Justia Tax Law Opinion Summaries

The government appeals the bankruptcy court's decision regarding the interest due from defendant for the taxable year 1998. In this case, the tax court never reached the issue of defendant's interest owed on the 1998 tax deficiency. Therefore, the bankruptcy court erred in deferring to the tax court for its calculation of the interest on defendant's underpayment for 1998. Accordingly, the court reversed the district court's judgment affirming the bankruptcy court. The court remanded for further proceedings. View "United States v. Beane" on Justia Law

In September 2004, an anonymous informant sent the City of Philadelphia a letter claiming that appellant Nathan Lerner was concealing taxable business income from the City. The City made numerous attempts to meet with Lerner in person to resolve his case, but Lerner refused the City’s offers. In 2010, Lerner filed a petition for review with the City’s Tax Review Board. The Board held a hearing, concluded that it lacked jurisdiction in light of a collection action pending at a trial court, and dismissed Lerner’s petition. Lerner appealed the Board’s dismissal to the trial court, which consolidated Lerner’s appeal with the City’s collection action. The Commonwealth Court affirmed the trial court’s order quashing Lerner’s appeal. Lerner sought to delay the City’s collection action with onerous discovery requests and frivolous filings. Meanwhile, Lerner simultaneously disregarded the City’s discovery requests and refused to disclose information about his income, expenses, assets, and business interests. When the trial court ordered Lerner to comply, he violated the court’s order. As a result, the court precluded Lerner from entering any evidence at trial that he had not disclosed to the City. At the outcome of a bench trial, though the trial court found that the amount Lerner owed was “basically an amount pulled out of the sky,” Lerner had waived his right to challenge that assessment when he failed to timely petition the Board for review. Lerner appealed when the trial court denied his post-trial motion for relief. In that appeal, Lerner argued for the first time that the ground upon which the trial court's judgment was premised was misplaced. Lerner decided to assert on appeal that a taxpayer who fails to exhaust his or her administrative remedies may nonetheless challenge a tax assessment in a subsequent collection action when the taxing authority’s own evidence demonstrates that the assessment has no basis in fact. Although Lerner espoused the same argument before the Supreme Court, he did not preserve it. Accordingly, the Supreme Court affirmed the Commonwealth Court's judgment. View "City of Philadelphia v. Lerner" on Justia Law

Petitioner seeks review of the Commissioner's determination that he owes income tax deficiencies and related penalties for 2004, 2005, and 2006. Petitioner was the president, director, and sole shareholder of a Florida “S” corporation called Paragon Homes Corporation. I.R.C. 165(a) allows a deduction for “any loss sustained during the taxable year and not compensated for by insurance or otherwise.” The court concluded that the tax court did not clearly err in determining that Paragon did not abandon the properties at issue in 2008, and that the evidence amply supports this finding, along with the finding that the properties were not worthless to Paragon at the end of 2008. Accordingly, the court concluded that the tax court properly determined that petitioner had not met his burden of demonstrating that the Commissioner’s disallowance of the section 165(a) loss deduction was incorrect. The court affirmed the tax court's decision. View "Tucker v. Commissioner of Internal Revenue" on Justia Law

After a merger in 1995, William and Patricia Cavallaro received 38 shares of stock in Camelot, the merged company. Their three sons received 54 shares each. When Camelot was subsequently acquired, the Cavallaros received a total of $10,830,000, and each son received $15,390,000. The IRS issued notices of deficiency to the Cavallaros for tax year 1995, determining that Camelot had a pre-merger value of $0 and that when the merger occurred, William and Patricia each made a taxable gift of $23,085,000 to their sons. Therefore, each of the Cavallaros incurred an increase in tax liability in the amount of $12,696,750. The Tax Court ultimately concluded that William owed $7,652,980 and that Patricia owed $8,009,202. The Cavallaros appealed, arguing that the Tax Court erred by failing to shift the burden of proof to the Commissioner. The First Circuit affirmed in part, reversed in part, and remanded, holding (1) the Tax Court correctly determined that the burden of proof was on the Cavallaros; but (2) the Tax Court misstated the nature of the Cavallaros’ burden of proof. Remanded. View "Cavallaro v. Koskinen" on Justia Law

In 2014, the IRS attempted to collect $244,464 in unpaid taxes and penalties from Adolphson for tax years 2002 and 2006-2010. Adolphson claims he was unaware of the IRS’s collection efforts until the agency levied on his funds held by third parties (26 U.S.C. 6330). Rather than challenge the levies with the IRS, Adolphson filed a pro se petition, asking the tax court to enjoin the collection efforts and refund amounts already collected. Adolphson argued that the IRS had not mailed him the required Final Notice of Intent to Levy, so that he was deprived of a “collection due process hearing” (CDP) before the IRS Office of Appeals. Adolphson cited tax court decisions in which the tax court asserted that it lacked jurisdiction without an IRS notice of determination, yet nevertheless invalidated levies after finding that the taxpayer was prevented from requesting a CDP by failure to mail a Final Notice to the proper address. The IRS was unable to say “with certainty” whether the Final Notices were sent to proper addresses. Exhibits corroborated the dates on which the Final Notices were issued but did not show where the notices were mailed. The tax court dismissed, reasoning that it lacked authority to grant relief without a notice of determination. The Seventh Circuit affirmed. While Adolphson’s case is indistinguishable from the tax court precedent he cited, those decisions were unsound and reflect an improper extension of the tax court’s jurisdiction. View "Adolphson v. Commissioner of Internal Revenue" on Justia Law

