Ag Law & Taxation Case Annotations :: Taxation

CCA Ltr. Rul. 200943029 (Jun. 23, 2009)(grants contained in Sec. 1603 of ARRA of 2009 are not tax credits and receipt of grant is not taxable income to recipient; recovery by Treasury of any overpayment (or recapture) to be handled as a debt owed to the government requiring the Justice Department to sue to recover if not voluntarily repaid to Treasury).

CCA Ltr. Rul. 200943028 (Sept. 8, 2009)(qualified small business owner does not include in income any interest paid by the Small Business Administration to the lender and has no interest deduction for the payment).

Deere & Co, et al. v. Comr., 133 T.C. No. 11 (2009)(petitioner not entitled to millions of dollars in research credits claimed under I.R.C. Sec. 41; in calculating the amount of the credit, petitioner omitted annual gross receipts from petitioner's foreign branches (overseas divisions) in computing average gross receipts for the four preceding tax years; the Congress did not expressly exclude foreign receipts from the calculation ).

Consolidated Edison Co. of New York, Inc., et al v. United States, No. 1:06-cv-00305T (Fed. Cl. Oct. 21, 2009)(plaintiff's lease-in, lease-out transaction was true lease that possessed economic substance; related deductions allowable).

Cavoto v. Hayes, No. 08 C 6957, 2009 U.S. Dist. LEXIS 96868 (N.D. Ill. Oct. 19, 2009)(ex-mother-in law defendant's filing of Form 1099-C with her tax return reporting debt forgiveness income of ex-son-in-law not actionable fraud; even though defendant not "applicable entity" under I.R.C. Sec. 6050P that is required to make such filing, such filing not actionable under I.R.C. 7434 if filing is truthful and accurate).

Illinois Dept. of Rev. Policy Ltr. (St. 09-0126-GIL, Sept. 28, 2009)(helicopter used in production agriculture for aerial surveillance and pollination may qualify for farm machinery and equipment exemption from retailers' occupation tax under 86 Ill. Adm. Code Sec. 130.305).

Sloan v. Comr., T.C. Sum. Op. 2009-162 (petitioner not entitled to claimed business expense deductions for musician and band business, not entitled to deductions for business use of home, and is a common law, rather than statutory employee).

McCormick v. Comr., T.C. Memo. 2009-239 (petitioner had only minimal amount of cancellation of debt income attributable to discharged credit card debt; petitioner reasonably disputed income reported on Form 1099-C and IRS failed to produce any reasonable and probative information independent of information returns).

Smith v. Comr., T.C. Memo. 2009-237 (petitioner not entitled to relief from joint and several liability under I.R.C. Sec. 6015).

Bogus v. Comr., T.C. Sum. Op. 2009-160 (petitioner denied loss deductions arising from dog racing activity under passive loss rules; petitioner did not participate in the activity on a basis that was regular, continuous and substantial; only self-serving, undocumented and uncorroborated testimony presented as to level of petitioner's involvement in the activity).

IRS Notice 2009-84 (provides limited administrative exception to ability of IRS to examine Form 706 in connection with certain protective claims for refunds that are timely filed; if claim for refund ripens and becomes ready for consideration after expiration of period of limitations on assessment in I.R.C. Sec. 6501, IRS will limit review of Form 706 to evidence relating to deduction under I.R.C. Sec. 2053 that was the subject of the protective claim).

Priv. Ltr. Rul. 200942022 (Jul. 9, 2009)(farmers' cooperative that markets commodities for its members and provides supplies to its farmer members can treat its payments to members and participating patrons as "per-unit retain allocations paid in money"; for purposes of computing cooperative's domestic production deduction (I.R.C. Sec. 199) the cooperative's qualified production activities income and taxable income are to be computed without regard to any deduction for payments to members and participating patrons).

Iowa Dept. of Rev. Policy Letter No. 09300058 (Aug. 17, 2009)(sales of solar-powered attic fans not subject to sales and use tax; fans convert solar radiation into electrical energy).

Florida Dept. of Rev. Tech. Adv. No. 09A-042 (Aug. 20, 2009)(purchase of propane pool heater for use at tropical fish farm exempt from sales and use tax because heater used exclusively on farm).

Martin, et ux. v. Comr., T.C. Memo. 2009-234 (petitioner who incorporated his real estate business properly classified as employee because he was a corporate officer that performed substantial services for the corporation; corporation cannot deduct employment taxes and petitioner not entitled to additional business expense deductions beyond what IRS allowed).

Deneselya, et ux. v. Comr., T.C. Summ. Op. 2009-157 (petitioners (married couple) not entitled to automobile expense deductions associated with husband's appraisal business due to failure to meet strict substantiation requirements of I.R.C. Sec. 274(d).

N.D. Atty. Gen. Op. No. 2009-L-14 (Oct. 9, 2009)(for purposes of the $40,000 non-farm income limitation to be eligible to claim the tax exemption for a farm residence, homeowner may defer W-2 income in an amount which lowers the off-farm income to less than $40,000, can offset W-2 non-farm income with Schedule C or D non-farm losses to reduce the net non-farm income, and can offset Schedule C income so that the resulting total net of non-farm income is less than $40,000).

IRS Notice 2009-83 (interim guidance relating to credit for carbon sequestration under I.R.C. Sec. 45Q).

Priv. Ltr. Rul. 200941003 (Jul. 1, 2009)(infant formula is "food" for the infant and is not a deductible medical expense under I.R.C. Sec. 213).

C.C.M. 200941011 (Jun. 3, 2009)("black liquor" (byproduct of paper milling process in kraft mills) is a liquid fuel derived from biomass and, when combined with diesel fuel, creates an alternative fuel mixture for purposes of the alternative fuel credit under I.R.C. Sec. 6425(e) and may also qualify for the cellulosic biofuel producer credit under I.R.C. Sec. 40(b)(6), but not both). Download Memo

Wauwatosa Avenue United Methodist Church v. City of Wauwatosa, No. 2009AP202 (Wisc. Ct. App. Oct. 6, 2009)(residence of plaintiff's janitor owned by plaintiff not tax-exempt; state statute only provides tax exemption for property that is used as an integral function of the church; church custodian not integral to function of church).

Hegarty v. Comr., T.C. Sum. Op. 2009-153 (reliance by IRS on I.R.C. Sec. 469(h)(2) to treat members of LLCs as automatically limited partners for passive loss purposes misplaced; general tests for material participation apply and petitioners (married couple) determined to have materially participated in charter fishing activity for tax year at issue - petitioners participated more than 100 hours and their participation was not less than the participation of any other individual during tax year; follows prior opinions in Garnett and Thompson).

Forrest v. Comr., T.C. Memo. 2009-228 (petitioner, a lawyer who worked as a contract attorney during the tax year at issue, cannot deduct certain business expenses under I.R.C. Sec. 162(a); petitioner's activity not regular and continuous).

Estate of Angle, et al. v. Comr., T.C. Memo. 2009-227 (petitioner liable for tax deficiency resulting from sale of family-owned almond business; sale transaction involved exchange of shares through foreign corporations and trusts for private non-taxable annuities which resulted in recognition of gain; accuracy-related penalty applied).

Priv. Ltr. Rul. 200940032 (Jul. 6, 2009)(scholarship awards made by private foundation to qualifying students of higher education institutions do not constitute taxable expenditures; amounts excludible from recipient's gross income).

I.L.M. 200940018 (Jun. 23, 2009)(payments that a utility company receives as reimbursement for costs incurred in relocation of transmission facilities to accommodate municipal development projects are not, consistent with I.R.S. Notice 87-82, 1987-2 C.B. 389, non-shareholder contributions to capital under I.R.C. Sec. 118(a); amounts includible in income).

I.L.M. 200940030 (Aug. 7, 2009)(indebtedness incurred by individual to acquire, construct or substantially improve qualified residence can be home equity indebtedness to the extent it exceeds $1 million, subject to the limitations of I.R.C. Sec. 163(h)(3)(C) ($100,000 and fair market value limitations).

