Case Summaries 09/2012
(motion for summary judgment by defendant based on defense of state’s Right to Farm law; plaintiff brought nuisance suit when defendant’s row crop agricultural operation became hog confinement agricultural operation; court held state law only allows nuisance action when “significant change” occurs; statute clarifies that transition from crops to hogs does not qualify as significant change as both are agricultural operations by definition; exception applies if operation is negligent, which causes a nuisance; because plaintiff failed to establish alleged negligence was proximate cause of nuisance, exception did not apply; summary judgment granted).
(petitioner owned rental property with spouse that produced loss; petitioner also member of LLC that owned rental properties and in which petitioner was manager; LLC individually owned rental property and produced losses with 1/3 of losses allocated to petitioner; petitioner also employed by U.S. Navy; petitioner deducted rental losses in full on basis that he was a real estate professional; to meet the more than 50% test, petitioner combined hours spent on personally owned rental activity and management activity for LLC; IRS invoked I.R.C. §469(h) to disallow the LLC managerial hours, but court disagreed, based on Garnett v. Comr., 132 T.C. No. 19 (2009); petitioner’s LLC interest not defacto passive, thus petitioner’s hours spent in LLC managerial activities toward total “real estate” hours; but, petitioner still failed to meet more than 50% test; fallback test of active participation allowing $25,000 of rental real estate losses not available because petitioner’s AGI in excess of $150,000).
(contract dispute regarding proceeds of wheat crop; tenant brought action against landlord for statements made to grain elevator regarding ownership of crop which caused damages to tenant; landlord failed to timely answer petition; tenant filed motion for default; landlord filed untimely answer and counterclaim; court held default judgment against landlord should be entered and counterclaim should be dismissed; on appeal, court disagreed with landlord’s contention that condition precedent must be pled in a valid contract action; court agreed counterclaim was compulsory because based on same contract and untimely, so dismissal was appropriate; district court judgment affirmed).
(the federal government did not reserve water rights on nearly 10 million acres of land upon giving the land to the state of Arizona to support education; reserved water rights doctrine inapplicable to state trust lands; no argument made that, without federal reserved water rights, the state trust lands will become worthless or incapable of producing a fund to support designated beneficiaries; support of the public schools serves the public interest).
(Forest Service issued final environment impact statement (EIS) and record of decision allowing installation of wind turbine facility in area of Green Mountain National Forest; plaintiffs assert administrative record incomplete and sought leave to supplement record with noise pollution expert’s declaration that Forest Service relied on report “devoid of any reliable scientific basis”; court denied discretionary motion as agency had comprehensive findings and review and comments on area for which plaintiffs sought to add extra-record materials).
(class action lawsuit against manufacturer of “honey” for mislabeling; under state statute products labeled as “honey” must not have removed pollen; plaintiff purchased product in which pollen had been removed and claimed injury; court held plaintiff alleged enough injury-in-fact due to loss of purchasing product for which the label was inaccurate; defendant argued federal law under FDA pre-empted state law; court agreed because federal statute requires products be labeled by common names; common definition of honey does not require pollen, so defendant unable to comply with federal law requiring product be labeled “honey” and state statute forbidding being labeled as “honey”; because state statute pre-empted, motion to dismiss granted; all other arguments dismissed as moot).
(appellate court upheld summary judgment in which sisters unable to establish undue influence claim in mother’s transfer of farmland to brothers following death of father; court held significant that mother made fair deal with brothers, mother got out from financing and was able to generate income upon which she could live and hire caregiver to allow her to stay in her home; undisputed evidence showed mother was competent and capable of making decisions; and sisters could not meet heightened standard of proof of undue influence under state statute for estate disputes).
(appeal from trial court’s denial of rescission of trust; allegations by plaintiff that wife used husband’s assets to fund her own trust in conflict with prenuptial agreement; on appeal, court held prenuptial allowed parties to give or receive property from each other during the marriage; fiduciary relationship not created by marital relationship alone, so no breach; court denied conversion claims due to lack of evidence that wife wrongfully appropriated property or forged beneficiary form; further, no evidence presented of reversionary interest in deeding of farmland to wife; trial court judgment affirmed).
(plaintiff brought lawsuit after discovering a portion of human finger found in salad she was eating; case against defendant dismissed through summary judgment because franchisor did not provide, prepare, or cook food at issue nor own or operate restaurant; at most, franchisor provided manuals regarding requirements, standards and procedures to franchisee, but franchisee was responsible for compliance and franchisor had no control of operations; affirmed on appeal).
