Justia Tax Law Opinion Summaries

The Supreme Court affirmed in part and reversed in part the rulings made by the circuit court determining that (1) home inspectors do not meet the professional services tax exemption in W. Va. Code 11-15-8; (2) home inspection services are not professional services pursuant to West Virginia Code of State Rules section 110-15-8.1.1.1; and (3) the four-part test set forth in section 110-15-8.1.1.1 creates a mandatory four-part test and not a balancing test as determined by the office of Tax Appeals, holding that the circuit court (1) correctly ruled that home inspection services do not qualify as professional services under West Virginia law; (2) did not err in its ruling regarding the four-year degree requirement; but (3) erred in concluding that each part of the four-part test must be met to be classified as professional. View "Keener v. Irby" on Justia Law

Mary and James Nelson, a married couple with daughters, formed Longspar limited partnership in 2008; each had a 0.5% general partner interest. The limited partners were Mary and trusts that had been established for their daughters. The Nelsons also formed a trust in 2008. Mary was the settlor, James was the trustee. James and the daughters were the beneficiaries. In 2008-2009, Mary transferred her Longspar limited partner interests to the trust in a gift (valued at $2,096,000.00) and then a sale for $20,000,000. An accountant valued a 1% Longspar limited partner interest at $341,000. The Nelsons used that value to convert the dollar values in the transfer agreements to percentages of limited partner interests—6.14% for the gift and 58.65% for the sale. Those percentages were then listed on Longspar’s records, included in Longspar’s amended partnership agreement, and listed on the Nelsons’ gift tax returns.The IRS audited the Nelsons’ tax returns. The Nelsons amended their records and reallocated previous distributions. The Commissioner issued Notices of Deficiency listing $611,708 in gift tax for 2008 and $6,123,168 for 2009. The Tax Court found that the proper valuation of a 1% Longspar limited partner interest was $411,235; the transfer documents' language was not a valid formula clause that could support reallocation; Mary had transferred the percentage of interests that the appraiser had determined to have the values stated in the transfer documents; those percentages were fixed once the appraisal was completed. The Fifth Circuit affirmed; the Nelsons each owed $87,942 in gift tax for 2008 and $920,340 for 2009. View "Nelson v. Commissioner of Internal Revenue" on Justia Law

Under the 1982 Tax Treatment of Partnership Items Act, 26 U.S.C. 6221–6232, partnership-related tax matters are resolved in two stages. During the partnership-level proceedings, the IRS may adjust items relevant to the partnership as a whole and determine the “applicability of any penalty.” The partnership can challenge the adjustment. All partners are bound by any final decision in a partnership-level proceeding.On its 2001 partnership tax return, AHG reported a $25,618 total loss. Ginsburg’s individual 2001 tax return reported a $10,069,505 loss from AHG to offset his income. In 2008, the IRS sent Ginsburg notice that it was proposing adjustments to AHG’s returns, alleging that AHG “was formed . . . solely for purposes of tax avoidance.” For Ginsburg, the IRS “disallowed” the $10,069,505 loss and said it would impose a 40 percent penalty for “gross valuation misstatement.”Based on Ginsburg’s concessions that he was not entitled to deduct AHG’s losses because he was not at risk and the partnership’s transactions did not have a substantial economic effect., the tax court found that AHG must be “disregarded for federal income tax purposes,” and adjusted AHG’s 2001 tax return. The court denied Ginsburg’s petition concerning the penalty, rejecting his argument that the government did not get “written approval of the penalty by an immediate supervisor,” as required by 26 U.S.C. 6751(b)(1). The district court agreed that Ginsburg could not have reasonably relied on the advice of his tax, legal, and financial advisors and would not consider Ginsburg’s supervisory approval argument because he did not exhaust it in his IRS refund claim.The Eleventh Circuit affirmed. In partnership tax cases, the supervisory approval issue must be exhausted with the IRS before the partner files his refund lawsuit and must be raised during the partnership-level proceedings. View "Ginsburg v. United States" on Justia Law

