Annotations 04/2011

(skittish behavior of six-day old colt which backed into stall door and knocked plaintiff to ground when halter attempted to be placed on it did not rise to a "proclivity to act in a way that puts others at risk of harm"; defendant's motion for leave to reargue prior cross motion for summary judgment granted). 


(case involves construction of Texas Equine Activity Limitation of Liability Act which limits liability for injuries arising from inherent risks associated with equine activities; inherent risk is one that is associated with the activities involving equine animals; act limits liability for failing to fully assess person's ability to participate in equine activity if such failure does not cause injury; under facts of case, rider injured in fall from horse during trail ride and sued horse owner; rider claimed injury resulted not from inherent risk of falling from horse, but by owner's negligence in selection of trail to be ridden that had mud and vines on it; Act's reference to "inherent risk of equine activity" refers to risks associated with the activity rather than simply those risks associated with innate animal behavior; under common law, there is no liability for injury caused by domestic animal unless animal is abnormally dangerous and owner had reason to know of such propensities or owner was negligent in handling the animal, thus such narrow construction of Act meaningless; Act does not require formal, searching inquiry into capabilities of potential rider by owner before ride occurs).   


(decedent's estate not entitled to lack of marketability or lack of control discount; no I.R.C. Sec. 2053 deduction allowed in connection with lawsuit against attorney). 


(estate not entitled to $30 million deduction for claim against estate from pending malpractice litigation - value uncertain at time of decedent's death; estate entitled to deduct amount actually paid during administration of estate). 


(real estate included in decedent's estate, including 4,056-acre ranch, properly valued via income capitalization approach as were two valuable paintings decedent owned). 


(petitioner, heavy-equipment operator, was member of union with served as employment agency and would get dispatched to jobs using his own transportation; for year in issue, petitioner made repairs to rental property he owned and received unemployment compensation and settled debt with GMAC for less than what was owed; court upholds IRS determination that repair expenses had to be added to basis in property, unemployment compensation includible in income as was cancelled debt).


(irrigation well pump qualifies as trade fixture that is subject to personal property tax rather than a fixture that is taxed as real property under Neb. Rev. Stat. Sec. 77-105; pump comparable to other tangible personal property defined in statute that is used directly in "commercial, manufacturing, or processing activities conducted on real property"). 


(summary judgment case where taxpayer claims entitlement to refund because defendant improperly denied business expenses and depreciation deductions and incorrectly required plaintiff to recognize gain on transaction designed to qualify as like-kind exchange involving aircraft; plaintiff claimed business expense deductions allowed because personal business activities and business activities of corporate entities are intertwined sufficiently to be viewed as a "unified business enterprise; taxpayer was significant owner of Hard Rock Cafe restaurant chain and used aircraft that were owned in various S corporations; IRS disallowed business expense deductions related to aircraft because S corporations not operated for profit; court applied "unified business enterprise theory" such that losses generated by S corporations (or other pass-through entities) can be aggregated with taxpayer's other activities conducted either individually or through commonly controlled entities to determine if overall profit motive present for purposes of I.R.C. Sec. 183; court's analysis specific to S corporations and other pass-through entities (with such transactions typically arising where taxpayer owns property that is leased to related business operation), and likely not applicable to C corporations; categorization of aircraft transaction as like-kind exchange dependent on substantiation of business expenses, so no ruling on validity of like-kind exchange treatment; taxpayer's motion for summary judgment granted in part and denied in part; defendant's motion for summary judgment denied). 


(reformation of trust by court would not disqualify trust's tax status under I.R.C. Sec. 664 if trust distributes all amounts to beneficiary from prior years within 120 days of receipt of private letter ruling; reformation was not self-dealing under I.R.C. Sec. 4941; trust was created with intent to provide lifetime annual income to beneficiary by virtue of a CRUT, but scrivenor used wrong form and created net income with makeup charitable remainder unitrust (NIMCRUT); petition filed to reform trust to a CRUT). 


(IRS regulatory position that overstated basis of items on tax return are subject to six-year statute of limitations to the extent the omission from gross income exceeds 25 percent of amount reported on return invalidated; court follows prior opinion in Intermountain Insurance Service of Vail LLC, et al. v. Comr., 134 T.C. No. 11 (2010) which invalidated Treas. Reg. Sec. 301.6501(e)-1T; modified regulatory language still rejected on basis that definition of omission from gross income not limited to context of trade or business; 2011 U.S. Supreme Court opinion in Mayo Foundation for Medical Education and Research v. United States applying Chevrondeference to treasury regulations immaterial; three-year statute of limitations of I.R.C. Sec. 6501(a) applicable; IRS final partnership administrative adjustment untimely). 


