional Entities. AES filed an interpleader action. The Sixth Circuit affirmed summary judgment in favor of the IRS. The timing of a federal tax lien is measured by when the IRS gave notice of its lien, 26 U.S.C. 6323(a), (f); the timing of state security interests, like Akouri’s, is measured by when they become “choate”—i.e., complete or perfected. Akouri’s interest would be choate as of 2019, but the IRS’s tax liens date to before 2019. The court rejected Akouri’s attempt to recategorize the customer list assets as originally belonging to Apex rather than the Directional Entities. View "AES-Apex Employer Services, Inc. v. Rotondo" on Justia Law

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Between 2012 and 2014, Medhost of Tennessee, Inc. ("Medhost"), sold Russell County Community Hospital, LLC, d/b/a Jack Hughston Memorial Hospital ("the taxpayer"), computer software and accompanying equipment, which Medhost contracted to install in a hospital operated by the taxpayer. The software and equipment assists the taxpayer in operating various aspects of its hospital. Medhost collected a little less than $18,000 in sales tax in connection with the transactions, which it remitted to the Alabama Department of Revenue ("the Department"). Later, the taxpayer petitioned the Department for a refund of the sales tax it had paid on the transactions with Medhost. The Department denied that request, and the taxpayer appealed to the Alabama Tax Tribunal, which reversed the Department's decision and directed the Department to grant the taxpayer's request for a refund. The Department then filed an action in the trial court requesting de novo review of the tax tribunal's decision. After a hearing, during which testimony was presented ore tenus, the trial court overturned the tax tribunal's decision and affirmed the Department's denial of the taxpayer's refund petition. The taxpayer appealed to the Court of Civil Appeals, which affirmed the trial court's judgment. The Alabama Supreme Court granted the taxpayer's petition for a writ of certiorari. Under the ore tenus rule, which the taxpayer has conceded was applicable here, "a judgment based on [ore tenus] evidence is presumed to be correct and will not be disturbed on appeal unless a consideration of the evidence and all reasonable inferences therefrom reveals that the judgment is plainly and palpably erroneous or manifestly unjust." Under that standard, the Court found the evidence sufficient to support the trial court's judgment. Accordingly, the Court of Civil Appeals correctly affirmed that judgment, and the Supreme Court affirmed its judgment. View "Ex parte Russell County Community Hospital, LLC, d/b/a Jack Hughston Memorial Hospital." on Justia Law

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After Hawk died, his wife, Nancy, decided to sell the family business, Holiday Bowl and made a deal with MidCoast, which claimed an interest in acquiring companies with corporate tax liabilities that it could set off against its net-operating losses. Holiday first sold its bowling alleys to Bowl New England, receiving $4.2 million in cash and generating about $1 million in federal taxes. Nancy and Billy’s estate then sold Holiday Bowl to MidCoast for about $3.4 million,"in essence exchanging one pile of cash for another minus the tax debt MidCoast agreed to pay." MidCoast never paid the taxes. The United States filed a transferee-liability action against Nancy and Hawk’s estate. The Tax Court ruled for the government. The Sixth Circuit affirmed, reasoning that the Hawks were transferees of a delinquent taxpayer under 26 U.S.C. 6901, and that Tennessee has adopted the Uniform Fraudulent Transfer Act, which provides remedies to creditors (like the United States) when insolvent debtors fraudulently transfer assets to third parties. Holiday Bowl owed taxes. “Congress, with assistance from the courts, has constructed a formidable defense against taxpayer efforts to traffic in net operating losses and other corporate tax benefits.” View "Billy F. Hawk, Jr., GST Non-Exempt Marital Trust v. Commissioner of Internal Revenue" on Justia Law

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This appeal concerns the propriety of the timing of deductions by a Subchapter S corporation for expenses paid to employees who participate in the corporation’s employee stock ownership plan (ESOP). Taxpayers Stephen and Pauline Petersen and John and Larue Johnstun were majority shareholders in Petersen Inc. (the Corporation), a Subchapter S corporation. The disputed liabilities arose from Taxpayers’ income-tax returns for 2009 (offset in small part by corrections in their favor for their 2010 returns). Because the Corporation was a Subchapter S corporation, it was a pass-through entity for income-tax purposes; taxable income, deductions, and losses were passed through to its shareholders. Taxpayers appealed the United States Tax Court’s decision holding them liable for past-due taxes arising out of errors in their income-tax returns caused by premature deductions for expenses paid to their Corporation’s ESOP. Taxpayers contended the Tax Court misinterpreted the Internal Revenue Code (IRC) and, even if its interpretation was correct, miscalculated the amounts of alleged deficiencies. The Commissioner agreed a recalculation was necessary. The Tenth Circuit affirmed Taxpayers’ liability but remanded for recalculation of the deficiencies. View "Petersen v. CIR" on Justia Law