Priv. Ltr. Rul. 200940006 (Jul. 1, 2009)(payments made by governmental entity to compensate survivors as part of settlement of wrongful death action on behalf of victims are excludible from gross income under I.R.C. Sec. 104(a)(2)).

LaPlante v. Comr., T.C. Memo. 2009-226 (petitioner liable for tax deficiency from underreporting of gambling income which increased amount of petitioner's social security benefits included in petitioner's income; no accuracy-related penalty imposed because petitioner acted in good faith).

American Boat Co. v. United States, No. 09-1109 (7th Cir. Oct. 1, 2009)(taxpayer not liable for accuracy-related penalties for engaging in Son-of-Boss tax shelter (involving transfer to a partnership of assets with significant liabilities) because taxpayer reasonable relied on tax opinion of law firm).

Ormond, et al. v. Anthem, Inc., et al., No. 1:05-cv-01908 (S.D. Ind. Sept. 29, 2009)(court refused to certify class of plaintiffs that claimed defendant (insurance company) provided them with negligent tax advice connected with defendant's conversion from mutual insurance company to stock insurance company; certification allowed on other non-tax claims).

Blue Bell Creameries LP v. Chumley, No. M2009-00255-COA-R3-CV (Tenn. Ct. App. Sept. 29, 2009)(parent corporation's redemption of stock held by subsidiary not subject to excise tax because parent and subsidiary not part of unitary business relationship).

Jordan v. Comr., T.C. Memo. 2009-223 (petitioner did not satisfy the material participation test for passive loss purposes with respect to losses incurred in horse breeding and raising activity; accuracy-related penalty applied).

Taproot Administrative Services, Inc. v. Comr., 133 T.C. No. 9 (2009)(petitioner ineligible for S corporation status because its shareholder was a Roth IRA, an ineligible shareholder; petitioner taxable as C corporation for tax year at issue).

Woodard v. Comr., T.C. Sum. Op. 2009-150 (petitioner subject to accuracy-related penalties related to underpayment of tax attributable to unreported income resulting from failure to report income IRA distributions; reliance on information obtained by Google search not substantiated so no reasonable cause for failing to report income from distributions).

Wheeler v. Comr., T.C. Sum. Op. 2009-151 (petitioner failed to substantiate deductible vehicle expenses as required by I.R.C. Sec. 274(d) and 280F(d)(4)).

Priv. Ltr. Rul. 200939001 (Jun. 11, 2009)(60-day extension granted to trust to make election under I.R.C. Sec. 642(c) to claim a charitable deduction in year 1 for amount distributed to charity in year 2).

Priv. Ltr. Rul. 200939003 (Jun. 23, 2009)(I.R.C. Sec. 6166 election not available to extend time for payment of generation-skipping transfer tax imposed on death of child as a result of the termination of the child's interest in the trust; I.R.C. Sec. 6166 election applies only to direct skips resulting at the death of an individual; thus, generation-skipping tax imposed on taxable termination is not eligible to be paid in installments).

IRS Temporary Regulation (T.D. 9466, Sept. 24, 2009)(defines omissions from gross income for purposes of the six-year statute of limitations period for assessing tax attributable to partnership items; regulation takes position that overstatement of basis results in omission of gross income and, as such, extends the statute of limitations for assessing tax or beginning court proceeding for collection of tax without assessment from 3 to 6 years; regulation is contrary to decisions of the Federal Circuit (Salman Ranch), the Ninth Circuit (Bakersfield Energy Partners, L.P.) and the Tax Court (Intermountain of Insurance Service of Vail, LLC, et al. v. Comr); regulation is consistent with Home Concrete & Supply, LLC v. United States, 599 F. Supp.2d 678 (E.D. N.C. 2008) and Brandon Ridge Partners v. United States (M.D. Fla. 2007); regulation entitled to deference even if in conflict with federal court opinions (see, e.g., Swallows Holding, Ltd. v. Comr., 515 F.3d 162 (3d Cir. 2008); regulation applies to all cases with respect to which the period for assessing tax under the applicable provisions has not expired before September 24, 2009).

Helmick v. Comr., T.C. Memo. 2009-220 (based on all of the facts and circumstances, petitioner's horse-breeding and boarding operation was an activity engaged in for profit under I.R.C. Sec. 183 for the years at issue).

Freeman v. Comr., T.C. Memo. 2009-213 (petitioner can deduct mileage expenses related to petitioner's auto parts delivery business because petitioner maintained adequate records, but no deduction allowed for mileage expenses related to commuting to and from home; no deduction allowed for wife's mileage expenses incurred in connection with business deliveries and her income is not excludible).

Hoosier Energy Rural Electric Cooperative, Inc. v. Hancock Life Insurance Co., et al., No. 08-4030 (7th Cir. Sept. 17, 2009), aff'g, 588 F. Supp. 2d 919 (S.D. Ind. 2008)(court upholds trial court's award of preliminary injunction for plaintiff so that plaintiff can have more time to argue its case and avoid immediately paying $120 million to defendant; dispute between parties arose from sale-in-lease-out (SILO) transaction established between the parties in 2002 as a tax shelter for the defendant, but deal soured when a partner had its credit rating downgraded).

Scott v. Comr., T.C. Memo. 2009-211 (petitioner's niece and nephew determined to be qualifying children for EITC purposes for one year because they shared the same place of abode with petitioner, but there was conflicting evidence concerning whether they shared the same place of abode in other years).

Estate of Melcher v. Comr., T.C. Memo. 2009-210 (legal expenses arising from taxpayer's divorce not deductible as ordinary and necessary expenses, but a portion of the expenses related to the defense of interests in taxpayer's ex-wife's bankruptcy estate are deductible; no accuracy related penalties applied because matter so complex).

Save v. Comr., T.C. Memo. 2009-209 ($500,000 payment petitioner received in settlement of whistleblower retaliation claims against county government includible in gross income; petitioner failed to show that the county intended to compensate petitioner for personal physical injury or personal physical sickness).

Simmons v. Comr., T.C. Memo. 2009-208 (petitioner entitled to charitable deductions for conservation easements donated to trust; petitioner's valuations accepted and 5 percent discount applied).

Proposed Treasury Regulation 127270-06 (Sept. 14, 2009)(relates to the exclusion from gross income for amounts received on account of personal physical injuries or physical sickness that reflect amendments under the Small Business Job Protection Act of 1996; deleted is the requirement that to qualify for exclusion from gross income, damages received from a legal suit, action, or settlement agreement must be based upon “tort or tort type rights;” taxpayers affected are those receiving damages on account of personal physical injuries or physical sickness and taxpayers paying such damages).

Halby v. Comr., T.C. Memo. 2009-204 ($109,959 in "fees" paid to prostitutes in 2004 and 2005 by 78-year old petitioner who had been a tax attorney for over 40 years not deductible as a medical expense and neither are amounts paid for medical texts and pornographic material; purchases not for treatment of medical condition, but were personal items).

Herman v. Comr., T.C. Memo. 2009-205 (charitable contribution deduction denied for contribution of a conservation easement restricting development of 10,000 square feet of unused development rights over a certified historic structure; easement does not preserve a "historically important land area" or a "certified historic structure" within the meaning of I.R.C. Sec. 170(h)(4)(A)(iv)).

FAA 20093701F (Jul. 27, 2009)(multi-member LLC formed under Washington law that did not elect corporate tax treatment incurred liability for employment taxes and subsequently became a single-member LLC that was disregarded as a tax entity; unpaid employment taxes incurred during pre-disregarded status years cannot be collected personally from single member of LLC).

