Justia Tax Law Opinion Summaries

When an employee's name and Social Security number listed on Form W-2 do not match in the SSA's database and this happens to a sufficient number of employees, the SSA sends the employer a "no-match" letter. In 2006, Judicial Watch filed a Freedom of Information Act (FOIA), 5 U.S.C. 552, request with the SSA seeking the names of the 100 U.S. employers that generated the most no-matches from 2001 through 2006. The agency declined to produce such records, concluding that they were exempt under FOIA Exemption 3. The district court agreed with the SSA. The court affirmed the district court's judgment and held that the records sought by Judicial Watch would disclose "return information" and were protected from disclosure by the Tax Code, 26 U.S.C. 6103(a). Moreover, the Haskell Amendment was not applicable here because Judicial Watch sought data that could be associated with a particular taxpayer, the employer. View "Judicial Watch, Inc. v. SSA" on Justia Law

106 Ltd. (Partnership), a limited partnership, appearing through its tax matters partner David Palmlund, appealed a decision of the United States Tax Court upholding the imposition of a forty per cent accuracy-related penalty by the IRS. The IRS determined that the Partnership had utilized a so-called "Son of BOSS" tax shelter to overstate its basis in Partnership interests by approximately $3 million and to thereby reduce Palmlund's individual federal income tax liability by nearly $400,000. The sole issue before the D.C. Circuit was whether the Tax Court erred in determining that the Partnership failed to establish a reasonable cause defense to the accuracy-related penalty pursuant to 26 U.S.C. 6664(c)(1). The D.C. Circuit affirmed, holding that the Tax Court did not err in concluding that the Partnership failed to establish the reasonable cause defense to the forty per cent accuracy-related penalty. View "106 Ltd. v. Comm'r of IRS" on Justia Law

Taxpayer appealed a judgment of the Tax Court rejecting two contentions: first, a constitutional claim that certain employees of the IRS's Office of Appeals were "Officers of the United States," so that their appointments must conform to the Constitution's Appointments Clause, art. II, section 2, cl. 2, and second, an argument that the employees in question abused their discretion in rejecting his proposed compromise of the collection of his tax liability. Because the authority exercised by the Appeals Office employees whose status was challenged here appeared insufficient to rank them even as "inferior Officers," the court rejected the constitutional claims. Furthermore, the court found no abuse of discretion in those employee's decision in this case. View "Tucker v. Commissioner, IRS" on Justia Law

In three challenged orders, the Commission addressed a "traffic pumping" scheme in which the holder of the filed tariff entered into contractual arrangements with conference calling companies and charged the interexchange carrier the tariff rate for providing switched access service. Farmers, the holder of the tariff, petitioned for review. As a threshold matter, Farmers, joined by intervenor, contended that the Commission lacked authority to overturn its decision in Farmers I because it failed, as 47 U.S.C. 405(b) required, to act within 90 days on Qwest's petition for partial reconsideration and consequently, Farmers I became a final appealable order. The court held that the contention was based on a misreading of the statute. The merits question was whether the Commission properly determined that Farmers was not entitled to bill Qwest for access service under Farmers' tariff because Farmers had not provided interstate "switched access service" as that term was defined in Farmers' federal access tariff. The court held that the Commission, upon considering factors within its expertise, could reasonably conclude that Farmers' relationships with the conference calling companies had been deliberately structured to fall outside the terms of Farmers' tariff and therefore reasonably rejected such services as tariffed services. Therefore, deference to the Commission's determination was appropriate. Accordingly, the court denied the petition.

Appellant appealed his conviction and sentence on two counts of attempted tax evasion. Appellant argued that the government failed to prove the element of tax loss because it relied upon a flawed calculation under the "cash method of proof" and attributed to appellant $1.9 million of alleged gain when those funds, as a matter of law, belonged to his two corporations. Appellant challenged his sentence to the extent it rested upon the allegedly incorrect calculation of tax loss. The court found no error in the district court's denial of defendant's motions for judgment of acquittal. The court also held that, because a rational trier of fact could find beyond a reasonable doubt a tax was due and owing on $300,000 of income, the court left for another day how best to interpret the dictum in James v. United States. The court affirmed the sentence because the district court made sufficient factual findings at sentencing to support the inclusion of the $1.9 million in the calculation of tax loss.

