Justia Tax Law Opinion Summaries

In 1966, DeBough purchased a Minnesota residence and surrounding 80 acres for $25,000. In 2006, DeBough sold the property for $1.4 million under an installment contract, secured by the property. Because the property was his principal residence,DeBough excluded $500,000 of gain from income on his 2006 tax return, 26 U.S.C. 121. DeBough received $505,000 from the buyers and reported $56,920 as taxable installment sale income for tax years 2006, 2007, and 2008. In 2009, the buyers defaulted. DeBough reacquired the property, incurring $3,723 in costs. DeBough kept the $505,000 previously received from the buyers as liquidated damages. On his 2009 tax return, DeBough treated this event as a reacquisition of property in full satisfaction of indebtedness under 26 U.S.C. 1038. In calculating his realized gain, DeBough again applied the $500,000 principal-residence exclusion. DeBough reported $97,153 as long-term capital gains related to the reacquisition for tax year 2009. The Commissioner sent DeBough a notice of deficiency, having determined DeBough had underreported $448,080 in long-term capital gain for tax year 2009 by applying the principal-residence exclusion in his calculation. The Tax Court and Eighth Circuit agreed that DeBough was not entitled to the principal-residence exclusion because he had not resold the property within one year. View "DeBough v. Shulman" on Justia Law

Klein Honda was a Honda dealership. From time to time, Honda (the manufacturer) offered a "dealer cash" incentive program for its dealerships whereby dealerships can earn a specific amount of extra money if they sold specific Honda models during specific times and comply with other terms and conditions. At issue in this case was whether Klein Honda's dealer cash earnings were taxable. "Klein Honda received additional, separate income beyond its ordinary retail sales. That constitutes an additional taxable business activity under the [B&O] catchall provision. Although dealer cash would not be taxable under one of the Washington State Department of Revenue's regulations if it represented a 'bona fide discount' on Klein Honda's wholesale purchase of vehicles, dealer cash is not a bona fide discount because Klein Honda does not purchase vehicles from Honda subject to a dealer cash discount. Dealer cash payments are not necessarily quantified or even knowable at the time that Klein Honda purchases vehicles from Honda. Thus, Klein Honda's dealer cash is taxable." View "Steven Klein, Inc. v. Dep't of Revenue" on Justia Law

Several Indian tribes successfully challenged the imposition of state fuel taxes on tribal retailers. Since then, the State and various tribes signed agreements under which the tribes agreed to buy taxed fuel, and the State agreed to refund a portion of the fuel tax receipts to the tribes. An industry group unsuccessfully challenged the lawfulness of these agreements. The issue this case presented for the Washington Supreme Court's review reduced to whether those agreements violated article II, section 40 of the State Constitution. "Without passing judgment on whether the legislature successfully moved the legal incidence of the tax away from tribal retailers," the Supreme Court affirmed dismissal of the industry group's challenge. View "Auto. United Trades Org. v. Washington" on Justia Law

In 2011, Appellant purchased a two-family dwelling from the United States Department of Housing and Urban Development for $5,000. The Cuyahoga County fiscal officer valued the property at $126,800 for tax year 2011. Appellant sought a reduction to $30,000. The County Board of Revision retained the fiscal officer’s valuation. The Board of Tax Appeals (BTA) affirmed. The Supreme Court reversed, holding that the BTA acted unreasonably when it found that the property’s 2011 sale price was not the best evidence of its tax year 2011 value. Remanded with instructions that the $5,000 sale price be used as the property’s value for tax year 2011. View "Schwartz v. Cuyahoga County Bd. of Revision" on Justia Law

At issue in this case was the homestead exemption’s prohibition on the collection of real property taxes under S.D. Codified Laws 43-31. In January 2014, prior to turning seventy years old, John Reints filed an application for a prohibition on the collection of real property taxes assessed on his home in 2013. Pennington County denied Reints’s request because he had not turned seventy prior to January 1, 2014. The Department upheld the determination, determining that the prohibition does not apply to taxes assessed prior to the year in which the applicant reaches seventy years of age. The circuit court affirmed. The Supreme Court affirmed, albeit on different grounds, holding (1) once a prohibition is granted under chapter 43-31 a county is restrained from collecting any real property taxes on the applicant’s single-family dwelling, regardless of when those taxes were assessed; (2) nevertheless, an applicant cannot establish a base year under the exemption until he actually reaches the age of seventy; (3) because Reints was only sixty-nine years old when he submitted his application, he had not established a base year as required by section 43-31-32; and (4) therefore, Reints’s application was properly denied. View "Reints v. Pennington County" on Justia Law