(IRS informed Congress that its agents would not play any role in enforcing the health insurance mandate contained in the government health care legislation; IRS stated that there would be no audits; statement made to House Ways and Means subcommittee).
(court upholds Tax Court determination that taxpayer had taxable income of $29,093.30 upon cancellation of whole life insurance policy; taxpayer paid $44,205 in premiums and had received $35,933.24 from surrender of additional insurance and from the use of dividends from the policy to pay premiums; net cost to taxpayer was $8,227.76 of policy with cash value of $37,356.06 resulting in gross income of $29,093.30; taxpayer did not receive any cash upon cancellation did not require different result due to fact that taxpayer had used cash value in prior years to pay off loans from insurance company).
(petitioner acquired 12 percent interest as tenant in common with two others in rowhouse in historic district; building subject to local ordinances restricting changes to structure; each co-tenant contributed façade easement to land trust; appraiser determined that property value declined 11 percent post-grant; co-tenant’s later reallocated interests such that petitioner’s interest had full burden of easement, and petitioner claimed deduction for full amount of contribution; upon later sale of property, petitioner received 1 percent of proceeds; IRS gave no value to easement; Tax Court agreed with IRS because petitioner’s appraiser did not compare sales of similarly encumbered properties and made no attempt to determine impact of easement on sale price, relying instead only on IRS memo prepared in 2000 (known as “Primoli memorandum”); in addition, property already subject to substantial restrictions).
(taxpayer, a cooperative makes grain payments to members and participating patrons; such payments constitute PURPIMs and taxpayer will be treated as having qualified production activities with respect to grain purchased from members and patrons under Master Marketing Agreements and Sale/Purchase contracts; taxpayer's DPAD to be computed without regard to any deduction for taxpayer's grain payments to members and participating patrons).
(non-precedential order in which court applies six-year statute of limitations under I.R.C. Sec. 6501 to omission from gross income caused by basis overstatement; case appealable to D.C. Circuit which has reversed Tax Court and held that basis overstatement is an omission from gross income and that statute does not necessarily bar application of 6-year statute of limitations).
(nearly 400,000 workers left the labor-force in August and, as a result, the unemployment rate fell from 8.3 percent to 8.1 percent; labor-force participation rate at 63.5 percent; unemployment rate is 1.25 percent higher that Obama Administration promised it would peak at if 2009 "stimulus" bill passed; rate is 47.3 percent higher than what Obama Administration projected unemployment would be in August of 2012 if "stimulus" bill passed, and 37.3 percent higher than what Obama Administration projected unemployment would be if "stimulus" bill not passed; number of jobs created must be nearly 150,000 each month and labor market must add almost 300,000 jobs every month until the end of 2014 to achieve pre-recession unemployment rate by 2015; average duration of unemployment exceeds 39 weeks and median duration of unemployment is 18 weeks; nearly six percent of adult population are "disabled" and out of the workforce; ratio of employed persons to entire population is 58.3 percent).
(taxpayer desired to make contribution of undivided interest in unitrust payment to charity and claim charitable deduction for contribution; taxpayer and spouse created CRUT that provides for annual payment to the couple; upon death of first of couple to die, surviving spouse entitled to entire payment; neither spouse has retained right to revoke their respective survivorship interest transferred at time of trust creation; upon death of last of spouses to die, trustee to distribute all principal and income of trust (remainder) to charity; IRS determined that charitable deduction would be allowed and that donor would be entitled to gift tax charitable deduction).
(severance payments from debtor to employees due to business cessation deemed to be supplemental unemployment compensation benefits rather than taxable wages under FICA).
(portion of purchase price paid by electric cooperative attributable to purchase power agreement is to be allocated to purchase power agreement and not to wind energy facilities; revoking in part PLR 201214007).
(neighbors sued for prescriptive easement over driveway; easement not recorded within deed; defendants argued they had obtained prescriptive easement for 20 years; trial court disagreed; on appeal, court agreed defendants had been given permissive use of driveway, so they could not establish hostile use or claim of right required for prescriptive easement).
(court upheld defendant’s conviction of intentionally allowing migratory birds die in defendant’s uncovered oil tanks in violation of the Migratory Bird Treaty Act (MBTA); defendant also found to be in violation of Clean Air Act for failure to cover tanks with emission-control equipment; MBTA not limited to covering only hunting, trapping and poaching activities, but extends to commercial activities that intentionally kill migratory birds; MBTA prohibits taking or killing of migratory birds “at any time, by any means or in any manner”).