Plaintiffs, retired U.S. Airways pilots, each received pensions from the U.S. Airways pension plan (the plan) and each opted to receive his pension in a single lump sum rather than as an annuity. Plaintiffs subsequently sued U.S. Airways claiming that the plan owed them interest for its 45-day delay. The court reversed the judgment of the district court with respect to plaintiffs' actuarial equivalence claim where the amount of plaintiffs' lump sum benefit was equal to the actuarial present value of the annuity payments plaintiffs would have received under the plan's default payment option. Even so, U.S. Airway's 45-day delay in paying plaintiffs was unrelated to the calculation of plaintiffs' benefits and therefore, not reasonable under existing IRS regulations. The court remanded to the district court to calculate the appropriate amounts due to plaintiffs and affirmed the judgment of the district court that plaintiffs were not entitled to attorney's fees.

After illegally collecting a three percent excise tax, the IRS created a refund procedure for taxpayers to recoup their money. Appellants argued that the procedure was unlawful. At issue was whether the court had jurisdiction and whether appellants stated a valid claim upon which relief could be granted. The court held that it had federal question jurisdiction and neither the Anti Injunction Act, 26 U.S.C. 7421(a), nor the Declaratory Judgment Act, 28 U.S.C. 2201(a), provided a limitation on the court's exercise of its jurisdiction. Therefore, because appellants had no other adequate remedy at law, the district court should consider the merits of their Administrative Procedure Act, 5 U.S.C. 551 et seq., claim on remand.

This appeal stemmed from a short sale transaction that raised UTA Management's outside basis in the UTAM partnership. On October 13, 2006, more than six years after the filing of UTAM's 1999 partnership return, but less than six years from the filing of the individual partner's 1999 individual return, the IRS mailed a notice of final partnershp administrative adjustment to DDM Management, UTAM's "tax matters" partner, pertaining to UTAM's 1999 tax year. At issue was whether the mailing of a notice of final partnership administrative adjustment by the IRS tolled an individual partner's limitation period under I.R.C. 6501. The court held that the six-year limitations period applied with regard to the individual partner's 1999 return and that the assessment period, suspended pursuant to I.R.C. 6229(d), was the partner's open assessment period under section 6501. Accordingly, the judgment of the Tax Court on the statute of limitations issue was reversed and the case was remanded for further proceedings.

The Commissioner of the IRS appealed a decision of the Tax Court holding taxpayer was entitled to claim deductions in 2003 and 2004 for donating to the L'Enfant Trust, Inc. conservation easements on the facades of two buildings located in an historic district. At issue was whether taxpayer could take such deductions where the Commissioner argued that her contribution was not "exclusively for conservation purposes," as required by 26 U.S.C. 170(h)(1)(C), and where she failed to obtain "qualified appraisals" meeting the standards of Treasury Regulation section 1.170A-13(c)(3)(ii). The court held that the Tax Court did not clearly err in concluding the factual circumstances supporting taxpayer's deductions met the applicable statutory and regulatory requirements where the donated easements would prevent in perpetuity any changes to the properties inconsistent with conservation purposes and where taxpayer provided the Commissioner with "qualified appraisals." Accordingly, the judgment of the Tax Court that taxpayer was entitled to claim the deductions at issue was affirmed.

The Commissioner of the IRS and appellees disagreed about appellees' 1999 gross income where the disagreement stemmed from appellees' sale of assets and centered primarily on the Commissioner's conclusion that appellees inflated its basis in those assets. At issue was whether the Commissioner waited too long to adjust appellees' gross income pursuant to sections 6501(e)(1)(A) and 6229(c)(2) of the Internal Tax Code. The court held that the Commissioner's regulations were validly promulgated, applied to the case, qualified for Chevron deference, and passed muster under the traditional Chevron two-step framework. Because the Tax Court concluded otherwise and failed to apply the Commissioner's interpretation of sections 6501(e)(1)(A) and 6229(c)(2), the court reversed the Tax Court's grant of summary judgment. The court remanded for the Tax Court to consider appellees' alternative argument made in the tax court but unaddressed there, that appellees avoided triggering the extended statute of limitations by "adequately disclos[ing] to the IRS the basis amount it applied in connection with the transaction at issue."