Justia Tax Law Opinion Summaries

Rockwater, Inc., doing business as Peerless Manufacturing Company, sold three peanut-drying trailers and was audited by the IRS, which determined that Rockwater owed excise taxes on these sales. Rockwater paid the taxes, statutory interest, and penalties, then filed a claim for a refund with the IRS. Subsequently, Rockwater filed a lawsuit against the United States for a full refund and attorney’s fees. The United States District Court for the Middle District of Georgia granted summary judgment in favor of Rockwater for the refund of excise taxes, statutory interest, and penalties but denied the request for attorney’s fees. The United States appealed the decision regarding the taxes and statutory interest but not the penalties.The United States Court of Appeals for the Eleventh Circuit reviewed the case. The court concluded that the district court erred in determining that Rockwater’s peanut-drying trailers were “off-highway transportation vehicles” exempt from the excise tax. The court found that the trailers were not specially designed for the primary function of transporting peanuts off-highway and that their capability to transport a load over public highways was not substantially limited or impaired. The trailers had standard highway equipment, could travel at road speed limits, and did not require special permits for highway use.The Eleventh Circuit reversed the district court’s grant of summary judgment to Rockwater regarding the excise taxes and statutory interest and remanded with instructions to enter final judgment for the United States for taxes and statutory interest. The court affirmed the district court’s ruling that Rockwater was not required to pay penalties, as the government did not appeal this part of the decision. View "Rockwater, Inc. v. United States" on Justia Law

The case involves two grand jury subpoenas issued to an accounting firm and an investment company in connection with an alleged illegal tax-shelter scheme. The investment company claimed that the documents sought were protected by attorney-client privilege. The government moved to compel the production of these documents, arguing that the crime-fraud exception applied, which would negate the privilege claims.The United States District Court for the Northern District of Georgia denied the investment company’s motion to intervene and ordered the accounting firm to comply with the subpoena. The court also ruled that the crime-fraud exception applied, compelling the investment company, the accounting firm, and other third parties to produce the requested documents. The investment company appealed these orders.The United States Court of Appeals for the Eleventh Circuit reviewed whether it had jurisdiction to hear the appeals. The court noted that typically, orders related to grand jury subpoenas are not appealable unless the party stands in contempt. The investment company had not stood in contempt before appealing, which generally precludes appellate review. The court also considered the Perlman exception, which allows immediate appeal if the subpoenaed party is unlikely to risk contempt to protect another’s privilege. However, the court found that this exception did not apply because the investment company could have raised its privilege arguments on appeal by standing in contempt.The Eleventh Circuit dismissed the appeals for lack of jurisdiction, emphasizing that the investment company’s failure to stand in contempt foreclosed its ability to seek immediate appellate review. The court held that the investment company must comply with the district court’s orders or stand in contempt to preserve its right to appeal. View "In Re: Grand Jury Investigation" on Justia Law

Robert Turner, a property owner in Suwannee County, Florida, claimed that his homestead property was sold at an impermissibly low amount under Florida law, which deprived him of any surplus after back taxes and costs were deducted. Turner had a homestead exemption on his property, which was automatically renewed until 2015. After failing to pay property taxes, a tax certificate was issued, and a tax deed sale was conducted in 2015. Turner alleged that the sale was unlawful because it did not account for the homestead exemption, and he did not receive proper notice of the sale.Turner initially sought relief in state court, challenging the removal of his homestead exemption, but his complaint was dismissed as untimely. He then filed a federal lawsuit under 42 U.S.C. § 1983, claiming violations of his constitutional rights, including First Amendment retaliation, Fourth Amendment illegal seizure, and due process violations. The federal district court dismissed his complaint, finding that abstention was warranted under the comity doctrine, which prevents federal courts from interfering with state tax administration when state remedies are adequate.The United States Court of Appeals for the Eleventh Circuit reviewed the district court's decision. The court affirmed the dismissal, holding that the relief Turner sought would disrupt Florida's administration of its ad valorem property tax scheme. The court found that Florida provided plain, adequate, and complete state remedies, including the ability to challenge tax deed sales and homestead exemption removals in state court. The court concluded that the district court did not abuse its discretion in abstaining from exercising jurisdiction under the comity doctrine. View "Turner v. Jordan" on Justia Law

