Justia Tax Law Opinion Summaries

The Eleventh Circuit affirmed the bankruptcy court's conclusion that debtors' 2001 tax liability was not dischargeable under 11 U.S.C. 523(a)(1)(C) because debtors "willfully attempted . . . to evade or defeat" that liability. The court found substantial evidence of attempted evasion and concluded that the bankruptcy court did not clearly err in finding that debtors acted willfully when they redirected their funds away from paying their debt and toward their personal luxuries. The court has held that excessive discretionary spending constitutes circumstantial evidence of willfulness. Furthermore, the bankruptcy court also inferred willfulness from debtor's exploitation of the offer-in-compromise process. View "Feshbach v. Department of Treasury Internal Revenue Service" on Justia Law

After plaintiffs filed suit against their accounting firm for negligence, the firm settled the case by paying plaintiffs $800,000. The Eleventh Circuit affirmed the district court's grant of summary judgment to the government as to plaintiffs' deduction of litigation expenses as a business expense, because the litigation between plaintiffs and the firm was personal in its character and origin. The court also affirmed the district court's grant of summary judgment in favor of the government as to plaintiffs' $1.4 million deduction for a purported loss, because the settlement agreement bars plaintiffs from deducting any fraction of the settlement for the covered transactions.With respect to the $800,000 settlement payment exclusion, the court reversed the district court's grant of summary judgment in favor of plaintiffs and remanded for entry of judgment in favor of the government. Assuming that Clark v. Comm'r, 40 B.T.A. 333, 335 (1939), was correctly decided, and that its rationale applies in a case like this one where the accounting malpractice related not to the preparation of a tax return but to the structuring of an underlying transaction, the court held that plaintiffs failed to sustain their burden of demonstrating that the $800,000 settlement was excludable. In this case, plaintiffs failed to meet their burdens of showing their entitlement to the exclusion and the amount of that exclusion. The court explained that the IRS' tax deficiency notice was presumed correct, and plaintiffs did not overcome that presumption. View "McKenney v. United States" on Justia Law

The Eleventh Circuit vacated the tax court's decision upholding the Commissioner's disallowance of a charitable deduction for taxpayer's donation of a conservative easement over property that included a private golf course and undeveloped land. The court explained that the deduction was proper if the donation was made for "the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem," or was made for "the preservation of open space . . . for the scenic enjoyment of the general public" under I.R.C. 170(h)(4)(A)(ii) & (iii)(I). The court reasoned that, without the golf course, this easement would easily meet these criteria. The court held that the Code does not disqualify an easement just because it includes a golf course. Accordingly, the court remanded for further proceedings. View "Champions Retreat Golf Founders, LLC v. Commissioner" on Justia Law

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

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

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

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

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

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

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