Justia Tax Law Opinion Summaries

Articles Posted in US Court of Appeals for the Eleventh Circuit

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The Eleventh Circuit affirmed the tax court's order denying taxpayer's motion to restrain collection to the extent it related to the gross valuation-misstatement penalty. At issue was whether, under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), a tax court presiding over partner-level deficiency proceedings has jurisdiction over a gross valuation-misstatement penalty previously determined to be applicable at the partnership level where the partnership was determined to be a "sham" and "lacking economic substance." The court held that the Internal Revenue Code, as in effect during the relevant time, applicable regulations, and Supreme Court precedent make clear that the valuation-misstatement penalty at issue here relates to an adjustment to a partnership item and, consequently, is explicitly excluded from the tax court's deficiency jurisdiction. Accordingly, the court held that the tax court presiding over partner-level deficiency proceedings does not have jurisdiction over gross valuation misstatement penalties imposed against a partnership previously determined to be a "sham" and "lacking economic substance." View "Highpoint Tower Technology Inc. v. Commissioner" on Justia Law

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The Eleventh Circuit affirmed the district court's order upholding the bankruptcy court's decision to deny an exemption to pension money and certain tax-exempt funds or accounts, including IRAs under Fla. Stat. 222.21. The court held that debtor forfeited his exemption when he engaged in self-dealing transactions prohibited by the IRA's governing instruments. In this case, debtor conceded that he incurred over one hundred thousand dollars in tax penalties for abusing his IRA, but nonetheless sought to shield the IRA from distribution to his creditors. View "Yerian v. Webber" on Justia Law

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The Eleventh Circuit reversed the district court's grant of summary judgment for the government in an action brought by plaintiff, seeking to recover taxes she previously paid to the government. The court held that, viewed in the light most favorable to plaintiff, the evidence supported the conclusion that she satisfied all the elements of 26 U.S.C. 1341, which allows a taxpayer who paid taxes on what she erroneously believed to be her income to recoup those unnecessary tax payments. Under section 1341, plaintiff had just as much of a right to recover the taxes she previously paid on the $300,000 she received and then gave back as did her ex-husband to recover the taxes he paid on his $300,000 that he returned. Accordingly, the court remanded for further proceedings. On remand, the district court should determine whether any genuine dispute as to any factual issues necessary to resolve the inquiry on each of the section 1341 factors exists and, if so, any dispute should proceed to trial. If there is no such factual dispute, the district court should enter judgment in favor of plaintiff. View "Mihelick v. United States" on Justia Law

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The Eleventh Circuit affirmed the tax court's judgment in favor of the IRS in an action challenging the IRS's notice of deficiency. The court held that taxpayers waived their argument that the fraud exception was triggered only when the taxpayer intends to evade tax, not when the return preparer intends to evade tax. The court declined to exercise its discretion by not enforcing the waiver doctrine. Finally, the court held that the tax court did not abuse its discretion by admitting the return preparer's out-of-court statements. Accordingly, the court affirmed the judgment of the tax court. View "Finnegan v. Commissioner" on Justia Law

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The Eleventh Circuit vacated the district court's order denying the IRS injunctive relief and remanded for further proceedings. The IRS sought a preliminary injunction against a serial employment-tax delinquent to ensure that it gets its due as taxes continue to pile up. Determining that the case was not moot, the court held that neither the adequate-remedy-at-law requirement nor Rule 65(d) should have precluded injunctive relief on the facts here. The court reasoned that the IRS's ability to sit on its hands until defendants fail to pay their taxes again and only then bring an action for money damages did not qualify as an adequate legal remedy. Therefore, the district court erred in applying a categorical rule that because tax liability may be calculated and sought in an action for damages, it necessarily precludes injunctive relief under section 7402(a) of the Internal Revenue Code. Furthermore, this case did not raise the sort of fair notice concerns that Rule 65(d) was designed to address. View "United States v. Askins & Miller Orthopaedics, P.A." on Justia Law

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In this appeal from the disallowance of a taxpayer's claimed deduction for his share of losses suffered by an S corporation, the Eleventh Circuit held that monetary transfers between various business entities partly owned by the taxpayer and an S corporation that were later reclassified as loans from the taxpayer to the S corporation did not establish a "bona fide indebtedness" that "runs directly" to the taxpayer. Therefore, the court held that taxpayer's back-to-back theory failed because the S corporation's debt ran to the affiliates, not taxpayer. Furthermore, taxpayer's incorporated-pocketbook theory failed because the affiliates were not his incorporated pocketbook. Accordingly, the court affirmed the judgment of the tax court in favor of the Commissioner. View "Meruelo v. Commissioner" on Justia Law

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26 U.S.C. 6672(a) applies with equal force when a government agency receiver tells a taxpayer not to pay trust fund taxes. The Eleventh Circuit affirmed the district court's grant of summary judgment for the Government in an action brought by plaintiff, seeking a refund of tax penalties paid under section 6672(a). The court rejected plaintiff's "my-boss-told-me-not-to-pay" argument, and held that it could not apply different substantive law because the receiver in this case was the Small Business Administration. View "Myers v. United States" on Justia Law

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After a government contractor, Security Walls, terminated two employees, the Board determined that the contractor violated the National Labor Relations Act of 1935. The Eleventh Circuit affirmed and held that the Board did not abuse its discretion by declining to reopen the administrative record to allow the contractor to establish that its contract with the IRS required it to fire the guards. In this case, the contractor did not dispute the Board's finding that no one at the IRS ordered the guards' removal; so the contractor's argument that the IRS would have required as much was beside the point; and thus the contractor's affidavit was irrelevant. View "Security Walls, Inc. v. National Labor Relations Board" on Justia Law

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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