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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court affirming the decision of the court of appeals affirming the judgment of the trial court granting summary judgment against the county on its claim that the LBD tax distribution statute, Tenn. Code Ann. 57-4-306, required cities to distribute the tax proceeds as the counties distribute the county property tax schools, holding that that the city was not required to share those proceeds with the county or the county schools. The county in this case had not approved the LBD sales, but the city had. The Commissioner of the Tennessee Department of Revenue distributed tax proceeds to the city in accordance with section 57-4-306. The city distributed half its tax proceeds to its own city school system and did not share the proceeds with the county. The trial court granted summary judgment in favor of the city. The court of appeals affirmed. The Supreme Court affirmed, holding that the statute directed the city to distribute the education portion of its LBD tax proceeds in support of its own municipal school system and did not require the city to share the proceeds with the county or its schools. View "Bradley County School System v. City of Cleveland, Tennessee" on Justia Law

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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court affirmed the court of appeals' decision reversing the trial court's grant of summary judgment in favor of the county on its claim that the LBD tax distribution statute, Tenn. Code Ann. 57-4-306, required cities to distribute the tax proceeds as the counties distribute the county property tax schools, holding that that the city was not required to share those proceeds with the county or the county schools. The county in this case had not approved the LBD sales, but the city had. The Commissioner of the Tennessee Department of Revenue distributed tax proceeds to the city in accordance with section 57-4-306. The city distributed half its tax proceeds to its own city school system and did not share the proceeds with the county. The trial court concluded that the city was required to distribute the tax proceeds pro rata among all schools in the county. The court of appeals reversed. The Supreme Court affirmed, holding that the distribution statute directed the city to distribute the education portion of its LBD tax proceeds in support of its own municipal school system. View "Washington County School System v. City of Johnson City, Tennessee" on Justia Law

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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court affirmed the decision of the court of appeals affirming the judgment of the trial court granting summary judgment against the county on its claim that the LBD tax distribution statute, Tenn. Code Ann. 57-4-306, required cities to distribute the tax proceeds as the counties distribute the county property tax schools, holding that that the city was not required to share those proceeds with the county or the county schools. The county in this case had not approved the LBD sales, but the city had. The Commissioner of the Tennessee Department of Revenue distributed tax proceeds to the city in accordance with section 57-4-306. The city distributed half its tax proceeds to its own city school system and did not share the proceeds with the county. The trial court granted summary judgment in favor of the city. The court of appeals affirmed. The Supreme Court affirmed, holding that the distribution statute directed the city to distribute the education portion of its LBD tax proceeds in support of its own municipal school system and did not require that the city share those proceeds with the county. View "Sullivan County, Tennessee v. City of Bristol, Tennessee" on Justia Law

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The Supreme Court denied Appellee's motion to dismiss Appellant's appeal from the decision of the Board of Tax Appeals (BTA) that denied Appellant's claim for property-tax exemption for several parcels of land it owned, holding that Appellant timely perfected its appeal. As support for its motion to dismiss, Appellee argued that because Appellant did not initiate service by certified mail within the thirty-day period prescribed by Ohio Rev. Code 5717.04 for filing its notice of appeal, the Supreme Court must dismiss the appeal for lack of jurisdiction. The Supreme Court rejected Appellee's argument, holding that section 5717.04 does not state a timeline for the certified-mail service of the notice of appeal on the appellees, and it is not disputed that the notice of appeal was properly served on Appellee by certified mail. View "The City of Upper Arlington v. McClain" on Justia Law

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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court reversed the decision of the court of appeals reversing the judgment of the trial court granting summary judgment against the county on its claim that the liquor-by-the-drink (LBD) tax distribution statute, Tenn. Code Ann. 57-4-306, required cities to distribute the tax proceeds as the counties distribute the county property tax schools, holding that that the city was not required to share those proceeds with the county. The county in this case had not approved the LBD sales, but the city had. The Commissioner of the Tennessee Department of Revenue distributed the tax proceeds to the city. The city distributed half its tax proceeds to its own city school system. The court of appeals concluded that section 57-4-306 required the city to distribute half of its LBD tax proceeds pro rata among all schools in the county. The Supreme Court reversed, holding (1) the distribution statute directed cities to distribute half of their LBD tax proceeds for the benefit of the city's own school system; and (2) the city in this case was not required to share its LBD tax proceeds with the county or the county schools. View "Coffee County Board of Education v. City of Tullahoma" on Justia Law

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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court affirmed the Court of Appeals' decision affirming the trial court's grant of summary judgment against the county and in favor of the two defendant cities, holding that the LBD statute, Tenn. Code Ann. 57-4-306, did not require the Commissioner of the Tennessee Department of Revenue to pay half of the cities' LBD tax proceeds to the county. The recipient cities distributed half of their tax proceeds to its own city school system and did not share the proceeds with the county. The counties sued the cities, arguing that section 57-4-306 required the cities to distribute the tax proceeds pro rata among all schools in the county based on average daily attendance. The trial court granted summary judgment for the cities. The trial court held that the statute required counties to distribute their LBD tax proceeds pro rata among all schools in the county, even though it did not require the same of cities. The court of appeals affirmed. The Supreme Court affirmed, holding holding that the distribution statute directed the cities to distribute the education portion of their LBD tax proceeds in support of their own municipal school systems. View "Blount County Board of Education v. City of Maryville, Tennessee" on Justia Law