Case Summaries 07/2012
(extension of time granted to file form 8939 with respect to decedent's estate so as to make income tax basis allocations for assets included in 2010 decedent's estate).
(livestock facility sought siting permit from local government under new statewide siting Law; town approved permit with conditions; facility appealed to Siting Board, which upheld granting of permit but removed conditions outside scope of town’s ability to require; town appealed and circuit court held that Siting Board must either uphold permit or send matter back to township for review; facility appealed and court of appeals overturned circuit court and held Siting Law preempted local authority on permit issue, and that town exceeded its authority by not adopting any findings of fact to support its regulations, and Siting Board is not limited to reversals or affirmances; town petitioned for further review; state Supreme Court held Siting Law clearly preempted local authority to regulate livestock facilities and provides uniform state standards; local authorities preempted from disapproving livestock siting permits unless ordinance is passed before application for permit is filed and is based on reasonable and scientifically defensible findings of fact; town’s additional requirements imposed on facility in this case impermissible without reasonable and scientific fact-finding to support requirements; Siting Board entitled to modify improper permit requirements rather than merely remand back to local government; dissent argued that withdrawing powers from local governments to regulate facilities is unreasonable interpretation of statute and creates absurd result).
(winery granted agricultural and agricultural sales permits; township passed new ordinance limiting outdoor events at wineries to fewer than 24 events and all events were required to end by 10 p.m.; winery had been holding more than 100 special events prior to enactment of ordinance and sought nonconforming use status for continuation of events outside new ordinance limits; zoning board held uses were not permitted under zoning classifications, so events were not legal at time they were held and not eligible for non-conforming use privileges; winery appealed zoning board decision holding prior special events were nonconforming uses; on appeal, court affirmed board’s opinion).
(Kentucky enacted limited liability protection for agritoursim operations; operators must post signage or provide written information to visitors warning them that they are assuming the risk for participating in an agritoursim activity; owners and operators have limited liability if injury or death to a participant results from the inherent risks of the agritourism activity and/or in the absence of negligence; more than half of states have enacted similar statutes and Maine was one of the others to recently enact a similar law; for more information, see our publication at http://www.calt.iastate.edu/briefs/CALT%20Legal%20Brief%20-%20Maine%20En...).
(on a 244-185 vote, the U.S. House voted to fully repeal the Patient Protection and Affordable Care Act; all Republicans and five Democrats voted for repeal; two representatives (one Democrat and one Republican did not vote).
(petitioner not entitled to exclude income from settlement from wrongful termination case against former employer under I.R.C. Sec. 104(a)(2); while claim based on tort-type rights, type of injuries petitioner suffered from did not qualify as physical injury or sickness as defined in the Code; petitioners injuries merely symptomatic of emotional distress; no substantial of amounts allegedly spent on medical care for emotional distress-related problems).
(debtor, S corporation, paid shareholder taxes and applied payments to shareholder's personal tax returns via agreement; debtor subsequently filed bankruptcy; trustee sought recovery of taxes from IRS on basis that they were fraudulent conveyances made without consideration; court rejected trustee's position on basis that payment did not make unsecured creditors any worse off and bankruptcy estate received an amount reasonably equivalent to what it paid; debtor's taxable income was $1,559,954 and passed through to shareholders; benefit to debtor of S election was significant).
(class-action lawsuit alleging violations of Fair Labor Standards Act (FLSA) against delivery service that contracted with drivers’ immediate employer for delivery of packages; question was whether joint-employment relationship existed; district court granted summary judgment finding no joint-relationship; on appeal, court relied on factors identified in Migrant and Seasonal Agricultural Worker Protection Act (AWPA) to resolve; court held delivery service had only “abstract” control of work, no direct supervision of drivers, no involvement in hiring decisions, setting pay rates, or payment of drivers, drivers main work location was vans owned by employer rather than delivery service warehouse, drivers free to perform work for other deliver services, and investments in equipment between delivery service and employer not helpful in analysis; district court opinion affirmed).
(farm employees paid hourly not included in ag exemption from overtime requirements of state Fair Labor Standards Act (Minn. Stat. Ann. Secs. 177.21-177.35; hourly amounts not "salary" as defined by Minn. Stat. Ann. Sec. 5200.0211).
