Justia Tax Law Opinion Summaries

Michael Brown, a taxpayer, requested a collection due process hearing regarding a notice of tax lien on his property for unpaid taxes. He submitted an offer-in-compromise to settle his tax liability, which was referred to the IRS Collection Division for investigation. The Collection Division returned Brown's offer within seven months, deeming it nonprocessable. Over two years later, the Office of Appeals sustained the notice of tax lien.Brown petitioned the United States Tax Court, arguing that his offer-in-compromise should be deemed accepted by law under 26 U.S.C. § 7122(f) because the Office of Appeals did not issue a final determination within 24 months. The Tax Court rejected this argument, ruling that the Collection Division's return of the offer within the 24-month period constituted a rejection, thus stopping the clock on the 24-month deadline.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the Tax Court's decision. The Ninth Circuit held that the Collection Division's return of Brown's offer-in-compromise within seven months was a valid rejection under § 7122(f), regardless of the ongoing collection due process hearing. The court clarified that the 24-month period for the IRS to act on an offer-in-compromise is terminated by the Collection Division's return of the offer, not by the Office of Appeals' final determination. Therefore, Brown's offer was not deemed accepted by operation of law. View "BROWN V. COMMISSIONER OF INTERNAL REVENUE" on Justia Law

The plaintiffs, Susan and Moses Libitzky, filed their 2011 tax return late in January 2016 and sought a refund for an overpayment of $692,690 in taxes from previous years. They had made substantial tax payments and received extensions but failed to file their returns on time due to their accountant's negligence. The IRS denied their refund request, asserting it was not filed within the statutory limitation period. The Libitzkys argued that their informal communications with the IRS in 2015 should count as an informal claim for a refund, which would stop the running of the statute of limitations.The United States District Court for the Northern District of California dismissed the Libitzkys' lawsuit, finding that their communications with the IRS did not amount to an informal claim for a refund. The court assumed a three-year limitation period applied but did not directly address whether a formal claim had been made in January 2016.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal but on different grounds. The Ninth Circuit held that the Libitzkys' formal refund claim, filed in January 2016, was timely under 26 U.S.C. § 6511(a) because it was made within three years of filing the return. However, the refund amount was limited by the look-back period under § 6511(b)(2), which restricts recovery to taxes paid within three years plus any extension before the refund claim was filed. Since the overpayment was deemed made in April 2012, outside the look-back period, the Libitzkys could not recover their overpayment. The court also held that the informal claim doctrine did not apply because the informal claim was untimely, as it was made before the 2011 return was filed, and thus the two-year limitation period applied. The court affirmed the district court’s dismissal for lack of jurisdiction. View "LIBITZKY V. USA" on Justia Law

The case revolves around a clerical error by the Internal Revenue Service (IRS) that resulted in a taxpayer, Jeffrey Page, receiving a tax refund check significantly larger than he was entitled to. Page returned only a portion of the excess refund, prompting the United States government to sue under 26 U.S.C. § 7405 to recover the outstanding balance. Page did not respond to the lawsuit, leading the government to move for default judgment. However, the district court denied the motion and dismissed the complaint as untimely, arguing that the two-year limitations period began when Page received the refund check.The United States Court of Appeals for the Ninth Circuit disagreed with the district court's interpretation of when the two-year limitations period began. The appellate court held that the limitations period to sue to recover an erroneous refund starts on the date the erroneous refund check clears the Federal Reserve and payment to the taxpayer is authorized by the Treasury. As Page's refund check cleared less than two years before the government sued, the appellate court held that the complaint was timely and that the district court erred by dismissing it. The appellate court also noted that the district court had improperly shifted the burden to the government to prove at the pleading stage that its claim against Page was timely. The case was reversed and remanded for further proceedings. View "United States v. Page" on Justia Law

