Justia Tax Law Opinion Summaries

Appellants challenged the IRS's deficiency finding, as well as an accuracy-related penalty. On appeal, appellants argued that the Tax Court misunderstood relevant law when it affirmed the IRS's calculation of their remaining basis in their S corporation. They also challenged the factual basis for the Tax Court's decisions affirming the Service's rejection of their over-reporting claim and upholding its imposition of the penalty. The court rejected defendant's first challenge, concluding that a shareholder's basis was decreased "for any period" by the amount of that shareholder's pro rata share of the corporation's losses, and a shareholder incurred previously unabsorbed losses in the first year the shareholder had adequate basis to do so. In regards to the over-reporting claim, the court held that the Tax Court made no clear error when it upheld the IRS's determination not to reduce the sole proprietorship's income. Consequently, there was no dispute that appellants' 2003 tax return understated their taxes by an amount that qualified as substantial. Accordingly, the court affirmed the judgment. View "Barnes, et al v. Commissioner, IRS" on Justia Law

After years of paying taxes on wages he received for his work as a carpenter, Scheuneman stopped paying federal income tax in 1998. In 1999, in an effort to prevent the IRS from discovering his income, Scheuneman purchased a sham tax avoidance system from an Arizona company, Innovative Financial , and formed a limited liability corporation, Larch, and two illegitimate trusts, Soned and Jokur. Scheuneman retained complete control of all three. Scheuneman was eventually convicted of three counts of tax evasion, 26 U.S.C. 7201 and one count of interference with the Internal Revenue laws, 26 U.S.C. 7212(a). The Seventh Circuit affirmed, first rejecting arguments that that a clerical error in the indictment’s description of the relevant date rendered two counts legally insufficient and that the government constructively amended the indictment by introducing proof regarding dates other than those described in the indictment. Schueneman also claimed that the district court improperly ordered restitution for losses that are unrelated to his tax evasion offenses. The court rejected the argument; although those losses were not caused by the conduct underlying his tax evasion offenses, they are properly included as restitution because they were attributable to his interference with the Internal Revenue laws. View "United States v. Scheuneman" on Justia Law

Appellants raised a constitutional challenge to a fee legislated on cigarettes distributed through Mississippi for sale outside the state, claiming separate violations of the Commerce and Due-Process Clauses. In 2009, the Mississippi Legislature passed a law imposing a fee on the sale, purchase, and distribution in Mississippi of cigarettes manufactured by companies that did not enter into settlement agreements with the State as a result of a 1997 lawsuit (the "nonsettling manufacturer" or "NSM" law), "including cigarettes sold, purchased or otherwise distributed in this state for sale outside of this state." In October 2009, the chancery court entered a temporary restraining order enjoining the Commissioner of Revenue from assessing and collecting the challenged fee, and later ruled that the legislative amendment did not apply retroactively, denied Appellants' motion for reconsideration, and granted the Commissioner's motion for final judgment. However, the chancery court did not enter final judgment at that time. In 2011, the chancellor entered final judgment, which incorporated an August 2010 order (denying Appellants’ request for a permanent injunction and declaratory relief) and a May 2011 order (denying motion for rehearing and granting motion for final judgment). Appellants raised several issues on appeal; the Supreme Court found that the provision of the NSM law imposing a fee on NSM cigarettes distributed through Mississippi for sale outside the state was not internally consistent in violation of the Commerce Clause. The Court declined to address Appellants' due process argument. Furthermore, the Court found that the chancery court erred in granting claims for attorney fees asserted under 42 U.S.C. 1988 for Appellants' section 1983 challenge to the constitutionality of the NSM law. The Court found that all Appellants had an adequate remedy at state law (declaratory relief under Mississippi Rule of Civil Procedure 57), and as such, the chancery court should have "refrain[ed] from considering Section 1983 claims in tax cases, mooting Section 1988 claims for fees. That being said, no basis exist[ed] for a claim by Appellants for attorney fees." View "Commonwealth Brands, Inc. v. Morgan" on Justia Law

Acting on the bad advice of his accountant, plaintiff, the executor of an estate, filed the estate-tax return several months late. Consequently, the IRS assessed significant penalties against the estate. Plaintiff initiated this action seeking a refund of the penalty. The court concluded that it was plaintiff's duty to ascertain the correct extended filing deadline. By relying on his accountant's advice about that nonsubstantive matter, he failed to exercise ordinary business care and prudence, and he could not show reasonable cause to excuse the penalty. Therefore, the court affirmed the judgment of the district court. View "Knappe v. United States" on Justia Law

In 2006, Teton County voters approved a Teton County Housing Authority (TCHA) sponsored ballot initiative enabling a specific purpose excise tax (SPET) to raise $5 million for TCHA's affordable housing program. In 2007, TCHA purchased a five-acre property on Cheney Lane. Later that year, Plaintiffs, residents of the Cheney Lane neighborhood, initiated a declaratory judgment action against TCHA, alleging violations of SPET limitations, breach of investment duties, and violations of Wyoming statutory limits on public financing. Two weeks after the district court heard arguments on the motion to dismiss, the Village Road Coalition (VRC), a nonprofit corporation consisting of residents of a neighborhood near the Cheney Lane property, filed a motion to intervene. The district court denied the motion. The court subsequently granted TCHA's motion to dismiss the complaint for lack of standing. The Supreme Court affirmed, holding (1) because VRC's interests and relief sought were duplicative of those presented by Plaintiffs, the district court did not err in denying the motion to intervene; and (2) the district court properly dismissed TCHA's action for lack of standing, as Plaintiffs failed to allege a tangible interest that had been harmed by the acquisition of the property. View "Village Road Coal. v. Teton County Hous. Auth." on Justia Law