(taxpayer, commission seller, reported income of $3,307 and claimed business deductions of $17,000; shoebox of receipts provided to tax preparer and court noted it was unclear whether preparer made any attempt to distinguish deductible from non-deductible expenses; largest expense was for taxpayer's car; mileage log kept, but nothing more than odometer reading recorded in log with no information of where taxpayer drove, purpose of trip or business relationship to persons visited; log included 27 miles driven in daily work commute; taxpayer conceded that some personal trips included and presented no evidence of appointment books, calendars or maps of sales territories to corroborate log; deduction for mileage expenses denied in full for failure to satisfy substantiation requirements of I.R.C. Sec. 274(d) and court not permitted to estimate business mileage because I.R.C. Sec. 274(d) supersedes Cohan rule).  


(taxpayer's receipt of disability payments from U.S. Office of Personnel Management are includible in income; taxpayer worked for U.S. Dept. of Veterans Affairs as claim examiner during which time taxpayer put on disability; while on disability taxpayer attempted to get job back and had applied for over 1,200 jobs since retiring from VA; taxpayer conceded amounts not excludible under I.R.C. Sec. 104; 10 percent early withdrawal penalty applies to taxpayer's withdrawal from IRA - disabled for SS or employment purposes not necessarily "disabled" within meaning of I.R.C. Sec. 72(t); no doctor's certification or other evidence substantiating nature or severity of taxpayer's condition or whether it could be remedied).


(disposable "to go" containers sold to restaurants are subject to IA sales and use tax; containers are distributed by restaurants after customer's meal and cost of containers factored into overall price of meals; point of sale is when supplier sells containers to restaurants, so no resale involved). 


(insurance case involving tractor/car accident in which tractor driver was husband of car driver and died at the scene; decedent's son in car at time of accident was step-son of vehicle driver and sued step-mom through his natural mother for negligence and sought damages for mental distress caused by witnessing his father's death; in separate action decedent's estate filed wrongful death action; based on language of policy that said that bodily injury to one person included all injury and damages resulting from that bodily injury, claims arising from son's witnessing his father's death were included in policy liability limit and not entitled to separate limit - including emotional distress). 


(plaintiff, dairy operation, appeals grant of summary judgment to USDA on USDA's interpretation of 2006 amended Arizona-Las Vegas Milk Marketing Order which disqualified plaintiff from producer-handler status for April 2006 because plaintiff exceeded monthly 3 million pound cap; USDA's interpretation of regulation not unreasonable). 


(defendant willfully violated federal minimum wage and overtime laws; defendant paid disabled persons to work in defendant's turkey processing facility in eastern Iowa $.41/hour for over 20 years; most workers resided in 100-year old "bunkhouse" with boarded windows and space heaters; defendant charged employees room and board and was listed as designated payee of workers' Social Security benefits; defendant claimed deductions for employees room and board costs and reimbursed itself for such expenses from employees' Social Security benefits; court ordered defendant to pay $880,777 in back wages and same amount in liquidated damages; trial scheduled for other claims involving, among other things, violation of Americans With Disabilities Act). 


(defendants found negligent for providing contaminated dairy cattle minerals to plaintiff that caused illness in and death of plaintiff's cows; $825,000 damage award upheld, but amount of attorney fees to be re-determined on remand). 


(case involves tax years 1964-1971; petitioner deceased spouse who suffered spousal abuse during the years at issue entitled to innocent spouse relief for all years except 1966 and 1971 - no joint return filed those years).


(debtor's three IRAs not exempt from bankruptcy estate and are reachable by creditors; debtor had previously (and many years in the past) engaged in prohibited transactions with the IRAs related to borrowing from the IRA and improper distributions and contributions). 


(plaintiffs own game ranches, most of which are defined by administrative rules as "wildlife;" plaintiffs seek declaratory ruling from defendant as to whether such animals are "property of the state" as defined by statute; defendant ruled that state had no ownership or proprietary interest in plaintiffs' animals and plaintiffs' sought judicial review; applicable statute classifies plaintiffs' animals as "wildlife," but state property interest in wildlife is not proprietary or possessory that amount to ownership; state merely has regulatory authority over rather than ownership of such animals). 