Guam taxpayers filed a class action suit against Guam and its officers, alleging that Guam violated the tax provisions of the Organic Act of Guam, 48 U.S.C. 1421i, by failing timely to refund overpayments, and, via a claim brought under 42 U.S.C. 1983, the taxpayers also challenged the arbitrary expedited refund program as a violation of equal protection. The district court granted summary judgment to the taxpayers on both claims, entered a permanent injunction both ending the expedited refund program and requiring Guam to pay approved refunds in a timely manner, and awarded substantial attorney’s fees and costs. The court concluded that Guam's section 1983 arguments did not implicate subject matter jurisdiction, but nonetheless, the court exercised its discretion in considering Guam's section 1983 arguments; the official-capacity defendants in this case are “persons” within the meaning of section 1983 for purposes of prospective relief; even if the territorial officials had been obliged by federal law to institute the arbitrary expedited refund process - which they most certainly were not - they were empowered to act only in their capacities as territorial officers; and the district court did not abuse its discretion in requiring that Guam pay refunds within six months once Guam determines that the requests are valid and not subject to investigation or audit. Accordingly, the court affirmed the judgment. View "Paeste v. Government of Guam" on Justia Law

In this appeal, the court considered whether Florida’s Rental Tax and Florida’s Utility Tax, as applied to matters occurring on Seminole Tribe lands, violate the tenets of federal Indian law. The court held that Florida’s Rental Tax is expressly precluded by 25 U.S.C. 465, and, in the alternative, is preempted by the comprehensive federal regulation of Indian land leasing. Therefore, the court affirmed the district court's order as to this issue. The court concluded, however, that the district court erred in placing the legal incidence of the Utility Tax on the Tribe and find that, on this record, the Tribe has not demonstrated that the Utility Tax is generally preempted by federal law. Therefore, the court reversed as to this issue and remanded for further proceedings. View "Seminole Tribe v. Stranburg" on Justia Law

Patrick discovered a Medicaid fraud scheme in which the government paid more than $75 million in phony billings. Patrick and an associate filed a qui tam suit under the False Claims Act against Kyphon, alleging that the company induced hospitals to file claims for Medicare reimbursement “for unnecessary inpatient hospital stays.” The United States intervened and settled the case. For his role in initiating the suit Patrick received a relator’s share of the government’s recovery, totaling $5.9 million. Patrick also received $900,000 from the settlement of related qui tam actions against hospitals that overbillled Medicare. Patrick filed tax returns for 2008 and 2009 reporting his share of the qui tam recoveries as capital gains. The IRS issued deficiency notices, notifying Patrick that the relator’s shares must be reported as ordinary income. The Tax Court upheld that determination. The Seventh Circuit agreed that the relator’s share of a qui tam recovery is not the result of a “gain from the sale or exchange of a capital asset.” Patrick’s relator’s shares are a reward for filing the suit against Kyphon and the hospitals and must be treated as ordinary income. View "Patrick v. Comm'r of Internal Revenue" on Justia Law

Respondent lived in his home for nearly ten years before razing the existing house in order to build a new house on the lot. Respondent benefitted from the application of the homestead tax credit with respect to increases in the value of the prior structure while he lived in it. The new construction increased the value of the property by approximately $500,000. The tax assessor, while retaining Respondent’s existing credit, included the full value of the renovation in the value to be taxed. The Maryland Tax Court affirmed the assessor’s interpretation. The circuit court reversed, and the Court of Special Appeals affirmed. At issue on appeal was whether the “taxable assessment” used to compute the homestead tax credit under Md. Code Tax-Property (TP) 9-105 should include the value of renovations when a homeowner razes and rebuilds a home. The Court of Appeals reversed the judgments of the Court of Special Appeals and circuit court affirmed the decision of the tax court, holding that, when a homeowner razes and rebuilds a home, the homeowner may retain existing homestead tax credit if the homeowner satisfies certain criteria and the tax credit computation for the property with the rebuilt house is to be done in accordance with TP 9-105(c)(5) and TP 9-105(e)(1). View "Dep’t of Assessments & Taxation v. Andrecs" on Justia Law

Appellant in this appeal contested twenty-seven assessments of delinquent sales tax. Appellant’s liability derived from previous assessments against a pet store business of which Appellant was co-owner and an officer. The Board of Tax Appeals (BTA) affirmed the tax commissioner’s determination upholding the assessments against Appellant. Appellant argued on appeal that she may contest the validity of the service of the assessments against the corporation as a defense against her derivative liability. The Supreme Court agreed. Noting that the record in this case documented successful service as to seven of the twenty-seven assessments but did not show completed service of the others, the Supreme Court affirmed the BTA’s decision to uphold the seven assessments as to which completed service was shown. The Court then vacated the BTA’s decision with regard to the other twenty assessments, holding that a successful challenge to the service on the corporation will invalidate the derivative-liability assessment against the responsible individual. Remanded with instructions that the BTA take additional evidence and determine whether service of those twenty assessments was perfected on the corporation. View "Cruz v. Testa" on Justia Law