The case revolves around Green Rock LLC, a company that solicited taxpayers to invest in arrangements promising conservation-easement deductions. The Internal Revenue Service (IRS) issued Notice 2017-10, which required taxpayers and their advisors to comply with reporting requirements when claiming deductions for donations of conservation easements. Green Rock challenged this notice, arguing that the IRS violated the Administrative Procedure Act by issuing the notice without public notice and comment.Previously, the district court ruled in favor of Green Rock, stating that the IRS had unlawfully promulgated Notice 2017-10 because Congress did not expressly authorize its issuance without notice and comment. The district court set Notice 2017-10 aside for Green Rock.The United States Court of Appeals for the Eleventh Circuit affirmed the district court's decision. The court held that Notice 2017-10 was a legislative rule and Congress did not expressly exempt the IRS from notice-and-comment rulemaking. Therefore, Notice 2017-10 is not binding on Green Rock. The court clarified that its decision was specific to Notice 2017-10 and did not rule on the validity of any other listed transaction not before it. View "Green Rock LLC v. Internal Revenue Service" on Justia Law

Plaintiff’s CPA failed to file Plaintiff’s tax returns for three consecutive years: 2014 through 2016. In 2019, the IRS assessed Plaintiff with over seventy thousand dollars in penalties for violating Section 6651(a) of the Internal Revenue Code and barred him from applying his 2014 overpayment to taxes owed for 2015 and 2016. Plaintiff sued, arguing that his failure to file was due to reasonable cause. He also sought a refund of the penalties. The district court granted summary judgment for the government, concluding that United States v. Boyle foreclosed Plaintiff’s claims. Plaintiff appealed.   The Eleventh Circuit affirmed. The court explained that if Plaintiff’s CPA had failed to file paper tax returns, there would be no question that Boyle would have precluded a reasonable cause defense and a refund. However, the court explained that no circuit court has yet applied Boyle to e-filed tax returns. The court decided that Boyle’s bright line rule applies to e-filed returns. Thus, the court concluded that Plaintiff’s reliance on his CPA does not constitute “reasonable cause” under Section 6651(a)(1). View "Wayne Lee v. USA" on Justia Law

This appeal turns on the meaning of the phrase “partner level determinations” in Section 6230(a)(2)(A)(i) of the now-repealed Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). When the IRS adjusts the tax items of a partnership, these partnership-level changes often require corresponding adjustments to “affected items” on the individual partners’ income tax returns. The IRS makes these resulting partner-level changes using one of two procedures. If adjusting a partner-taxpayer’s affected item “require[s] partner level determinations,” the IRS must send the taxpayer a notice of deficiency describing the adjustment to the taxpayer’s tax liability, and the taxpayer has the right to challenge the adjustments in court before paying. If, on the other hand, adjusting the affected item does not “require partner level determinations,” the IRS generally must make a direct assessment against the taxpayer, and the taxpayer may challenge the adjustment only in a post-payment refund action.   The Eleventh Circuit affirmed the Tax Court. The court explained that making the relevant adjustments requires an individualized assessment of each taxpayer’s unique circumstances, we hold that they “require partner level determinations,” mandating deficiency procedures. The court explained that none of the authorities on which taxpayers rely addressed the ultimate question in this case—whether adjusting losses claimed on sales of property from a sham partnership requires partner-level determinations. Instead, all the on-point caselaw bolsters our conclusion. The court explained that because it concluded that the IRS was required to make partner-level determinations to adjust the taxpayers’ reported losses and itemized deductions, the IRS properly employed deficiency procedures to make these adjustments. View "Estate of James P. Keeter, Deceased, et al. v. Commissioner of Internal Revenue" on Justia Law

In 2008, Debtors Mosaic Management Group, Inc., Mosaic Alternative Assets, Ltd., and Paladin Settlements, Inc. filed for Chapter 11 bankruptcy in the Southern District of Florida, a “UST district” in which the U.S. Trustee program operates. In June 2017, the bankruptcy court confirmed a joint Chapter 11 plan, under which most of the Debtors’ assets were transferred to an Investment Trust managed by an Investment Trustee. The issue before the court is the appropriate remedy for the constitutional violation the Supreme Court found in Siegel. The Debtors in this case—being debtors in a U.S. Trustee district—have been required to pay higher fees than a comparable debtor in one of the six BA districts in Alabama or North Carolina.   The Eleventh Circuit vacated and remanded. The court concluded that Reich, Newsweek, Bennett, McKesson, and the long line of similar state tax cases are closely analogous to the instant case and provide strong precedent supporting the refund remedy urged upon us by the Debtors. Accordingly, the court held that the appropriate remedy in this case for the constitutional violation identified in Siegel is the refunds that the Debtors in this case seek. View "United States Trustee Region 21 v. Bast Amron LLP" on Justia Law