Mason Companies, Inc., a company based in Wisconsin, appealed from the imposition of Ohio’s commercial-activity tax (CAT) on revenue it earned from its sales of goods through orders received via telephone, mail, and the Internet. Mason challenged the imposition of the CAT assessments based on its being operated outside Ohio, employing no personnel in Ohio, and maintaining no facilities in Ohio. The Supreme Court upheld the CAT assessments against Mason, holding that, after applying the holding in Crutchfield Corp. v. Testa, the lack of Mason’s physical presence within Ohio was not a necessary condition for imposing the obligations of the CAT law given that the $500,000 sales-receipts threshold adequately assured that Mason’s nexus with Ohio was substantial. View "Mason Cos., Inc. v. Testa" on Justia Law

In this companion case to Crutchfield Corp. v. Testa, the Supreme Court considered Newegg, Inc.’s appeal from the imposition of Ohio’s commercial-activity tax (CAT) on revenue it earned from sales of computer-related products that it shipped into the state of Ohio. Newegg contested its CAT assessments based on its being operated outside Ohio, employing no personnel in Ohio, and maintaining no facilities in Ohio. In Crutchfield, the Supreme Court held that, under the Commerce Clause, the physical presence of an interstate business within Ohio is not a necessary condition for imposing the obligations of the CAT law given that the $500,000 sales receipts threshold adequately assures that the taxpayer’s nexus with Ohio is substantial. After applying Crutchfield’s holding in this case, the Supreme Court upheld the CAT assessments against Newegg. View "Newegg, Inc. v. Testa" on Justia Law

The tax commissioner issued commercial-activity tax (CAT) assessments against the Crutchfield Corporation on revenue it earned from sales of electronic products that it shipped from the state of Ohio. Crutchfield, whose business in Ohio consisted solely of shipping goods from outside the state to its consumers in Ohio using the United States Postal Service or common-carrier delivery services, challenged the issuance of CAT assessments against it, arguing that Ohio may not impose a tax on the gross receipts associated with its sales to Ohio consumers because Crutchfield lacks a “substantial nexus” with Ohio. Citing case law interpreting this substantial-nexus requirement, Crutchfield argued that its nexus to Ohio was not sufficiently substantial because it lacked a “physical presence” in Ohio. The Board of Tax Appeals (BTA) affirmed the assessments issued by the tax commissioner. The Supreme Court affirmed the decision of the BTA and upheld the CAT assessments against Crutchfield, holding (1) the physical presence requirement recognized by the United States Supreme Court for purposes of use-tax collection does not extend to business-privileges taxes such as the CAT; and (2) the statutory threshold of $500,000 of Ohio sales constitutes a sufficient guarantee of the substantiality of an Ohio nexus for purposes of the dormant Commerce Clause. View "Crutchfield Corp. v. Testa" on Justia Law

W. Va. Code 11-15A-10a affords taxpayers a credit for sales taxes paid to other states, which offsets the West Virginia Motor Fuel Use Tax (“use tax”) a fuel importer must pay under W. Va. Code 11-15A-13a. After it was assessed a use tax on the fuel it uses in West Virginia, CSX Transportation sought a refund of the sales taxes it had paid on its motor fuel purchases to cities, counties, and localities of other sales pursuant to section 11-15A-10a. The Tax Commissioner rejected the refund request. The Office of Tax Appeals (OTA) granted CSX’s refund request and vacated the assessment, finding that CSX was entitled to a credit under section 11-15A-10a for the sales taxes it paid to other states’ subdivisions on its purchases of motor fuel therein. The circuit court affirmed. The Tax Commissioner appealed, arguing that the circuit court erred by not limiting the credit to sales taxes paid only to other states upon the purchase of a motor fuel. The Supreme Court affirmed, holding that the sales tax credit afforded by section 11-15A-10a applies both to sales taxes paid to other states and to sales taxes paid to the municipalities of other states. View "Matkovich v. CSX Transportation, Inc." on Justia Law

After a bench trial, defendant-appellant Eldon Boisseau was convicted of tax evasion The district court determined that Boisseau, a practicing attorney, willfully evaded paying his taxes by: (1) placing his law practice in the hands of a nominee owner to prevent the Internal Revenue Service (IRS) from seizing his assets; (2) causing his law firm to pay his personal expenses directly given an impending IRS levy, rather than receiving wages; and (3) telling a government revenue officer that he was receiving no compensation from his firm when in fact the firm was paying his personal expenses. On appeal, he challenged the sufficiency of the evidence and argued that the district court wrongly convicted him: (1) without evidence of an affirmative act designed to conceal or mislead; and (2) by concluding that proof satisfying the affirmative act element of tax evasion was sufficient to prove willfulness. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Boisseau" on Justia Law