Justia Tax Law Opinion Summaries

The Smiths lived in a Joliet home, title to which passed to wife in 2004 as an inheritance. Real estate taxes had gone unpaid in 2000, resulting in a tax lien. At a 2001 auction, SIPI purchased the tax lien and paid the delinquent taxes—$4,046.26—plus costs and was awarded a Certificate of Purchase. Smith did not redeem her tax obligation. SIPI recorded its tax deed in 2005 and sold the property to Midwest for $50,000. In 2007, the Smiths filed for Chapter 13 bankruptcy relief and sought to avoid the tax sale. The bankruptcy judge and the Seventh Circuit found a fraudulent transfer (11 U.S.C. 548(a)(1)(B)) because the property was not transferred for reasonably equivalent value, but found Midwest a subsequent transferee in good faith. The 1994 Supreme Court decision, BFP v. Resolution Trust, that a mortgage foreclosure sale that complies with state law is deemed for “reasonably equivalent value” as a matter of law, does not apply in Illinois. Unlike mortgage foreclosure sales and some other states’ tax sales, Illinois tax sales do not involve competitive bidding where the highest bid wins. Instead, bidders bid how little money they are willing to accept in return for payment of the owner’s delinquent taxes. The lowest bid wins; bid amounts bear no relationship to the value of the real estate. View "Smith v. Sipi, LLC" on Justia Law

Defendant pled guilty to failing to file a tax return in 2006 and was sentenced to twelve months’ imprisonment, one year supervised release, and restitution in the amount of $453,547.00. The district court entered an order directing defendant's ex-wife's employer to withhold the portion of her earnings that accrued prior to the date of the divorce, including paid time off and contributions to her 401(k) and 403(b) retirement plans. The district court subsequently denied the ex-wife's motion to quash the writs of garnishment, as well as a motion to alter or amend the judgment. The court agreed with the district court that the ex-wife did not qualify for relief under I.R.C. 66(c), the "Innocent Spouse" provision, because this provision is only available as an affirmative defense to the government’s efforts to assess a tax deficiency, not when the government is enforcing a criminal judgment. Further, the ex-wife was aware that her husband earned an income as an insurance broker, disqualifying her under the knowledge provision of section 66(c)(3). The court affirmed the judgment. View "United States v. Tilford" on Justia Law

Taxpayer owned real property in the Town of Fair Haven. In 2014, the town listers assessed the value of the parcel at $585,800. Taxpayer appealed to the Board of Civil Authority (BCA). Taxpayer would not allow the BCA members to inspect the main house, however, and the BCA therefore considered the appeal withdrawn. At the hearing, taxpayer argued that that the BCA erred in considering his appeal withdrawn. He stated that he had appealed only a portion of the listers’ valuation to the BCA (the value of the improvements concerning two rental properties and not the main house on a separate lot) and therefore he was not obligated to allow the BCA to inspect the main house. The town responded that because the properties were contiguous and in common ownership, by statute, all of the property was treated as one parcel for purposes of assessment and the grand list. In a written order, the hearing officer concluded that the BCA had correctly dismissed taxpayer’s appeal, and that there was no avenue for further appeal to the hearing officer. Taxpayer acting pro se, appealed the Town's assessment of his property for the 2014 grand list. Finding no reversible error, the Supreme Court affirmed. View "Rasmussen v. Town of Fair Haven" on Justia Law

Neb. Rev. Stat. 77-1502(2) imposes a requirement and specifies a consequence for its violation. In this case, a taxpayer filed a property valuation protest. The taxpayer’s protest form specified the assessed and requested valuation amounts but stated no reason for the requested change. The Lincoln County Board of Equalization dismissed the protest, citing section 77-1502(2). The taxpayer appealed to the Nebraska Tax Equalization and Review Commission (TERC). TERC dismissed the appeal with prejudice, concluding that it lacked jurisdiction because the Board did not have jurisdiction to hear the protest due to the taxpayer’s failure to state the reason for the protest. The Supreme Court affirmed, holding (1) the Board correctly dismissed the taxpayer’s protest because the protest failed to include a reason for the requested change in valuation; and (2) because the Board lacked authority to hear the taxpayer’s property valuation protest on the merits, TERC likewise lacked authority to do so. View "Village at North Platte v. Lincoln County Bd. of Equalization" on Justia Law