ILM 200937025 (Jun. 5, 2009)(married couple sole owners of C corporation that employed several workers withheld federal income taxes and FICA taxes and issued forms W-2 to employees reflecting that the taxes had been withheld, but corporation did not pay any of the taxes or file forms 940 or 941 electing instead to use corporate funds to pay for the owners' personal expenses; owners determined to be aware of filing responsibilities, refused to cooperate with IRS and appear for scheduled appointments, used the withheld taxes for personal benefit and claimed income tax withholding despite knowingly never paying the taxes; corporation subject to penalties under IRS Sec. 6651 for fraudulent failure to file and failure to file quarterly returns and pay the withholding tax, Sec. 6656 for failure to deposit employment taxes, and Sec. 6672 for failure to collect and pay over FICA taxes).

ECC 200937035 (Mar. 18, 2009)(remaining basis in a damaged building and the cost of its demolition are only recoverable as an offset against proceeds from the sale of the land on which the building was located).

ECC 200937028 (Nov. 18, 2008)(property transferred to a grantor trust before death is not eligible for a basis step-up under I.R.C. Sec. 1014 unless the property is included in the decedent's gross estate for federal estate tax purposes).

Phemister v. Comr., T.C. Memo. 2009-201 (taxpayer did not engage in horse activity with intent to make a profit - over $500,000 of losses not fully deductible; addition to tax for failure to timely file return applied as did 20 percent penalty for substantial underpayment of tax; taxpayer's spouse entitled to spousal relief from joint and several liability with respect to understatements of tax resulting from disallowance of taxpayer's ER physician business expense deductions, but is not entitled to relief from tax deficiencies arising from horse activity). 

T.D. 9460 (eff. Sept. 9, 2009)(IRS final regulations adopted providing rules for determining whether a donor may petition the Tax Court for declaratory judgments on gift valuations and providing guidance on the definition of exhaustion of administrative remedies; to be eligible for declaratory judgment procedure of I.R.C. Sec. 7477, Tax Court must determine that donor exhausted all administrative remedies (i.e., appeals conference is timely requested and donor fully participates in appeals conference or if request is not granted)).

Melvin v. Co mr., T.C. Memo. 2009-199 (petitioners had $8,768 of discharge of indebtedness income arising from settlement of credit card debt; there was no dispute as to the amount or enforceability of the debt; petitioners may not deduct fee paid to company that negotiated settlement with credit card company).

Teruya Brothers Ltd., et al. v. Comr., No. 05-73779 (9th Cir. Sept. 8, 2009)(court affirmed Tax Court's determination that plaintiff's exchange of properties does not qualify for deferral of gain under I.R.C. Sec. 1031; transactions were structured to avoid the related party restriction of I.R.C. Sec. 1031(f) via a series of transactions which also were designed to allow related parties to receive nonrecognition treatment while cashing out of investments using basis-shifting provisions of I.R.C. Sec. 1031; but a principal purpose of the overall transaction was tax avoidance and, thus, I.R.C. Sec. 1031(f)(4) violated).

Engle, et al. v. Comr., T.C. Sum. Op. 2009-138 (Honda Odyssey minivan, with accessories (as purchased) weighed 6,005 pounds and eligible for I.R.C. Sec. 179 depreciation, and also not a "passenger vehicle" under I.R.C. Sec. 280F which would trigger the strict substantiation and mileage log rules for listed property; but, even though vehicle used 100 percent in taxpayers' real estate business, taxpayer failed to substantiate business use in accordance with Treas. Reg. Sec. 1.274-5T(c)(2)(i)), thus I.R.C. Sec. 179 depreciation not available).

Priv. Ltr. Rul. 200936024 (Jun. 9, 2009)(gain from sale of residence qualifies for exclusion from income under I.R.C. Sec. 121; taxpayer owned and used the property for at least for two years or more during the five-year period ending on date of sale).

Priv. Ltr. Rul. 200936023 (May 14, 2009)(modification of trust will not result in gift tax to grantor or beneficiaries, or estate tax to the grantor).

Priv. Ltr. Rul. 200936005 (Jun. 4, 2009)(concerns tax issues involved in proposed corporate reorganization and whether business purpose requirement of Treas. Reg. Sec. 1.355-2(b) is satisfied).

Neb. Dept. of Rev., Rev. Rul. 01-09-1 (Sept. 1, 2009)(effective Sept. 1, 2009, Iowa and its political subdivision's industrial machinery purchases in Nebraska are subject to sales and use tax because the Iowa Department of Revenue has taken the position that the two states' reciprocity laws are too dissimilar to provide an exemption and that the statutes must be virtually identical in order for reciprocity to exist between Iowa and Nebraska).

A.J. Fowler, et al. v. United States, No. 08-216, 2009 U.S. Dist. LEXIS 78805 (W.D. La. Sept. 1, 2009)(plaintiff failed to establish that soybean farming operation conducted for profit; activity appeared to be attempt to shelter income from other sources; lack of business records, activity not conducted in manner substantially similar to legitimate farming operations, no abandonment of unprofitable activities or adoption of new techniques, lack of evidence of substantial time put into soybean farming activity, no evidence of asset appreciation as proof of profit motive, no evidence of success in similar activities, history of income or loss not helpful to plaintiff's position, plaintiff had six-figure income from non-farm passive sources, no evidence of of expenses claimed, but plaintiff did have knowledge and expertise in soybean farming; but amount previously abated by IRS was done with knowledge).

Balice, et ux. v. Comr., T.C. Memo. 2009-196 (married couple liable for tax deficiencies for two tax years; irrevocable trust created by one spouse was a sham that should be disregarded for tax purposes; trust was termed a "pure" trust and promoter was Ronald Ottaviano).

United States v. Chisum, No. 09-7034 (10th Cir. Sept. 1, 2009)(defendant, tax protestor and promoter of fraudulent trusts, convicted of tax fraud and sentenced to 66 months in prison; certificate of appealabilitty denied - defendant's arguments either resolved on prior appeal or meritless).

Intermountain Insurance Service of Vail, LLC, et al. v. Comr., T.C. Memo. 2009-195 (final partnership administrative adjustment untimely because it was issued after the three-year statute of limitations expired; basis overstatement is not an omission from gross income and does not trigger the six-year statute of limitations (follows Salman Ranch and Beard).

United States v. Bigalk, et al., No. 0:08-cv-00817 (D. Minn. Aug. 28, 2009)(plaintiff granted partial summary judgment in suit to foreclose federal tax liens; defendants' transfer of their farm to a trust was a fraudulent conveyance to avoid paying taxes and should be set aside; trust was defendants' alter ego or nominee; fraudulent trust promoter was Alex Yung and used "Cache Properties Unlimited" as the grantor).

Cunningham v. Comr., T.C. Memo. 2009-194 (losses from horse activities conducted in California not deductible by petitioner (who resided in NY and had no knowledge of what the horse activities consisted of; total lack of material participation and activity deemed passive under I.R.C. Sec. 469; addition to tax for late filing also applied).

Priv. Ltr. Rul. 200935019 (May 14, 2009)(a cooperative group purchasing organization that had gain as a result of the sale of real property that it owned was patronage-sourced and, thus, eligible for the patronage dividend deduction).

Estate of Brandon v. Comr., 133 T.C. No. 4 (2009)(tax lien for trust fund recovery penalties not extinguished upon taxpayer's death; IRS notice valid even though it named the taxpayer individually after his death; lien held to have attached to property before taxpayer's death).

Moore v. United States, No. 4:07-cv-00180-JAJ (S.D. Iowa Aug. 27, 2009)(IRS properly gave notice to plaintiff of his responsibility as a "responsible person" to pay payroll taxes (over $50,000) for company that is now bankrupt (plaintiff was Secretary/Treasurer of the Company); plaintiff signed Form 2751 consenting to the assessment and collection of the taxes; Form 1153(DO) is not exclusive method for providing notice to taxpayer and I.R.C. Sec. 6672(b)(1) does not describe specific method of notice to be used)

Hopson v. Comr., T.C. Summ. Op. 2009-130 (taxpayer has duty to review return generated by tax software (which didn't detect error at issue) to ensure that all income items were included; so-called "Turbo Tax" defense utilized successfully by Timothy Geithner to win Senate Confirmation as U.S. Treasury Secretary (head of IRS) rejected by court; accuracy-related penalties assessed).

