Justia Tax Law Opinion Summaries

Plaintiffs, two brothers, were the sole shareholders of Crown C Corporation. The corporation obtained life insurance on each brother so that if one died, the corporation could use the proceeds to redeem his shares. When one brother died, the Internal Revenue Service assessed taxes on his estate, which included his stock interest in the corporation. According to the IRS, the corporation’s fair market value includes the life insurance proceeds intended for the stock redemption. The brother's estate argues otherwise and sued for a tax refund. The district court agreed with the IRS.   The Eighth Circuit affirmed. The court explained that here the estate argues that the court should look to the stock-purchase agreement to value of the brother’s shares because it satisfies these criteria. But the estate glosses over an important component missing from the stock purchase agreement: some fixed or determinable price to which we can look when valuing the brother’s shares. Further, the Treasury regulation that clarifies how to value stock subject to a buy-sell agreement refers to the price in such agreements and “the effect, if any, that is given to the . . . price in determining the value of the securities for estate tax purposes.” 26 C.F.R. Section 20.2031-2(h). Here, the stock-purchase agreement fixed no price nor prescribed a formula for arriving at one. Further, the court explained that the proceeds were simply an asset that increased shareholders’ equity. A fair market value of the brother's shares must account for that reality. View "Thomas Connelly v. United States" on Justia Law

The Board of Supervisors for Lowndes County appealed the trial court’s grant of summary judgment in favor of the Lowndes County School District. The Board argued that the trial court erred in its interpretation of Mississippi Code Section 37-57-107(1) (Rev. 2014) and that the trial court lacked jurisdiction to review the Board’s September 15, 2020 decision to exclude $3,352,0751 from the District’s requested ad valorem tax effort. The Mississippi Supreme Court found that the District appealed the decision of a county board of supervisors. As such, the District’s exclusive remedy was Section 11-51-75. Because the District failed to meet these requirements and because Section 11-51-75 was the District’s exclusive remedy, the chancery court was without jurisdiction to hear this matter and issue a declaratory judgment. Therefore, the trial court’s grant of summary judgment was reversed, and the matter remanded to the chancery court for it to enter an order dismissing the case for lack of jurisdiction. View "Board of Supervisors for Lowndes County v. Lowndes County School District" on Justia Law

CalSTRS is a “unit of the Government Operations Agency” authorized to invest the assets of the Teachers’ Retirement Fund (Ed. Code, 22001, 22203). In 2016, CalSTRS formed two LLCs for the purpose of acquiring two properties in Oakland. Both LLC agreements state “The purpose of the Company is to implement the essential governmental function of the Member ([CalSTRS]) … No other person or entity may become a member of the Company.” “For Federal and relevant State income and/or franchise tax purposes and for no other purposes whatsoever, the Company shall be disregarded as an entity separate from [CalSTRS].” The LLCs paid documentary transfer taxes of $3,371,250 to Oakland, and $247,225 to Alameda County for the acquisition of one property and $161,250 to Oakland, and $11,825 to Alameda County in connection with the other property. The LLCs unsuccessfully sought refunds.The superior court ruled “[t]he LLCs are not governmental entities even if a governmental entity is the sole member of the LLC” and the ordinances do not “provide a textual basis for an exemption for transactions in which a business entity takes ownership of real property based on that entity’s ownership” by an exempt state agency. The court of appeal affirmed, finding that the competing interests at stake are a matter for the legislature. View "CSHV 1999 Harrison, LLC v. County of Alameda" on Justia Law

Clary Hood, Inc. (“Hood, Inc.”), a South Carolina corporation engaged in land excavation and grading, with revenue of $44 million in 2015 and $69 million in 2016, paid its CEO a $5 million bonus in both of those years, deducting the payments on its income tax returns as reasonable business expenses under 26 U.S.C. Section 162(a)(1). The Internal Revenue Service (“IRS”) contended that the bonuses were excessive, with the excess amount actually representing a disguised payment of dividends from profits, which could not be deducted. The Tax Court mostly agreed with the IRS and determined that Hood, Inc. could only deduct roughly $3.7 million for 2015 and $1.4 million for 2016 as reasonable amounts for total compensation to its CEO. Accordingly, it assessed tax deficiencies for both years in the total amount of roughly $1.96 million, as well as a penalty for 2016 in the amount of $282,398.   The Fourth Circuit affirmed the Tax Court’s findings with respect to the amount of reasonable deductions and consequent tax deficiency but vacated the imposition of the penalty. The court explained that because the record indicates that Hood, Inc. anticipated remedying Mr. Hood’s past under compensation in installments over multiple years and discussed that plan with its tax advisors, who approved it as reasonable, the court concluded that the Tax Court’s finding regarding the reasonable-cause defense for the 2015 tax year should also have applied to the 2016 tax year. Further, Hood, Inc. used a consistent methodology to determine the amount of Mr. Hood’s bonuses for both 2015 and 2016 with the advice of independent accountants. View "Clary Hood, Inc. v. Commissioner of Internal Revenue" on Justia Law

This was one of several similar cases filed in the fall of 2020 by the owners of hundreds of commercial properties in eleven different Colorado counties seeking to compel the assessors in each of the counties to revalue their properties and lower their property tax assessments for the 2020 tax year. This matter involved the valuation of over 60 parcels of commercial property in Douglas County, Colorado. The taxpayers here—and in the other cases—contended that the pandemic and various state and local public health orders issued in response were “unusual conditions” that required revaluation of their properties under section 39-1-104(11)(b)(I), C.R.S. (2022). To this, the Colorado Supreme Court concluded the orders were not "unusual conditions:" COVID-19 was not a “detrimental act[] of nature,” and the orders issued in response to COVID-19 were not “regulations restricting . . . the use of the land” under section 39-1-104(11)(b)(I). Therefore, section 39-1-104(11)(b)(I) did not require the Douglas County property assessors to revalue the taxpayers’ 2020 property valuations. View "Educhildren v. City of Douglas" on Justia Law

