Justia Tax Law Opinion Summaries

Taxpayers did not file returns for 2007 and 2012. The Tax Court concluded that taxpayers owed no deficiencies or penalties for those years, because the partnership losses claimed for those years exceeded the IRS’s adjusted non-partnership deficiencies.   The Ninth Circuit reversed and remanded for recalculation of the deficiencies and penalties for those years. The panel held that the unsigned, unfiled tax returns on which the partnership losses were reported were legally invalid because they had not been filed and executed under penalty of perjury and, therefore, could not be used to offset non-partnership income in an individual deficiency proceeding. Accordingly, the panel reversed the Tax Court’s deficiency determinations for these years and remanded with instructions to determine taxpayers’ deficiencies without regard to any partnership losses claimed on the legally invalid tax returns. For 2009 through 2011, taxpayers reported no tax liability because of large net operating losses (NOLs) from partnerships subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The panel explained that when carried forward as deductions, net operating losses composed of partnership losses can offset a taxpayer’s non-partnership income or instead are part of the “net loss from partnership items” under Internal Revenue Code Section 6234(a)(3), as it was then in effect. The panel remanded for the Tax Court to assess the non-partnership items in the recomputed deficiencies for those years, accounting for the TEFRA-eligible partnership components of the net-operating-loss deductions only in the Section 6234(a)(3) calculations of “net loss from partnership items.” View "CIR V. RITCHIE STEVENS, ET AL" on Justia Law

Plaintiff injured himself on the job while working as a photojournalist for media corporation Turner Broadcasting Systems, Inc. In the following years, while he was unable to work, Turner paid him for his leave. Plaintiff claimed that because his injury was job-related, Turner paid him workers’ compensation, while Turner claims that it paid him according to a separate disability policy. This distinction has legal significance because income earned as workers’ compensation is non-taxable, while disability payments are taxed. Turner reported the compensation as part of Plaintiff’s taxable income on the W-2s it filed with the IRS. Plaintiff sued Turner under 26 U.S.C. Section 7434 for willfully filing fraudulent information returns on his behalf. The district court granted summary judgment for Turner.   The DC Circuit reversed. The court explained that under Section 7434, a plaintiff must show: (1) the defendant filed an information return on his or her behalf, (2) the return was false as to the amount paid, and (3) the defendant acted willfully and fraudulently. The parties agree that the W-2s qualify as information returns, and Plaintiff has raised a dispute of material fact as to the second and third elements. As to falsity, Plaintiff’s injury was job-related, and a reasonable jury could therefore conclude that the W-2s were inaccurate because they overstated his taxable income by including workers’ compensation. And as to scienter, several pieces of evidence including the language of Turner’s own policies as well as communications between the parties could lead a factfinder to conclude that Turner knew or should have known the actual nature of these payments. View "Martin Doherty v. Turner Broadcasting Systems, Inc." on Justia Law

The Supreme Court affirmed the judgment of the district court granting an uncontested petition of the trustees of the Marvin S. Robinson Charitable Trust to retroactively modify the trust's terms to maintain its tax-exempt status as a "supporting organization" under the federal tax code, holding that Kan. Stat. Ann. 58a-416 authorized the retroactive modification of the trust.Under In Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), which held that the Internal Revenue Service (IRS) and federal courts are not bound by decisions of lower state courts on issues of state law but that these entities will defer to decisions of a state's highest court, an order allowing the retroactive modification of a trust's terms to maintain its tax-exempt status is binding on federal tax authorities only if it emanates from the Supreme Court. The Supreme Court agreed to review the district court's order in accordance with Bosch and affirmed the district court's judgment granting the petition, holding modification of the trust was proper. View "In re Marvin S. Robinson Charitable Trust" on Justia Law

