Justia Tax Law Opinion Summaries

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

The district court held that temporary foreign workers in the Commonwealth of the Northern Mariana Islands (CNMI) and their employers are required to pay FICA taxes, which fund Social Security and Medicare. Concorde and more than 4,000 temporary, nonresident former employees of Concorde, appealed the district court's entry of judgment on the pleadings in favor of the United States. The court concluded that, because FICA is a law that imposes an excise tax to support the Social Security system, it applies to the CNMI as it applies to Guam; FICA applies to all workers and their employers in Guam, regardless of their citizenship; and FICA also applies to all workers and their employers in the CNMI, including appellants, regardless of their citizenship. Accordingly, the court affirmed the judgment. View "Fang Lin Ai v. United States" on Justia Law

Taxpayers received and then sold stock derived from the demutualization of five mutual life insurance companies from which they had purchased policies. At issue was whether a life insurance policyholder has any basis in a mutual life insurance company’s membership rights. The court held that taxpayers who sold stock obtained through demutualization cannot claim a basis in that stock for tax purposes because they had a zero basis in the mutual rights that were extinguished during the demutualization. The district court skipped a critical step by examining the value of the mutual rights without evidence of whether the taxpayers paid anything to first acquire them. The district court also erred when it estimated basis by using the stock price at the time of demutualization rather than calculating basis at the time the policies were acquired. Consequently, the court concluded that the IRS properly rejected taxpayers' refund claim in this case where they offered nothing to show payment for their stake in the membership rights, as opposed to premium payments for the underlying insurance coverage. Accordingly, the court reversed the district court's denial of the government's motion for summary judgment. View "Dorrance v. United States" on Justia Law