Respondents filed a complaint against AT&T Mobility LLC ("AT&T"), which was later consolidated with a putative class action, alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. AT&T moved to compel arbitration under the terms of its contract with respondents and respondents opposed the motion contending that the arbitration agreement was unconscionable and unlawfully exculpatory under California law because it disallowed classwide procedures. The district court denied AT&T's motion in light of Discover Bank v. Superior Court and the Ninth Circuit affirmed. At issue was whether the Federal Arbitration Act ("FAA"), 9 U.S.C. 2, prohibited states from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures. The Court held that, because it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," quoting Hines v. Davidowitz, California's Discover Bank rule was preempted by the FAA. Therefore, the Court reversed the Ninth Circuit's ruling and remanded for further proceedings consistent with the opinion.

Plaintiff-Appellant Alexandre was selected for a tax audit by Defendant, to cover the period October, 1999 to March, 2005. In preparation, Plaintiff pulled ledgers, bank statements, and "z reports" or summary cash register tapes for review by the auditor. Detailed records were used to prepare the "z report", but it was Plaintiff's custom to discard those receipts once the z-report was complete. Without the detailed register receipts, the state auditor used an industry-standard method of calculating properly audited gross receipts. By this method, the auditor assessed a tax delinquency of over $250,000, which eventually lead to a tax lien on Plaintiff's business and property. Plaintiff sought a hearing from Defendant to reconsider the penalties and lien; the penalties were reduced, but Plaintiff brought suit seeking the entire assessment be set aside. The trial court concluded that because Plaintiff did not keep the detailed register receipts, he had no basis to challenge the Defendant's review of the original audit and assessment. In this appeal, the Court upheld the lower court's findings, holding that Plaintiff's "z reports" were not enough to preclude the auditor from using the industry-standard method Plaintiff's sales receipts.

The taxpayer and her ex-husband maintained a joint account pending resolution of a support dispute. In May 2003 the IRS levied the funds because of the ex-husband's failure to turnover taxes withheld from his employees. The IRS did not notify the taxpayer and she did not learn of the levy until July 2004; she filed a claim for taxpayer assistance in August 2004, which was denied as untimely in January 2005. In March 2005, the taxpayer filed a petition for lien or levy with the tax court, which ultimately transferred the case. The district court dismissed. The Third Circuit vacated and remanded. Although her "wrongful levy" claims are not saved by the doctrine of equitable tolling, the taxpayer also raised a due process claim, based on lack of notice. Claims for damages are barred by sovereign immunity, but the taxpayer sought a procedural remedy, over which the district court did have jurisdiction (5 U.S.C. 702).

Defendant appealed a grant of summary judgment in favor of the United States when the government brought an action against him to recover a tax refund of over $300,000 that it contended was erroneously refunded. At issue was whether the district court properly granted summary judgment where defendant filed an amended tax refund in 2000 asserting that he did not realize income in 2000 from the restricted shares he received as a partner at Ernst & Young. The court held that the district court did not err in granting summary judgment where defendant realized income at the time the restricted shares were transferred into his account in 2000 when he constructively received the shares in 2000, he bore the risk of share appreciation or depreciation, and he possessed indicia of control over the shares.

The company claimed based $115 million in deductions for 2002, based on 26 sale-in lease-out (SILO) transactions with tax-exempt entities, including domestic transit agencies. After the IRS denied the deduction, the company paid under protest. The Court of Federal Claims denied a refund. The Federal Circuit affirmed, applying the substance-over-form doctrine. Noting that title is only one indicator of ownership, the court analyzed the economic substance of the transactions, particularly risk and the near-certainty that the entities would exercise repurchase options and retain possession of the assets. The claimed deductions were for depreciation on property (such as buses, rail cars, and telecommunications equipment) that the company never expected to own or operate, interest on debt that existed only on a balance sheet, and write-offs for the costs of transactions that amounted to nothing more than tax deduction arbitrage. The tax-exempt entities were, in essence, paid for allowing the company to use tax advantages that could not be used by those entities.

The IRS auctioned the taxpayer's property for back taxes. Letters sent by the taxpayer, in an attempt to resolve or appeal the decision, were incorrectly addressed. The district court dismissed a suit for damages. The Sixth Circuit affirmed, but held that failure to exhaust administrative remedies (26 U.S.C. 7433)did not deprive the court of jurisdiction. What is mandatory is not necessarily jurisdictional; the context shows that the requirement is a limit on relief.

Petitioner appealed the Tax Court's ruling that her settlement proceeds, received as a result of a discrimination suit against her employer, was taxable income in 2006. At issue was whether the $50,000 lump sum payment to "resolve and settle all differences, disputes, and controversies between the parties" in an action concerning various employment-related claims was excludable from a taxpayer's income under Internal Revenue Code 104(a)(2). The court held that the Tax Court did not err in concluding that the settlement proceeds were income where petitioner failed to demonstrate that her employer intended to allocate any specific portion or the entire amount of the settlement for her personal physical injury or physical illness.

Plaintiff filed an instant refund suit alleging that she was entitled to a refund of the income and Medicare taxes she paid in 1999-2000. At issue was whether plaintiff could postpone tax consequences attributable to her option exercises during 1999 and early 2000 under Internal Revenue Code 83(c)(3). Also at issue was whether plaintiff could defer tax consequences for a distinct reason under Treasury Regulation 1.83-3(k). The court held that plaintiff could not postpone tax consequences attributable to her option exercises where she did not demonstrate an entitlement to deferral of tax consequences under section 83(c)(3). The court remanded the issue related to the deferral under section 1.83-3 for further proceedings.

Non-resident alien citizens of China sought refunds of taxes paid under the Federal Insurance Contribution Act (FICA), 26 U.S.C. 3101, for work performed as contract workers in the Northern Mariana Islands. A corporation sought a refund of taxes paid for its contract workers in the Islands. The statutory definition of work performed in the United States contains no reference to the Islands. The Claims Court entered judgment on the pleadings in favor of the government. The Federal Circuit affirmed, noting various laws and covenants under which citizens of the Islands are to be treated as citizens of the United States. Congress intended to treat the Islands like Guam is treated for purposes of FICA and to apply both employer and employee FICA taxes to the Islands.

The Seventh Circuit affirmed the Tax Court holding that the Coles omitted income from their 2001 return and imposed a fraud penalty. Because the Coles had not maintained adequate records of income from a "confusing maze of entities and financial dealings," the IRS reconstructed their income. The Coles did not rebut the presumption of accuracy with respect to the reconstruction. An argument that certain entity income was not attributable to the Coles was "spurious," according to the court, and a claim that the Coles did not benefit from certain loans was a "nonstarter." The court particularly noted the Coles' control over the entities at issue. There was clear and convincing evidence of fraud: Jennifer Cole has worked as an accountant and Scott is a licensed attorney, yet they failed to keep records, commingled funds, and funneled assets into entities that had no business purpose.