(on motion for summary judgment, court ruled that "open transaction" rule is inappropriate method for determining tax on sale of stock received in insurance company demutualization; cost of insurance policies must be allocated between stock and insurance policy value; IRS approach of disallowing any basis to be allocated to stock received upon demutualization also improper; trial to be held on issue of how to determine basis allocation between policies and shares of stock).
(plaintiff can proceed with Racketeering and Conspiracy (RICO) claims and claims under Virginia Conspiracy Act against defendants and their lawyers; plaintiff determined to have made sufficient claims that victims of defendants' RICO violations were the plaintiff and members of the public that may have been improperly induced to made donations to the defendants based on the lawsuit; case involves long court battle over whether plaintiff violated Endangered Species Act by using Asian elephants in circuses put on by Ringling Brothers and Barnum & Bailey Circus; after nine years of litigation and six-week non-jury trial, court determined that individual plaintiff lacked standing and was a paid plaintiff whose sole source of income was from defendants).
(tax deficiency caused by disallowed mileage deduction; petitioners claimed mileage deductible due to driving to view potential fixer-upper investment real estate properties; all properties viewed were along daily commute or close to mother’s home; petitioner claimed activity engaged in 361 days out of the year ; petitioner made no documentation of homes or investment opportunities; no actions were taken other than viewing potential homes; petitioners failed to establish evidence of any factors that activity was engaged in for profit; facts appeared to be commuters claiming deduction for personal mileage; deduction disallowed).
(on motion for summary judgment, court ruled that "open transaction" rule is inappropriate method for determining tax on sale of stock received in insurance company demutualization; cost of insurance policies must be allocated between stock and insurance policy value; IRS approach of disallowing any basis to be allocated to stock received upon demutualization also improper; trial to be held on issue of how to determine basis allocation between policies and shares of stock).
(U.S. economy added only 80,000 jobs in June (comparison should be made to same timeframe in President’s Reagan’s first term where the economy was adding 273,000 jobs monthly coming out of the recession); unemployment rate remained at 8.2 percent; labor-force participation rate at 63.8 percent (historic low); unemployment rate is 2.5 percent higher than what Obama Administration promised it would peak at if 2009 “stimulus” bill passed; rate is 45.1 percent higher than what Obama Administration projected unemployment would be in June of 2012 if “stimulus” bill passed ; rate is 34.4 percent higher than what Obama Administration projected unemployment would be if “stimulus” bill not passed; number of jobs created must be 125,000 each month and labor market must add 285,000 jobs every month for the next 30 months to achieve pre-recession unemployment rate by 2016; 85,000 persons applied for Social Security disability in June; real unemployment rate at 14.9 percent; long-term unemployed (jobless for at least 27 weeks) at 5.4 million and 2.5 million not counted as unemployed because they had not looked for a job in the past four weeks).
(judicial review of agency decision denying crop insurance indemnification to general partnership; partnership had lease agreement with separate partnership of which all partners were also members; partnership also used farm manager who assisted both partnerships in acquiring land and making agronomic decisions; partnership sought recovery after drought destroyed corn crop; claim denied because agency held partnership did not have insurable interest in crop, did not provide access to records, no interest in certain acres at time insurance attached, and good farming practice had not been followed; partnership appealed to director who upheld denial; on appeal, court gave no deference to agency interpretation that person claiming 100% interest in crop required to show all four requirements: that it produces crop, exercises managerial control, makes credit arrangements, AND owns farming equipment; court held partnership established proof of managerial control through agency relationship with farm manager and bore financial risk for crop; held director’s determination the partnership had no bona fide interest in crop was arbitrary and capricious; other issues on appeal handled through stipulation; court ordered indemnification for all applicable acres).
(motion to reconsider proposed classes in class action lawsuit alleging violations of federal Migrant and Seasonal Agricultural Workers Protection Act; plaintiffs sought reconsideration of class certification for meal break violations for workers jointly employed; court held evidence established a uniform policy that permitted reconsideration of employees jointly employed; court denied plaintiffs request to recertify other classes as they failed to establish evidence of off the clock work and employee purchase of tools; plaintiffs permitted to file second motion for class certification with respect to meal period of jointly employed plaintiffs).