Oakland businesses must obtain a business tax certificate and pay business license taxes each year, based on the type of activities in which the business is engaged. A separate business tax certificate is required for each activity of the business unless the activity comprises less than 20 percent of the total gross receipts of the business. City tax authorities determine the appropriate business tax classifications based on the information reported by the taxpayer. Host held Port Department permits to occupy space and operate food, beverage, retail, and duty-free concessions at Oakland International Airport. The permits authorized Host to sublease its space to other parties with consent. In 2015, based on an audit of Host’s financial records, an auditor determined that Host owed Oakland unpaid business taxes, penalties, interest, and fees for rental income from subleases,2006-2015. Host had obtained a business certificate and paid business tax for its retail activities, but not for subleasing.Host unsuccessfully appealed, asserting that it was engaged only in retail sales (not commercial subleasing), that the 20 percent exception applied, and that Oakland could not collect some of the back taxes because of the statute of limitations. The Board, the trial court, and the court of appeal upheld the determination of a $371,195.40 tax liability. View "Host International, Inc. v. City of Oakland" on Justia Law

Plaintiffs Merrimack Premium Outlets, LLC and Merrimack Premium Outlets Center, LLC, appealed, and defendant Town of Merrimack (Town), cross-appealed superior court orders in an action challenging the Town’s reassessment of taxable property. Merrimack Premium Outlets, LLC owned a large property in Merrimack (the Property) that it leased to Merrimack Premium Outlets Center, LLC. The latter entity operated a retail outlet shopping mall, known as the Merrimack Premium Outlets, on the Property. In 2016, the Town conducted a revaluation of all taxable property within the municipality. As a result, the Property was assessed at $86,549,400. Later that year, the Town became aware that the Property had been used in or about 2013 as collateral for a loan and had been valued for that purpose at $220,000,000. Based on this information, the Town believed that it had severely undervalued the Property. Accordingly, the Town reassessed the Property for the 2017 tax year at $154,149,500 (the 2017 reassessment). Plaintiffs then brought this action for declaratory judgment and injunctive relief, alleging there were no changes in either the Property or the market that justified the 2017 reassessment. The superior court ruled in favor of the Town. The New Hampshire Supreme Court concluded that the trial court erred in ruling that the Town had the authority to correct its undervaluation of the Property by adjusting its assessment pursuant to RSA 75:8. Given this disposition, the Court did not address the parties' remaining arguments. View "Merrimack Premium Outlets, LLC et al. v. Town of Merrimack" on Justia Law

Eighteen petitioners (the Taxpayers) appealed a New Hampshire Board of Tax and Land Appeals (BTLA) order issued following the New Hampshire Supreme Court's decision in Appeal of Keith R. Mader 2000 Revocable Trust, 173 N.H. 362 (2020). In that decision, the Supreme Court vacated the BTLA’s prior dismissal of the Taxpayers’ property tax abatement appeals and remanded for the BTLA to further consider whether the Taxpayers omitted their personal signatures and certifications on their tax abatement applications to respondent Town of Bartlett (Town), “due to reasonable cause and not willful neglect.” On remand, the BTLA found that “based on the facts presented, the Taxpayers [had] not met their burden of proving the omission of their signatures and certifications was due to reasonable cause and not willful neglect,” and again dismissed their appeals. Finding no reversible error in that judgment, the Supreme Court affirmed. View "Appeal of Keith R. Mader 2000 Revocable Trust, et al." on Justia Law

Defendant Town of Windham (Town) appealed a superior court order denying its motion to dismiss the tax abatement appeal of plaintiff Shaw’s Supermarkets, Inc. (Shaw’s), for lack of standing. The Town also appealed the superior court's order granting Shaw’s requested tax abatement. The owner of the property at issue leased 1.5 acres of a 34.21-acre parcel in Windham established as Current Use. The lease, in relevant part, required Shaw’s to pay the Owner its pro rata share of the real estate taxes assessed on the entire parcel, and the Owner was required to pay the taxes to the Town. If the Owner received a tax abatement, Shaw’s was entitled to its pro rata share of the abatement. In 2017, Shaw’s was directed by the Owner to pay the property taxes directly to the Town, and it did. Shaw’s unsuccessfully applied to the Town’s selectboard for a tax abatement and subsequently appealed to the superior court. The Town moved to dismiss, arguing that Shaw’s lacked standing to request a tax abatement on property it did not own. Finding the superior court did not err in finding Shaw's had standing to seek the abatement, or err in granting the abatement, the New Hampshire Supreme Court affirmed the superior court's orders. View "Shaw's Supermarkets, Inc. v. Town of Windham" on Justia Law

