Annotations 11/2009

(portion of plaintiffs' (married couple) property qualifies for farm use special assessment under state law; however, balance of property not eligible for special assessment because plaintiff did not use property for farming activities).  

(defendants are beneficiaries of a lease allowing them to extract oil and gas from four wells on plaintiff's property; declaratory judgment entered finding that lease had expired by its terms when defendants failed to continue production; affirmative defenses of estoppel and unclean hands rejected by trial court and affirmed on appeal).

(taxpayers could not deduct rental real estate activity losses due to lack of evidence that either spouse qualified as a real estate professional; taxpayers' modified adjusted gross income exceeded the offset phaseout limit of I.R.C. Sec. 469(i)(3)(A)). 

(defendant must reclassify 14 parcels as agricultural from vacant; property was leased to cattle company which grazed cattle on the parcels for two years as required by statute). 

(plaintiff signed a release before skiing at defendant's resort which barred plaintiff's right to sue for injuries; plaintiff did suffer injuries upon skiing over the edge of an intermediate-level course; under state (MN) law, release is valid due to lack of disparity in bargaining power between the parties and release not violative of public policy).

(amounts paid to members of cooperative for their products qualify as per-unit retains paid in money and for purposes of computing cooperative's Sec. 199 deduction, cooperative's QPAI and taxable income are to be computed without regard to any deduction for such payments to members).

(I.R.C. Sec. 179 depreciation available in year that asset is placed in service defined as when property is in state of readiness for use in taxpayer's trade or business; IRS argument that property placed in service in earlier years rejected; taxpayer's arguments as to when property placed in service upheld).

(IRS lists factors affecting IRS's ability to collect after default of Chapter 11 reorganization plan; IRS notes that there are four post-BAPCPA aspects of bankruptcy cases that could limit the IRS's ability to collect from the debtor after default on the Chapter 11 plan - (1) discharge injunction (confirmation of the plan does not discharge debts until court grants discharge upon completion of all plan payments, but debtor may seek hardship discharge); (2) binding effect of the plan (upon default, plan generally not binding - IRS directed to try to have default provisions included in Chapter 11 plans); (3) stay of acts to collect pre-petition debts (stay terminated upon discharge or closing of the case); (4) stay of acts against estate property (does not end until property no longer in estate - IRS position is that, in the absence of binding precedent or contrary language included in the plan or confirmation order, bankruptcy estate after confirmation is limited to portion of debtor's income or other earnings necessary to fund the plan - if plan provides that all of debtor's property remains property of the estate, to be protected by the stay, IRS's only recourse may be to file a motion for relief from stay, or motion to convert or dismiss; memo notes that if IRS not bound by plan, the discharge or the stay, IRS could proceed with collection remedies against debtor to collect pre-petition debts).

(state statute requiring grape growers to fund generic advertising for promotion of grapes is government speech that is exempt from First Amendment challenge).

(plaintiff lacks standing to pursue its claim that chickens, turkeys and other domestic fowl are not excluded (contrary to USDA's position) from the humane slaughter provisions of the Humane Methods Slaughter Act of 1958). 

(recreational use statute does not impose a duty upon a landowner to warn or protect recreational users against the danger of a naturally occurring condition or otherwise refrain from gross negligence with respect to the condition).

(nonresident limited partner in foreign investment partnership not required to file an income tax return to report capital gains because the nonresident partner does not have Iowa-source income). 

(electric golf cars do not qualify for plug-in electric drive vehicle credit under I.R.C. Sec. 30D; such golf carts not manufactured for use primarily on public streets and cannot reach stopped of 20 mph; to be eligible, manufacturer must certify that vehicle manufactured for use primarily on public streets and not for off-road use via IRS Notice 2009-54).

(fence line originally intended as boundary line; farming of disputed area bounded by fence support finding of boundary by acquiescence for required 15-year statutory period). 

(defendant sparked brush fire that caused significant damage to ranch and jury awarded damages to plaintiff for more than required to restore ranch to value that was greater than ranch worth before fire; damage award upheld but plaintiff not entitled to annoyance and discomfort damages because plaintiff was a nonresident property owner who merely stored personal property on the premises; but plaintiff entitled to double damages for damages to trees and award of attorney fees).

