Annotations 06/2013

(debtor’s case dismissed; plan incomplete and debtor’s would not be able to fund plan from their timber business).  [category – Bankruptcy – archives]


(250-gallon fuel tank rusted through and spilled fuel oil  with visible sheen apparent on waterway; property owner advised by plaintiff to hire contractor to clean up spill or plaintiff would undertake cleanup by hiring cleanup done with bill to property owner (defendant); property owner took no action and plaintiff hired third party to perform cleanup with bill to defendant of over $15,000; defendant challenged bill on basis that petroleum spills not billable cleanup costs under CERCLA and same result should apply under state (OH) law;  trial court ruled for plaintiff; on appeal, court affirmed; federal law not controlling on what is a hazardous substance under state law requiring emergency action; state law focus is on when emergency action required for cleanup and not on definition of types of hazardous waste that are billable; note – by September 26, 2013, all farms must have Oil Spill Prevention, Control, and Countermeasure Plans adopted in accordance with EPA regulations). 


(taxpayer’s issuance of debentures did not cause taxpayer (S corporation) to have more than a single class of stock under I.R.C. §1361(b)(1)(B)). 


(S corporations that are members of controlled group are not subject to rule limiting controlled group’s maximum annual I.R.C. §179 amount; such entities are treated as separate entities for purposes of expense method depreciation limit). 


(upon death of spouse, surviving wife became sole trustee and sole beneficiary for her life of husband's trust; trustee had authority to pay wife as much trust principal as requested in writing; wife withdrew entire trust property; after wife's death, remainder beneficiaries sued wife's estate on breach of fiduciary grounds because wife made no written request of herself at trustee to withdraw trust property; trial court ruled for estate and appellate court affirmed making point that requiring such act would be in vain and pointless). 


(petitioners, married couple, built personal home as general contractor, but used husband's C corporation to pass payments through to sub-contractor; C corporation also kept track of materials and labor utilized in building home; husband oversaw home building, selected sub-contractors and managed building project; petitioners paid C corporation for actual cost of the C corporation services utilized but did not pay customary mark-up of 6-7% that husband typically applied to other customers; IRS took position that failure to pay mark-up constituted constructive dividend to husband who was the sole shareholder of C corporation; court disagreed with IRS position, noting that presence of constructive dividend tied to whether corporation conferred benefit on husband so as to distribute available earnings and profits without any expectation of repayment; question is whether what C corporation earned is being given to shareholder or whether shareholder's capital investment is being returned; court unimpressed with IRS argument because, under I.R.C. Sec. 316(a), there must be a distribution of property to the shareholder that reduces the corporation's current or accumulated earnings and profits - constructive dividend present only when corporate assets diverted to or for shareholder's benefit; no diversion of corporate assets or distribution of earnings and profits occurred; use of corporate assets only incidental). 


(citizens of CA voted to approve constitutional amendment (Proposition 8) defining marriage as the union of a man and a woman; CA governor and attorney general refused to defend the law and citizen group that sponsored Proposition 8 sought enforcement; U.S. Supreme Court determined that citizen group lacked standing to defend such constitutional amendment under Article I, Sec. 2 because of lack of direct stake in outcome of appeal and only interest was to vindicate constitutional validity of generally applicable state law; U.S. Supreme Court did not create right to redefine marriage as anything other than that established by Natural Moral Law from the beginning of time). 


(two homosexual women married in Canada at a time when homosexual marriages were legitimate under provincial law; at time of death of first of the two homosexuals, parties lived in NY which recognized such marriages as legal under state law; surviving homosexual claimed marital deduction for estate tax purposes; IRS denied deduction on basis that Defense of Marriage Act (DOMA) (which was passed by overwhelming majorities in both parties in the Congress and in both bodies) did not recognize homosexual marriages for purposes of federal benefits; Obama Administration refused to defend law so law defended by Bipartisan Legal Advisory Group from U.S. House of Representatives; Court held that, for purposes of federal law, portion of DOMA defining marriage in manner consistent with Natural Law as a union between one man and one woman unconstitutional as deprivation of equal liberty guaranteed by Fifth Amendment in absence of specific federal policy; by so holding, Court suggested that the Congress does not have the power to define meaning of words in statutes enacted by the Congress; Court's ruling does not impact portion of DOMA providing that no state is required to give effect to another state's recognition of homosexual marriage; presently 38 states have laws prohibiting homosexual marriage; Court's opinion lays groundwork for all types of consensual adult sexual behaviors to be deemed legal). 