Petitioners chartered their yacht, Lady Leila, in 2014 and 2015. They did not conduct the chartering activity for profit—it was a hobby. Though the hobby generated income, it also incurred sizeable expenses each year. Petitioners deducted some of those expenses under Section 183(b)(2) and placed them “above the line” to reduce their gross income. After an audit, the Commissioner determined that the Section 183(b)(2) deductions were miscellaneous itemized deductions under Section 67, meaning that they belonged “below the line” and reduced adjusted gross income, not gross income. Moreover, because Petitioners had earned tens of millions of dollars in 2014 and 2015 and, at that time, the Code allowed miscellaneous itemized deductions only to the extent that they exceeded two percent of adjusted gross income, the Commissioner disallowed the Section 183(b)(2) deductions altogether. Facing deficiencies and penalties, Petitioners petitioned the Tax Court, which granted summary judgment for the Commissioner. They sought appellate review.   The Eleventh Circuit agreed with the Tax Court and denied the petition for review. The court explained that because Sections 63 and 67 also omit Section 183, hobby expenses deducted under Section 183(b)(2) are miscellaneous itemized deductions. During the relevant time period, these deductions were subject to a two-percent floor on adjusted gross income. The result is that Section 183(b)(2) gave Petitioners a deduction for their expenses from operating Lady Leila, but Section 67 did not allow them to take that deduction because they could not meet the two-percent threshold for miscellaneous itemized deductions. View "Carl L. Gregory, et al v. Commissioner of Internal Revenue" on Justia Law

Petitioner sent $10,263,750 to the United States Internal Revenue Service (“IRS”) as a “deposit” toward his expected gift tax liability. After an IRS audit examination and Petitioner’s tax deficiency proceeding in the Tax Court, Petitioner and the IRS settled the deficiency proceeding, stipulating that Petitioner owed a gift tax deficiency of $6,790,000 for 2011. The IRS applied the $10,263,750 to that 2011 deficiency and issued Petitioner a check for the balance of $3,473,750. The parties disputed the interest rate. The IRS used the interest rate for deposits, which is the federal short-term rate. Petitioner wanted the interest rate for overpayments, which is the federal short-term rate plus three percentage points. In the Tax Court, Petitioner filed a petition to reopen his case to redetermine interest. The Tax Court has jurisdiction to redetermine interest due to a taxpayer if the court previously found a remittance was an overpayment. So its jurisdiction turns on whether the Tax Court found that Petitioner made an overpayment of tax.   The Eleventh Circuit affirmed the Tax Court’s decision denying Petitioner’s motion to redetermine interest for lack of jurisdiction. The court concluded that there is no Tax Court finding that Petitioner made an overpayment of tax, and thus the Tax Court did not have jurisdiction over Petitioner’s post-judgment motion to redetermine interest. The court explained that, at most, the Tax Court was silent on whether Petitioner made an overpayment for the tax year 2011. The Tax Court’s silence cannot be, and is not, a finding of an overpayment for Section 6512(b)(1) jurisdictional purposes. View "Albert G. Hill, III v. Commissioner of Internal Revenue" on Justia Law

The government filed a complaint against Defendant, alleging that he promoted a tax evasion scheme in which he advised his clients to claim unwarranted federal income tax deductions for bogus charitable donations. The government sought to enjoin him from operating his business, as well as disgorgement of all of the proceeds from his scheme.   The question before the Eleventh Circuit was whether the Act bars a defendant from moving—in an action initiated by the government—for a protective order to restrain the government from using his responses to requests for admission when assessing a tax penalty in a separate administrative proceeding.   The Eleventh Circuit vacated the district court’s dismissal of Defendant’s motion under the Anti-Injunction Act and remanded for further proceedings. The court explained that because moving for a protective order in an action filed by the government does not amount to the maintenance of a “suit,” the Act does not apply. View "USA v. Michael L. Meyer" on Justia Law