Annotations 08/2009

(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).

(payments from farming cooperative to members and nonmember patrons qualify as per-unit retain allocations paid in money; cooperative's DPAD to be computed without regard to deductions for those payments).

(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).

(plain language of 11 U.S.C. Sec. 707(b)(2)(A)(ii)(I) permits a debtor with above-median income to claim a vehicle-ownership expense for a vehicle that the debtor owns outright and without encumbrance; court joins Fifth and Seventh Circuits).

(plaintiff granted partial summary judgment in adversary proceeding against debtor for amount debtor charged on credit card to pay employment taxes and penalties owed by his business; debt incurred to pay a nondischargeable tax debt).

(Fair Labor Standards Act case involving the issue of payment for donning and doffing and defendant's motion to dismiss). 

(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).

(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).

(remarried widows of U.S. Army retirees can collect full amount of death benefits from defendant because remarriage occurred after age 57; Veterans Benefits Act of 2003 allows for full Dependency and Indemnity Compensation (DIC) payments (which are automatically paid to surviving spouses of veterans who died on active duty or because of service-related disability) to surviving spouses who remarry after age 57 and states that DIC benefits won't decrease if surviving spouse receives other benefits; but, Survivor Benefit Plan (SBP) program (which allows military personnel to have premiums deducted from pay in order to provide surviving spouses with death benefits) specifies that SBP payments are reduced by the amount a surviving spouse receives in DIC payments; court held that offset provision violates the Veterans Benefits Act).

(defendant's conviction for violating vicious dog ordinance reinstated; ordinance rationally related to City's legitimate interest in protecting citizens from vicious dogs).

(defendant cattle ranchers not liable for plaintiff's personal injuries sustained as a guest while riding a horse at the defendant's ranch; plaintiff did not present triable issue of material fact showing that horse was unduly dangerous and defendant did not have duty to question plaintiff about her horseback riding skills after plaintiff assured defendant that she had ridden horses on prior occasions).

(defendant responsible for clean-up of former oil refinery site under Resource Conservation and Recovery Act because oil refinery was owned by defendant's predecessor who had created the contamination; EPA's claim for injunction not discharged upon defendant's reorganization bankruptcy filing).

(plaintiff, prospective buyer of horse, was injured when knocked over by horse; jury verdict for plaintiff upheld - defendant in possession and control of horse at time of injury and solicited the plaintiff as a buyer; to the extent that insurance payment of $2,000 amounted to double recovery, there was nothing in the insurance policy, in public policy, or the law that would prevent the court's award). 

(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).

(I.R.C. Sec. 170(f)(14) deduction reduced by amount which bears the same ratio as the rehabilitation tax credits allowed for the 5 preceding tax years over the FMV of the building on the date of the contribution).

(dyed diesel fuel seller need not pay sales tax on environmental protection charge; separately stated, legally imposed fees are excluded from taxable sales price of tangible personal property).

(even though single-member LLC is disregarded entity for federal tax purposes, individual not liable for gift tax on underlying assets contributed to LLC before contribution of LLC interests to trusts for individual's son and granddaughter; regulations do not support IRS position that LLC should be disregarded in determining tax on transfer of interests).

(Clean Water Act citizen suit; plaintiff's motion for summary judgment and injunctive relief granted; defendant, Secretary of State EPA, found to be discharging pollutants into navigable waters of U.S. without NPDES permit and suit not barred by Eleventh Amendment).

(guidance on charitable contributions of facade easements).

(first-time homebuyer credit may be claimed for purchase of duplex, but credit only claimable against portion of purchase price attributable to portion of duplex that taxpayer will use as principal residence).

(under facts presented, state animal cruelty statute upheld as constitutional; plaintiff’s acts were not reasonable acts of discipline or training of a dog) – see also Tooley v. State, 911 N.E.2d 721 (Ind. Ct. App. 2009)(same – case involved cat).

(forward grain contracts rendered unenforceable when defendant's license to deal in grain was revoked making it illegal for the defendant to take delivery of the grain under the contracts and making assignments of the contracts to the assignees ineffective; arbitration clause of National Grain and Feed Association invalidated as unconscionable). 

(IRS concedes that an overstatement of basis is not an omission from gross income for purposes of extending the statute of limitations under I.R.C. Sec. 6501(e)(1) and that an item must be fully omitted to be covered by I.R.C. Sec. 6501(e)(2)).

(plaintiff, Kansas bank, had banking relationship with a Kansas feedyard that went bankrupt; plaintiff alleged tort of conversion against two Nebraska cattle feeding operations who engaged in cattle transactions with Kansas feedyard; defendant moved to dismiss or transfer venue due to lack of personal jurisdiction; motion denied because defendants had minimum contacts with Kansas via continuing business relationship with Kansas feedyard).

(unsecured creditors' committee seeks to avoid, as a transfer made for less than reasonably equivalent value, an alleged disproportionate allocation of proceeds of the sale of the debtor's assets; motion denied because there was no transfer before petition date, but merely an agreement to transfer multiple properties owned by different entities and allocate purchase price).