(plaintiff filed claim against defendant for title to undeveloped eight acres of land alleged to have been in her family since the 1800s; no chain of title could be located for disputed land, but defendant’s property had chain of title from conveyance in 1895 from plaintiff’s great-great-great grandmother; grandmother conveyed property adjacent to plot at issue; later a boundary agreement that incorporated the disputed land was found in defendant’s title; defendant filed motion for summary judgment asserting doctrine of laches applied due to extensive upkeep and development on disputed land over 100 years, and in the alternative, property acquired through adverse possession; trial court granted motion finding laches barred claim, title acquired by defendant through adverse possession and Marketable Record Title Act applied granting title to defendant; on appeal, court held it was “hard-pressed to conceive of a clearer example of the proper application of laches” than the plaintiff waiting more than a century to bring claim to defend title to land; trial court affirmed and case dismissed).
(feedlot operator applied for permit to operate 8,000-head confined animal feeding operation (CAFO) on 1,204 acres on land zoned agricultural that was approximately 1.25 miles from National Historic Site; county board of commissioners denied permit on basis that CAFO inconsistent county's comprehensive plan; trial court reversed on basis that application complete, CAFO to be constructed on land zoned "ag" and that board could not consider county comprehensive plan; on reconsideration, board approved permit and disaffected landowners and activist groups appealed; trial court determined that many petitioners lacked standing, and those that had standing did not prove constitutional or other violations and dismissed case; on further review, state Supreme Court court determined that all parties except one had standing on basis that standing conferred under state law on "one who has an interest in real property which may be adversely affected by the issuance or denial of a permit authorizing development"; such provision applied to individuals owning a residence within one mile radius of proposed CAFO; no violation of due process rights; "one mile radius" rule did not violate constitutional equal protection requirement because it was attempt by government to preserve efficiency and expediency in permitting process which was a legitimate government purpose; comprehensive plan not a legally controlling zoning law that required strict compliance by board, thus court deferred to board's interpretation of its own ordinances with court determined were not arbitrary, capricious or unreasonable; permit grant upheld).
(judicial review of agency decision denying crop insurance indemnification to general partnership; partnership had lease agreement with separate partnership of which all partners were also members; partnership also used farm manager who assisted both partnerships in acquiring land and making agronomic decisions; partnership sought recovery after drought destroyed corn crop; claim denied because agency held partnership did not have insurable interest in crop, did not provide access to records, no interest in certain acres at time insurance attached, and good farming practice had not been followed; partnership appealed to director who upheld denial; on appeal, court gave no deference to agency interpretation that person claiming 100% interest in crop required to show all four requirements: that it produces crop, exercises managerial control, makes credit arrangements, AND owns farming equipment; court held partnership established proof of managerial control through agency relationship with farm manager and bore financial risk for crop; held director’s determination the partnership had no bona fide interest in crop was arbitrary and capricious; other issues on appeal handled through stipulation; court ordered indemnification for all applicable acres).
(following intimate relations with correctional officer’s daughter, plaintiff found himself naked, handcuffed, and behind the wrong side of a pistol when mother came home sooner than expected; plaintiff brought § 1983 claim against mother and her boss claiming she used her position as officer to cause him physical harm and embarrassment; district court dismissed for failure to state a claim upon which relief could be granted because mother’s actions were no different than any ordinary citizen who happened upon a naked man in her daughter’s closet; appellate court affirmed and case dismissed).
(district court opinion regarding motion to dismiss on issue previously presented in February opinion; FSA statement that SURE payments calculation not appealable led to agreement with FSA Director to receive letters stating remedies exhausted enabling plaintiffs to appeal directly to federal court; USDA filed motion to dismiss plaintiffs’ appeal because they failed to exhaust administrative appeals; plaintiffs argued failure to exhaust should be excused because administrative appeal was futile, the issue was legal, and defendant should be equitably estopped from raising issue; court rejected all three arguments holding unappealable issue must still be exhausted through administrative appeals, issue was not legal because involved interpretation of agency regulation within specialty of agency to interpret, and previous opinion addressed denial of estoppel claim; case dismissed).
