Annotations 07/2009

(majority shareholders in closely-held corporation did not breach fiduciary duties to minority shareholders; majority's actions consistent with powers given to them in operating agreement and done with business purpose).

(Texas city ordinance prohibiting the keeping of four-legged animals within town borders violates the Texas Religious Freedom Restoration Act because the ordinance prevents the plaintiff, a Santeria Oba Oriate priest (combination of Catholicism and African Tribal Religion) from performing animal sacrifice ceremonies essential to plaintiff's religious practice without a compelling government interest to ban such practices).

(EPA interpretation of applicable RCRA permit regulations upheld; RCRA inapplicable to regular, intended use of lead shot on shooting range and plaintiff failed to offer sufficient evidence to create material issue of fact as to whether defendant discharged lead shot into "navigable water" from a "point source"; trial court's award of summary judgment for defendant affirmed).

(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).

(debtors not eligible for Chapter 12 bankruptcy; part of debtors' business involving raising of horses constitutes "farming operation" but portion of business involving horse boarding/training services does not constitute "farming operation"; income from horse raising activity only constituted approximately 12 percent of debtors' gross income during applicable timeframe). 

(bankruptcy trustee brought adversary action to sell 80 acres of farmland in which debtor was a joint tenant with his brother and their father; father's funds were used to buy the land and sons' names put on deed as surviving joint tenants merely for estate planning purposes; court held that debtor's bankruptcy estate has no interest in the land for purposes of 11 U.S.C. Sec. 363(h) and that 11 U.S.C. Sec. 541(d) limits estate's interest to debtor's bare legal title; strong-arm powers of 11 U.S.C. Sec. 544(a)(3) are limited to recovery of transfers made by a debtor and do not include recovery of an equitable interest in real property held by debtor's father as joint tenant; even assuming 11 U.S.C. Sec. 544(a) would allow the avoidance of equitable interests, trustee has notice of father's equitable interest and is not a bona fide purchaser for value who could purchase debtor's interest in the land free of the father's interest).

(petitioner on cash method held to be in receipt of disbursement from deferred compensation plan as of date of actual receipt of check (Jan. 2) and not when he was advised that the check was available to be picked up (Dec. 31 of prior year); office at which checked could be picked up closed on Dec. 31 so petitioner not in constructive receipt of check as of Dec. 31 of prior year). 

(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). 

(owner and lessor of condemned commercial real estate has three years to acquire qualifying like-kind replacement property, starting from the end of the tax year in which the taxpayer took actual or constructive receipt of the proceeds from the condemnation).

(guidance requires notification of split-estate surface owners when subsurface included in a lease sale; companies nominating parcels on split-estate lands must provide name and address of the surface owners for BLM to process the nomination; requirement to include such information effective immediately, but requirement to notify landowners effective beginning with October 2010 lease sales). 

(seller terminated real estate sale contract upon learning of survey mistake; contract clause provided that either party could terminate the contract if the actual acreage contained in a survey varied by more than 10 percent from 5,000 acres; court held that contract terms allowed seller to terminate the contract, and title problems were not relevant to the termination provision in the contract).

(both NRSA and non-NRSA grant payments (stipends) from university to postdoctoral fellows are subject to FICA tax because they are compensation for services under I.R.C. Sec. 117(c) and because there is an employment relationship between the university and the postdoctural fellows receiving payments).

(debtor failed to meet undue hardship test of 11 U.S.C. Sec. 523(a)(8) to have student loan indebtedness discharged; debtor had sufficient income to maintain a minimal standard of living and pay the student loan debt).

(plaintiff conveyed farm to Farm Service Agency (FSA) in satisfaction of $686,349 debt and entered into five-year lease-back agreement under which plaintiff could buy the property back at the end of the five-year term at its appraised value at that time; FSA appraised property at $899,000 and plaintiff objected; FSA NAD ultimately upheld appraisal value and plaintiff brought court action; court held that plaintiff failed to show that FSA's decision was arbitrary or capricious, and plaintiff's claim for damages based on federal farm policies without merit).

(child exerted undue influence on her mother by convincing the mother to leave the other eight siblings one dollar each under the terms of the mother's will while will left everything to the one child; child had confidential relationship with mother who relied on child for meals, housekeeping and transportation and child controlled mother's bank account and was agent under POA; at time of will execution, mother had suffered a stroke that affected her memory and thinking abilities; child kept dealings with mother secret from other siblings).

(issuance of non-discharge NPDES permit for CAFO upheld; defendant considered and concluded that CAFO was not in a sensitive area, plaintiff failed to prove that issuance of permit did not comply with all regulatory and statutory requirements, and defendant cannot overturn administrative agency decision to issue permit based on speculation of future non-compliance with permit requirements).

