In 2014, the IRS issued an administrative summons to Titan, to inspect its 2009 records in connection with an audit of the company’s 2010 tax return. Titan had taken an operating-loss carryforward in the 2010 tax year for a loss that occurred in 2009. Titan had claimed this same loss in 2009; the IRS had already audited its return for that tax year. Titan refused to comply with the 2014 summons, citing 26 U.S.C. 7605(b), which provides that “only one inspection of a taxpayer’s books of account shall be made for each taxable year unless … the [Treasury] Secretary … notifies the taxpayer in writing that an additional inspection is necessary.” Because the Secretary had not issued this notice, Titan asserted that the reinspection of its 2009 records was not permitted. The district court ordered Titan to comply with the summons. The Seventh Circuit affirmed. Section 7605(b) applies if the IRS seeks to inspect a taxpayer’s records when auditing a tax liability for a given year when the agency has already inspected the records in auditing the taxpayer’s liability for that same tax year. It does not apply when the IRS seeks already-inspected records for an audit of a different tax year. View "United States v. Titan Int'l, Inc." on Justia Law

Plaintiffs allowed a wind turbine to be built on their property in North Kingstown. None of the electricity produced by this wind turbine was sold to the public but, rather, was sold directly to National Grid. The Town of North Kingstown assessed the wind turbine at a value of $1.9 and sought payment of annual tangible personal property taxes. Plaintiffs appealed the assessment, arguing that the wind turbine was tax exempt. Both the Northtown Tax Assessor and the North Kingstown Tax Board of Review denied Plaintiffs’ appeal. Plaintiffs subsequently brought this action against Defendant, in her capacity as the Town Tax Assessor. The superior court granted summary judgment in favor of Plaintiffs, concluding that the wind turbine was exempt from taxation. The Supreme Court affirmed, holding that Plaintiffs qualified for the exemption listed in R.I. Gen. Laws 44-3-3(22), which exempts manufacturing machinery and equipment acquired or used by a manufacturer from taxation. View "DePasquale v. Cwiek" on Justia Law

Richard Schiffmann and Stephen Cummings were officers of ICOA, Inc. (ICOA), a corporation that struggled to stay current on federal trust fund tax - or payroll tax - obligations. After Schiffmann and Cummings were fired, the Internal Revenue Service (IRS) made trust fund recovery penalty assessments against Schiffmann and Cummings. Schiffman filed suit seeking to recover the sums previously seized from him and to nullify the assessments. The government counterclaimed against Schiffman, Cummings, and others seeking to recover the remainder of the overdue taxes and penalties. Cummings, in turn, counterclaimed against the government seeking to nullify the assessments against him. The district court entered summary judgment for the government on its counterclaims and on the claims asserted by Schiffmann and Cummings, concluding that, as a matter of law, Schiffmann and Cummings were responsible persons who had acted willfully in not paying ICOA’s trust fund taxes. The First Circuit affirmed, holding that the district court did not err in concluding that Schiffmann and Cummings were responsible persons who had willfully caused ICOA to shirk its payroll tax obligations. View "Schiffmann v. United States" on Justia Law

USA Tire Management Systems Inc. entered into a contract with Great Western Bank to “take title to, remove, and transport” tires and casings from a foreclosed property that a bank was attempting to sell. After an audit, the South Dakota Department of Revenue issued an assessment on the gross receipts USA Tire received from Great Western under their contract. USA Tire contested the assessment. The circuit court affirmed the assessment. USA Tire appealed, arguing that it was entitled to a trucking services tax exemption. The Supreme Court affirmed, holding that USA Tire did not meet its burden of proving that its services were exempt trucking services under S.D. Codified Laws 10-45-12.1. View "In re Sales Tax Liability of USA Tire Mgmt. Sys., Inc." on Justia Law

In 2009, Wheelabrator Bridgeport, L.P., which operates a waste to energy facility in the city of Bridgeport, appealed from the tax assessment of the City, alleging that the city had overvalued the property on the city’s 2007 and 2008 grand lists. In 2011, Wheelabrator and other plaintiffs filed a second appeal from the city’s tax assessment, alleging that the city had overvalued the property on the 2010 grand list. The two appeals were consolidated for purposes of trial. The trial court dismissed the first appeal for lack of standing and then rendered partial judgment in favor of Wheelabrator in the second appeal. The Supreme Court reversed, holding (1) the trial court improperly dismissed the first appeal; and (2) the trial court improperly valued the property in the second appeal and failed to consider evidence of the city’s wrongful conduct in the second appeal. Remanded for further proceedings in the first appeal and a new trial in the second appeal. View "Wheelabrator Bridgeport, L.P. v. Bridgeport" on Justia Law