Jefferson County Commission, et al v. Edwards, et al., No. 1080496 (Ala. Sup. Ct. Aug. 25, 2009)(state legislature repealed plaintiff's authority to impose occupational tax).

Freda, et ux. v. Comr., TC. Memo. 2009-191 (money paid in accordance with settlement agreement is taxable as income rather than capital gains; money was paid for lost profits rather than for the sale of exchange of trade secrets or to terminate rights to a trade secret).

Southgate Master Fund, LLC v. United States, No. 3:06-CV-2335-K, 2009 U.S. Dist. LEXIS 74937 (N.D. Tex. Aug. 18, 2009)(IRS properly denied plaintiff's claimed capital loss; transaction that created high basis in stock lacked economic substance and is disregarded for tax purposes).

United States v. Textron, Inc., et al., No. 07-2631 (1st Cir. Aug. 13, 2009)(tax accrual papers not protected by work product privilege; privilege aimed at protecting work conducting in preparation for litigation rather than work performed in preparing financial statements; IRS access to such papers serves legitimate function of detecting and disallowing abusive tax shelters).

Beard v. Comr., T.C. Memo. 2009-184 (overstated basis in two S corporations that were sold in 1999 which caused an understatement of gross income by more than 25 percent of the amount reported on tax return is not an "omission from gross income" for purposes of extending the statute of limitations from 3 to 6 years).

Martin, et ux. v. Comr., T.C. Summ. Op. 2009-21 (married couple not liable for cancellation of indebtedness income relating to repossession of their vehicle by lender; neither lender nor IRS could substantiate validity of Form 1099-C and value of repossessed vehicle same as cancelled debt at time of repossession; once accuracy of Form 1099-C challenged, burden of proof shifted to IRS under I.R.C. §§ 7491(a)(1) and 6201(d)).

Salman Ranch, Ltd., et al. v. United States, No. 2008-5053, 2009 U.S. App. LEXIS 16912 (Fed. Cir. Jul. 30, 2009)(overstatement of basis (resulting in understatement of reported gain on sale of property) is not an "omission from gross income" for purposes of extending the statute of limitations (from 3 to 6 years) for IRS to assess additional income tax if omission is greater than 25 percent of amount of gross income stated on the return; decision reverses Court of Federal Claims decision (Salman Ranch, Ltd. v. United States, 79 Fed. Cl. 189 (2007) and is consistent with Bakersfield Energy Partners, LP, et al. v. Comr., 568 F.3d 767 (9th Cir. 2009); court relied on Colony, Inc. v. Comr., 357 U.S. 28 (1958) where the Supreme Court indicated that the statutory language specifically referred to the specific situation where a taxpayer actually omitted income that had been received or accrued when computing gross income rather than errors in computing gross income).

Merrill v. Comr., T.C. Memo. 2009-166 (petitioner, a millionaire homosexual activist who was also a tax protestor that refused to file tax returns as an act of civil disobedience must pay income tax deficiency of $836,304 plus penalties; while petitioner married to same-sex partner under California law for years at issue, taxpayer never filed return for years at issue and is, therefore, statutorily ineligible for married filing joint status; constitutionality of DOMA irrelevant).

Johnson, et ux. v. Comr., T.C. Memo. 2009-156 (settlement proceeds received from mortgage company over dispute concerning foreclosure of petitioner's home includible in petitioner's gross income because it was not compensation for physical injury or illness, but portion of settlement used to pay attorney fees is deductible; petitioner's spouse did not satisfy requirements for innocent spouse relief; spouse failed to testify as to why she had no reason to know of the understatement on the return).

Kyne v. Comr., T.C. Summ. Op. 2009-98 (court upheld IRS's disallowance of petitioner's medical expense, charitable contribution and miscellaneous itemized deductions for failure to provide substantiation for expenses beyond what IRS allowed).

Mayo Foundation v. United States, No. 07-3242 (8th Cir. Jun. 12, 2009)(Treasury Regulations limiting student exceptions to FICA tax imposed on employers and employees to students who are not full-time employees entitled to deference; decision reverses trial court determination that stipends paid to residents participating in accredited graduate medical programs qualified for the exception).

Nelson, et al. v. Comr., No. 08-2912 (8th Cir. Jun. 10, 2009)(taxpayer not entitled to defer reporting crop insurance proceeds due to lack of business practice of deferring more than 50 percent of crop; Rev. Rul 74-145 upheld as reasonable; affirming 130 T.C. 70 (2008)).

Beasley, et ux. v. Comr., T.C. Summ. Op. 2009-93 (taxpayer's charter fishing activity not engaged in for profit; taxpayer only allowed to deduct expenses to extent of income received from charter fishing activity).

United States v. McFerrin, et ux., No. 08-20377 (5th Cir. Jun. 9, 2009)(district court applied incorrect definition for determining what research qualified for the I.R.C. Sec. 41 credit; Treas. Reg. Sec. 1.41-4 does not require qualifying research to go beyond the current state of knowledge in the field; appellate court applied the rule established in Cohan v. Commissioner and found that the taxpayer shouldn't be penalized for not keeping records of hours worked on a research project and that the court should instead rely on testimony to determine a fair estimate of what amount of credit is allowable; appellate court's opinion is consistent with Tax Court's opinion in Union Carbide Corp., et al. v. Comr., T.C. Memo. 2009-50 in which the taxpayer was allowed to use estimates to determine its qualified expenses for the I.R.C. Sec. 41 credit).

Cox Enterprises, Inc., et al. v. Comr., T.C. Memo. 2009-134 (because the main purpose of a gratuitous transfer of a subsidiary company's assets to family partnerships in exchange for a majority interest was not economic benefit, there was no constructive dividend that would result in taxable gain; in addition there was no benefit to the shareholder trusts).

Fuller v. Comr., T.C. Summ. Op. 2009-91 (petitioner not entitled to exclude discharge of indebtedness income stemming from unpaid car loan payments; failed to prove that outstanding debt was unenforceable under state law or that he was insolvent at time of discharge).

Hakim v. Comr., T.C. Summ. Op. 2009-92 (petitioner not entitled to exclude discharge of indebtedness income because of failure to prove insolvency at time debt discharged).

Rice v. Comr., T.C. Sum. Op. No. 2009-83 (petitioner not entitled to claim girlfriend's son as a qualifying child for purposes of child tax credit and earned income tax credit; relationship test of I.R.C. Sec. 152(c) not satisfied).

Elsayed v. Comr., T.C. Sum. Op. No. 2009-81 (petiitoner, a truck driver, was entitled to a deduction for meals and incidental expenses at the per diem rate for employees in the transportation industry;IRS disallowance of other unreimbursed employee expense deductions and determination of filing status upheld).

Shelton et ux. v. Comr., T.C. Memo. 2009-116 (damage award petitioner received in settlement of sexual harrassment claim against petitioner's employer was taxable income and not excludible under I.R.C. Sec. 104(a)(2); payment not received for physical injury or sickness).

Hughes v. Comr., T.C. Memo. 2009-94 ($3,100,000 claimed charitable contribution deduction for grant of conservation easement to Colorado land trust reduced by $1,107,625; amount of contribution limited to basis at time of contribution reduced by percentage decrease in entire property's fair market value as a result of the easement because taxpayer held property for less than one year before grant of easement; respondent's valuation expert report more accurate).

Seidel v. Comr., No. 07-72754 (9th Cir. Apr. 28, 2009)(money an individual received under settlement agreement with former employer was for emotional distress and, thus, not excludible from gross income under I.R.C. Sec. 104(a)(2)).