In 2014, Salvatore Groppo pleaded guilty to aiding and abetting the transmission of wagering information as a "sub-bookie" in an unlawful international sports gambling enterprise. He was sentenced to five years' probation, 200 hours of community service, a $3,000 fine, and a $100 special assessment. In 2022, Groppo moved to expunge his conviction, seeking relief from a potential tax liability of over $100,000 on his sports wagering activity. He argued that the tax liability was disproportionate to his relatively minor role in the criminal enterprise.The district court denied Groppo's motion to expunge his conviction. The court reasoned that expungement of a conviction is only available if the conviction itself was unlawful or otherwise invalid. The court also stated that the IRS's imposition of an excise tax does not provide grounds for relief as 'government misconduct' that would warrant expungement.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The appellate court held that because Groppo alleged neither an unlawful arrest or conviction nor a clerical error, the district court correctly determined that it did not have ancillary jurisdiction to grant the motion to expunge. The court explained that a district court is powerless to expunge a valid arrest and conviction solely for equitable considerations, including alleged misconduct by the IRS. View "USA V. GROPPO" on Justia Law

The case involves the United States government's action to reduce federal tax liens to judgment and foreclose on real property. The government sought to foreclose on tax liens against a property owned by Komron Allahyari. Shaun Allahyari, Komron's father, was named as an additional defendant due to his interest in the property through two deeds of trust. The district court found that the government was entitled to foreclose on the tax liens and sell the property. However, the court did not have sufficient information to enter an order for judicial sale and ordered the parties to submit a Joint Status Report. Shaun Allahyari filed an appeal before the parties submitted the Joint Status Report and stipulated to the value of the property to be sold.The United States Court of Appeals for the Ninth Circuit dismissed the appeal for lack of jurisdiction. The court explained that the district court's order was not final because it did not have sufficient information to enter an order for judicial sale. The court also clarified that for a decree of sale in a foreclosure suit to be considered a final decree for purposes of an appeal, it must settle all of the rights of the parties and leave nothing to be done but to make the sale and pay out the proceeds. Because that standard was not met in this case, there still was no final judgment. The court therefore dismissed the appeal for lack of jurisdiction. View "USA V. ALLAHYARI" on Justia Law

Plaintiff-taxpayer formed a nonprofit with tax-exempt status that facilitated the donation of timeshares by timeshare owners. Taxpayer also formed Resort Closings, a for-profit service that handled the real estate closings for timeshares donated to DFC. Donors paid a donation fee to DFC and shouldered the timeshare transfer fees. Taxpayer, his sister, and other associates appraised the value of the unwanted timeshares.Under 26 U.S.C. Sec. 6700, imposed a penalty on taxpayer for his involvement in the organization or sale of tax shelters that made false statements or involved exaggerate valuation. The panel upheld the district court’s determination on summary judgment that taxpayer was liable for the appraisals of the associates because, as a matter of law, taxpayer knew or had reason to know the associates were disqualified as appraisers under the Treasury regulations, and taxpayer forfeited his argument on appeal that he was unaware the appraisals would be imputed to the non-profit he formed. . View "JAMES TARPEY V. USA" on Justia Law

Taxpayers did not file returns for 2007 and 2012. The Tax Court concluded that taxpayers owed no deficiencies or penalties for those years, because the partnership losses claimed for those years exceeded the IRS’s adjusted non-partnership deficiencies.   The Ninth Circuit reversed and remanded for recalculation of the deficiencies and penalties for those years. The panel held that the unsigned, unfiled tax returns on which the partnership losses were reported were legally invalid because they had not been filed and executed under penalty of perjury and, therefore, could not be used to offset non-partnership income in an individual deficiency proceeding. Accordingly, the panel reversed the Tax Court’s deficiency determinations for these years and remanded with instructions to determine taxpayers’ deficiencies without regard to any partnership losses claimed on the legally invalid tax returns. For 2009 through 2011, taxpayers reported no tax liability because of large net operating losses (NOLs) from partnerships subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The panel explained that when carried forward as deductions, net operating losses composed of partnership losses can offset a taxpayer’s non-partnership income or instead are part of the “net loss from partnership items” under Internal Revenue Code Section 6234(a)(3), as it was then in effect. The panel remanded for the Tax Court to assess the non-partnership items in the recomputed deficiencies for those years, accounting for the TEFRA-eligible partnership components of the net-operating-loss deductions only in the Section 6234(a)(3) calculations of “net loss from partnership items.” View "CIR V. RITCHIE STEVENS, ET AL" on Justia Law