Four corporations acknowledged they owed the federal government more than $24 million in taxes and penalties, but before the IRS could collect its dues, the corporations transferred all of their assets to other entities. At issue was whether the previous owner of the four corporations, a trust (Trust), was liable to the IRS for the corporations' unpaid taxes and penalties. The tax court looked to state substantive law to determine the Trust's liability and concluded that the Trust could not be held liable because the IRS (1) failed to prove the Trust had knowledge of the new shareholders' asset-stripping scheme, and (2) did not show that any of the corporation's assets were transferred directly to the Trust. The First Circuit Court of Appeals reversed, holding (1) the tax court correctly looked to Massachusetts law to determine whether the Trust could be held liable for the corporations' taxes and penalties; but (2) the tax court misconstrued Massachusetts fraudulent transfer law in making its decision. Remanded for a determination of whether the conditions for liability were met in this case. View "Frank Sawyer Trust of May 1992 v. Comm'r of Internal Revenue" on Justia Law

Hospital sought full tax refunds in relation to Hospital's attempt to reclassify certain services from either "inpatient" or "outpatient" hospital services to "physicians' services" for purposes of the West Virginia Health Care Provider Tax Act. The Office of Tax Appeals denied Hospital's request, and the circuit court affirmed. In seeking to reclassify items of overhead as "physicians' services," Hospital focused on its use of certain billing codes that were required by federal law. The Tax Commission argued that Hospital's reliance on these billing codes to identify what qualifies as "physicians' services" under the Act was misplaced. The Supreme Court affirmed, holding that the overhead items at issue did not qualify as "physicians' services" under the Act. View "Wheeling Hosp., Inc. v. Lorensen" on Justia Law

Plaintiffs in this case were Amazon.com and Overstock.com. Both companies were formed in states other than New York, were located in states other than New York, and sold their merchandise solely through the Internet. At issue was N.Y. Tax Law 1101(b)(8)(vi) (the Internet tax), which was amended in 2008 to provide that vendors who paid New York residents to actively solicit business in the State would be required to pay New York taxes. Plaintiffs challenged the Internet tax, alleging that it was unconstitutional on its face as a violation the Commerce Clause and the Due Process Clause. Supreme Court dismissed the complaints for failure to state a cause of action. The Court of Appeals affirmed, holding (1) the Internet tax did not subject online retailers without a physical presence in the State to New York sales and compensating use taxes; and (2) the tax did not create an irrational, irrebuttable presumption of solicitation of business within the State. View "Overstock.com, Inc. v State Dep't of Taxation & Fin." on Justia Law

In 1969, the Cities of Atlanta and College Park entered into an agreement for purposes of expanding Atlanta Hartsfield-Jackson International Airport. One of the provisions of the granted Atlanta the exclusive right to collect and levy occupation taxes from businesses located at the Airport that were within the city limits of College Park. In 2007, after commissioning a study for the purpose of reassessing this relationship, College Park informed Atlanta and Airport businesses that it would no longer honor the 1969 Agreement and that it would seek to collect occupation taxes from the Airport businesses including Atlanta's proprietary business operations. Atlanta filed a declaratory action in seeking a judgment that the 1969 Agreement controlled the collection of occupation taxes from businesses operating at the Airport within College Park. Both Atlanta and College Park moved for partial summary judgment, and, in ruling on the cross motions, the trial court found that Atlanta and College Park's 1969 Agreement was unenforceable. The trial court further ruled that OCGA 48-13-13 (5), which prohibited local governments from levying an occupation tax on any "local authority," precluded College Park from levying an occupation tax on Atlanta's proprietary operations because Atlanta met the definition of a "local authority" under the statute. Both parties appealed, and the Court of Appeals affirmed the trial court's judgment invalidating the 1969 Agreement, but reversed the trial court's finding that the term "local authority" as used in OCGA 48-13-13 (5) included smunicipalities. Upon review, the Supreme Court concluded that the Court of Appeals was correct in its determination that the City of Atlanta was not a "local authority" as that term is used in the statute. View "City of Atlanta v. City of College Park" on Justia Law

Pro se appellant John Schoppe petitioned the Tenth Circuit for review of a Tax Court decision that found him liable for tax deficiencies for the years 2002-2007. While the case was proceeding before the Tenth Circuit, Petitioner filed a voluntary bankruptcy petition. That filing prompted the Court to request a supplemental briefing from the parties on whether the automatic bankruptcy stay would apply to appellant's appeal before the Tenth Circuit. Finding that 11 U.S.C. 362(a)(1) of the Bankruptcy Code did not stay this appeal, the Court reviewed the Tax Court decision and affirmed it. View "Schoppe v. CIR" on Justia Law