Annotations 12/2010

(taxpayer can deduct medical expenses and real estate taxes paid by taxpayer's mother even though mother not legally obligated to pay such expenses and taxes; mother paid expenses directly to medical providers and taxes directly to city government; payments treated as a gift to taxpayer (even though no gift tax on amount paid directly to medical care provider; direct payment of real estate taxes is a gift). 

(debtor bought land from friend under installment contract which allowed friend to make advancements for certain expenses associated with the land with any advancements to be added to the principal due; friend made significant additional loans and debtor later filed bankruptcy and trustee sought to sell the land free and clear of all encumbrances, but friend wanted additional loan amounts to be added to principal on basis that such amounts were advancements; creditor failed to prove that loans were advancements that were secured by the land; trustee entitled to sell land free and clear of all liens). 

(defendant's plan to discharge contaminated water from environmental clean-up site in Manistee River watershed into previously unpolluted watershed not allowable use of water). 

(operation of farm tractor cannot serve as basis for sustaining charge of operating a motor vehicle while driving privileges are suspended - "motor vehicle" does not include a farm tractor; but, such operation can serve as basis for sustaining charge of operating a "vehicle" while intoxicated). 

(creditor (bank) sought judgment that debt was nondischargeable under 11 U.S.C. Sec. 523(a)(2)(A) on the basis that the loaned funds were fraudulently obtained; debtor's motion to dismiss granted because 11 U.S.C. Sec. 523(a)(2)(A) and (a)(2)(B) are mutually exclusive;. (A) specifically excludes debts obtained via a statement "respecting a financial condition" and (B) requires that a statement "respecting a financial condition must be in writing to be actionable; debtor merely made oral statements via a telephonic loan application process).

(petitioner not entitled to claim $13,636 Schedule C deduction for vehicle expenses (resulting in net loss on Schedule C) attributable entirely to mileage; only documentation maintained was a calendar on which petitioner wrote destination and miles driven; destination descriptions vague and generic, business purpose for miles driven absent, and no client identification provided). 

(LLC members personally liable for unpaid state excise tax; under state law, excise tax is akin to a sales tax). 

(title to disputed tract of land not quieted in plaintiff due to lack of present intent to deliver deed; deed executed in 1977, not recorded and stored in decedent's desk for 30 years). 

(horse breeding activity conducted with intent to make profit even though business incurred losses for 10 consecutive years; nine factors analyzed and applied).

(IDOR is coupling with the provision contained in the federal Health Care Act of 2010 which provides for health care coverage for nonqualified tax dependents through age 26 (up from age 24); Iowa Code Sec. 422.7(29A) provides that the value of health care coverage for a nonqualified dependent is not subject to Iowa income tax and deduction can be claimed on return for value of coverage included on federal return; IDOR's position is that value of health care coverage provided for nonqualified dependent ages 25 and 26 is also not subject to Iowa income tax). 

(petitioner, an LLC taxed as a partnership, granted a conservation easement; IRS reduced charitable contribution from approximately $2.2 million to under $500,000 and then to $0; land at issue acquired with intent to subdivide and develop property along river; case involves battle over valuation approaches; court holds that value of contributed easement is $560,000 with contribution limit of 30% of contribution base; charitable contribution is a partnership item as the contribution was made by the partnership). 

(case involves various issues concerning application of defendant's zoning ordinance on plaintiff's activities; one claim is that ordinance requiring frontage on a public road to obtain building permit conflicts with MI Right-To-Farm Act by preventing plaintiffs from engaging in agricultural activities; evidence insufficient to show that plaintiff filed request with defendant to build barn; thus, no possible violation of Right-To-Farm Act).

(plaintiff, partnership CPA firm (established as separate S corporations for each partner in firm with each S corporation paying salary to each shareholder in firm), paid CPA-owner $24,000 in annual salary out of CPA's approximately $200,000 in earnings for 2002 and 2003 from CPA business; $67,044 of distributions reclassified as salary each year resulting in $91,044 of FICA/Medicare wages; salary paid unreasonably low - taxpayer, as shareholder paid less than rookie accountant in firm). 

