News & Updates

February Articles and Updates

• Texas Recognizes Property Interest in Groundwater in Place - The Texas Supreme Court has held that landowners own the water beneath their land and must be compensated for certain types of regulatory taking of that water.

• Eighth Circuit Affirms District Court in S Corporation Reasonable Compensation Case - The U.S. Circuit Court of Appeals for the Eighth Circuit has affirmed the trial court's determination that a West Des Moines CPA firm paid too low of a salary to senior partner in an attempt to avoid payroll taxes. Additional taxes, penalties and interest were imposed.

• “Payroll Tax Cut” Extension Bill Clears the Congress - The Congress has passed legislation that extends the 2 percentage point reduction in the OASDI portion of the FICA tax through the end of 2012.  The bill also contains some other interesting provisions.

• Ag and Tax-Related Legislation in the Iowa Legislature - The Iowa legislature is considering some legislation that has application to agriculture, rural landowners and estates.  

• Ambiguous Pre-Nuptial Agreement Requires Court to Determine Recipient of Life Insurance Proceeds - The Iowa Court of Appeals has issued an opinion in a case involving rights to proceeds of an insurance policy where a pre-marital agreement didn't clearly specify the deceased spouse's intent and a beneficiary change form hadn't been completed before death.

• Extended Deadline For Filing Form 706 To Make Portability Election - The IRS has extended the filing deadline for making the portability election for the benefit of surviving spouses of estates of decedents dying during the first half of 2011.

• May the Sidewalk Rise Up to Meet You With a Large Verdict - The Iowa Court of Appeals has upheld a large jury verdict for a person who tripped on a sidewalk and fell. The sidewalk was on the person's normal walking route, and photos of the repaired sidewalk were allowed into evidence with a "curative" instruction.

• Court Says Farm Products Rule Requires Strict Compliance - An Illinois court has determined that a bank failed to comply with the farm products rule when it got a bit sloppy with a form notice given to a buyer of the debtor's crops.

• Steel Wheels Keep on Turning - The Iowa Supreme Court has ruled that a county ordinance designed to protect county road surfaces unconstitutionally violated the free exercise rights of a member of a Mennonite sect.

• Iowa Cases
  • Despite Property Owner’s Stony Resolve, a Driveway Easement Remains
  • Mechanic’s Lien Easy to Prove when Everyone Admits the Facts

 

January Articles and Updates

• “Sometimes You’ve Got to Break the Rules” – Emotional Distress Damages for Contaminated Food That Isn’t Eaten?

• Economic Loss Doctrine Inapplicable Defense to Farmers’ Claims for Over-Application of Purchased Chemical Herbicide

• Failure to Obtain Written Contract or File Lien is Cause of Feeding Company’s Financial Woes

• U.S. Supreme Court Strikes Down State Law Criminalizing Use of Meat From Downed Livestock

• Oil and Gas Lessee is Good Faith Trespasser During the Pendency of An Appeal for Breach of Contract

• Foreseeability, Flying Body Parts and Estate Liability – Palsgraf Reprise

• Iowa Cases
  • Nonpurchase-Money Mortgage Not Subject to Surviving Spouse’s Dower Interest
  • Failure to Perform Compaction in Workmanlike Manner Results In Bumpy Road
  • Court Determines Distribution of Estate
  • Boundary by Acquiescence Established by Written Fence Agreement
  • Lessees Must Timely File Mechanic’s Liens to Recover for Costs of Improvements
• Top Ten Agricultural Law Developments of 2011

• Recent Legal Action Involves Genetically Modified Crops

 

December Articles and Updates

• U.S. Supreme Court Agrees to Hear Case Involving Challenge to Health Care Act, But Will They Decide the Constitutional Issue?

• President Signs Bill Authorizing Tax Credits for Firing (and Re-Hiring) Veterans

• Generation-Skipping Tax Planning Is A Tax Shelter Activity? - New IRS final regulations state that generation-skipping transfer tax (GSTT) planning is a reportable transaction under the tax shelter reporting/disclosure rules. What those rules say is that when a practitioner advises a taxpayer concerning a transaction that the IRS determines to be essentially the same (in the IRS view) as a tax avoidance transaction that is a "listed" transaction, such advicde triggers the application of penalties for non-disclosure. GSTT planning is not yet a "listed" transaction, but fiduciaries such as trustees and executors will have to report whenever a trust or estate that they are the associated fiduciary for engages in a GSTT transaction and the trustee or executor provides "material aid, assistance or advice" on the transaction. Reporting is also required if the fiduciary receives gross income over a threshold amount and the taxpayer at issue entered into the GSTT transaction. T.D. 9556, Nov. 10, 2011, finalizing Treas. Regs. Sec. 26.6011-4, 301-6111-3 and 301-6112-2, eff. Nov. 14, 2011.

