Case Summaries 04/2012
(U.S. economy added only 120,000 new jobs in March; labor force participation rate was 63.8 percent, resulting in unemployment rate of 8.2 percent; unemployment rate would be 10.9 percent if labor force participation rate remained the same as when President Obama took office; 8.2 percent unemployment rate 2.5 percent higher than what Obama Administration promised unemployment would peak at if 2009 "stimulus" bill passed; rate is 42 percent higher than was Obama Administration projected unemployment would be in March of 2012 if stimulus bill not passed; unemployment rate is 14 percent among blacks; 2.4 million persons marginally attached to labor force - an unchanged amount from March 2011).
(two-acre family cemetery reserved by original landowner when deeding land to his son in 1888; cemetery property landlocked by surrounding property; surrounding property conveyed to current owner in 1973; county assessed property taxes against cemetery property, which went unpaid; third party purchased cemetery property for hunting and petitioned court for easement; surrounding property owner cross-claimed against third party and county arguing sale of cemetery property void and against public policy; county counter-claimed to partition cemetery portion from remainder of cemetery property and acquire easement for public access to cemetery; surrounding property owner filed summary judgment for issues raised claiming easement to cemetery had been abandoned by original owners and whether cemetery land obtained by adverse possession; trial court determined tax foreclosure on cemetery void and set aside sale and found no adverse possession of property could be established; court ordered county to take control of cemetery and granted easement across surrounding property for public access to and from cemetery; surrounding property owner appealed whether an easement existed, scope of easement, and public visitation of cemetery; appellate court held no evidence of actual relinquishment of easement by original grantors, so easement still existed; appellate court remanded to trial court regarding scope of easement and whether cemetery required public access as these issues were not capable of resolution by summary judgment).
(appeal of grant of summary judgment for defendant in personal injury case; plaintiff hit cow in roadway; plaintiff alleged negligence against plaintiff, but court held that claim could only proceed via strict liability following evidence of animal’s vicious tendencies; negligence claim dismissed due to failure to plead viable claim; no evidence presented of animal’s tendencies so strict liability claim would also have failed if pled; judgment affirmed, but court noted displeasure in its inability to allow claim for negligence to proceed due to facts of case).
(for innocent spouse purposes, denial of first-time homebuyer credit (FTHBC) is to be treated as deficiency under I.R.C. §6211 (b)(4); manner in which denied FTHBC allocated between spouses depends on reason for denial and the subsection of I.R.C. §6015 under which innocent spouse relief is sought).
(enrollment and freeze fees are subject to the 10 percent excise tax on indoor tanning services contained in the Administration’s health care legislation; enrollment fees charged in connection with membership program, and freeze fees allows individual paying fee to either skip one or more months of membership dues without being charged enrollment fee upon restarting monthly membership or waive required contract cancellation fee).
(township appealed zoning board approved variances enabling dairy farm to build silo and erect cellular towers on top of silo in an effort to modernize operations by storing grain in new silo that was presently stored in “hag bags”, and obtaining lease payments from wireless provider; neighboring property owners supported application; township appealed claiming variance granted is substantial variation from zoning code rather than mere reasonable adjustment; appellate court found antenna and silo is not use variance as use will remain agricultural and will “penetrate the Township’s skyline, impinging on the rights of no one”; likewise variance not an unpermitted dimensional variance because it sustains reasonable pre-existing use of land and owner unable to maintain current use without variance; further substantial evidence existed of economic detriment to dairy farm if variance denied; zoning board decision affirmed.)
(case involves adverse possession claim between neighbors concerning beachfront boardwalk and dock; in 1960s, owners of adjoining lakefront properties relied on placement of wooden jetty as boundary line; plaintiff used jetty to support a dock and an extension to an existing boardwalk; plaintiff allowed neighbors to use and access both; prior owner of defendant’s property surveyed land in 1980s and discovered jetty, dock, and boardwalk part of her property, but no dispute arose; after defendant purchased property, he refused plaintiff access to dock and boardwalk; plaintiff claimed adverse possession of property; disputed issues in claim included whether hostility and exclusivity elements were met; district court found them lacking and ruled for defendant; plaintiff appealed; appellate court held hostility shown by plaintiff’s claim of right to property adverse to prior neighbor’s interests; mutual mistake regarding true boundary did not negate hostility; exclusivity also established even though plaintiff allowed friends to use area, because prohibited access to general public; appellate court held plaintiff used and controlled land for 21 years sufficient to establish adverse possession; district court decision reversed).