(plaintiff opposed proposed construction by defendant of large-scale dairy; state approved construction in accordance with state law; preliminary injunction granted to plaintiff, but permanent injunction denied by trial court due to plaintiff's lack of standing and failure to show high risk of groundwater contamination; preliminary injunction not dissolved by trial court; trial court judgment affirmed). 

(guidelines issued on the application of I.R.C. Sec. 162(m) (which was added by the Health Care Act to limit to $500,000 of earnings per employee the deduction for remuneration for services provided by persons to some health insurance providers and utilizes aggregation rules across consolidated groups; under a deminimis rule, employer not treated as covered health insurance provider for tax years beginning in 2010 and through 2012 if premiums employer receives are less than 2 percent of employer's gross revenues for that tax year; starting in 2013, employer excepted from provider definition if health coverage insurance received from providing minimum essential coverage are less than 2 percent of employer's gross revenues for the year; definition of "applicable individual" under Sec. 162(m)(6)(F) excludes some independent contractors; as for who is a "covered health insurance provider", premiums received under indemnity reinsurance contract are not "premiums" from providing health insurance coverage).

(sale of two acres of vacant land sold separately from remainder of taxpayer's parcel which contained commercial buildings, not eligible for exclusion from capital gain; while 10-year holding period test satisfied, vacant land (even though part of five-acre parcel taxpayer operated business on) not used in taxpayer's trade or business for requisite 10-year period). 

(amounts that doctors in a medical practice paid for insurance policies provided by a risk retention group that the doctors in the practice planned on forming with other doctors in other medical practices are deductible under I.R.C. Sec. 162). 

(defendant landowner not liable for death of plaintiff's 5-year old son who drowned in defendant's farm pond located on property where plaintiff pastured horses on a fee basis; farm pond is not an attractive nuisance and are open and obvious hazards even to small children; landowner not required to erect barriers or take other precautions to keep children from being injured; immaterial whether child is an invitee or licensee because it is the parents' duty to ensure that child avoids the danger; plaintiff and child appreciated the danger of the pond).

(pesticide drift case that destroyed plaintiff's crops; court holds that plaintiff's causes of action for negligence, trespass and nuisance are not displaced by state pesticide laws; in addition nuisance and trespass claims not barred by an administrative determination that defendant had complied with pesticide laws). 

(debtor is an LLC formed under Kansas law and two of its managers along with a company member of the LLC, moved to dismiss LLC's Chapter 12 petition on basis that one of the members could not put the LLC in bankruptcy without their consent; under KS LLC Act, LLC's Operating Agreement controls dissolution once LLC becomes insolvent; under insolvency rules filing member had become sole member of LLC and had authority to conduct business). 

(taxpayer does not qualify for first-time homebuyer credit because no binding purchase contract entered into by May 1, 2010).

(plaintiffs' case challenging constitutionality of New Jersey Alcoholic Beverage Law can proceed under the Dormant Commerce Clause; statute may discriminate against out-of-state wineries in addition to interstate commerce; court upholds ban on wine shipments from any winery to New Jersey residents).

(tracts of land not qualified to classified as "agricultural" for ad valorem real property tax purposes; lack of evidence of current use in agriculture). 

(plaintiff, grain elevator, sued defendant, neighboring landowner, over defendant's attempts to prevent plaintiff's expansion; court upheld jury verdict for plaintiff). 

(Iowa Propane Gas Association (IPGA) not qualified for sales tax refund on amounts charged for property used for educational purposes via construction contracts; IPGA not a "school, college, or university" as those words are commonly understood, but is a business league organized to promote the propane industry; thus, IPGA does not meet definition of private nonprofit educational institution).