The 2012 Cook County Firearm Tax Ordinance imposed a $25 tax on the retail purchase of a firearm within Cook County. A 2015 amendment to the County Code included a tax on the retail purchase of firearm ammunition at the rate of $0.05 per cartridge for centerfire ammunition and $0.01 per cartridge for rimfire ammunition. The taxes levied on the retail purchaser are imposed in addition to all other taxes imposed by the County, Illinois, or any municipal corporation or political subdivision. The revenue generated from the tax on ammunition is directed to the Public Safety Fund; the revenue generated from the tax on firearms is not directed to any specified fund or program.Plaintiffs alleged that the taxes facially violate the Second Amendment to the U.S. Constitution and the Illinois Constitution concerning the right to bear arms and the uniformity clause, and are preempted by the Firearm Owners Identification Card Act and the Firearm Concealed Carry Act. The trial court rejected the suit on summary judgment. The appellate court affirmed.The Illinois Supreme Court reversed. To satisfy scrutiny under a uniformity challenge, where a tax classification directly bears on a fundamental right, the government must establish that the tax classification is substantially related to the object of the legislation. Under that level of scrutiny, the firearm and ammunition tax ordinances violate the uniformity clause. View "Guns Save Life, Inc. v. Ali" on Justia Law

The IRS recorded liens for unpaid taxes, interest, and penalties against the debtors’ residence. After debtors filed for bankruptcy, the IRS filed a proof of claim. The portion of the claim that was secured by liens on the residence and attributable only to penalties was $162,000. The debtors filed an adversary proceeding, asserting that the IRS’s claim for penalties was subject to avoidance by the trustee and that because the trustee had not attempted to avoid this claim, debtors could do so under 11 U.S.C. 522(h). The trustee cross-claimed to avoid the liens and alleged their value should be recovered for the benefit of the bankruptcy estate.The bankruptcy court dismissed the adversary complaint. The trustee and the IRS agreed that the penalty portions of the liens were avoided under 11 U.S.C. 724(a). The Bankruptcy Appellate Panel and Ninth Circuit affirmed. Section 522(h) did not authorize the debtors to avoid the liens that secured the penalties claim to the extent of their $100,000 California law homestead exemption. Section 522(c)(2)(B), denies debtors the right to remove tax liens from their otherwise exempt property. Under 11 U.S.C. 551, a transfer that is avoided by the trustee under 724(a) is preserved for the benefit of the estate; this aspect of 551 is not overridden by 522(i)(2), which provides that property may be preserved for the benefit of the debtor to the extent of a homestead exemption. View "Hutchinson v. Internal Revenue Service" on Justia Law

The Heitings’ Revocable Trust, administered by BMO, filed no tax returns; the Heitings reported its gains and losses on their returns. With respect to two stocks, BMO had no discretionary power to take any action, including any sale or purchase of the stock. Nonetheless, in 2015 BMO sold the restricted stock, incurring a taxable gain of $5,643,067.50. The Heitings included that gain on their 2015 personal tax return. BMO subsequently realized that the sale was prohibited, and in 2016, purchased shares of the restricted stock with the proceeds from the earlier transaction.The Heitlings sought to invoke the claim of right doctrine. 26 U.S.C. 1341 to claim a deduction on their 2016 return: A taxpayer must report income in the year in which it was received, even if the taxpayer could later be required to return the income but would then be entitled to a deduction in the repayment year; alternatively, taxpayers may recompute their taxes for the year of receipt of the income. The Seventh Circuit affirmed the dismissal of the Heitings’ suit. Under section 1341(a)(2), the Heitings had to show that the repayment occurred because “it was established after the close of such prior taxable year" that the taxpayer "did not have an unrestricted right to such item.” It was not established that the Trust did not have an unrestricted right to the income item. The Heitlings never challenged the purchase or sale of the restricted stock. View "Heiting v. United States" on Justia Law