The City of Fernley filed a complaint seeking declaratory and injunctive relief arguing that the Local Government Tax Distribution Account under Nev. Rev. Stat. 360.660 violates the Separation of Powers Doctrine and the prohibition on special or local legislation under Nev. Const. art IV, 20. The district court entered summary judgment in favor of the State. The Supreme Court affirmed, holding that the district court properly found the Local Government Tax Distribution Account to be general legislation because the system is a “general law that applies neutrally to local government entities and is based on classifications that are rationally related to achieving the Legislature’s legitimate government objective of promoting general-purpose governments that have public services.” View "City of Fernley v. State, Dep't of Taxation" on Justia Law

In 2010, New Thistledown, LLC, which owned Thistledown Racetrack, petitioned for Chapter 11 bankruptcy relief. Thistledown was purchased at an auction for $43,000,000. The bankruptcy court authorized the sale, stating that the sale price constituted reasonably equivalent value and fair consideration of the purchased assets. For tax year 2010, the Cuyahoga County fiscal officer assigned a value of $14,264,000 to the parcels comprising Thistledown. The Board of Education of Warrensville Heights City School District filed a complaint with the board of revision (BOR) seeking an increase in valuation. The BOR retained the fiscal officer’s initial valuation. The Board of Tax Appeals (BTA) rejected the 2010 sale price as evidence of value and valued the real property at $13,800,000. The Supreme Court affirmed, holding (1) the BTA reasonably and lawfully determined that the 2010 sale did not establish the true value of Thistledown; and (2) the evidence supported the BTA’s finding that Thistledown was worth $13,800,000 as of the tax-lien date. View "Warrensville Heights City Sch. Dist. Bd. of Educ. v. Cuyahoga County Bd. of Revision" on Justia Law

The Director of Revenue assessed Miss Dianna’s School of Dance, Inc. $23,215 plus interest in unpaid taxes. Miss Dianna’s charged fees for dance classes that instruct participants on various styles of dance. The Commission determined that Miss Dianna’s was liable for $23,984 in unpaid tax, ruling that the dance fees were taxable under Mo. Rev. Stat. $144.020.1(2) as fees to a place of amusement, entertainment, or recreation. The Supreme Court affirmed, holding (1) because amusement or recreational activities comprise more than a de minimus portion of Miss Dianna’s business activities, it is considered a place of amusement or recreation with fees taxable under section 144.020.1(2); and (2) therefore, the Commission’s decision is authored by law and supported by competent and substantial evidence upon the record. View "Miss Dianna's Sch. of Dance, Inc., v. Dir. of Revenue" on Justia Law

The Commissioner issued a Final Partnership Administrative Adjustment (FPAA) indicating that Route 231 should have reported the $3,816,000 it received from Virginia Conservation, one of its members, as gross income and not a capital contribution. The Tax Court determined that the transaction was a “sale” and reportable as gross income in 2005. The court concluded that the Tax Court did not err in agreeing with the Commissioner that the money Route 231 received from Virginia Conservation was “income” for federal tax purposes. Further, the court concluded that the Tax Court correctly determined that the tax credit sale occurred in 2005 for federal tax purposes. Accordingly, the court affirmed the judgment. View "Route 231, LLC v. Commissioner" on Justia Law

Internal Revenue Code section 1256 provides that an investor who holds certain derivatives at the close of the taxable year must “mark to market” by treating those derivatives as having been sold for fair market value on the last business day of the taxable year. A “foreign currency contract” is a “section 1256 contract” that an investor must mark to market. Contending that a foreign currency option is within the definition of “foreign currency contract," the Wrights claimed a large tax loss by marking to market a euro put option upon their assignment of the option to a charity. The Wrights’ assignment of the option was part of a series of transfers of mutually offsetting foreign currency options that they executed over three days. These transactions apparently allowed the Wrights to generate a large tax loss at minimal economic risk or out-of-pocket expense. The Tax Court held that the Wrights could not recognize a loss upon assignment of the euro put option because the option was not a “foreign currency contract” under section 1256. The Sixth Circuit reversed. While disallowance of the claimed tax loss makes sense as tax policy, the statute's plain language clearly provides that a foreign currency option can be a “foreign currency contract.” View "Wright v. Comm'r of Internal Revenue" on Justia Law

Rent-A-Center West, Inc. leases and sells a variety of consumer goods. Customers may opt to participate in a liability waiver program for an extra fee. Rent-A-Center charges sales tax on rental payments but not on the liability waiver fee. In 2010, the Utah State Tax Commission issued a statutory notice to Rent-A-Center imposing taxes and interest on the amounts Rent-A-Center charged for the liability waiver fee. In a formal hearing, the Commission found the waiver fee taxable. The Supreme Court reversed, holding that the liability waiver fee is not subject to sales and use tax under the plain text of the Utah Tax Code. View "Rent-A-Center v. Tax Comm’n" on Justia Law