This was one of several similar cases filed in the fall of 2020 by the owners of hundreds of commercial properties in eleven different Colorado counties seeking to compel the assessors in each of the counties to revalue their properties and lower their property tax assessments for the 2020 tax year. This matter involved the valuation of 130 parcels of commercial property in Larimer County, Colorado. The taxpayers here—and in the other cases—contended that the pandemic and various state and local public health orders issued in response were “unusual conditions” that required revaluation of their properties under section 39-1-104(11)(b)(I), C.R.S. (2022). To this, the Colorado Supreme Court concluded the orders were not "unusual conditions:" COVID-19 was not a “detrimental act[] of nature,” and the orders issued in response to COVID-19 were not “regulations restricting . . . the use of the land” under section 39-1-104(11)(b)(I). Therefore, section 39-1-104(11)(b)(I) did not require the Larimer County property assessors to revalue the taxpayers’ 2020 property valuations. View "Larimer County v. 1303 Frontage Holdings" on Justia Law

This was one of several cases filed in Colorado in which commercial property owners have sued to compel the county assessor to revalue their properties and lower their property tax assessments for the 2020 tax year to account for the economic impacts of the COVID-19 pandemic. This case concerned the valuation of commercial real property located in the City and County of Broomfield, Colorado. The taxpayers here—and in the other cases—contended that the pandemic and various state and local public health orders issued in response were “unusual conditions” that required revaluation of their properties under section 39-1-104(11)(b)(I), C.R.S. (2022). To this, the Colorado Supreme Court concluded the orders were not "unusual conditions:" COVID-19 was not a “detrimental act[] of nature,” and the orders issued in response to COVID-19 were not “regulations restricting . . . the use of the land” under section 39-1-104(11)(b)(I). Therefore, section 39-1-104(11)(b)(I) did not require the City and County of Broomfield Assessor to revalue the taxpayers’ 2020 property valuations, and it did not require the Board of Equalization to correct the Assessor’s valuations. View "Hunter Douglas v. City & County of Broomfield" on Justia Law

This was one of several cases filed in Colorado in which commercial property owners sued to compel the county assessor to revalue their properties and lower their property tax assessments for the 2020 tax year to account for the economic impacts of the COVID-19 pandemic. This case concerned the valuation of hundreds of parcels of commercial real property located in Jefferson County, Colorado. The taxpayers here—and in the other cases—contended that the pandemic and various state and local public health orders issued in response were “unusual conditions” that required revaluation of their properties under section 39-1-104(11)(b)(I), C.R.S. (2022). To this, the Colorado Supreme Court concluded the orders were not "unusual conditions:" COVID-19 was not a “detrimental act[] of nature,” and the orders issued in response to COVID-19 were not “regulations restricting . . . the use of the land” under section 39-1-104(11)(b)(I). Therefore, section 39-1-104(11)(b)(I) did not require the Jefferson County Assessor to revalue the taxpayers’ 2020 property valuations, and it did not require the Board of Equalization to correct the Assessor’s valuations. View " MJB Motel v. County of Jefferson" on Justia Law

The Supreme Judicial Court vacated the judgment of the superior court that reversed and modified the decision of the tax assessor of the Town of Vinalhaven denying Hurricane Island Foundation a local property tax exemption under Me. Rev. Stat. 36, 652(1)(B), holding that the Town's tax assessor correctly denied the tax exemption.In denying the Foundation's application, the Town's tax assessor concluded that the Foundation failed to meet the standard for a "literary and scientific" institution under the statute. The superior court twice remanded the case. For both the second and the third time, the assessor denied the tax exemption to the Foundation. The superior court modified the decision to designate the Foundation as tax exempt, concluding that there was an error of law in the assessor's decision. The Supreme Judicial Court vacated the judgment below and remanded for the court to enter a judgment declaring that the Foundation was not exempt, holding that the Foundation failed to show it was a "scientific" institution. View "Hurricane Island Foundation v. Town of Vinalhaven" on Justia Law

Petitioners chartered their yacht, Lady Leila, in 2014 and 2015. They did not conduct the chartering activity for profit—it was a hobby. Though the hobby generated income, it also incurred sizeable expenses each year. Petitioners deducted some of those expenses under Section 183(b)(2) and placed them “above the line” to reduce their gross income. After an audit, the Commissioner determined that the Section 183(b)(2) deductions were miscellaneous itemized deductions under Section 67, meaning that they belonged “below the line” and reduced adjusted gross income, not gross income. Moreover, because Petitioners had earned tens of millions of dollars in 2014 and 2015 and, at that time, the Code allowed miscellaneous itemized deductions only to the extent that they exceeded two percent of adjusted gross income, the Commissioner disallowed the Section 183(b)(2) deductions altogether. Facing deficiencies and penalties, Petitioners petitioned the Tax Court, which granted summary judgment for the Commissioner. They sought appellate review.   The Eleventh Circuit agreed with the Tax Court and denied the petition for review. The court explained that because Sections 63 and 67 also omit Section 183, hobby expenses deducted under Section 183(b)(2) are miscellaneous itemized deductions. During the relevant time period, these deductions were subject to a two-percent floor on adjusted gross income. The result is that Section 183(b)(2) gave Petitioners a deduction for their expenses from operating Lady Leila, but Section 67 did not allow them to take that deduction because they could not meet the two-percent threshold for miscellaneous itemized deductions. View "Carl L. Gregory, et al v. Commissioner of Internal Revenue" on Justia Law