Defendant is a medical doctor. He contracted with two hospitals, one in Mississippi and one in Alabama. He usually made $30,000 to $40,000 per month. Because he was a contractor, the hospitals did not withhold any wages for tax purposes— Defendant was solely responsible for satisfying his federal tax obligations. From 2006 through 2012, Defendant did not pay any income taxes or file any timely tax returns. A jury found him guilty of tax evasion in violation of 26 U.S.C. Section 7201. Defendant raised two claims on appeal: first, that the evidence at trial was insufficient to support a conviction for tax evasion under Section 7201; and second, that the district court abused its discretion by denying his motion for a mistrial.   The Fifth Circuit affirmed. The court explained that even if it was legitimate for Defendant to deduct IRS garnishments from his income, that does not explain why Defendant neglected to mention key assets on the form—such as the $50,000 gun collection and the corporate bank accounts that he used to pay personal expenses. Moreover, the prosecution presented evidence suggesting that he manipulated his wages to artificially depress his income at the time he submitted Form 433-A.   Further, even assuming that the district court was right to sustain the defense’s objection, Defendant offered no reason to believe that the questions incurably prejudiced the jury. Given the weight of evidence presented to the jury in this case, there is no “significant possibility” that these two questions had a substantial impact on the verdict. View "USA v. Crandell" on Justia Law

The Supreme Court affirmed the decision of the circuit court declaring the Town of Buchanan's transportation utility fee (TUF) to be a property tax subject to the Town's levy limit, holding that funds raised for utility districts under Wis. Stat. 66.0827 are property taxes subject to municipal levy limits.After the circuit court concluded that the money raised for the district fund was subject to the Town's property tax limit Appellants appealed, arguing that the TUF was unlawful. The Supreme Court affirmed, holding that the Town did not follow the lawful procedures that a municipality must follow for funding public improvements because the imposition of property taxes over the Town's levy limits required the consent of the Town's voters and because nothing in the statutes permitted the Town to bypass those levy limits for the purpose of imposing a TUF on property owners in the municipality. View "Wis. Property Taxpayers, Inc. v. Town of Buchanan" on Justia Law

This appeal arose from a converted Chapter 7 bankruptcy filed in 2017. In 2014, the debtor, All Resorts Group, Inc., paid personal tax debts of two of its principals totaling $145,138.78 to the Internal Revenue Service. Plaintiff, the United States Trustee, brought an adversary proceeding in bankruptcy court against the United States pursuant to Code 11 U.S.C. § 544(b)(1) to avoid these transfers. The “applicable law” on which the Trustee relied was now-former § 25-6-6(1) of Utah’s Uniform Fraudulent Transfer Act (amended 2017) as part of Utah’s Uniform Voidable Transactions Act. The United States (Government) did not contest the substantive elements required for the actual creditor (in this case, an individual with an employment discrimination claim against the debtor) to establish a voidable transfer under § 25-6-6(1). The Government acknowledged: (1) the debtor had made the transfers; (2) an actual creditor had an unsecured claim against the debtor arising before the transfers; (3) the debtor did not receive a reasonably equivalent value in exchange for the transfers; and (4) the debtor was insolvent at the time of the transfers. The Government further acknowledged that the sovereign immunity waiver contained in 11 U.S.C. § 106(a)(1) made it amenable to the Trustee’s § 544(b)(1) action. The Government contested § 544(b)(1)’s “actual creditor requirement,” arguing the actual creditor could not avoid the debtor’s tax payments made on behalf of its principals to the IRS because sovereign immunity would bar such creditor’s action against the Government outside of bankruptcy. According to the Trustee, the waiver contained in Code § 106(a) abrogated sovereign immunity not only as to his § 544(b)(1) adversary proceeding against the Government, but also as to the underlying Utah state law cause of action he invoked under subsection (b)(1) to avoid the transfers. On cross-motions for summary judgment, the bankruptcy court ruled in favor of the Trustee and avoided the transfers. The Government appealed. Finding no reversible error in the bankruptcy court's judgment, the Tenth Circuit affirmed. View "Miller v. United States" on Justia Law