Wilma Stuller and her late husband bred Tennessee Walking Horses. They incorporated the operation and claimed its substantial losses as deductions on their tax returns. The IRS determined that the horse-breeding was not an activity engaged in for profit, assessed taxes and penalties, and penalized them for failing to timely file their 2003 return. After paying, the Stullers and LSA, sued the government for a refund. The district court excluded the Stullers’ proposed expert. It determined that his expertise did not extend to the financial or business aspects of horse-breeding and he lacked a reliable methodology to opine on the Stullers’ intent. The court found that the corporation was not run as a for-profit business under 26 U.S.C. 183, and determined that the Stullers lacked reasonable cause for failing to timely file their 2003 tax return. The court also denied a request to amend the judgment and effectively refund taxes paid by the Stullers on rental income received from the corporation. The Seventh Circuit affirmed. The district court followed Daubert in excluding the expert and applied each factor of the regulations to the facts. Only the expectation of asset appreciation weighed in the Stullers’ favor; almost every other consideration pointed to horse-breeding as a hobby or personal pleasure. View "Estate of Stuller v. United States" on Justia Law

This case arose from a complaint filed in 2011, by the late Al Davis and his wife, against the United States, seeking a refund of income taxes. Davis, a Pro Football Hall of Famer and the principal owner of the Oakland Raiders, argued that the IRS assessed the taxes outside the statue of limitations and in breach of a Closing Agreement between the IRS and the partnership that formally owned the Raiders. The district court entered judgment for Davis. In this case, the court held that, although the IRS admits that it breached Paragraph Q of the Closing Agreement by making the September 2007 assessments without giving Davis a second opportunity to review its calculations, the IRS's breach did not invalidate the assessments. Even though the breach denied Davis an opportunity to comment on the amounts of the assessments before they were made, it did not prevent him from challenging the assessed amounts by seeking an administrative refund claim or a refund action. Under the plain language of I.R.C. 6231(b)(1)(C), the court concluded that the IRS does not “enter into a settlement agreement with the partner” when it enters into a settlement agreement with the tax matters partner (TMP) and the individual partner is bound merely by operation of the tax court’s decision to which the partner is a party. Because the Closing Agreement and stipulations were not a “settlement agreement with” Davis within the scope of I.R.C. 6231(b), the assessments made on September 4, 2007 were timely, as they occurred within one year after the Tax Court decision became final. Accordingly, the court reversed and remanded for further proceedings. View "Davis v. United States" on Justia Law

Plaintiff applied for abatement of real property taxes that the Town of Lebanon assessed against her property for the tax years 2011 through 2013. The Town denied the application on the basis that the taxes had been paid. After a de novo hearing, the York County Commissioners ultimately denied Plaintiff’s application for abatement for tax years 2011 and 2012 and remanded the matter for further action with respect to tax year 2013. The superior court affirmed the decision of the Commissioners with respect to the 2011 and 2012 tax years. The Supreme Judicial Court affirmed, holding that because Plaintiff failed to supply the Court with a complete and defined record of the evidence and arguments presented to the Commissioners, the Court could not review Plaintiff’s argument that the Commissioners were compelled to authorize an abatement. View "Penkul v. Town of Lebanon" on Justia Law

The Smiths lived in a Joliet home, title to which passed to wife in 2004 as an inheritance. Real estate taxes had gone unpaid in 2000, resulting in a tax lien. At a 2001 auction, SIPI purchased the tax lien and paid the delinquent taxes—$4,046.26—plus costs and was awarded a Certificate of Purchase. Smith did not redeem her tax obligation. SIPI recorded its tax deed in 2005 and sold the property to Midwest for $50,000. In 2007, the Smiths filed for Chapter 13 bankruptcy relief and sought to avoid the tax sale. The bankruptcy judge and the Seventh Circuit found a fraudulent transfer (11 U.S.C. 548(a)(1)(B)) because the property was not transferred for reasonably equivalent value, but found Midwest a subsequent transferee in good faith. The 1994 Supreme Court decision, BFP v. Resolution Trust, that a mortgage foreclosure sale that complies with state law is deemed for “reasonably equivalent value” as a matter of law, does not apply in Illinois. Unlike mortgage foreclosure sales and some other states’ tax sales, Illinois tax sales do not involve competitive bidding where the highest bid wins. Instead, bidders bid how little money they are willing to accept in return for payment of the owner’s delinquent taxes. The lowest bid wins; bid amounts bear no relationship to the value of the real estate. View "Smith v. Sipi, LLC" on Justia Law

Defendant pled guilty to failing to file a tax return in 2006 and was sentenced to twelve months’ imprisonment, one year supervised release, and restitution in the amount of $453,547.00. The district court entered an order directing defendant's ex-wife's employer to withhold the portion of her earnings that accrued prior to the date of the divorce, including paid time off and contributions to her 401(k) and 403(b) retirement plans. The district court subsequently denied the ex-wife's motion to quash the writs of garnishment, as well as a motion to alter or amend the judgment. The court agreed with the district court that the ex-wife did not qualify for relief under I.R.C. 66(c), the "Innocent Spouse" provision, because this provision is only available as an affirmative defense to the government’s efforts to assess a tax deficiency, not when the government is enforcing a criminal judgment. Further, the ex-wife was aware that her husband earned an income as an insurance broker, disqualifying her under the knowledge provision of section 66(c)(3). The court affirmed the judgment. View "United States v. Tilford" on Justia Law