(physical presence in state not required for corporation to establish nexus with state for corporate income tax purposes; LLC at issue was Idaho LLC with all employees located in Idaho, but is registered with IA Sec. of State; LLC is registered agent service that serves process where process server unavailable; IDOR's position contrary to established U.S. Supreme Court precedent set forth in Quill v. North Dakota, 504 U.S. 298 (1992)). 

(regs. specify that qualified settlement income received in connection with the Exxon Valdez civil action to be treated as qualified farm income to the extent of interest and punitive damages with compensatory damages potentially eligible to the extent determined under the normal rules of Sec. 1301; definition of fishing business provided; eligible taxpayers include individual sole proprietors engaged in farming or fishing, partner in a partnership engaged in farming or fishing, and shareholders of S corporations engaged in farming or fishing; taxpayer need not be engaged in farming or fishing in any of the base years; lessors of vessels engaged in fishing are eligible to make election if payments received under lease are based on share of catch in accordance with a written lease entered into before lessee begins significant fishing activities resulting in the catch). 

(two-horse gooseneck trailer not exempt as a "homestead" because it is not a "dwelling house"; trailer does not meet definition of a "manufactured home" and, thus, not exempt up to $3,000 in value under state law; trailer did not qualify as "mobile home" because it did not meet size requirements of "manufactured home"). 

(defines omissions from gross income for purposes of the six-year statute of limitations period for assessing tax attributable to partnership items; regulation takes position that overstatement of basis results in omission of gross income and, as such, extends the statute of limitations for assessing tax or beginning court proceeding for collection of tax without assessment from 3 to 6 years; regulation is contrary to decisions of the Federal Circuit (Salman Ranch), the Ninth Circuit (Bakersfield Energy Partners, L.P.) and the Tax Court (Intermountain of Insurance Service of Vail, LLC, et al. v. Comr); regulation is consistent with Home Concrete & Supply, LLC v. United States, 599 F. Supp.2d 678 (E.D. N.C. 2008) and Brandon Ridge Partners v. United States (M.D. Fla. 2007), and Beard v. Comr., No. 09-3741 (7th Cir. Jan. 26, 2011); regulation entitled to deference even if in conflict with federal court opinions (see, e.g., Swallows Holding, Ltd. v. Comr., 515 F.3d 162 (3d Cir. 2008); regulation applies to all cases with respect to which the period for assessing tax under the applicable provisions has not expired before September 24, 2009).

(Worker, Homeownership and Business Assistance Act of 2009, enacted post-petition, allows net operating losses (NOLs for up to five years rather than the usual two years; court holds that provision allowed debtors to carryback NOLs and that resulting refunds are property of the bankruptcy estate; refunds are the result of pre-petition taxes that had been paid).

(court holds, in case of first impression, that amounts paid to minister by church that minister uses to buy a home and maintain it are not included in the minister's gross income even if they are also used on a second home; court noted that statutory words written in the singular "include and apply to several person, parties or things"; IRS did not question why the allowance was paid or its reasonableness). 

(on motion for summary judgment, court determines that Section 5000A of Patient Protection and Affordable Care Act is unconstitutional as beyond the power of the Congress under the Commerce Clause; the Section imposes a penalty on persons who fail to obtain and maintain "acceptable" health insurance as determined by federal government; court rejects federal government's argument that Section imposes a tax (which is contrary to the President's argument made while promoting the Act that the Section did not impose a tax) and, as such, is not within the authority of the Congress under the Taxation Clause of the Constitution; provision constitutes a regulatory penalty for inactivity; invalidation of other parts of the bill not required). 

(pollution exclusion clause contained in farming operation’s insurance policy held applicable to injuries sustained by worker on road adjacent to farm land who was exposed to accidental mist of anhydrous ammonia fertilizer; definition of “pollution” contained in policy not ambiguous and is not subject to conflicting interpretations; while policy contained exclusion to pollution exclusion clause for “damage caused by accidental drift of vapors, fumes or toxic chemicals as a result of spraying operations”, court did not address application of such exception to the facts of the case). 