Hansen v. Comr., T.C. Memo. 2009-87 (payment an individual received under a settlement agreement with his former employer for emotional distress and legal fees was not excludible from gross income under I.R.C. Sec. 104(a)(2) because it was not received on account of personal physical injury or physical sickness).

Capitol Machine & Equip. Co. LLC v. State Department of Revenue (decision by Administrative Law Judge, Apr. 20, 2009)(individual members of a multimember LLC are not personally liable for taxes owed by the LLC based on Rev. Rul. 2004-41 (if, under state law, LLC members are not liable for LLC debts, then absent fraudulent transfers or other special circumstances, IRS is barred from collecting LLC's employment tax liability directly from the members).

Senra v. Comr., T.C. Memo. 2009-79 (passive losses from LLC not deductible against non-passive income; activities did not constitute "appropriate economic unit" eligible to be treated as single activity for purposes of assessing gains and losses under I.R.C. Sec. 469).

Mannella v. Comr., 132 T.C. No. 10 (2009)(Treas. Reg. §1.6015-5(b)(1), which imposes a two-year statute of limitations from the beginning of IRS collection action in innocent spouse cases, is an invalid interpretation of I.R.C. §6015; thus, plaintiff is not barred from receiving innocent spouse relief under I.R.C. §6015(f)).

Lantz v. Comr., 132 T.C. No. 8 (2009)(Treas. Reg. Sec. 1.6015-5(b)(1), which requires taxpayers seeking innocent spouse relief under I.R.C. Sec. 6015(b) or (c) to request such relief within two years of IRS bringing collection action does not apply to requests for equitable innocent spouse relief made under I.R.C. Sec. 6015(f)).  Note:  IRS will continue to argue at trial that the two-year statute of limitations in the Regulation continues to apply in Sec. 6015(f) cases, but that such argument should not be made in a summary judgment motion.  CC-2009-012 (Apr. 17, 2009)..

Kerzner v. Comr., T.C. Memo. 2009-76 (plaintiff had no economic outlay and lacked sufficient basis in S corporation indebtedness to claim its passthrough losses because taxpayer loaned money to the S corporation that taxpayer had received from a partnership owned by the taxpayer to which the taxpayer also owed money which was then paid back to the partnership by the S corporation as rent).

The Home Depot, USA, Inc. v. Levin, No. 2006-M-206 (Ohio Sup. Ct. Apr. 2, 2009)(plaintiff not entitled to bad debt sales tax deduction because bad debt not carried on plaintiff's books; plaintiff's financial partner carried the debt and was entitled to refund of sales tax upon credit card purchaser's default; statute required that "amount of debt must be charged off as uncollectible on the books of the debtor").

Medical Practice Solutions, LLC, v. Comr., 123 T.C. No. 7 (2009)(single-member LLC owner personally liable for LLC's unpaid employment taxes; "check-the-box" regulations upheld).

Steele v. Comr., T.C. Sum. Op 2009-45 (couple's net income received for helping care for their granddaughter not subject to self-employment tax; taxpayers not engaged in trade or business of providing daycare for children).

Zeigler v. Comr., No. 07-4206, cert. den. (U.S. Mar. 30, 2009)(passive loss rules not impermissible retroactive and did not constitute a Fifth Amendment taking; certioriari denied).

Jones v. Comr., 560 F3d 1196 (10th Cir. 2009), cert. dem., No. 09-192 (U.S. Sup. Ct. Oct. 5, 2009)(taxpayer not entitled to charitable deduction for charitable contribution of trial discovery material; such property is a "letter, memorandum, or similar property" that is "prepared or produced" for a taxpayer, and is excluded from the Code's definition of "capital asset" under Sec. 1221(a)(3)(B); as such allowable tax deduction limited to taxpayer's basis, which was zero).

Bruzewicz v. United States, No. 1:07-cv-04074 (N.D. Ill. Mar. 25, 2009)(charitable contribution deduction denied for donation of preservation easement on taxpayer's home (designed by Frank Lloyd Wright); taxpayer failed to properly substantiate; penalties upheld).

United States v. Memorial Sloan-Kettering Cancer Center, et al., No. 07-9026 (2nd Cir. Mar. 25, 2009)(court rejects IRS position that medical residents not eligible for FICA student exception; case remanded for determinations regarding students' qualification for student exception).

In re Marriage of Wiese, No. 100,207, 2009 Kan. App. LEXIS 126 (Kan. Ct. App. Mar. 20, 2009)(ex-wife petitioned for increase in child support and ex-husband (a farmer) claimed that court must use expense method depreciation as utilized on ex-husband's tax return to determine ex-husband's income rather than straight-line depreciation; case of first impression; because child support guidelines caution that a court may include depreciation as a business expense only if it is reasonably necessary to produce income, trial court did not abuse discretion by using straight-line depreciation to calculate child suport income).

Priv. Ltr. Rul. 200912004 (Dec. 2, 2008)(cars, light general purpose trucks, and vehicles that share characteristics of both cars and light-duty trucks are like-kind for purposes of I.R.C. Sec. 1031).

ECC 200912023 (Feb. 23, 2009)(upon payment of federal estate tax in installments under I.R.C. Sec. 6166, the lien against the property subject to the election may not exceed the amount specified in I.R.C. Sec. 6324(b)(2), but may be less that that amount).

Alpha I LP, et al. v. United States, No. 1:06-cv-00407 (Fed. Cl. Mar. 16, 2009)(valuation misstatement penalties do not apply after plaintiff conceded to adjustments IRS made in a final partnership administrative adjustment).

Minton v. Comr., No. 08-60284, 2009 U.S. App. LEXIS 5569 (5th Cir. Mar. 13, 2009)(agreement between S corporation and its founder when founder's children obtained interests in the corporation did not create second class of stock and S election thereby not terminated; preferential payments to taxpayer-shareholder's parents did not constitute second class of stock; payments made to parents not made pursuant to a binding agreement that gave them different legal rights from other shareholders).

Sunleaf v. Comr., T.C. Memo. 2009-52 (innocent spouse relief granted; deceased spouse (Iowa lawyer) hid personal financial problems from spouse).

Menards, Inc. v. Comr., No. 08-2125, 2009 U.S. App. LEXIS 4883 (7th Cir. Mar. 11, 2009)($13 million paid to founder of Menards was deductible under I.R.C. Sec. 162(a)(l) as reasonable compensation; reverses Tax Court which had set itself up as the "superpersonnel department for closely held corporations").

Schmuecker v. Comr., T.C. Sum. Op. 2009-32 (taxpayer did not actively participate in horse racing business, thus passive loss rules bar use of losses from offsetting other income).

Priv. Ltr. Rul. 200910007 (Dec. 2, 2008)(commercial demonstration cellulosic ethanol production plant will be eligible for additional first-year bonus depreciation for qualified cellulosic ethanol plant property if requirements of I.R.C. Sec. 168(l) and (k) satisfied).

Sita, et ux. v. Comr., No. 08-1764, 2009 U.S. App. LEXIS 4881 (7th Cir. Mar. 6, 2009)(taxpayer denied business deductions and disabled access credit for investment in pay phones; purchase and service arrangements did not give couple sufficient ownership in the phones and phones not subject to Americans with Disabilities Act).

Agarwal v. Com'r., T.C. Summary Op. 2009-29 (rental real estate losses not per se passive because taxpayer was a real estate professional; taxpayer satisfied material partiipation test by being a full-time real estate agent at a Century 21 brokerage; novel IRS argument that real estate agent is not in "brokerage" business rejected).

Priv. Ltr. Rul. 200909044 (Dec. 2, 2008)(maximum value of required property under I.R.C. § 6324A includes the amount of interest expected to become payable over first four years of deferral; if use of flat 2 percent interest rate results in amount that is less than or equal to 45 percent of underpayment interest rate, it is legally permissible).