(case involves numerous claims against defendant, operator of a chicken processing plant, one of which involves claim for violation of FLSA for not counting time spent donning and doffing required protective gear toward total weekly hours which, if counted, would result in overtime wages being paid; court rejects claim based on holding of Sepulveda, et al. v. Allen Family Foods, Inc., 591 F.3d 209 (4th Cir. 2009); donning and doffing protective gear constitutes "changing clothes" under FLSA and is excludible from compensable time under Section 203(o) of the FLSA; employees had been compensated based on "line time" for many years before the negotiation of the parties' 2005 collective bargaining agreement). 


(widow of partnership partner (partnership owned real estate and operated nursery) sought partition of land owned by partnership and sale of partnership assets to obtain estate's one-third of partnership; trial court order affirmed that land be sold at auction and proceeds partitioned and that expenses be paid from sale before proceeds distributed to estate and remaining partners).


(civil rights case where plaintiff claims that defendants issued an unconstitutional civil infraction ticket for storing a trailer (on which plaintiff conducts his roadside farm stand) on a vacant lot in violation of a township ordinance; plaintiff claims that he was ticketed in retaliation for giving testimony in federal case against the township for which a judgment was entered against the township; township trustee wrote letter to plaintiff's counsel stating that citation unwarranted and that no action would be taken; plaintiff subsequently sued for civil rights violations; plaintiff's claims dismissed including procedural due process claim - although ticket issued, township made no effort to enforce it, so no decision rendered on any level requiring plaintiff to remove trailer). 


(case involves defendant's motion in limine to exclude testimony concerning valuation methods and evidence that IRS used to determine discounts for minority interest and lack of marketability; motion granted; IRS not required to use same methodology in subsequent refund proceeding as was used in initial assessment determination). 


(defendant, public water authority, took plaintiffs' riparian rights entitling plaintiffs to compensation; defendant used power of eminent domain to acquire land and diverted by inter-basin transfer up to 30.5 million gallons of water daily from Deep River Basin to Haw and Yadkin River Basins; dam constructed and lake filled with diverted water to create public water supply; water flow in Deep River diminished as result of project which impaired plaintiffs' ability to produce electricity; plaintiffs have sufficiently defined interest in rate of water flow in Deep River and riparian rights are vested property rights in natural flow of water arising out of land ownership of land bounded or traversed by navigable water; reduction of flow is compensable taking; capitalization of income approach appropriate method to calculate plaintiffs' compensation owed). 


(defendant properly convicted of waste of a game animal; state able to prove game meat unfit for human consumption via photographs offering visual representation of carcass condition which was substantially unchanged from time of seizure).  


(defendant, public water authority, took plaintiffs' riparian rights entitling plaintiffs to compensation; defendant used power of eminent domain to acquire land and divert by inter-basin transfer up to 30.5 million gallons of water daily from Deep River Basin to Haw and Yadkin River Basins; dam constructed and lake filled with diverted water to create public water supply; water flow in Deep River diminished as result of project which impaired plaintiffs' ability to produce electricity; plaintiffs have sufficiently defined interest in rate of water flow in Deep River and riparian rights are vested property rights in natural flow of water arising out of land ownership of land bounded or traversed by navigable water; reduction of flow is compensable taking; capitalization of income approach appropriate method to calculate plaintiffs' compensation owed). 


(court has jurisdiction to hear cases involving decisions by IRS to ignore taxpayers' hearing requests; IRS cannot ignore such request without providing rationale). 


(police officer became permanently disabled as a result of an on-the-job injury and received pension distributions; amounts received not taxable disability benefits after taxpayer turned 50). 


(for 2011, credit under I.R.C. Sec. 45(a) (renewable electricity production credit) is 2.17 cents per KwH and 1.08 cents per KwH for sale of electricity produced in open-loop biomass facilities, small irrigation power facilities, landfill gas facilities, etc; credit for refined coal production under Sec. 45(e)(8)(A) is $6.33/ton on sale of such coal).


(taxpayer's method of allocating costs of condensing unit for solar energy system acceptable; certain system components qualified as solar electric property for purposes of the residential energy-efficient property credit under I.R.C. Sec. 25D). 


(bankruptcy trustee motioned for additional time to decide whether to assume or reject executory contract - coal operating agreement; motion granted by bankruptcy court and concluded that agreement was property of bankruptcy estate (meaning that trustee could assume or reject it); 10th B.A.P. affirmed and debtor appealed and trustee moved to dismiss appeal as moot; appeal not moot because trustee had not established that coal development company did not have alternative relief available; motion to dismiss appeal denied). 