(family limited partnership fully funded under state (Texas) law prior to decedent's death - immaterial that record title to property not transferred prior to death and decedent contractually obligated to fund general partner interest before death; decedent intended to transfer property to FLP at time she signed the FLP agreement; FLP formed for legitimate business reasons and transfer was for full and adequate consideration; estate entitled to refund of estate tax).

(plaintiff, owner and operator of casinos, restaurants, hotels and other retail establishments in Deadwood, SD, was financially impacted by wildfire which resulted in state declaration of city closure and evacuation; defendant is provider of electric energy through transmission lines via easements for such lines; plaintiff sued defendant for creation of public nuisance which was the direct and proximate cause of plaintiff's damages (food spoilage and physical damage to property) and defendant moved for summary judgment; defendant's motion denied).

(purchase of propane pool heater for use at tropical fish farm exempt from sales and use tax because heater used exclusively on farm).

(case involves relationship of parties involved in watermelon harvesting operation - independent contractor or employee). 

(IRS properly denied plaintiff's claimed capital loss; transaction that created high basis in stock lacked economic substance and is disregarded for tax purposes).

(taxpayers, married couple, lost amounts overpaid for 2000 and 2001 because returns for those years not filed until May 27, 2008, well beyond the three years of the due date for the return or within one year after payment was made; taxpayers could not have overpayment applied to future tax liability on line 71 of Iowa Form 1040). 

(plaintiff, a cotton gin operator that routinely added moisture to cotton after ginning, wrapped its cotton bales in bags that the defendant designed and manufactured; upon inspection, cotton found to have large spots of mold and two cotton marketing associations sued plaintiff for damaged bales; plaintiff sued defendant on theories of strict liability failure to warn, strict liability product defect, negligence and breach of implied warranties; trial court granted summary judgment for defendant and plaintiff appealed; on appeal court held that: (1) plaintiff knew or should reasonably have been expected to know of the danger of bagging cotton with excess moisture; (2) plaintiff failed to show that it put defendant's bags to a reasonably anticipated use or a foreseeable misuse because plaintiff added to much moisture to cotton before bagging; (3) negligence and implied warranty claims properly dismissed because plaintiff failed to establish a reasonably anticipated use).

(sales of solar-powered attic fans not subject to sales and use tax; fans convert solar radiation into electrical energy).

(Energy Policy and Conservation Act of 1975 preempted local rule that required all taxis to be hybrid vehicles).

(defendant liable to plaintiff on contract theory for damages caused by negligently performed labor when installing wind and solar generating systems on plaintiff's ranch).

(plaintiffs' claims that defendant's operation of gun range which discharged bullets into Lake Michigan violated various environmental laws dismissed for lack of jurisdiction due to plaintiffs' lack of constitutional standing; plaintiffs' interests too generalized to give rise to standing).

(premises liability case for injuries arising from ATV accident on land operated by the defendant corporation that was owned individually by the corporation's sole shareholder who leased the land to the corporation; individual shareholder not entitled to summary judgment on liability issue due to close relationship with corporation - evidence could lead to a finding that individual is alter ego of corporation).

(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).

(cooperative's DPAD limited to one-half of W-2 wages in accordance with Treas. Reg. Sec. 1.199-7 such that expanded affiliate group (EAG) members are treated as a single corporation; facts involved a cooperative with a wholly-owned subsidiary).

(proceeds received upon married couple's sale of home before using home as principal residence for 2 years qualifies for exclusion of gain under I.R.C. Sec. 121; primary reason for sale was unforeseen circumstance - change in military assignment). 

(cooperative's DPAD limited to one-half of W-2 wages in accordance with Treas. Reg. Sec. 1.199-7 such that expanded affiliate group (EAG) members are treated as a single corporation; facts involved a cooperative with a wholly-owned subsidiary). 

(proceeds received upon married couple's sale of home before using home as principal residence for 2 years qualifies for exclusion of gain under I.R.C. Sec. 121; primary reason for sale was unforeseen circumstance - change in military assignment). 

(payments from a farming cooperative qualify as per-unit retain allocations paid in money with result that cooperative's DPAD should be computed without regard to deductions for payments made to farmers for commodities). 


(payments from a farming cooperative qualify as per-unit retain allocations paid in money with result that cooperative's DPAD should be computed without regard to deductions for payments made to farmers for commodities). 

(state recreational use statute precludes defendant's liability for death of 13-year old boy who died after touching an active electric power line while jumping off a hydroelectric generation facility into the waters of the Presumpscot River at a local swimming spot).   

(defendant's motion for summary judgment against plaintiff's nuisance claim granted; defendant had acquired a prescriptive easement to maintain the alleged nuisance in 2002 which was 10 years after the plaintiff first felt the harmful consequences of the alleged nuisance).

(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). Note: On 1/26/11, the 7th Circuit reversed the Tax Court's opinion.

(reflective roof surface associated with photovoltaic solar generation system qualifies as I.R.C. Sec. 48 property because reflective surface is uses solar energy to directly generate electricity and contains the appropriate equipment and materials).