Justia Tax Law Opinion Summaries

On remand from the Supreme Court, these consolidated appeals challenge six actions brought by the district court to enforce summonses issued by the IRS in an investigation of DHLP and Beekman. The court remanded the case to the district court to determine whether defendants’ allegations of improper purpose were improper as a matter of law or sufficiently supported under United States v. Clarke to require a hearing. The district court enforced the summonses, finding that defendants neither alleged improper motives as a matter of law nor met their burden under Clarke. The court concluded that issuing a summons for the sole purpose of retaliation against a taxpayer would be improper as a matter of law; issuing summons in bad faith for the sole purpose of circumventing tax court discovery would be an improper purpose as a matter of law; the district court's decision not to hold a status conference or permit additional evidence is appropriate in light of the summary nature of a summons enforcement proceeding; and, although the district court erred in finding that the allegations set forth by defendants could not constitute an improper purpose as a matter of law, the district court correctly found that defendants failed to meet their burden under Clarke. Clarke permits a taxpayer challenging the enforcement of a summons “to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith.” In this case, defendants' submissions suggest that the summonses were issued in bad faith anticipation of tax court proceedings rather than in furtherance of Agent Fierfelder’s investigation. Conjecture and bare allegations of improper purpose are insufficient as a matter of law. Accordingly, the court affirmed the judgment. View "United States v. Clarke" on Justia Law

The IRS sent petitioner a Letter 1153 (notice of proposed assessment) informing her that, pursuant to 26 U.S.C. 6672(a), she - as the chief operating officer of NPRN - was personally responsible for the company’s unpaid trust fund taxes for the second quarter of 2005. The IRS then made an assessment against her in the amount of $346,732.38. The court held that a taxpayer is entitled to a pre-assessment administrative determination by the IRS of her proposed liability for trust fund taxes if she files a timely protest. Therefore, in this case, the IRS erred by not making such a determination for petitioner after she filed a timely protest. The court vacated the judgment of the tax court and remanded so that it can address whether the IRS’ error, under the circumstances, is harmless or requires setting aside the 2007 assessment (or some lesser form of corrective action). View "Romano-Murphy v. Commissioner of IRS" on Justia Law

This case stems from a dispute regarding Palmer Ranch's residential development (B-10). Palmer Ranch argued that B-10’s highest and best use was residential development under a Moderate Density Residential (“MDR”) zoning designation, which would allow between two and five units per acre, or 164 to 410 units total. Based on this highest and best use, Palmer Ranch stuck to its initial $25,200,000 valuation. The IRS countered with a maximum highest and best use of 100 units and a corresponding valuation of $7,750,000. The tax court held in favor of Palmer Ranch. The parties cross-appealed. The court affirmed the tax court's determination of B-10's highest and best use. However, the court reversed the ensuing valuation and directed the tax court on remand to either stick with the comparable-sales analysis or explain its departure. Whatever the tax court chooses to do, the tax court must keep its sights set strictly on the evidentiary record for purposes of selecting an appreciation rate, and ensure that it crunches the numbers correctly. View "Palmer Ranch Holdings v. Commissioner" on Justia Law

Plaintiffs filed suit challenging the Notices of Final Partnership Administrative Adjustment (FPAAs) the IRS issued disallowing all items they claimed on their partnership returns on the ground that partnerships constituted an abusive tax shelter designed to generate artificial, noneconomic tax losses desired by the taxpayer. The district court upheld the administrative adjustments to the partnerships’ returns and entered judgment for the Government. The court concluded that the district court's Memorandum Opinion and Order correctly resolved these questions; and therefore, the court affirmed on this basis. The district court concluded that the FPAAs properly found that the partnerships lacked economic substance and made adjustments accordingly. However, the FPAAs improperly imposed penalties. View "Kearney Partners Fund v. United States" on Justia Law