• Estate Planning Article Updated

• 2012 Interest Rates for Underpayments and Refunds

  1st Quarter 2012 (Rev. Rul. 2011-32, 2011-52 I.R.B. 1)
  
  Non-Corporate taxpayers: 3%
  Corporate Taxpayers:

  • 2% for overpayment
  • 3% for underpayment

  Large Corporate Underpayments (amount exceeding $10,000): 5%
  Large Corporate Overpayments (amount exceeding $10,000): 0.5%

 

November Articles and Updates

• Full Repeal of the Estate Tax Leads to Significant Deficit Reduction - A new study on the federal estate tax concludes that reducing the estate tax provides more deficit reduction than does higher estate taxes.  That's an important point for the "Super Committee" to take into consideration.  The study concludes that complete repeal of the estate tax would account for 30.18% of the $1.2 trillion in deficit reduction that the "Super Committee" is required to come up with over the next 10 years. 

• W-2 Reporting for Foreign Ag Workers - IRS recently reiterated that, beginning in 2011, payments of $600 or more to foreign ag workers that have been temporarily admitted to the United States on H-2(A) visas must be reported on Form W-2.  Of course, this will require that the worker have a valid Social Security number or taxpayer identification number.  That could cause confusion for some practitioners and taxpayers.  The confusion could result from the fact that payments to these workers are not subject to withholding for Social Security or Medicare purposes because their compensation is not deemed to be "wages" for withholding purposes.  As such, the payments may only get reported on Form 1099-Misc as "Other Compensation."  We will go over the finer points of this at the tax schools this fall.

• Aerogenerator Ban Upheld Against Takings Claim - The Kansas Supreme Court has upheld a Wabaunsee County, Kansas, ban on the development of large-scale wind generators in the county against a constitutional taking claim. The court said that the language of the zoning rules in the county gave the county commissioners the complete authority to grant conditional use permits or not. Thus, a landowner has no vested property right to put in generators unless the board grants a conditional use permit.  Without a vested property right, there is nothing that has been taken.  The Court also held that the ban was not facially discriminatory against interstate commerce because it banned all wind generators no matter where the electricity was sold.  It was a complete, non-discriminatory ban.  But, the court remanded for further factual development on whether the ban imposed a burden on interstate commerce that was clearly excessive in relation to the local benefits the ban provided.  We will post an article on this court case in the coming days.

• Potpourri of Tax Items - In recent days, a number of inflation adjusted amounts for 2012 have been announced by IRS and the Social Security Administration.  You can find some of the most relevant numbers on the IRS page and the Elder Law page.  Also, the estate tax exemption climbs to $5,120,000 for deaths in 2012, the maximum reduction for property subject to a special use valuation election will be $1,040,000.  The present interest annual exclusion will remain at $13,000 for gifts made in 2012.

• IRS Provides Guidance on Filing Protective Claims For Estate With Outstanding Claims - In 2009, IRS finalized regulations concerning the treatment of an estate's outstanding claims at the time of the decedent's death.  Now, IRS has provided guidance in Rev. Proc. 2011-48 on how to file protective claims to keep the statute of limitations from preventing an amended return from being filed. 

• More Ag-Law and Taxation Court Opinions Summarized - The current batch of court opinions from Iowa and elsewhere involve a joint tenant's unilateral withdrawal of funds in a joint account, claim preclusion, the notice required in a tax sale, actions against fellow shareholders in a closely-held corporation, whether an occupation tax is constitutional, the allocation of a dependency deduction in divorce, a boundary case, and a patent infringement case involving GMO seeds.

  • Unilateral Withdrawal of Funds in a Joint Bank Account
  • Ownership of Disputed Strip of Land Established Via Acquiescence
  • Adequate Notice of Tax Sale
  • Closely-Held Corporations: Courts Address Distinction Between Derivative and Direct Shareholder Actions - Kansas
  • Occupation Tax for Irrigation Constitutional - Nebraska
  • Child Dependency Deduction At Issue in Divorce Case
  • Appeal Dismissed in Property Boundary Case
  • Farmer Sued for Patent Infringement for Saving Protected Seed