(Chapter 12 case; individual hog farmers owned and controlled debtor, an LLC; hog farmers filed bankruptcy on same day that LLC filed; 9,320 hogs sold by LLC to hog farmers over 10-month period; at time farmers filed bankruptcy, all hogs not yet paid for; at issue was 5,002 hogs that lender claimed were sold to farmers and not subject to statutory ag lien; court agreed on basis that affidavit supported sale along with invoices; lack of sufficient documentation of sale along with close relationship of parties not sufficient to negate purported sale). 


(petitioner not entitled to EITC or additional child tax credit; no qualifying children and income above applicable phase-out level). 


(business expenses denied because business activity had not yet begun - not yet functioning as a going concern). 


(expenses associated with petitioners' operation of adult caregiver business in home deductible; portion of home used exclusively for business; some deductions disallowed because not associated with business; accuracy-related penalty applied). 


(case involves charitable deduction for non-cash contributions; some deductions were substantiated but court held that petitioner could not prove transfer of title to charity associated with a property (copies of original deeds not provided) nor could petitioner get deduction for costs associated with relocating house to property).


(Presidential proclamation designating May 6, 2010 as National Day of Prayer and requesting that citizens "...pray or otherwise give thanks, in accordance with their own faiths and consciences..." not challengeable by plaintiffs due to lack of standing to challenge the proclamation as unconstitutional; President merely issued a request and not a command and court noted that plaintiffs' hurt feelings are not the same as legal injury; long-standing tradition of recognizing day annually as National Day of Prayer). 


(motion for reformation of warranty deed granted and upheld on appeal; sales contract for 176.52 acres reserved to sellers all minerals, royalties and timber interests in the land, but deed did not contain mineral reservation; lawyer who prepared sales contract and deed used title insurance commitment's legal description of property (which did not contain mineral reservation) when preparing warranty deed and did not compare deed with sales contract; scrivenor's error sufficient to show mutual mistake; deed not ambiguous). 


(defendant appeals Board of Assessment order that reclassified parcel of real estate as ag property for tax years 2007 and 2008; reversed - no grazing of livestock or crop growing activities present; property not sufficiently connected to other land and not connected by use with other land so as to be classified as ag land; property not used for conservation purposes; Douglas County Board of Equalization v. Clarke, 921 P.2d 717 (Colo. 1996) distinguished). 


(bill specifies that in any action for private nuisance the court or jury must visit the site in question if any party makes a request; bill specifies that exclusive damages that can be awarded for private nuisance arising from property used for farming, agriculture crop or animal production purposes are (for permanent nuisances) compensatory damages measured by drop in fair market value of claimant's property caused by the nuisance (capped at fair market value of property, and (for temporary nuisance) compensatory damages measured by drop in fair market value of property as a result of the nuisance; if successive claims for temporary nuisance filed activity deemed a permanent nuisance). 


(debtors, married couple, operate farm with son and married couple filed Chapter 12 and son filed separate Chapter 12; parties form LLC in 2008 for which a loss was reported in 2008 and 2009; wife worked off-farm as a school teacher and LLC projected to have income in 2010 and 2011 based on wife's off-farm income and husband's receipt of retirement income; eligibility for Chapter 12 challenged for failure to have more than 50 percent of income from farming during applicable measuring period; farm income flows through to debtors for purposes of 50 percent test and debtors determined to have sufficient farm income from which to pay debts under Chapter 12 plan; debtors qualify for Chapter 12; in later case in which bankruptcy trustee filed objections to debtors' amended Chapter 12 plan, court determined that debtors' plan did not meet confirmation requirements of 11 U.S.C. Sec. 1225 in that debtors did not commit all disposable income to their plan as required by Sec. 1225(b)(1)(B); In re Sandifer, No. 11-00095, 2011 Bankr. LEXIS 1926 (Bankr. D. S.C. May 25, 2011)). 


(Iowa nonresident sold stock in Iowa-based family S-corporation to create ESOP; IDOR views creation of ESOP as resulting in stock attaining independent business situs because stock used as integral part of business activity occurring in Iowa via creation of ESOP; capital gain earned by nonresident considered Iowa source income; no indication given as to where outer limit of such standard is located; current regulations do not require such standard). 