(alimony deduction allowed for payments petitioner made to ex-spouse after ex-spouse remarried; payments satisfied I.R.C. Sec. 71(b)(1) because payments were not required to be made under legally enforceable obligation; IRS regulations invalidated). 

(in lengthy opinion, court denies summary judgment motion of delivery drivers in most of the 42 separate actions involved in the case; the drivers had claimed that they were employees rather than independent contractors; multi-state class action involved).

(plaintiff's proposed construction of stable for race horses constituted agricultural building and is exempt from state Construction Code).

(married couple's antenuptial agreement upheld as valid). 

(plaintiffs, dairy farmers, constructed in-ground earthen trench silo to hold corn silage approximately 90-100 feet from neighbor's well; neighbors complained of odor in tap water; defendant ordered plaintiffs to remedy situation by various measures and later issued $33,772 civil penalty against plaintiffs for failure to comply with order and for violation of Clean Streams Law; violations not willful or reckless; case remanded to administrative board to recalculate penalty). 

(certain farm-related expenses incurred during administration of decedent's estate deductible for inheritance tax purposes because they were incurred to maintain, preserve and repair the farming assets; other expenditures were incurred while operating the farming business and are not deductible by the estate). 

(disability payments are includible in income; petitioner was a civil service employee with the Army who retired in 1988 and began receiving disability benefits; amounts not excludible under I.R.C. Sec. 104(a)(4) because civil service retirement system benefits are not paid on account of personal injury or sickness). 

(taxpayer eligible for long-term homeowner credit to apply against cost of constructing new home on same location as old home). 

(taxpayer was not licensed day-care provider due to belief that she was exempt from licensing requirement; business expense deductions for use of portion of home to provide daycare under I.R.C. Sec. 280A(c)(4)(A) & (B) not allowed). 

(petitioner cannot claim bad debt deduction attributable to gross receipts that petitioner's finance company can't collect because petitioner has no involvement with debt after products involved in retail sale giving rise to the debt are sold). 

(court lacks subject matter jurisdiction to hear homosexual divorce case; TX Constitutional provision and related statutory provision defining marriage as between persons of opposite sex did not violate Equal Protection Clause of U.S. Constitution (14th Amend.); rational relationship to legitimate state interest present - the promotion of well-being of children; the general welfare does not require extending marriage option to same-sex couples who are merely members of social units and are not part of a suspect class). 

(retiree's former employer distributed $438,752 from 401(k) account, with slightly over $40,000 distributed directly to petitioner and the balance rolled over to a brokerage company which were eventually used to purchase annuities with pre-tax amounts from 401(k); annuity distributions reported to taxpayer on Form 1099, but taxpayer reported only amount of distribution less amount representing "recovery for investment"; court finds that petitioner's investment in annuities was zero, and annuity payments fully taxable). 

(taxpayer was claimable as dependent on parents' tax return and, thus, was not eligible to claim first-time homebuyer tax credit attributable to post-11/6/09 purchase of home). 

(conservation organization loses exempt status due to acceptance of donations of non-qualified conservation easements, and operating for substantial non-exempt purposes). 

(certain farm-related expenses incurred during administration of decedent's estate deductible for inheritance tax purposes because they were incurred to maintain, preserve and repair the farming assets; other expenditures were incurred while operating the farming business and are not deductible by the estate). 

(boundary dispute case; plaintiffs not entitled to rebuttable presumption of ownership over disputed tract via payment of taxes for over 20 years; boundary line determined by usage as posited by defendant).

(withdrawals from petitioner's I.R.C. Sec. 401(k) taken as a result of financial problems to pay off debt associated with Hurricane Katrina could not be reported and them claimed as a corresponding Schedule A deduction as "unreimbursed employee expenses"; income from petitioner's corporation subject to self-employment tax because it was never separate from the taxpayer (no tax i.d. number obtained); unsubstantiated deductions disallowed; accuracy-related penalty imposed).