Articles Posted in US Court of Appeals for the Eleventh Circuit

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After CIC entered into a tax avoidance scheme and claimed over $27 million in capital losses, the IRS issued a Final Partnership Administrative Adjustment (FPAA) disallowing CIC's claimed capital loss and fee deductions on its 2000 tax return. The IRS also applied a gross valuation misstatement penalty pursuant to 26 U.S.C. 6662 and 6664. The Eleventh Circuit affirmed the tax court's judgment upholding the IRS's decisions. The court held that the tax court did not err in concluding that CIC's CARDS transaction lacked economic substance or business purpose, nor in finding that CIC was liable for a 40% gross valuation misstatement penalty for its 2000 tax return. The court also held that the tax court did not clearly err in determining that CIC lacked reasonable cause and good faith in making an understatement on its 2000 tax return. View "Curtis Investment Co., LLC v. Commissioner" on Justia Law

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The Eleventh Circuit affirmed the district court's order denying the quashing of IRS summonses to Bank of America in the course of investigating the federal income tax liabilities of a lawyer, his law firm, and associated parties (plaintiffs). The court held that neither plaintiffs nor their law firm clients whose interests plaintiffs attempted to invoke have a viable Fourth Amendment objection to the IRS's collection of plaintiffs' bank records from plaintiffs' bank. Plaintiffs' arguments were foreclosed by the Supreme Court's holdings in United States v. Miller, 425 U.S. 435 (1976), and United States v. Powell, 379 U.S. 48 (1964). View "Presley v. United States" on Justia Law

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The Miccosukee Indian Tribe and one of its members raised an affirmative defense that revenue distributions from gaming activities were exempt from taxation as Indian general welfare benefits under the Tribal General Welfare Exclusion Act (GWEA), 26 U.S.C. 139E. The Eleventh Circuit held that the distribution payments could not qualify as Indian general welfare benefits under GWEA because Congress specifically subjected such distributions to federal taxation in the Indian Gaming Revenue Act (IGRA), 25 U.S.C. 2701 et seq.; the member waived any arguments as to penalties or the amount assessed against her, and the tribe lacked a legal interest in those issues; and the district court did not err in entering judgment against the tribe because the tribe intervened as of right and the Government sought to establish its obligation to withhold taxes on the distributions. View "United States v. Jim" on Justia Law

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The Miccosukee Indian Tribe and one of its members raised an affirmative defense that revenue distributions from gaming activities were exempt from taxation as Indian general welfare benefits under the Tribal General Welfare Exclusion Act (GWEA), 26 U.S.C. 139E. The Eleventh Circuit held that the distribution payments could not qualify as Indian general welfare benefits under GWEA because Congress specifically subjected such distributions to federal taxation in the Indian Gaming Revenue Act (IGRA), 25 U.S.C. 2701 et seq.; the member waived any arguments as to penalties or the amount assessed against her, and the tribe lacked a legal interest in those issues; and the district court did not err in entering judgment against the tribe because the tribe intervened as of right and the Government sought to establish its obligation to withhold taxes on the distributions. View "United States v. Jim" on Justia Law

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The Eleventh Circuit denied petitioner's challenge to the tax court's dismissal of his petition for review for lack of jurisdiction. Petitioner argued that the IRS should have provided notice to him at his prison address when it intended to levy on a restitution-based assessment against him. The court held that petitioner did not file a request for a CDP hearing within 30 days and was thus not entitled to a hearing or a notice of determination. Furthermore, he had no right to request review by the tax court. The court also held that petitioner did not properly preserve his legislative history argument in the tax court because he first presented it in his motion to vacate the order of dismissal. Therefore, the tax court was within its discretion to deny his motion to vacate. View "Berkun v. Commissioner of Internal Revenue" on Justia Law