(taxpayer can claim first-time homebuyer credit on purchase of home from mother's estate in satisfaction of pecuniary bequest).

(taxpayer not eligible for first-time homebuyer credit on purchase of home because wife had ownership interest in a principal residence in prior three years; no discussion of married filing separately status).

(case involves defendants’ motion to dismiss plaintiff’s claim that defendants (a neighborhood alliance) conspired with public officials to pass an illegal fire safety code for the sole purpose of discriminating against the plaintiff (an out-of-state egg farm company), and plaintiff’s Spanish-speaking employees; defendants entitled to immunity under Noerr-Pennington Doctrine; plaintiff failed to state claim for civil conspiracy; plaintiff also failed to state claim for conspiracy to interfere with civil rights).

(plaintiff established statutory elements of adverse possession of disputed strip of land for 20 years; fence remnants were sufficient to "raise a flag of hostility" and were in fact treated as the boundary between the properties - acquiescence present).

(plaintiff properly stated claim for relief that its perfected security agreement covers defendant's rebate checks issued to debtor as a general intangible).  

(gross receipts derived from sale of taxpayer's tangible personal property developed via scientific process that is sold in commercial quantities which is then resold to end-users qualifies as DPGR; royalty income and technology fees from licensees that use taxpayer's product not DPGR because licensing of intangible right is not a disposition that gives rise to DPGR; but taxpayer's product to which item developed in scientific process is affixed is tangible personal property from which the gross receipts derived from the sale count as DPGR). 

(plaintiffs, workers at defendant's chicken processing facility, bring claim under Fair Labor Standards Act (FLSA) to recover compensation for "donning and doffing" time and time spent sanitizing and washing protective gear; court holds that protective gear at issue in case are "clothes" within the exemption contained in 29 U.S.C. Sec. 203(o) and that donning and doffing them constitutes "changing clothes" - summary judgment granted for defendant on that issue; but, washing protective gear is not within exemption because exemption only applies to time spent washing ones body; however, donning and doffing and washing of protective gear may be integral activities under Portal-to-Portal Act that benefit both parties and summary judgment inappropriate on this issue).

(case involves dispute over ownership of strip of land between adjoining land of parties, and plaintiff's inverse condemnation action against defendant for compensation for taking of portion of disputed area for drainage easement; trial court entered "take nothing" judgment and plaintiff appealed; on appeal, plaintiff's claim to ownership under "strip and gore" doctrine failed because deed clearly described the precise boundary with the disputed strip and conveyed grantor's intent not to convey disputed strip; adverse possession elements not present). 

(heir's partial disclaimer valid as to amount that passed to charitable foundation, and estate entitled to charitable deduction; IRS's final determination of estate value not a "preceded event" or contingency that caused the disclaimer to be contingent; allowance of fixed-dollar-amount partial disclaimers not against public policy merely because IRS might be disincentivized to audit estate tax returns).

(plaintiff seeks damages for injuries suffered while working on defendant's barn, asserting violations of state labor law and negligence; on appeal of trial court's award of summary judgment for defendant, court affirmed; only question on appeal was whether the defendant entitled to exemption under state labor laws for owners of one- and two-family dwellings, and court determined that exemptions applied; fact that plaintiff hired to build barn before construction of defendants' home immaterial because plan for home construction underway).

(production molds that petitioner purchased and that were later sold to customers are not assets subject to depreciation; thus, petitioner properly included costs of molds in petitioner's cost of supplies in determining amount of research credit).

(on plaintiff's motion for summary judgment that income from its "extracurricular" activities are not subject to unrelated business income tax court ruled that brokerage services income and commissions are tax-exempt when earned from member activity, but is subject to UBIT when earned from non-member activity with no deminimis exception; UBIT applicable to 4 percent interest that credit union owned in a partnership consisting of a group of credit unions; case remanded for trial on whether income related to credit life and disability insurance products subject to UBIT).

(company's disposition of part of mortgage portfolio via foreclosure does not bar deduction of passive losses if income is recognized from the activity, the entire interest is disposed of, or taxpayer has other passive income).

(specifies that when service member leaves home state in accord with military or naval orders that service member's heterosexual spouse may retain residency in home state for voting and tax purposes after relocating from the home state to accompany the service member).

