Case Summaries 06/2011

(farmers' cooperative made payments to members for grain sales qualified as PURPIMS; cooperative's DPAD (I.R.C. Sec. 199) to be computed without regard to any deduction for such payments).

(petitioner not entitled to deduction attributable to business use of vehicle due to lack of substantiation; accuracy-related penalty imposed; mileage log inadequate and showed that business use less than 50 percent).

(reverses previous ruling to specify that gross receipts from participation in guided and non-guided hunting are not subject to state retailers' sales tax or any other type of sales tax; effective July 1, 2011).

(debtors entered into lease of cropland and hay ground with landlord’s conservator with annual rent payable in April and December; debtors filed bankruptcy in November, and the following March rejected the lease; conservator requested full amount of December rent be treated as administrative expense and court held that rent due post-petition and pre-rejection could be allowed as an administrative expense only for the time of the debtor’s post-petition use of the premises with interest at 12 percent per annum (as provided for in lease for unpaid rent)).

(debtor defaulted on a purchase-and-lease-back transaction for cows and yearlings; creditor  brought proceeding to except debt from discharge based on “willful and malicious injury” alleging debtor and his father conspired to trick creditor out of his money; court held that the improprieties of the transaction upon which the creditor based his allegations were apparently due to failure to address the specifics in the original agreement, lack of adequate recordkeeping by the debtor, and poor communications between the parties following the default rather than a willful intent to harm the plaintiff.)

(taxpayer not entitled to ad valorem real property tax assessment as farm because property not used primarily for making profit; taxpayer's testimony was that he intended to start vineyard and grow hay and blueberries and filberts on 9.27 acres; statute focuses on current use of land, and land had been laying fallow for more than one year; sales of a few pounds of honey insufficient to show profit). 

(sole member of limited liability company liable for company's unpaid employment taxes; check-the box regulations upheld; opinion follows other circuit court opinions on the issue).

(loan taken out against wife's life insurance policy funded by neurosurgeon husband's wholly-owned corporation for "unexpected housing costs" not bona fide; no contemporaneous memorialization of indebtedness at time of distribution, terms of promissory note not heeded, market rate of interest not charged, quarterly payments not made as not required, no attempt to collect amounts due upon default; loan was taxable distribution).

(Chapter 12 debtors filed motion for valuation of collateral of secured creditors which would then allow determination of secured status of claims against the properties being valued; court tried to determine what debtors intended to do with the properties and then considered valuation evidence; with respect to one property, court made findings as to both liquidation and fair market value and discounted an appraiser's approach because it did not use consider the debtors' intended use of the property and there was insufficient comparable sale data; court established value of three tracts of real estate and entered order). 

(state law requiring reflectors on horse-drawn vehicles is not unconstitutional interference with free exercise of religion; statutory requirement of fluorescent yellow-orange triangle with red reflective border claimed to violate plaintiffs' sincerely held religious beliefs shunning bright colors and secular symbols; court disagreed opining that law targeted slow-moving vehicles, not a religion; act of using a public road is not a religious act). 

(self-employed graphic designer not entitled to many expense deductions for lack of substantiation). 

(parents of handicapped minor child sold home to child through child's guardian who used child's funds to satisfy mortgage on home; guardian transferred title of home to himself as child's guardian and claimed first-time homebuyer tax credit; credit disallowed because child deemed, under step-transaction doctrine, to have purchased home from related persons under Sec. 36(c)(5); no analysis of Sec. 36(c)(3) which does not bar purchases for fair market value from related persons). 

(petitioner that provided foster care for wild cats on behalf of charity entitled to reimbursement of expenses that were largely paid out-of-pocket that were exclusively related to feline foster care; other expenses not deductible because commingled with personal expenses; substantiation requirements not satisfied, thus expenses over $250 not deductible). 

(CEO remains liable for corporate payroll taxes that company did not remit; responsibility to remit payroll taxes cannot be delegated to employees). 

(US cellular phone replacement program which requires participating subscribers to exchange a damaged phone for a replacement phone does not trigger sales tax when replacement phone provided to an Iowa subscriber; parts and labor furnished in addition to that covered by warranty subject to tax only when party must pay additional charges). 

(unemployment rate rose to 9.2 percent (which is 15 percent higher than what Administration promised it would peak at if 2009 "stimulus" bill passed, and 42 percent higher than what Administration projected unemployment would be in June of 2011 if stimulus bill passed; only 18,000 jobs created, the weakest number since September of 2010; government also revised April and May payrolls to reflect 44,000 fewer jobs created than previously reported; 125,000 jobs must be created monthly and labor market must add 285,000 jobs every month for next 5 years to achieve pre-recession unemployment rate by 2016; labor force participation rate shrunk to 64.1 percent, the lowest level since 1984).