In 2008, Debtors Mosaic Management Group, Inc., Mosaic Alternative Assets, Ltd., and Paladin Settlements, Inc. filed for Chapter 11 bankruptcy in the Southern District of Florida, a “UST district” in which the U.S. Trustee program operates. In June 2017, the bankruptcy court confirmed a joint Chapter 11 plan, under which most of the Debtors’ assets were transferred to an Investment Trust managed by an Investment Trustee. The issue before the court is the appropriate remedy for the constitutional violation the Supreme Court found in Siegel. The Debtors in this case—being debtors in a U.S. Trustee district—have been required to pay higher fees than a comparable debtor in one of the six BA districts in Alabama or North Carolina.   The Eleventh Circuit vacated and remanded. The court concluded that Reich, Newsweek, Bennett, McKesson, and the long line of similar state tax cases are closely analogous to the instant case and provide strong precedent supporting the refund remedy urged upon us by the Debtors. Accordingly, the court held that the appropriate remedy in this case for the constitutional violation identified in Siegel is the refunds that the Debtors in this case seek. View "United States Trustee Region 21 v. Bast Amron LLP" on Justia Law

The Supreme Court affirmed the order of the Nebraska Tax Equalization and Review Commission (TERC) reversing three decisions made by the Lincoln County Board of Equalization upholding the assessed value of certain property for tax years 2018 through 2020, holding that TERC did not err in finding the Board's decision to uphold the valuations was arbitrary and unreasonable.The property at issue was subject to rent restrictions under the Internal Revenue Code. Appellant protested the 2018, 2019, and 2020 valuations of the property, and the Board of affirmed the county assessor's valuation for each year. After a hearing, TERC reversed. The Supreme Court affirmed, holding (1) TERC correctly determined that the property's assessed value was arbitrary and unreasonable for each year; and (2) TERC was permitted to consider all evidence of actual value on appeal and was not limited to the income approach. View "Lincoln County Bd. of Equalization v. Western Tabor Ranch Apartments, LLC" on Justia Law

The Supreme Court affirmed the judgment of the superior court granting summary judgment in favor of Respondent, the tax assessor for the City of East Providence, and dismissing Petitioner's complaint brought pursuant to R.I. Gen. Laws 44-5-26(c) alleging that Respondent conducted an illegal property tax assessment for tax year 2012 and an excessive tax assessment for tax year 2013, holding that the superior court did not err.In moving for summary judgment Respondent asserted that Petitioner's claims fell outside the three-month statute of limitations contained in R.I. Gen. Laws 44-5-26 and 44-5-27. Petitioner appealed, arguing that the ten-year statute of limitations generally applicable to civil actions governed its tax assessment challenges. The Supreme Court disagreed and affirmed, holding (1) the General Assembly intended for the three-month statute of limitations to apply to petitions for relief such as the instant petition; and (2) Petitioner's challenges to the illegality of the 2012 and 2013 tax assessments were untimely filed after the three-month statute of limitations had expired. View "Newport & New Road, LLC v. Hazard" on Justia Law

The Supreme Court affirmed the judgment of the Minnesota Tax Court reducing the Commissioner of Revenue's valuations of CenterPoint Energy Minnegasco's natural gas distribution pipeline system for January 2, 2018 through January 2, 2019, holding that the Commissioner was not entitled to relief.The tax court reduced the Commissioner's valuations and ordered the Commissioner to recalculate Minnegasco's tax liability. The Commissioner appealed, challenging the tax court's income-equalization and cost approaches. The Supreme Court affirmed, holding that the tax court (1) did not err in the way that it used the Commissioner's initial assessments when evaluating the totality of the evidence and making its independent evaluations; (2) did not abuse its discretion in considering the conflicting expert opinions; and (3) did not clearly err in finding external obsolescence. View "Commissioner of Revenue v. CenterPoint Energy Resources Corp." on Justia Law