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Defendant appealed the district court's grant of summary judgment in favor of the United States for unpaid federal income taxes, late penalties, and interest accrued. The Eleventh Circuit initially affirmed but then later granted rehearing en banc and overruled Mays v. United States, 763 F.2d 1295 (11th Cir. 1985). On remand to the original panel, the parties raised arguments that no longer resemble the arguments they had made to the district court. Therefore, the court vacated the judgment of the district court and remanded to the district court to consider the new arguments in the first instance. View "United States v. Stein" on Justia Law

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Alabama rail carriers pay a 4% sales and use tax on diesel fuel. Motor carriers and water carriers are exempt from that tax but motor carriers pay a Motor Fuels Excise Tax of $0.19 per gallon of diesel. Water carriers pay no tax for diesel fuel. The Eleventh Circuit previously determined that Alabama failed to sufficiently justify the scheme under the Railroad Revitalization and Regulatory Reform Act, 49 U.S.C. 11501, which forbids states from discriminating against rail carriers in assessing property or imposing taxes. The Supreme Court reversed and remanded. On remand, the district court again ruled that Alabama’s tax scheme does not violate the Act. The Eleventh Circuit then reversed. The excise tax justifies the motor carrier exemption. As to water carriers, their exemption is not “compelled by federal law.” Although imposing the sales and use tax on water carriers transporting freight interstate might “expose” the state to a lawsuit under federal law, compulsion requires more than exposure. The water carrier exemption is “compelled by federal law” only if imposition of the sales and use tax would violate federal law. It would not, so it violates the Act. View "CSX Transportation, Inc. v. Alabama Department of Revenue" on Justia Law

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The Railroad Revitalization and Regulatory Reform Act prohibits states from imposing a tax that discriminates against a rail carrier. 49 U.S.C. 11501(b)(4). The Eleventh Circuit held that Alabama's tax scheme, which imposes either a sales or use tax on rail carriers when they buy or consume diesel fuel but exempts competing motor and water carriers from those taxes, violates the Act as to water carriers, but not to motor carriers. The court held that the district court correctly concluded that the excise tax was roughly equivalent to the sales and use tax and thus the excise tax justified the motor carrier sales-tax exemption. However, unlike the motor carrier exemption, the State could offer no rough equivalency justification for the water carrier exemption because water carriers pay no state taxes at all when they buy or consume diesel. View "CSX Transportation, Inc. v. Alabama Department of Revenue" on Justia Law

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The Railroad Revitalization and Regulatory Reform Act prohibits states from imposing a tax that discriminates against a rail carrier. 49 U.S.C. 11501(b)(4). The Eleventh Circuit held that Alabama's tax scheme, which imposes either a sales or use tax on rail carriers when they buy or consume diesel fuel but exempts competing motor and water carriers from those taxes, violates the Act as to water carriers, but not to motor carriers. The court held that the district court correctly concluded that the excise tax was roughly equivalent to the sales and use tax and thus the excise tax justified the motor carrier sales-tax exemption. However, unlike the motor carrier exemption, the State could offer no rough equivalency justification for the water carrier exemption because water carriers pay no state taxes at all when they buy or consume diesel. View "CSX Transportation, Inc. v. Alabama Department of Revenue" on Justia Law

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A taxpayer that contracts to sell property used in its trade or business is not entitled to treat as capital gain an advance deposit that it rightfully retains when its would-be buyer defaults and cancels the deal. In this partnership tax case, CRI-Leslie filed a petition for readjustment in the tax court, asserting that the Internal Revenue Code was meant to prescribe the same tax treatment for gains related to the disposition of "trade or business" property regardless of whether the property was successfully sold or the sale agreement was canceled. The Eleventh Circuit held that I.R.C. 1234A provides for capital-gains treatment of income resulting from canceled sales only where the underlying property constitutes a "capital asset," and I.R.C. 1221 defines "capital asset" in a way that all agree excludes the property at issue here. Therefore, CRI-Leslie was not entitled to treat its $9.7 million deposit as capital gain. View "Cri-Leslie, LLC v. Commissioner of Internal Revenue" on Justia Law