(Perishable Agricultural Commodities Acts (PACA) claim against banana distributing companies and the owner for unpaid invoices; plaintiff sought injunctive relief regarding unpaid amounts due to likelihood defendants may dissipate trust assets by paying employees and other ongoing bills; court held plaintiff had likelihood of success regarding claim against one defendant and owner due to PACA notifications; injunction granted, but court ordered half of amount held in escrow to allow defendant to continue operations rather than freezing accounts; court denied defendant’s motion to dismiss due to need for further evidence; court granted motion to dismiss plaintiff’s claim for unjust enrichment to extent recovery could be made based on contract claims, but denied for potential claims in which PACA may not apply due to plaintiff’s lack of licensing).
(appellate court upheld trial court’s denial of plaintiff’s claim for failing to establish an easement by prescription over a right-of-way owned by defendant; plaintiff also failed to establish right-of-way was public road; court held plaintiff did establish actual use of easement; plaintiff’s claim failed, however, because use was infrequent and permissive; plaintiff also submitted subdivision plans for his property that included building a new road parallel to right-of-way at issue demonstrating no objective manifestation of the right to use easement; court also held right-of-way was not public road; no evidence presented to establish public accepted road as “public” even if a dedication of road for such purposes may have exists; all use of right-of-way was by few neighbors and permissive).
(employee of potato farmer brought suit for violation of state’s “safe place” statute and common negligence against building owner (defendant) from whom farmer rented space; employee injured by faulty equipment provided by her employer and brought into defendant’s facility by employer; appellate court affirmed trial court in granting summary judgment for defendant and dismissing suit; court held no duty under safe place statute for building owner when injury caused by employer’s equipment not connected to owner’s building and over which building owner did not exercise control; court also affirmed dismissal of negligence claim because no duty owned by building owner alleged by plaintiff).
(decedent deeded title to four parcels of farmland to friend from 2000-2004; deeds were not recorded; friend sought to acquire property from estate pursuant to deeds; friend, however, had filed Chapter 13 bankruptcy in 2007 but denied ownership of farmland at that time; hours before probate hearing on deeds, friend sought to reopen bankruptcy proceedings to amend his schedules to reflect ownership of land; probate court went ahead and barred friend from claiming ownership of property based on judicial estoppel; court noted discrepancies in decedent’s will and friend’s ownership claim as well as lack of explanation for denying ownership to bankruptcy court under oath; friend claimed order violated automatic stay; appellate court held automatic stay provision not violated because bankruptcy plan confirmed in 2007; judicial estoppel upheld on appeal due to wholly inconsistent statements asserted to two different courts).
(taxpayer's residence was destroyed in presidentially declared disaster (involuntarily converted) and taxpayer acquired new residence the following year as replacement residence, but didn't tell IRS that second home was his residence; at time of disaster, basis in destroyed home exceeded its value; taxpayer made improvements to the new home and used some insurance proceeds to make the improvements; taxpayer recognized gain from involuntary conversion due to insurance proceeds exceeding basis in the destroyed home; at time or ruling request, taxpayer had not yet reported gain; IRS said that taxpayer could file original and amended return for year of replacement so as to notify IRS of acquisition of new residence).
(debtor’s Form 1040 filed after assessment of tax for year at issue failed to qualify as tax return as defined by 11 U.S.C. §523(a)(19) and, consequently, tax debt associated with Form 1040 not dischargeable under 11 U.S.C. §523(a)(1)(B)(i); debtors filed Chapter 7 on Jan. 20, 2011 and initiated adversary proceeding against IRS a month later to determine dischargeability of taxes for years 1998 and 2000-2003; IRS determined no taxes owed for 1998 and agreed that tax debt for 2000, 2002-2003 dischargeable; debtors did not file return for 2001 and IRS issued SNOD and then assessed deficiency in early 2005 for 2001 taxes; debtors filed Form 1040 on Aug. 1, 2006; IRS claimed taxes owed for 2001 were not dischargeable; IRS position upheld).
(Chapter 12 case involving trustee's objection to plan confirmation; while debtor eligible for Chapter 12 by generating sufficient non-farm income to satisfy income test of 11 U.S.C. Sec. 101(18) and owning farm equipment, two cows and a goat; but, debtor failed to establish that plan feasible under 11 U.S.C. Sec. 1225(a)(6) because proposal only speculative and raised significant question as to whether debtor could meet plan specifications; secured creditor entitled to relief from automatic stay due to lack of adequate protection and debtor had no equity in property; plan confirmation denied).