(Chapter 12 case involving issue of whether debtors qualified for Chapter 12 as a "family farmer" by having at least 50 percent of gross income from farming in the year before filing or the second and third year before filing;  debtors tried to include gross receipts from livestock sales as part of farm income without reducing it by their basis in the livestock; court disagreed with debtors - gross income for purposes of Chapter 12 is not the same as gross receipts; Schedule F defines gross income from farming means gross receipts less cost (or other) basis in farm items sold); debtors not qualified for Chapter 12). 


(lawsuit arising out of an incident in which stud horses were infected with an STD from the shared use of an artificial vagina by the horse semen collector; horse farm owner sought summary judgment to dispose of claim for piercing of corporate veil regarding personal liability; court denied motion due to factual questions; court granted motion to dismiss claim for violation of privacy through the publication of private facts claim because horse owners could not prove sufficient facts that the disclosure their horses had contracted an STD was highly offensive to them personally; court also dismissed claim for negligence in hiring because employee had been hired more than 10 years prior to incident.


(personal injury suit involving a collision between plaintiff’s vehicle and two horses from equestrian center in which gate did not work and horses were confined in temporary electric fence; jury returned verdict in favor of plaintiff; court held expert witness’ testimony was speculative and conclusory because it failed to explain how horses escaped or how the alleged failures identified were negligent, so testimony should have been excluded, but error was harmless; court upheld jury’s determination of negligence because defendants testified the lack of a functioning gate allowed horses to escape; court reversed finding of gross negligence which requires an extreme danger and defendants’ knowledge of risk but indifference; evidence showed electric fence had been used for fifteen years without incidence, so no evidence defendants were subjectively aware of risk; court affirmed negligence, but reversed gross negligence claim and ordered plaintiff take nothing on her judgment for that claim).


(plaintiff held an agricultural deed of easement restricting the use of defendant’s farm; plaintiff alleged easement violated when excavation activities destroyed bulk of soil on 25 acres; court held evidence lacking for one area, but ordered remediation plan consistent with claimed damages to soil in areas of excavation to be overseen by Court Master of conservation district; annual reports required due to acknowledgement that remediation make take several years).


(attorney represented two siblings as personal representatives of their mother’s estate; following the closing of the estate, attorney continued to represent one sibling in all his family dealings and real estate; representation of brother included filing lawsuit against beneficiaries of estate; attorney held to have violated rules through representation when a conflict of interest to a former client applied because representation of sibling in estate created conflict of interest that could not be waived; attorney received public reprimand and ordered to pay costs of proceedings). 


(plaintiff, now deceased, sought permits from defendant to develop portion of property; state law required permits because building to occur on wetland area and plaintiff required under state law to offset environmental damage; plaintiff offered to mitigate by deeding to defendant a conservation easement on approximately three-fourths of plaintiff's property; proposal rejected and development approved only if plaintiff reduced size of development and deeded to defendant on balance of property or have contractors make improvements to defendant's wetlands miles from plaintiff's property; plaintiff challenged defendant's conduct as violation of police power and constituted a taking; trial court determined unconstitutional taking had occurred; state Supreme Court reversed because defendant had denied the permit application and because money demand cannot give rise to takings claim; on further review, U.S. Supreme Court reversed state Supreme Court opinion; unconstitutional conditions doctrine applicable as espoused in Nollan and Dolan and make no distinction between conditions precedent and conditions subsequent and makes no difference that none of plaintiff's property was actually taken; defendant engaged in unconstitutional extortion; monetary extractions are subject to Nollan and Dolan takings scrutiny). 


(appeal from summary judgment declaring option to purchase land invalid for lack of consideration and that statute of limitations barred claim; appellate court reversed and remanded holding contract contained several promises all bargained for with consideration as stated in contract, so option was valid; case remanded for factual determination regarding whether clause provided option in future and whether defendants’ sought to exercise option in reasonable time; court denied statute of limitations claim because did not begin to run until breach of contract occurred).


(eighty-one year old landowner previously had more than forty horses which were deemed to be in poor condition by humane officer; agreement reached whereby landowner would reduce his herd to no more than ten horses and a mule within a specified period of time; humane officer notified that landowner not abiding by agreement and had begun increasing herd again; additionally horses were improperly fenced and were trespassing on neighboring property and in road; humane officer brought action to seize horses; substantial evidence presented of imminent danger to horses due to conditions; landowner appealed, but court upheld seizure and jurisdiction of court in ordering seizure).