Priv. Ltr. Rul. 200909020 (Nov. 26, 2008)(amounts paid to cooperative members are PURPIM and the cooperatives DPAD, taxable income and QPAI is computed without regard to any deduction for amounts paid to members for grain delivered to cooperative).

Priv. Ltr. Rul. 200909016 (Nov. 24, 2008)(same as PLR 200909020).

United States v. Detroit Medical Center, No. 07-1602, 2009 U.S. App. LEXIS 3760 (6th Cir. Feb. 26, 2009)(stipends paid to medical residents are not scholarships or fellowships that are exempt from tax; but, lower court's holding that student exemption from FICA doesn't apply to residents vacated and case remanded for further proceedings regarding student exemption).

United States v. O'Cheskey, No. 08-10006 (5th Cir. Feb. 19, 2009)(bankruptcy distributions to a creditor bank were a nondeductible return of equity rather than damage payments; trustees may not take a deduction for unpaid state taxes until federal tax liability is assessed).

IRS Chief Counsel Letter, GENIN-14-1682-08 (Feb. 17, 2009)(taxpayers permitted to make an I.R.C. Sec. 179 election without Commissioner's consent on amended return for tax years beginning after 2007 and before 2011; follows Rev. Proc. 2008-54, 2008-38 I.R.B. 722).

Brooker v. Madigan, et al., No. 1-07-1876 (Ill. Ct. App. Feb. 17, 2009)(estate may not avoid its state tax obligations on a property transfer by electing not to claim a state tax credit on its federal return; Illinois estate taxes are due as the credit would have been computed and allowed under I.R.C. Sec. 2001).

Snell v. Com’r., T.C. Memo. 2009-21 (discount for built-in-gains tax for S corporation stock was 17.4 percent (farmland and marketable securities were primary assets); discount for built-in-gains tax on stock in second corporation containing marketable securities was 23.6 percent).

Negron, et al. v. United States, No. 07-4460, 2009 U.S. App. LEXIS 1545 (6th Cir. Jan. 28, 2009)(IRS properly used annuity tables under I.R.C.§ 7520 to value stream of lottery payments remaining as of time of decedent's death).

Morris v. Comr., T.C. Sum. Op. 2009-15 (taxpayer not entitled to offset realized long-term capital gain by negative taxable income before offsetting such gains by long-term capital loss carryovers).

General Mills, Inc. & Subsidiaries v. United States, No. 08-1638 (8th Cir. Jan. 26, 2009)(I.R.C. Sec. 162(k)(1) bars deduction allowed by I.R.C. Sec. 404(k)(1) for corporate dividends paid in cash with respect to the corporation's securities).

In re Rickert, No. BK06-40253-TLS, 2009 Bankr. LEXIS 17 (Bankr. D. Neb. Jan. 9, 2009)(11 U.S.C. §1222(a)(2)(A) allows debtors to treat capital gain taxes as a general unsecured claim that is not entitled to priority, and the taxes entitled to non-priority treatment are to be calculated in accordance with the proportional method proposed by IRS).

Fife, et al. v. Greene County Board of Revisions, et al., No. 2007-2213, 2008 Ohio LEXIS 3552 (Ohio Sup. Ct. Dec. 30, 2008)(defendant improperly concluded that plaintiff's property did not qualify as current agricultural-use valuation status; property met the requirements because it consisted of more than 10 contiguous acres that satisfied regulatory standards; 19-year gap between timber harvests did not defeat the plaintiff's claim because the plaintiff met the standard of showing a discernible modicum of activity designed to further growth of timber for commercial purposes through activity establishing such purpose).

Sklar v. Com’r., No. 06-72961 (9th Cir. Dec. 12, 2008)(tuition and fees paid to Orthodox Jewish day schools not deductible).

Alabama Department of Revenue v. The National Peanut Festival Association, Inc., 11 So. 3d 821 (Ala. Ct. Civ. App. 2008)(because defendant's festival was a "state fair," receipts from the sale of admission tickets were exempt from tax, but subject to license tax for privilege of conducting non-agricultural exhibits, displays and shows).

Wallace v. Marion County, No. TC-MD 080958B, 2008 Ore. Tax LEXIS 245 (Ore. Tax Court Nov. 25, 2008)(defendant’s decision disqualifying 3.95 acres of plaintiff’s land from farm use special assessment for 2008-2009 tax year reversed; personal factors beyond plaintiff’s immediate control caused absence of animals from property in spring of 2008, and such factors satisfy statutory exception to active farming requirement to receive special assessment).

Hoosier Energy Rural Electric Cooperative, Inc. v. Hancock Life Insurance Company, et al., No. 1:08-cv-1560-DFH-DML, 2008 U.S. Dist. LEXIS 96283 (S.D. Ind. Nov. 25, 2008)(plaintiff granted preliminary injunction against defendant to get more time to argue its case and avoid immediately paying $120 million to defendant; dispute between parties arose from sale-in- lease-out (SILO) transaction established between the parties in 2002 as a tax shelter for the defendant, but deal soured when a partner had its credit rating downgraded; court characterized transaction as a “sham” and “without economic substance”).

Estate of Wilshire v. United States, No. 1:07-cv-00377 (S.D. Ohio Nov. 10, 2008)(estate granted refund on basis that written and oral communications between executor and IRS constituted valid, informal refund claim that was later perfected by formal claim).

Priv. Ltr. Rul. 200845008 (Aug. 1, 2008)(wind turbine facilities of rural electric cooperative's subsidiary are qualified energy resources and facilities; sale of power generated by subsidiary to some members of cooperative will not be disqualified from I.R.C. Sec. 45 credit by application of I.R.C. §45(e)(7)(A)).

Internal Revenue Service v. Ealy, No. 08-6031 (B.A.P. 8th Cir. Nov. 5, 2008)(IRS not entitled to relief from automatic stay to offset an overpayment and economic stimulus payment against debtor's tax debt because IRS had already made the payments to the debtor and, as such, lost the right to offset).

Whitehouse Hotel Limited Partnership v. Comr., 131 T.C. No. 10 (IRS appraisal valuation of facade easement upheld; penalty applied for gross valuation misstatement).

In re Bilski, No. 2007-1130 (Fed. Cir. Oct. 30, 2008) (business concepts falling outside “machine-or-transformation” test for patentability are not patentable; but precise contours of machine implementation or when recitation of a computer suffices to tie a process claim to a particular machine left unresolved (i.e., tax strategy patents)).

Priv. Ltr. Ruls. 200843016 (Jul. 21, 2008)(amount of domestic production deduction (I.R.C. §199) for patronage distributions qualifying under I.R.C. §1382(b) that is paid to a Subchapter T cooperative in money must be computed at the cooperative level to prevent double counting; no distributions will eligible for I.R.C. §199 in the patron's hands).

Fadeley v. Comr., T.C. Memo. 2008-235 (deductions denied for various business and personal expenses due to lack of substantiation, and expenses for which taxpayer’s wife could have received reimbursement from her employer are not deductible; use of portion of residence both for personal and business purposes does not meet exclusive use test; alleged farming activity did not constitute trade or business).

IRS Legal Advice 20084301F (Sept. 25, 2008)(taxpayer’s payment to three states in settlement of antitrust suit under federal and state law is a non-deductible fine or penalty under I.R.C. §162(f)).

Keating, et al. v. Comr., No. 07-3660, 2008 U.S. App. LEXIS 21403 (8th Cir. Oct. 14, 2008)(Arabian horse breeding activity not engaged in for profit, thus losses not fully deductible; taxpayer had no experience in caring for and riding horses and no experience in the buying, selling or showing of horses and presented no evidence that she had consulted anyone regarding the economic or business aspects of breeding, training or showing horses; taxpayer paid both personal and horse activity expenses from same two or three personal checking accounts; no written business plan created; no financial projections maintained; no expectation of future increase in value of assets; taxpayer had high income as a physician and received a great deal of personal pleasure from the activity).

