Justia Tax Law Opinion Summaries

Plaintiff claimed that it acquired title to the foreclosed property at issue by a tax sale and filed suit to quiet title in state court. Defendant removed the action to federal court and counter-claimed for declaratory relief. The district court dismissed the suit and found that the tax sale was void, quieting title in favor of defendant. The court determined that the district court properly concluded that it did not have subject matter jurisdiction over plaintiff’s suit. A quiet title action against the federal government must be brought in federal court, and when the state court lacks subject matter jurisdiction, no jurisdiction is added by removal to federal court. The court also concluded that in the absence of consent from the federal government, the sale of the property under state law was invalid. While the statute preserves local “power to tax,” it does not permit local governments to seize and sell federal government property. Therefore, the tax sale of federally owned real estate was null and void, and the district court rightly quieted title in favor of the Secretary. The court affirmed the judgment. View "Equity Trust Co. v. McDonald" on Justia Law

Petitioners are subsidiaries of the Howard Hughes Corp., an entity involved in selling and developing commercial and residential real estate. Petitioners used the completed contract method of accounting in computing their gains from sales of property under long-term construction contracts. The IRS challenged the method and the Tax Court sided with the IRS. At issue was whether petitioners' contracts were “home construction contracts” within the meaning of I.R.C. 460(e)(6)(A), thereby making petitioners eligible to use the completed contract method of accounting. The court concluded that petitioners' construction contracts do not fall within the meaning of subsection (i) of section 460(e)(6)(A) or subsection (ii) of section 460(e)(6)(A). Because petitioners' contracts are not "home construction contracts," within the meaning of the statute, the court affirmed the Tax Court's judgment. View "Howard Hughes Co. v. Commissioner" on Justia Law