(debtors, married couple, operate farm with son and married couple filed Chapter 12 and son filed separate Chapter 12; parties form LLC in 2008 for which a loss was reported in 2008 and 2009; wife worked off-farm as a school teacher and LLC projected to have income in 2010 and 2011 based on wife's off-farm income and husband's receipt of retirement income; eligibility for Chapter 12 challenged for failure to have more than 50 percent of income from farming during applicable measuring period; farm income flows through to debtors for purposes of 50 percent test and debtors determined to have sufficient farm income from which to pay debts under Chapter 12 plan; debtors qualify for Chapter 12). 


(plaintiffs (peanut farmers) claim that 2002 Farm Bill which repealed peanut quota and replaced it with other price support measures and mandated that amount used to calculate indemnity for non-quota peanut losses under 2002 MCPI policy would increase from 16 cents to 17.75 cents per pound (rather than 31 cents per pound prior to enactment of 2002 Farm Bill violated their due process rights and constituted breach of contract; claims rejected). 


(case involves action brought by original owner of property under Farm Credit Act of 1971 to enjoin sale at public auction of real estate that had been foreclosed on and ownership transferred to another party; plaintiff claimed that defendant violated Ag Credit Act of 1987 by failing to notify plaintiff of appraised market value of property and plaintiff's right to buy property at appraised value or right to offer property at price below appraised value; plaintiff also claims defendant violated ACA 1987 by failing to notify plaintiff of  minimum amount, if any, required to qualify as acceptable bid and that division of property into five tracts also violates Act; Act contains no express provision giving borrowers private right of action, but court did not rule on issue; plaintiff did not make clear showing that it is likely to suffer irreparable harm in absence of injunctive relief; preliminary injunction denied).


(extension of interim guidance on deductibility under I.R.C. §67 of costs paid  to investment advisor by non-grantor trust or estate; extension is until IRS publishes final regulations on the issue (i.e., extension is for tax years beginning before date that final regulations are issued); initially, IRS provided in Notice 2008-32 that taxpayers do not have to determine the part of a bundled fiduciary fee that is subject to the 2 percent floor for any tax year beginning before 1/1/08 and later guidance specified a later cut-off date; regulations are necessary in light of U.S. Supreme Court decision in Knight v. Comr., 552 U.S. 181 (2008)). 


(defendant violated MSWPA and state (OR) minimum wage law by crediting seasonal workers' on-farm housing costs toward workers' minimum wage; had housing costs not been credited toward minimum wage, wage would have been below minimum; court ruled that evidence showed that orchard could not maintain adequate workforce without offering on-farm housing and local room availability insufficient to accommodate 350 workers necessary for defendant's month-long peach and pear harvest; court also ruled that defendant violated OR law by paying workers day after harvest ended rather than on last day of work). 


(case involves plaintiff's acquisition of 3 acres of 60-acre tract for road improvement purposes; tract purchased in 1999 for $1.2 million and case involves damages to remaining 57 acres caused by limiting access to adjacent highway and designation of 57 acres as a planned commercial development and research park; trial court did not prejudice defendant by refusing to instruct jury that it could not consider speculative and potential future access to tract in determining damages to 57 acres; trial court did not err by refusing to give proper and complete jury instruction on internal circuity of travel; trial court did not err by allowing evidence, testimony and argument that defendant would have access to state highway when plaintiff's engineer denied that such access existed; no error on appraisal valuation; jury's finding of zero damage to 57 acres not against clear weight of evidence). 


(plaintiffs, homosexual males, cannot be named on birth certificate of child they adopted in New York; state (LA) law bars all unmarried couples (whether adopting in-state or out-of-state) from adopting children in Louisiana - child was born in LA and plaintiffs living in CT at time emergency adoption decree obtained in NY state court; defendant, LA registrar, offered to list one plaintiff on birth certificate, but plaintiffs refused alleging violation of constitutional rights; no violation of either Full Faith and Credit Clause or Equal Protection Clause; state law does not necessarily operate as that state's law when it is attempted to be applied by another state - the manner in which LA enforces out-of-state adoptions does not deny plaintiffs' full faith and credit of other state's law; LA's treatment of adoptive children of unmarried persons differently from adoptive children of married persons does not violate equal protection, but serves a legitimate governmental interest and the state's rational preference for stable adoptive families - the state can rationally conclude that having parenthood focused on a married couple or single individual rather than the freely severable relationship of unmarried persons furthers the interests of adopted children). 


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