(in case of first impression under Idaho law, court held that a Chapter 7 debtor must make election concerning how to receive annuity payments by before petition filed for annuity benefits to be exempt (up to a maximum amount); court determined that not making such election before petition date would frustrate legislative intent of capping amount of exempt monthly benefits).
(petitioners, married couple, established FLP and via FLP donated an easement to qualified done; donated land subject to purchase money mortgage, but at time of donation deed of trust securing debt not subordinated to easement held by qualified donee; when petitioner ultimately got debt subordinated two years after donation; easement required to be perpetual - chance that easement would cease must be “so remote as to be negligible; court holds that remoteness has nothing to do with subordination, and subordination must be in place at time of donation – Treas. Reg. §1.170A-14(g)(2); until time of subordination, foreclosure proceedings could have been brought which would have eliminated the easement; immaterial that petitioner had funds at all times to pay off debt because mortgages are never too remote to be negligible ; accuracy-related penalty not imposed).
(petitioner invested in oil and gas leasing partnership by contributing $110,000 cash and $200,000 note (termed “subscription note”); petitioner claimed non-passive loss of $275,045 on 2001 return; on 2002 return, petitioner deducted $15,003 and reported $16,000 income from partnership; in 2003, partnership distributed $32,407 to petitioner in termination of petitioner’s partnership interest; note not paid-off; court determined that note was genuine debt in 2002 and not 2003 due to lack of payments made after 2002 and termination and liquidation of partnership; under at-risk rules of I.R.C. §465, petitioner had zero risk in 2003 and amount at risk became non-genuine and petitioner had $200,000 gain for 2003 under I.R.C. §465(e)).
(farmers were operating organic materials processing on a farm; county issued citations after neighbors complained that farmers operating unauthorized “materials processing facility” in critical area; hearing examiner found use was valid nonconforming use and no demonstration made that area was wetland or flood hazard; county department appealed and brought in hearing examiner to challenge authority to issue part of its ruling; lower court ruled in favor of department; hearing examiner and farmers appealed; appellate court found the farmers were preparing material processing facility at time ordinance went into effect, so their prospective intent was in existence and is a legal nonconforming use; county code included detailed process for determining flood hazard and not simply “100 year flood” designations by FEMA as argued by department, so department failed to prove farmers were in flood hazard zone; appellate court also found hearing examiner’s opinion did not preclude application of additional review of whether farmers in critical area, so examiner did not exceed authority; lower court opinion reversed and hearing examiner opinion reinstated).
(estate entitled to $11.7 million charitable deduction for amount paid to charitable trust in settlement of dispute with decedent's son concerning residuary estate; court concluded that decedent wanted residuary estate to pass to charitable trust, but failed to do so do solely to scrivener's error (all other testamentary instruments had provided for a charitable residuary bequest, but 1999 will failed to include it due to scrivener's error); I.R.C. Sec. 2056 has been narrowly construed to curtail marital deduction abuses, but I.R.C Sec. 2055 is designed to encourage charitable gifts; bona fide dispute existed as to whether charity had legal right to residuary estate; case distinguishable from Bach v. McGinnes, 333 F.2d 979 (3d Cir. 1964) on basis that no bona fide dispute concerning charity's legal entitlement to bequest existed in Bach; estate denied fees and costs because charitable trust not a "prevailing party" for purposes of fee recover - trust did not pay any costs, estate did).
(U.S. Supreme Court agreed to hear case where lower court held that deviations by U.S. Army Corps of Engineers from operating plan for dam that caused increased flooding downstream to wildlife management area that plaintiff owned were only temporary and not “inevitably recurring” and did not constitute taking of flowage easement; Fed. Cir. opinion reversed Court of Federal Claims opinion holding that action constituted taking of temporary flowage easement over plaintiff’s property – damages of $5,778,758 awarded).
(petitioner, employee of Sheriff’s Department, sustained career-ending injury on-the-job; petitioner had several retirement plans to choose from; petitioner initially chose plan that didn’t take his injury into account, but then switched to plan that did take into account his injury and was awarded retroactive coverage to beginning of initial plan; petitioner received full service retirement amount of $12,861 monthly; 1099-R issued showing service-connected amount taxable, followed by amended 1099-R stating that taxability had not been determined; five years later County told petitioner that 50 percent of pension taxable, but petitioner never reported the income; income exemption of I.R.C. §104(a)(1) inapplicable to payments determined by reference to employee’s age or length of service; petitioner’s pension set payments at greater of 50 percent of final compensation or full retirement allowance and is based on age or length of service; petitioner’s service retirement benefit exceeded guaranteed amount so benefit amount increased to service retirement benefit amount reference by length of service; thus, portion in excess of guaranteed amount included in income; understatement penalty not imposed).