Priv. Ltr. Rul. 200841038 (Jul. 15, 2008)(taxpayer does not qualify for exemption from federal income tax under I.R.C. §521 as a farmers’ cooperative; taxpayer’s activity of harvesting, processing and marketing of brine shrimp does not constitute engagement in farming activity).

H.R. 2851, P.L. No. 110-381, signed into law on Oct. 9, 2008, by President Bush (creates new I.R.C. §9813, effective Oct. 9, 2009; requires health insurers to maintain coverage of dependent college students for up to one year after they begin a medically necessary leave of absence). 

Jefferson v. United States, No. 06-4082, 2008 U.S. App. LEXIS 21089 (7th Cir. Oct. 8, 2008)(plaintiff (Democrat member of state legislature and state delegate for Barack Hussein Obama), unpaid president of board of directors of day-care center, found to be personally responsible for day- care’s unpaid payroll tax liability; plaintiff had significant involvement in day-care’s financial affairs and “willfully” failed to pay taxes; court imposed penalty for willful failure to pay tax).

Peno Trucking, Inc. v. Comr., No. 07-1869 (6th Cir. Oct. 3, 2008), rev'g, T.C. Memo. 2007-66 (trucking company not liable for employment taxes for its drivers; no employer-employee relationship; company qualified for Section 530 relief because company did not treat drivers as employees).

Miller v. Comr., T.C. Memo. 2008-224 (petitioner conducted horse breeding activity in business-like manner as determined in accordance with nine-factor test; losses at issue incurred during start-up phase and due, in part, to unforeseen circumstances; losses fully deductible).

Palahnuk, et ux. v. Comr., No. 07-0770 (2d Cir. Sept. 29, 2008)(court affirms Tax Court decision which sustained IRS determination of plaintiffs' deficiency and disallowed an adjustment to AMTI; rules for calculating NOLs for regular income apply to AMT NOLs and plaintiffs improperly calculated their alternative tax NOL).

Acar v. Comm'r., No. 06-16820 (9th Cir. Sept. 23, 2008)(plaintiff not entitled to refund for 1999 tax year on basis of purported retroactive election of the mark-to-market method of accounting under I.R.C. §475(f) because election was untimely under Rev. Proc. 99-17 and petitioner was not entitled to an extension of time).

Shelton v. United States, No. 02-1042T (Fed. Cl. Sept. 23, 2008)(partnership losses suspended under I.R.C. Sec. 465 by virtue of language in closing agreement remain subject to I.R.C. § 469 limit on passive activity losses against income from non-passive activity because closing agreement did not indicate that I.R.C. Sec. 469 would not apply to the suspended losses).

University of Chicago Hospitals v. United States, No. 07-1838, 2008 U.S. App. LEXIS 20075 (7th Cir. Sept. 23, 2008)(government's position that medical residents are categorically not "students" under I.R.C. § 3121(b)(10) and, therefore, not exempt from FICA tax as a matter of law rejected; case-by-case analysis required to determine whether medical residents qualify for statutory exemption from FICA tax).

Private Letter Ruling 200838011 (Jun. 18, 2008)(cooperative patron may not count qualified payment received from cooperative in patron’s I.R.C. §199 computation whether or not cooperative keeps or passes through I.R.C. §199 deduction; the only way a patron can claim an I.R.C. §199 deduction for a qualified payment from a cooperative is for the cooperative to pass-through the I.R.C. §199 amount in accordance with the provisions of I.R.C. §199(d)(3); but, net proceeds distributed on patronage basis qualify as per-unit retain allocations because they were distributed with respect to products that the cooperative markets for its patrons and patrons receive payments based on quantity of product delivered to the cooperative and are not based on cooperative’s net earnings).

Ralston Purina Co. v. Comm’r., 131 T.C. No. 4 (2008)(I.R.C. §162(k) precludes a deduction for petitioner’s payment to its ESOP in redemption of its preferred stock, where the proceeds were distributed to employees terminating their participation in the plan; court’s decision contrary to Boise Cascade Corp. v. United States, 329 F.3d 751 (9th Cir. 2003), but is consistent with Conopco, Inc. v. United States, No. 2:2004cv06025, 2008 U.S. Dist. LEXIS 52306 (D. N.J. Jul. 17, 2007); and General Mills, Inc. v. United States, No. 06-3547, 2008 U.S. Dist. LEXIS 3196 (D. Minn. Jan. 14, 2008)).

Estate of Martin, T.C. Memo. 2008-208 (arbitration award of $616,600 as a result of USDA discrimination includable in gross income in year received and startup costs not deductible against amount of award due to lack of substantiation; Schedule F farming deductions also disallowed for lack of substantiation; rental real estate losses limited to $25,000 under I.R.C. §469(i); accuracy-related penalties imposed).

Dean v. Internal Revenue Service, No. 07-35341, 2008 U.S. App. LEXIS 18985 (9th Cir. Sept. 2, 2008)(taxpayer's refund claim denied based on a loss carryback because taxpayer failed to establish that he worked at least 500 hours and "materially participated" in his family-run stock trading business (which would have exempted him from the passive loss limitations of I.R.C. § 469).

Ventas Finance LLC v. Franchise Tax Board 165 Cal. App. 4th 1207, 81 Cal. Rptr. 3d 823 (2008)(state-imposed LLC fee is unconstitutional tax because not fairly apportioned, placed greater burden on interstate commerce than on intrastate commerce, and was based on LLC’s total income wherever earned; refund limited to difference between amount of levy actually paid and amount that could have been constitutionally assessed).

Center for Family Medicine et al. v. United States, No. 4:05-cv-04049 (D. S.D. Aug. 6, 2008)(two medical facilities entitled to a refund of FICA taxes paid on medical residents' stipends because they qualify for the student exclusion from FICA taxation but not on taxes paid for head residents who elected to stay after completing their residency programs to help administer the program).

United States v. Porter, No. 4:05-cv-00464-JEG, 2008 U.S. Dist. LEXIS 58858 (S.D. Iowa Aug. 4, 2008)(defendant, maker and seller of nutritional products for swine, dairy and beef cattle, classified salesmen as “independent contractors”, but plaintiff asserted salesmen were “employees” such that defendant was responsible for withholding and remitting employment and unemployment taxes on such persons; additional taxes and interest which defendant failed to pay; as such, plaintiff filed a federal tax lien on defendant’s real property and later moved to foreclose the lien; government’s classification of salesmen as employees upheld, but issues of material fact existed as to whether defendant entitled to Section 530 safe harbor; whether or not innocent spouse relief granted immaterial to issue in case; no fact issues present as to statute of limitations question; defendant’s motion to dismiss denied as is defendant’s motion for jury trial; government’s liens upheld).

Darnall Ranch Inc. v. Banner County Bd. of Equalization, No. S-07-811 (Neb. Sup. Ct.  Aug. 1, 2008)(residential homes near animal feedlot entitled to depreciation adjustment for property tax purposes for external (locational) factor).

United States v. Mount Sinai Medical Center of Florida, Inc., No. 02-22715-CIV-GOLD, 2008 U.S. Dist. LEXIS 57808 (S.D. Fla. Jul. 28, 2008)(plaintiff must refund $2.5 million in FICA taxes paid by defendant on its residents' stipends; residents are excepted from FICA taxation under I.R.C. §3121(b)(10) because the facility qualified as a school, college or university and the residents were students).

Winn, et ux. v. Comm’r., T.C. Memo. 2008-172 (taxpayer had cancelled debt income equal to the difference between settlement amount and amount owed at time of settlement).

Mobley, et al. v. Comr., No. 07-2019 (6th Cir. Jul. 8, 2008)(Tax Court’s decision dismissing taxpayer’s petition for lack of jurisdiction because taxpayer had not received notice of deficiency upheld, and Tax Court could not transfer case to Federal District Court because U.S. Tax Court is not a “court” under I.R.C. §1631 as the term is defined by I.R.C. §610).

