Justia Tax Law Opinion Summaries

Defendants appealed from a judgment of the district court awarding the United States $112,324.18, plus statutory additions and interest, in connection with an unpaid tax assessment from 2007. The district court granted summary judgment in favor of the government, notwithstanding the fact that the Internal Revenue Service (the “IRS”) referred the assessment to the Department of Justice (the “DOJ”) before formally rejecting Defendants’ proposed installment agreement. Defendants contended that this referral violated the provisions of the Internal Revenue Code and the implementing Treasury Regulations that curb the IRS’s collection activities while a proposed installment agreement remains on the table.   The Second Circuit affirmed. The court explained that as their plain terms indicate, the suspension provisions of Section 6331(i) and (k) prohibit the commencement of a collection action in court during specified periods, not the IRS’s antecedent request that the DOJ file such an action. The court wrote that the Internal Revenue Code is silent on when the IRS may refer an action to the DOJ, and a Treasury Regulation that limits the IRS’s referral power cannot read into the statute something that is not there. Further, this conclusion is not altered because authorization from the Treasury Secretary is a prerequisite to commencing an in-court proceeding.   Further, the court explained that Defendants have not claimed a violation of their constitutional rights and the regulatory limits on IRS referrals of collection actions are not statutorily derived. As a result, Defendants must demonstrate prejudice for the government’s regulatory violation to invalidate the instant collection action. The court found that Defendants have failed to do so. View "United States v. Schiller" on Justia Law

The Supreme Court affirmed the decision of the Board of Equalization upholding the final determinations of the Department of Revenue (DOR) increasing the taxable value of Jonah Energy LLC's natural gas liquids (NGL) production for 2014 through 2016, holding that Jonah was not entitled to relief on its allegations of error.On appeal, Jonah argued that the Board misinterpreted the NGL purchase agreement between Jonah and the purchaser of its NGL, Enterprise Products Operating LLC, by refusing to account for deficiency fees Jonah paid to Enterprise in determining the NGL's taxable value. The Supreme Court affirmed, holding (1) the Board did not misinterpret the NGL purchase agreement at issue; and (2) the Board did not err by failing to take the facts and circumstances surrounding execution of the purchase agreement into account when interpreting it because there was no basis for losing outside the four corners of the purchase agreement to determine its meaning. View "Jonah Energy LLC v. Wyo. Dep't of Revenue" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals upholding the final determination by the tax commissioner assessing a use tax against Appellant, holding that the Board did not err in upholding that tax commissioner's final determination.The challenged assessment in this action related to items used in the construction of a data center that Appellant contracted to have built. The Supreme Court affirmed the Board's decision upholding the use tax assessed against Appellant, holding (1) Appellant failed to cite to any authority to support its argument that it was not liable for the use tax because a contractor had already paid it on the items in question; (2) Appellant forfeited the arguments under its third and fourth positions of law; and (3) Appellant's first and second propositions of law were moot. View "PCM, Inc. v. Harris" on Justia Law

The Supreme Court affirmed in part and vacated in part the decision of the tax court that the taxable 2018 market value of a DoubleTree in Bloomington was $25,500,000, an amount that exceeded the valuations offered by the DoubleTree's owner and the County of Hennepin, holding that remand was required on a single issue.The County initially assessed the value of the DoubleTree property at $31,586,400, but Relator, the DoubleTree's owner, appealed the valuation to the tax court. After a trial, the tax court determined that the taxable 2018 market value of the DoubleTree was $25,500,000. The Supreme Court vacated the judgment in part and otherwise affirmed, holding that remand was required for the tax court to revisit and explain its adoption of the percentage reduction to the sales price of one of the hotels it used in its sales comparison analysis to account for non-taxable assets included in the sales price of comparator hotels. View "Bloomington Hotel Investors, LLC v. County of Hennepin" on Justia Law

Jarrett produces Tezos tokens cryptocurrency by “staking.” Jarrett claims staking uses existing Tezos tokens and computing power to produce new tokens, so he owes tax on the tokens only when he sells or transfers them and “realizes” income, 26 U.S.C. 61(a). The IRS's position was that Jarrett realized income when he received each token. Jarrett’s 2019 staking yielded 8,876 Tezos tokens; he “did not sell, exchange, or otherwise dispose of these tokens during 2019.” He reported those tokens as income and paid tax, then asked the IRS for a refund ($3,793). After six months, Jarrett filed a refund lawsuit, 28 U.S.C. 1346(a)(1), seeking a judgment that Jarrett was entitled to a refund; costs and attorney’s fees; and an injunction preventing the IRS “from treating tokens created by the Jarretts as income.”The Attorney General approved Jarrett’s refund request. The IRS issued a $4,001.83 refund check and a “Notice of Adjustment.” Preferring to litigate the case to judgment, Jarrett has “not cashed, and [does] not intend to cash, this check.” The district court dismissed the case as moot. The Sixth Circuit affirmed. Refund lawsuits exist for a single purpose: “the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected.” The IRS satisfies its repayment obligation when it issues and mails a refund check for the full amount of the overpayment. View "Jarrett v. United States" on Justia Law