(LLC interests are not limited partner interests for purposes of Treas. Reg. Sec. 1.469-5T(e)(3)(i)). 

(defendant's interpretation of its surface water regulation which contains agricultural exemption partially upheld; but portion of regulation abrogating exemption for agricultural drainage activities that are "predominant" where "predominant" defined as "more than incidental" invalidated).

(reversal of district court judgment concluding that mortgage was invalid under Minnesota law because both spouses did not sign it; plaintiffs estopped from claiming invalidity of mortgage because nonsigning spouse knew of and intended to mortgage the homestead, retained the benefits of the mortgage and defendant changed position based on assumed validity of mortgage; dissent pointed out that defendant never detrimentally relied on the non-signing spouse's language or conduct in making loan - nothing the plaintiff's did or said caused defendant to lend funds or forego obtaining non-signing spouse's signature on necessary documents).

(debts owed to creditor not discharged merely because creditor issued account statements indicating zero balances on loans which were charged off and issued tax forms (1099-Cs) to report the cancellation of indebtedness; issuance of account statements indicating zero balance not legal equivalent of discharging liability on the debt, and issuance of tax forms did not discharge the debts, but just an informational filing that didn't, by themselves, satisfy state law for discharging debt).

(government entitled to injunction barring defendant from placing additional fill or performing any additional earthmoving work on subject property; plaintiff discharged dredged spoil, rock, sand and dirt (which are within the CWA's definition of "pollutant"), into regulable wetlands under either standard espoused in Rapanos, without a permit; activity not within exemption for "normal farming activities" because farming activity not ongoing and modifications to hydrological regime necessary to resume farming practices and some areas had been converted to other uses).

(grantor's contribution to trust was taxable gift; no ruling made on whether trustee's discretion to distribute income and principal of trust to grantor causes trust's assets to be included in grantor's estate via I.R.C. Sec. 2036). Priv. Ltr. Rul. 200944012 (Jul. 27, 2009)(owner and lessor of condemned commercial real estate has three years to acquire qualifying like-kind replacement property; three-year period begins from the end of the tax year in which owner and lessor took actual or constructive receipt of the proceeds from the condemnation).

(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).

(taxpayers who obtain benefits and burdens of ownership of new home can claim first-time homebuyer credit even if seller still retains legal title; involved house purchased on contract for deed).

(debtors acted in bad faith upon failing to disclose in bankruptcy filings their borrowing of $17,000 from 401K account and depositing the sum in their checking account; fact that debtors could have exempted the funds if they had accurately reported the loan does not change the conclusion that they acted in bad faith and bankruptcy court did not abuse discretion in disallowing debtors' attempt to amend their exemptions because of the bad faith).

(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).

(government had jurisdiction over subject wetlands under Justice Kennedy's "substantial nexus" test in Rapanos v. United States, 547 U.S. 715 (2006) because they were adjacent to a lake; trial court did not err in determining that U.S. had jurisdiction to hear government's complaint, and did not err in admitting Army Corps of Engineer's expert evidence establishing existence of wetlands under Daubert test; trial court's order requiring defendant to restore wetlands in issue not arbitrary or capricious and did not violate defendant's equal protection rights under 14th amendment).

(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).

(debtor's bankruptcy case dismissed; debtor failed to obtain credit counseling, failed to file schedules or a plan, and failed to show that any plan could be proposed or confirmed and had only sporadic income from occasional sales of farm animals).

(because neither the Clean Air Act nor the Georgia Air Quality Act regulate carbon dioxide emissions, air quality permit issued to pulverized coal-fired electric power plant was not invalid for its failure to include limit on power plant's carbon dioxide gas emissions; trial court judgment which invalidated the issuance of the permit reversed; on remand, administrative judge must review permitting process).

(defendant's promulgation of "nonattainment area" designations for annual national ambient air quality standards applicable to fine particulate matter upheld; defendant complied with the statute). 

(although parent had previously brought nuisance claim against defendant are was awarded $100,000 in damages for the defendant's creation of a temporary nuisance with respect to defendant's hog farm operation, child of parent (who is now an adult, but was a minor at the time of the prior case) not precluded by res judicata from bringing own claim for damages for direct, personal injuries arising from the nuisance as a resident of the parents' home; summary judgment for defendant on child's nuisance claim reversed and case remanded to conduct new trial on child's nuisance claim). 

(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).

(cotton was damaged at defendant's cotton gin facility by excessive moisture which rendered the cotton unmerchantable; because cotton was in defendant's custody, care and control at time of occurrence of damage, exclusionary language in policy applied and defendant's agribusiness policy excluded coverage under its provision excluding "defects, errors and omissions").

(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)).

(infant formula is "food" for the infant and is not a deductible medical expense under I.R.C. Sec. 213).