(petitioner (wife) and spouse divorced after 24 years and five children; separation agreement specified for reductions in alimony as each child reached age 18, with alimony terminating six years after beginning; for tax year in issue, three children over age 18 and three years remained before automatic termination of alimony; while separation agreement didn't specify termination of alimony upon death, state law so specified; IRS determined the per-child amount of alimony for remaining two children with balance taxable to petitioner; court determined that automatic six-year termination not a reduction in alimony related to a child or a contingency referable to a child under I.R.C. Sec. 71(c)(2) for remaining years; Treas. Reg. 1.71-1T (Q and A 18) inapplicable because petitioner did not have child whose 18th birthday within 6 months of automatic termination date; because neither the separation agreement, divorce decree nor shared parenting plan specifically designated any portion of the spousal support payments for support of children, entire amount included in petitioner's income as alimony).
(during retirement, petitioner bought rental property and claimed to intend to buy additional rental properties; two years after purchase, renovations of property completed and property rented; while expenses substantiated, but not deductible due to petitioner not in real estate trade or business for year at issue; expenses to be capitalized as start-up expenses).
(petitioner, nurse, won $10 million in the lottery and bought a building in Denver to honor her deceased mother and also to use to provide mortgage loan services; petitioner never brokered any mortgages and did not charge for reflexology treatments that were also provided; petitioner formed S corporation in 2002 for business ventures but never filed a corporate return, instead reporting losses from each activity on Schedule C; losses denied in 2009 on basis that that they were hobby losses; court did not engage in nine-factor analysis because petitioner had litigated precisely the same issue in the Tax Court concerning petitioner’s 2002 and 2003 returns where court concluded that activities were hobbies; activities deemed to subject to hobby loss limitations).
(plaintiff filed petition for injunctive relief seeking injunction allowing it to show graphic video ("Glass Walls") at state fair exhibit booth containing images of animal slaughter without being required to shield video from view of children and others not wanting to see such images; defendant moved to dismiss action; court did not grant motion to dismiss, but also rejected plaintiff's motion for injunctive relief on basis that state fair is a "limited public forum" because exhibitors must apply for a booth and pay a fee unlike a public square; restrictions imposed by fair officials were minimal and did not constitute any significant infringement of plaintiff's free speech rights; court stated that matter was "whether you can have it shoved in your face, or whether you take a step or two in another direction").
(appeal from a class-action case concerning whether slaughterhouse facility plaintiffs should be compensated for donning or doffing equipment as part of “work” under Fair Labor Standards Act; jury found for defendant employer; appellate court found plaintiffs failed to properly object at trial to almost every issue raised on appeal, so most issues were waived or reviewed for plain error; jury instructions reviewed for plain error found issue had no effect on plaintiffs substantial rights, so no error; one instruction was actually requested by plaintiffs, so court declined to find error in plaintiffs’ own instruction; having found no reversible error on appeal, trial court judgment affirmed).
(legal memorandum issued in response to request from members of the U.S. House and Senate concerning U.S. Dept. of Health and Human Services memo (TANF-ACF-IM-2012-03 (Jul. 12, 2012)) detailing that traditional Temporary Assistance for Needy Families (TANF) mandatory work requirements contained in Personal Responsibility and Work Opportunity Reconciliation Act of 1996 that must be satisfied before TANF welfare benefits can be received can be waived or overridden by so-called Sec. 1115 waiver authority under the Social Security Act (42 U.S.C. Sec. 1315); HHS memo takes position contrary to 2001 Congressional Research Service Report that work requirements in TANF cannot be waived because they are not specifically listed in Sec. 1115 of Social Security Act and the Congress included only one of 35 sections of TANF as waivable which does not include the work requirements; GAO legal memorandum specifies that Obama Administration violated the law by circumventing the Congress in attempting to waive work requirements administratively; GAO legal memo states that HHS must submit policy change to the Congress because the policy change is subject to the Congressional Review Act (5 U.S.C. Secs. 801-808); HHS must formally submit policy to both House and Senate where 60 days must be provided for both chambers to vote on law change).
(appeal from small claims action in which court held contract for spraying 19-acre plot existed; damage occurred and both parties bore responsibility for the damage - the plaintiff for failing to inspect his fields and the defendant for failing to spray, plaintiff granted half damage award; on appeal, court upheld entire judgment as not against manifest weight of evidence).
(upon retirement, petitioner reported only one-half of accumulated funds in pension and did not report $2,000 in other income and some wages; IRS asserted $44,000 in unpaid tax plus penalties; petitioner blamed mistakes on TurboTax; court ruled for IRS because petitioner entered incorrect information into TurboTax program).