(plaintiff not entitled to overtime wages because plaintiff's labor in fruit packing facilities was "agricultural labor" exempt from the requirement to pay overtime wages). 

(court applied Cohan rule to estimate petitioner's unsubstantiated charitable contributions).

(petitioner determined to be self-employed truck driver and not employee of trucking company with result that income subject to self-employment tax; petitioner determined which route to take and order of pick-ups; petitioner not paid set wage, but percentage of gross; no accrual of vacation or pension benefits; petitioner never sent a W-2 and didn't object to receiving Form 1099).

(IRS could ignore existence of corporation formed to buy target company's stock which would then sell the stock to the actual buyer of the stock; income on asset sales is ordinary income to and seller and seller on asset sale and subsequent distribution of proceeds from the corporation; no new basis for buyer; penalties applicable; sham transaction arranged by PriceWaterhouse Coopers).

(debtor was member of joint venture that purchased cattle via loan from creditor, until creditor called note upon learning that there were insufficient cattle for collateral; proceeds of cattle sales did not pay-off note; court determined that creditor failed to proved that debt non-dischargeable and debtor’s alleged misrepresentation of number of cattle occurred after not extended, thus no justifiable reliance on alleged misrepresentation). 

(taxpayer's basis in subsurface estate is greater of value of subsurface estate on either date of conveyance or time of first commercial development; taxpayer's basis in subsurface estate is value on date subsurface estate is sold to state of Alaska). 

(IRS's notice of final partnership administrative adjustment to a partnership held to be untimely because IRS issued the notice after the three-year statute of limitations expired; basis overstatement did not trigger six-year statute of limitations; opinion follows court's prior holding in Bakersfield Energy Partners and other cases). 

(unreported payments received by insurance agent upon termination of agency agreement are ordinary income and not capital gain; payments subject to self-employment tax because they were based on quality and quantity of agent's prior work; accuracy-related penalty upheld). 

(debtor attempted to avoid judgment liens on grounds that they impaired his homestead exemption, but creditor claimed that its judgment arose before debtor acquired the homestead and, therefore debtor could not claim a homestead exemption against pre-acquisition debt; court agreed with creditor – debtor did not intend to permanently reside at farm until after parties’ agreement entered into).

(taxpayer not eligible for first-time homebuyer credit on purchase of home from certain relatives, including parents; no analysis of I.R.C. Sec. 36(c)(provided)).

(boundary-line tree is owned by the adjacent owners as tenants in common; thus, no particular adjacent owner can cut or destroy such a tree without the consent of all owners; concurring judge would modify rule to allow an owner to cut such tree without other owner's consent if nuisance present). 

(no abuse of discretion by bankruptcy court in dismissing debtors' case for failure to file required credit counseling certificate; debtors failed to establish exigent circumstances meriting a waiver of the requirement).

(case involves breach of contract claim for sale and delivery of cows to defendants’ dairy operation; insufficient evidence present to conclude that wife was partner with husband in dairy operation for purpose of holding wife jointly and severally liable). 

(fire at hog confinement facility causing death of 223 hogs not covered by insurance policy which excluded loss caused by mechanical or electrical breakdown or malfunction; while loss from windstorm a covered loss, there was no evidence that strong winds at issue amounted to a windstorm, and high winds not proximate cause of hogs' death). 

(petitioner entitled to equitable innocent spouse relief from one-half of joint income tax liability owed with former spouse because petitioner did not have reason to know that former spouse would not pay one-half of tax liability as ordered by family court during divorce proceedings).

(petitioners, married couple, had ordinary rather than capital gain income from the surrender of life insurance policy; surrender not a sale or exchange of a capital asset; accuracy penalty upheld for failure to report).

(plaintiff's state law claim for failure to warn not preempted by federal law because there was no evidence that FDA would not have permitted the strengthening of the labels of Premarin, Prempro and Provera in a manner consistent with Arkansas law; defendants failed to show that the state requirements obstruct the purposes of federal drug labeling regulation). 

(interim guidance relating to credit for carbon sequestration under I.R.C. Sec. 45Q).

(sales of facial wrinkle removal product are not subject to sales tax because product requires doctor's prescription and product impacts structure of human body).