The United States sued several heirs of A.P., alleging that they were trustees of the trust or received estate property as transferees or beneficiaries and were thus personally liable for estate taxes under 26 U.S.C. Section 6324(a)(2). The United States also alleged that two of the heirs were liable for estate taxes under California state law. The district court ruled in favor of Defendants on the Tax Code claims and in favor of the United States on the state law claims.   The Ninth Circuit reversed the district court’s judgment in favor of Defendants, and remanded with instructions to enter judgment in favor of the government on its claims for estate taxes and to conduct any further proceedings necessary to determine the amount of each defendant’s liability for unpaid taxes. The panel held that Section 6324(a)(2) imposes personal liability for unpaid estate taxes on the categories of persons listed in the statute who have or receive estate property, either on the date of the decedent’s death or at any time thereafter (as opposed to only on the date of death), subject to the applicable statute of limitations. The panel next held that Defendants were within the categories of persons listed in Section 6324(a) when they had or received estate property and are thus liable for the unpaid estate taxes as trustees and beneficiaries. The panel further held that each Defendant’s liability cannot exceed the value of the estate property at the time of the decedent’s death or the value of that property at the time they received or had it as trustees and beneficiaries. View "USA V. JAMES D. PAULSON, ET AL" on Justia Law

Defendant LuLaRoe, a multilevel-marketing company that sells clothing to purchasers across the United States through “fashion retailers” located in all fifty states, allegedly charged sales tax to these purchasers based on the location of the retailer rather than the location of the purchaser. LuLaRoe eventually refunded all the improper sales tax it collected, but it did not pay interest on the refunded amounts. Plaintiff, an Alaska resident who paid the improperly charged sales tax to LuLaRoe, brought this class action under Alaska law on behalf of herself and other Alaskans who were improperly charged, for recovery of the interest on the now-refunded amounts collected and for recovery of statutory damages. The district court certified the class under Rule 23(b)(3) and LuLaRoe appealed under Rule 23(f).   The Ninth Circuit vacated the district court’s order certifying the class of Alaska purchasers and remanded for further proceedings. The panel first rejected LuLaRoe’s argument that class certification was improper because the small amount of money currently owed to some class members was insufficient to support standing and the presence of these class members in the class made individualized issues predominant over class issues. The panel next rejected LuLaRoe’s assertion that some purchasers knew that the sales tax charge was improper but nevertheless voluntarily paid the invoice which contained the improperly assessed sales tax amount, and thus, under applicable Alaska law, no deceptive practice caused any injury for these purchasers. Finally, the panel held that LuLaRoe’s third argument, that class certification should be reversed because some fashion retailers offset the improper sales tax through individual discounts, had merit. View "KATIE VAN V. LLR, INC., ET AL" on Justia Law

The Internal Revenue Service (IRS) generally has three years from the date a taxpayer files a tax return to assess any taxes that are owed for that year. In this case, we must decide whether a partnership “filed” its 2001 tax return by faxing a copy of that return to an IRS revenue agent in 2005 or by mailing a copy to an IRS attorney in 2007. If either of those actions qualified as a “filing” of the partnership’s return, the statute of limitations would bar the IRS’s decision, more than three years later, to disallow a large loss the partnership had claimed.   The Ninth Circuit affirmed the Tax Court’s decision. The court held that neither Seaview Trading LLC’s faxing a copy of their delinquent 2001 tax return to an IRS revenue agent in 2005, nor mailing a copy to an IRS attorney in 2007, qualified as a “filing” of the partnership’s return, and therefore the statute of limitations did not bar the IRS’s readjustment of the partnership’s tax liability. The court concluded that because Seaview did not meticulously comply with the regulation’s place-for-filing requirement, it was not entitled to claim the benefit of the three-year limitations period. The court wrote that its conclusion was consistent with cases from other circuits and a long line of Tax Court decisions. The court also rejected Seaview’s argument that the regulation’s place-for-filing requirement applies only to returns that are timely filed—not to those that are filed late. View "SEAVIEW TRADING, LLC, AGK INVE V. CIR" on Justia Law