The Westin St. Francis, in Union Square, is San Francisco’s third largest hotel. In return for a base management fee and an incentive fee, the Company manages and maintains the hotel, handles personnel and employment matters, provides advertising and promotional services, and provides all computer services, including reservations. In addition to renting its rooms, the Westin receives income from guest cancellations, no-shows, and attrition. The hotel also profits from in-room movies and guest laundry services provided by third parties. In 2015, BRE purchased Strategic, the owner of the Westin St. Francis and other hotels, triggering a reassessment. The Assessor assessed the hotel’s value at approximately $785 million. Strategic sought a refund. The trial court upheld the Board’s determination.The court of appeal held that the method used by the city to exclude the value of nontaxable, intangible assets from the assessed value of the hotel—i.e., the deduction of fees or expenses associated with the asset from the hotel’s future income stream—is legally incorrect. As a result, the assessed value of the hotel improperly subsumed the value of the management agreement, in-room movies, and guest laundry services. However, the assessed value properly included the cancellation/no-show/attrition income because that asset is a taxable attribute of the property. The court remanded for a redetermination of the taxable value of the hotel. View "SHR St. Francis, LLC v. City and County of San Francisco" 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

In 1997-2009, Chappelle managed Terra and withheld federal income, Social Security, and Medicare taxes (trust fund taxes) from Terra’s employees’ wages, 26 U.S.C. 3102, 3402, 7501, but failed to remit them to the IRS in 2007-2009. The IRS imposed “trust fund recovery penalties” on Chappelle. To avoid paying, Chappelle misstated his income and assets. He used business funds to pay personal expenses. He purchased real estate in others’ names rather than his own. Chappelle repeated this cycle in 2009-2016 after he closed Terra and sequentially opened three more companies. Chappelle repeatedly moved assets.In a 2016 IRS interview, Chappelle made false statements about his real estate purchases. Chappelle subsequently falsely claimed that the latest company did not have any employees and was entitled to a tax refund. Chappelle pleaded guilty to willfully attempting to evade the payment of the Trust Fund Recovery Penalties in 2008-2009. Chappelle’s PSR calculated a total tax loss of $1,636,228.28 and recommended increasing Chappelle’s offense level by two levels for his use of sophisticated means, U.S.S.G. 2T1.1(b). The district court overruled Chappelle’s objections, calculated his guideline range as 37-46 months, considered the 18 U.S.C. 3553(a) factors, and sentenced Chappelle to 38 months’ imprisonment. The Sixth Circuit affirmed, rejecting arguments that the court miscalculated the tax loss and erroneously found that his offense involved sophisticated means. View "United States v. Chappelle" on Justia Law

The Supreme Court affirmed in part and reversed in part the judgment of the district court finding that Nancy Miles, Cheryl Bettin, and Robert Moninger would by unjustly enriched if they were not required to make reimbursement of taxes paid on the property at issue in this case during the time that Boone River, LLC and 11T NE, LLC held the tax certificate and tax deed, holding that the present lawsuit was barred by claim preclusion.Boone River purchased a tax certificate for the property owned by Miles, Bettin, and Moninger and obtained a tax deed. Boone River later transferred the property to 11T. When 11T sued to quiet title to the property the district court voided 11T's tax deed and quieted title to the property in Miles, Bettin, and Moninger. Thereafter, Boone River and 11T brought this lawsuit for unjust enrichment, seeking to be reimbursed for taxes paid on the property while they held they held the tax certificate and tax deed. The district court ruled in favor of Boone River and 11T. Miles and Bettin appealed, but Moninger did not. The Supreme Court reversed in part, holding that Miles and Bettin showed that this action was barred by claim preclusion. View "Boone River, LLC v. Miles" on Justia Law

Hoops, which owned an NBA franchise sought a $10.7 million tax deduction for deferred compensation that it owed to two of its players at the close of the 2012 tax year, based on their performance during previous seasons. Under 26 U.S.C. 404(a)(5), an accrual-based taxpayer like Hoops can only deduct deferred compensation expenses in the tax years when it pays its employees or contributes to certain qualified plans, such as a trust or pension fund. Hoops did not do either. In 2012 the firm sold substantially all its assets and liabilities. As part of the transaction, the buyer assumed Hoops’s $10.7 million deferred compensation liability. Hoops viewed this $10.7 million amount as a deemed payment to the buyer to compensate it for assuming the deferred compensation obligation and took a tax deduction, claiming the buyer’s assumption of the $10.7 million liability as an ordinary business expense deductible at the time of sale.The IRS denied the deduction. The Tax Court and Seventh Circuit affirmed. Section 404(a)(5) barred Hoops from claiming a deduction for deferred compensation in the 2012 tax year because the firm did not pay the employees during that year; the statute precluded Hoops from taking the deduction until the players were paid. View "Hoops, LP v. Commissioner of Internal Revenue" on Justia Law