Justice Department News Release (Jul. 3, 2008)(former treasurer, CFO and legal secretary for Catholic Diocese of Cleveland convicted on six charges of conspiracy to defraud IRS and filing false tax returns; could be sentenced to up to 20 years in prison).

IRS Announcement 2008-65, 2008-31 IRB 1 (Jul. 3, 2008)(non-materially participating individual partner’s distributive share of the interest expense of partnership engaged in trade or business of trading securities is subject to investment interest limitation of I.R.C. §163(d)(1) and is a trade or business deduction that is deductible in determining AGI; accordingly, amount includible on Schedule E, Part II, Line 28, column (a)).

IRS Notice 2008-62 (Jul. 2, 2008)(I.R.C. §409A rules only applicable to taxpayers earning more than $186,000 for the school year).

Bachman v. Comr., No. 07-9009, 2008 U.S. App. LEXIS 13847 (10th Cir. Jul. 1, 2008)(Tax Court’s award of summary judgment to government in tax protestor case upheld, but IRS not entitled to award of sanctions due to government’s failure to provide adequate factual support).

Mitchell v. Comr., No. 07-9002, 2008 U.S. App. LEXIS 14003 (10th Cir. Jul. 1, 2008)(court lacked jurisdiction to consider petitioner’s pro-se motion for reconsideration of Tax Court decision; motion untimely because post-mark date on envelope was more than 90 days after entry of Tax Court’s decision; under I.R.C. §7502(a)(1), postmark date on envelope is deemed to be the date of delivery to Tax Court).

IRS Info. 2008-0021 (Jun. 27, 2008)(bankruptcy of qualified intermediary used to facilitate I.R.C. §1031 exchange disqualifies taxpayer from achieving tax-deferred exchange status for transaction).

IRS Info. 2008-0023 (Jun. 27, 2008)(I.R.C. does not impose dollar limitation on de minimis fringe benefits excludible from gross income for those fringes listed in Treas. Reg. §1.132-6(e)(1)). 

Ziegler v. Comr., No. 07-4206-ag, 2008 U.S. App. LEXIS 13520, aff’g, T.C. Memo. 2007-166 (2d Cir. Jun. 26, 2008)(application of passive loss limitations to partnership losses do not violate partner’s due process rights; application of the passive loss rules not impermissibly retroactive).

Brackey v. Washington County, No. C4-06-7837 (Minn. Tax Ct. Jun. 23, 2008)(land qualified for agricultural status and Green Acres tax benefits because land primarily devoted to agricultural use; land used for purpose of growing trees as well as weeding, mowing, spraying and overall maintenance for agricultural use).

Priv. Ltr. Rul. 200826024 (Mar. 19, 2008)(primary reason for selling home that taxpayer owned and lived in for fewer than two out of five years before selling the home qualifies as an unforeseen circumstance that makes taxpayer eligible to exclude a reduced amount of gain under I.R.C. §121(c); taxpayer got married, and home not large enough for blended family; also, under local government school enrollment policies, son of spouse of taxpayer would have to move to a new school). 

Priv. Ltr. Rul. 200826005 (Mar. 17, 2008)(undivided fractional interest in rental properties that are co-owned by unrelated business entities does not constitute an interest in a business entity under Treas. Reg. §301.7701-2(a) and, therefore, does not qualify the undivided fractional interest as eligible replacement property under I.R.C. §1031(a)).

Watkins v. Jesse, et al., No. A-07-548, 2008 Neb. App. LEXIS 115 (Neb. Ct. App. Jun. 3, 2008)(plaintiffs’ use of particular route established a prescriptive easement, but did not establish the element of adverse use with regard to the claimed easement for cattle driving – use was permissive).

Stevens v. Comr., T.C. Sum. Op. 2008-61 (“short-sale” of residence held for investment purposes resulted in cancellation of indebtedness income (CODI); taxpayer failed to prove that any exception from the general rule of recognition applied; accuracy-related penalty upheld).

Birdsill, et al. v. Com’r., T.C. Summ. Op. 2008-55 (court upheld IRS’s decision to require depreciation recapture on taxpayer’s vehicle for which taxpayer claimed expense method depreciation; taxpayer failed to meet substantiation requirements of I.R.C. §274(d)).

In re Marriage of Reuter, No. A07-0338, 2008 Minn. App. Unpub. LEXIS 574 (Minn. Ct. App. May 20, 2008)(trial court erred in computation of self-employed farmer’s net monthly income by failing to take into account depreciation deductions for dairy cows, farm buildings and farm equipment).

Kentucky Department of Revenue, et al. v. Davis, et ux., 128 S. Ct. 1801 (2008)(state has constitutional authority to tax interest on municipal bonds sold by other states, while not taxing in-state bonds; no dormant commerce clause violation – issuing debt securities to pay for public projects is a public function).

American General Financial Services, Inc. v. Carter, 184 P.3d 273 (Kan. Ct. App. 2008)(real estate foreclosure case involving relative priorities of a lien for unpaid sales tax and later purchase money mortgage given by defaulting taxpayers to acquire the property which is later sold at foreclosure; court held that mortgage given to secure the loan used by taxpayer to buy the property has priority).

Teigen, et al. v. State, 749 N.W.2d 505 (N.D. 2008)(state statute requiring state to use a portion of wheat tax funds for policy and promotion activities and to award contracts to two domestic trade associations did not violated state constitutional provisions prohibiting special laws, gifts and special privileges and immunities).

Astleford v. Comr., T.C. Memo. 2008-128 (Substantial discounts for gifts of farmland to FLP granted – 33.9 percent for one year and 35.6 percent for another year (saving taxpayer about $2 million); FLP operated like a business and not taxpayer’s personal bank account; non-tax avoidance reasons for establishing the FLP present).

Mollica v. Division of Property Valuation and Review, 2008 VT. 60 (2008)(“Christmas Cottage” on Christmas tree farm used as sales office and warming hut for customers during Christmas season and rented guest house during off-season remains eligible for enrollment in tax abatement program as farm property; property used as “rental property” only during “non-farm” season and still remained actively used in a “farming” operation during the Christmas tree harvesting season).

L & L Holding Co., L.L.C. v. United States, et al., No. 1:05-cv-00794, 2008 U.S. Dist. LEXIS 35229 (W.D. La. Apr. 30, 2008)(sole member of LLC personally liable for payroll taxes; LLC was disregarded entity because owner failed to elect to have it treated as a corporation under the check-the-box regulations).

Christenson v. Comr., 523 F.3d 957 (9th Cir. 2008)(innocent spouse relief under I.R.C. §6105 only available if joint return filed for year in question; while taxpayer faced joint liability under state community property law, plain language of I.R.C. §6105 provides relief only to spouses who file a joint return).

In re Goddard, 39 Kan. App. 2d 325, 180 P.3d 604 (2008)(sawmill operation not “farming” for purposes of state ad valorem property tax exemption; however, yarding tractor used to harvest trees is exempt farm equipment).

Estate of Claeyssens v. California, 101 Cal. App. 4th 465, 74 Cal. Rptr. 3d 304 (2008)(state law allowing collection of filing fees and surcharges for estate claims held unconstitutional; “pick-up” tax amounted to an unconstitutional estate or inheritance tax masquerading as a graduated probate court user or filing fee; in CA, legislature, acting alone, cannot impose an inheritance or estate tax; in this case, calling a $74,762 filing fee a “court user fee” disingenuous).

Regents v. United States, No. 06-cv-5084, 2008 U.S. Dist. LEXIS 26263 (D. Minn. Apr. 1, 2008)(University of Minnesota entitled to refund of FICA taxes paid on medical residents’ stipends because payments qualify for student exclusion from FICA taxation; amended regulations disqualifying residents from the exclusion have been held invalid).

Priv. Ltr. Ruls. 200810016 and 200810017 (Dec. 6, 2007)(exchange of property between partnerships controlled by related persons qualifies for like-kind treatment).