Annotations 01/2013

(in response to Tax Court's opinion in Shiekh v. Comr., T.C. Memo. 2012-126, IRS points out that court decision could be incorrectly interpreted as stating that capital gain and ordinary losses offset each other for tax reporting purposes and for purposes of calculating amount of tax due outside scope and context of I.R.C. Sec. 469(d)(1); under I.R.C. Sec. 469 does not require offsetting of capital gain with ordinary losses for other tax purposes). 

(chicken contract growers’ claims in bankruptcy denied – promissory estoppel claims lacked legal merit; in spite of contact language indicating otherwise, growers' claimed recovery from debtor for investment in chicken houses based on oral statements made to growers by debtors’ employees that each grower “would receive chickens as long as he met the company’s requirement” and that debtor was “here for the long haul” (debtor terminated production contracts with growers and filed bankruptcy due to downturn in poultry industry); as such, growers' claimed statements meant that contracts would remain in effect for a time period long enough for each grower to earn enough income under the contract to cover their cost of rendering performance under each contract; however, subject of statements must have been express elements of contracts; contracts specific and complete and specify that type of damages growers’ claim based on alleged oral promises not recoverable because contracts specified that either party could terminate the contract without cause between flocks (4-9 weeks), and debtor could terminate contract at any time for cause or economic necessity).

(petitioners, married couple, received a bed and breakfast as boot in a muti-party like-kind exchange; while petitioners claimed that they intended to use the property as business property, they failed to produce evidence of business use instead using the property as a personal residence; petitioners could, however, to use FMV allocations utilized for purpose of exchange because parties were in adverse positions and IRS did not adequately refute allocations set forth in agreement).

(insurance demutualization basis case; court determines that plaintiff failed to establish that any of the premiums paid were for membership rights in insurance company; consequently, plaintiff did not have an income tax cost basis in share of stock issued on demutualization when shares eventually sold in 2005; plaintiff failed to offer evidence of purchase price paid for membership rights in particular as opposed to policy as a whole; thus, plaintiff failed to satisfy proof burden that income tax basis other than zero; facts of case distinguishable from those in Fisher, et al. v. United States, 82 Fed. Cl. 780 (2008)).

(defendant was involved in cattle feeding business that was heavily indebted; when questioned regarding cattle in lot bearing another owner’s brand, defendant showed forged bill of sale and brand transfer showing cattle were owned by business and made further assurances to bank that were false; defendant finally came clean regarding the fraud; under sentencing guidelines, court ordered 18 months imprisonment; restitution denied because no causation between loss of funds and criminal conduct).

(question raised as to whether CA residents can deduct the CA Fire Prevention Fee as a real property tax; fee enacted via 2011 legislation requiring State Board of Equalization to charge up to $150 as fire prevention fee on each structure in "state responsibility area"; under Treas. Reg. Sec. 1.164-4(a), to be deductible, real property tax must be levied for general public welfare at like rate against all real property in taxing authority's jurisdiction, and assessed amount on specific property benefitted by local benefit (such as for streets, etc.) not deductible as real property tax; fee at issue not deductible as real property tax because it is not a tax under either federal or CA law, is not levied at a like rate, is not imposed against all real property throughout taxing authority's jurisdiction, and is assessed only against specific property to provide local benefit). 

(decedent was art collector that gifted art collection to family members via interests in LLC but died within three years of the gifts; gifts were of LLC units not exceeding the decedent's "basic exclusion amount" plus annual exclusion gifts with any remaining value transferred in LLC units in a later year; appraisal of artwork cam in higher than expected and assignment of LLC interests amended in later year to provide that family members would pay any resulting gift tax; upon death, surviving spouse seeks to have gifts canceled or that family members pay estate and gift tax based on actual value of gifted property if they retain gifts; court interpreted 2001 and 2002 gift documents as decedent's desire to give LLC units free of any obligation of donees to pay gift tax; blank spaces in assignment simply ministerial act of completing parties' original agreement). 

(petitioner bought home with ex-fiancee; ex-fiancee was obligor on loan and petitioner failed to provide evidence that amounts he paid to ex-fiancee were to be applied to mortgage interest; petitioner could not establish that he could claim deduction for points paid, and no proof offered that would allow petitioner to deduct any amount attributable to refinancing of home).

(township challenged decision of zoning board that chicken houses were permitted use in district in which they were housed; the ordinance allowed raising and keeping of "livestock" and poultry was among permitted livestock; township argued that chicken houses were concentrated animal operations that were not approved; language of ordinance, however, only applied to new and expanded operations and did not apply to the chicken houses).