(plaintiff corporation denoted its purpose as agribusiness resource center; predecessor was for-profit consulting business that focused on regulatory compliance; plaintiff claimed that without non-profit status it couldn't partner with trade associations because the couldn't share revenue with for-profit entity; court upheld Tax Court determination that plaintiff not operated exclusively for tax-exempt purposes; plaintiff's operations were commercial rather than charitable and business involved offering fee-based compliance services and plaintiff did not establish that profits would not inure to benefit of private persons or shareholders).
(Rep. Stearns (R-FL) calls for investigation of Cape Wind proposal on basis of e-mails demonstrating the FAA officials bowed to political pressure from President Obama to approve the project and ignored expert opinions that the aerogenerators would interfere with radar and endanger aircraft; Rep. Stearns also uncovered the Administration’s Solyndra scandal which lost $535 million of taxpayer funds and remains the target of an FBI criminal investigation).
(effective for deaths after Jun. 30, 2012, provision exempts working farms and related agricultural commodities from state inheritance tax; to be exempt, inherited farmland must be transferred to family members and continue in farm use for seven years after decedent's death and land must produce annual gross income of at least $2,000; annual certification required).
(landowners filed takings case against U.S. Army Corps Of Engineers based on improvements Corps made to Prado Dam that could increase flood levels on landowners’ land if water is released; plaintiffs claimed that improvements effectively blocked their land from being zoned for future residential or commercial development; when local flood control districts began buying parcels in 1990s, landowners offered up to $9 million for their land, but landowners presented counteroffer of $21 million which was rejected; in lawsuit, plaintiffs sought $60 million in compensation plus interest and attorney fees and costs; court rejected taking claim on basis that plaintiffs had not demonstrated that permanent flooding or repeat flooding would inevitably recur; changes in property value resulting from flood control projects cannot be considered “takings” of property under the constitution absent actual flooding).
(bank hired law firm for title opinion before approving land as collateral for loan in 2007; law firm hired independent contractor to search county records; contractor’s handwritten note regarding timber lease on property not included in her summary and not received by attorney, so not included in bank’s title opinion; debtors defaulted in June 2009 and land received by bank in lieu of foreclosure in 2012; value of land decreased from appraised $1,230,750 at time of loan to $370,000 because of discovery of timber lease; bank notified by law firm of timber lease in September 2009 after debtor defaulted; bank filed suit against law firm January 2011; court held bank did not file suit within two years of receiving inaccurate title opinion nor was suit filed within six months of discovering omission as required by statute; case dismissed on statute of limitations grounds).
(Chapter 7 case; debtor retired from non-farm job and purchased acreage to build home and create horse farm as a sole proprietorship; horse activity lost money and could no longer pay creditors; trustee sought judgment against debtor’s wife who owned subject property in tenancy-by-the-entirety with debtor, and revocation of discharge; wife not partner in business and did not benefit from portion of loan used to cover farm’s operating losses and was only an accommodation party – trustee’s claim for contribution fails; discharge not revoked).
(phases out state inheritance tax beginning in 2013 by phasing-up credit against inheritance tax liability; credit is 10 percent for deaths in 2013, and increases and additional ten percentage points per year through 2021; tax eliminated for deaths beginning in 2022; replacement amounts payable to counties phased out over 10 years beginning with amounts payable beginning July 1, 2012; exemption for Class A transferees increased from $100,000 to $250,000 for deaths after 2011, and reclassifies spouse, widow or widower of child of transferor as Class A rather than Class B; spouse, widow or widower of step-child of transferor reclassified as Class A transferee rather than Class C transferee).
(enactment of decanting statute which allows a trustee to exercise discretionary distribution power by appointing trust principal or income to the trustee of a second trust that may have different terms; beneficiaries of second trust must include only beneficiaries of original trust; when trustee's power to distribute income and principal is subject to ascertainable standard, distributions from second trust must be limited by same ascertainable standard and such distribution power must be exercisable in favor of same current beneficiaries, unless court approves otherwise, with exception made for distributions to special needs trust).
Indiana Legislation Barring Medicaid Estate Recovery (Enrolled Act No. 1258, effective Jul. 1, 2012)
(Act adds IC 6-4.1-1-3.5 to the Code too bar estate recovery upon surviving spouse's death for recovery of Medicaid benefits that had been paid to pre-deceased spouse; Act is part of revised probate provisions).