(consolidated appeal of three water rights cases involving large, neighboring, ranching operations seeking to develop water rights from small tributary for eventual commercial use; Raftopoulos sought to add alternate points of diversion and change place of use of rights to irrigate land as well as permission to store water in proposed reservoirs for industrial and commercial uses; water court issued a decree granting application of which Vermillion appeals; Vermillion argues court misinterpreted “all other beneficial uses” within 1974 decrees permitting industrial use and court erred in granting water storage rights; court held issue of interpretation of all other beneficial uses was not properly before water court and decree vacated as to any interpretation; water court held Raftopoulos showed non-speculative intent to use stored water due to dust suppression contract and oil and gas exploration; on appeal, court held no definitive need for water was shown and evidence did not show nonspeculative uses, so decree reversed as to need for storage; Raftopoulos appealed grant of additional storage to Vermillion due to lack of development of reservoirs from previous decree; appellate court reversed water court’s grant of conditional water storage for Vermillion because evidence showed Vermillion has not been reasonably diligent in developing previously decreed conditional water storage). 


(charitable deduction denied for contribution of facade easement on historic property or corresponding cash donation; donation was to qualified charity, but letter existed which assured that cash contribution would be returned and eliminate the easement if IRS subsequently disallowed charitable deduction; letter rendered gift conditional and donation, therefore, no longer deductible because easement not protected in perpetuity as required by I.R.C. Sec. 170(h)(5)(A); possibility of disallowance by IRS not negligible given IRS scrutiny of such donations and claimed deductions).


(petitioner transferred leasehold interest in real estate for fee interest in real estate in purported I.R.C. Sec. 1031 deferred gain exchange transaction; Treas. Reg. Sec. 1.1031(a)-1(c) authorizes exchanges of leasehold interest for fee interest if the leasehold interest is of at least 30 years; petitioner's ground lease entered into in 1993 with original term of 33 years and was not renewable or extendable; petitioner operated motel on property until 2006 then sold leasehold interest to investment firm and parked proceeds with qualified intermediary at time when 21 years remained on ground lease; petitioner held two replacement properties for use in trade or business and reported recognized gain of $2,104,632 (cash and debt relief actually received in transaction) on realized gain of $4,320,618; IRS denied gain deferral on basis that leasehold interest not "like-kind" to fee interests received where less than 30 years remained on interest at time transaction entered into; case decided on past precedent and not on basis of Treas. Reg. at issue, so uncertainty remains as to whether leasehold interests with less 30 years are categorically unqualified for I.R.C. Sec. 1031 treatment per the regulation).


(petitioner transferred leasehold interest in real estate for fee interest in real estate in purported I.R.C. Sec. 1031 deferred gain exchange transaction; Treas. Reg. Sec. 1.1031(a)-1(c) authorizes exchanges of leasehold interest for fee interest if the leasehold interest is of at least 30 years; petitioner's ground lease entered into in 1993 with original term of 33 years and was not renewable or extendable; petitioner operated motel on property until 2006 then sold leasehold interest to investment firm and parked proceeds with qualified intermediary at time when 21 years remained on ground lease; petitioner held two replacement properties for use in trade or business and reported recognized gain of $2,104,632 (cash and debt relief actually received in transaction) on realized gain of $4,320,618; IRS denied gain deferral on basis that leasehold interest not "like-kind" to fee interests received where less than 30 years remained on interest at time transaction entered into; case decided on past precedent and not on basis of Treas. Reg. at issue, so uncertainty remains as to whether leasehold interests with less 30 years are categorically unqualified for I.R.C. Sec. 1031 treatment per the regulation). 


(dairy sold agricultural preservation easement to state conservation agency; ten years later dairy sought permit to build creamery; agency granted permit; local group opposed permit arguing they had standing as third-party beneficiaries to easement, as "aggrieved" parties under state trust code because the easement constituted a charitable trust; court determined easement was not charitable trust because language in document and in statutory scheme indicated trust meant to benefit dairy and agency only and not public; because no charitable trust, group lacked standing to challenge permit; dismissal affirmed).


(appeal of a jury verdict in favor of the purchaser in competing breach of contract claims concerning melon production; jury determined neither party fully performed their obligations under the contract, but that growers unfairly interfered with the purchaser’s rights and awarded damages to purchaser; on appeal, growers contend the claim cannot stand in the absence of a finding of a breach of contract, which they argue the jury did not find; court held that under verdict form, jury was never asked to reach question of whether a breach occurred because jury held neither party fully performed their obligations under the contract, so growers’ argument failed; court also held that jury’s award of damages was not dependent on a specified quantity to be grown in the contract, but was based on damages of reasonable expectations of the crop; court also held that sufficient evidence presented to award damages; judgment affirmed). 


(defendants, dairies, handled cow manure by converting it to compost and selling it, applying it as fertilizer to fields, and storing in lagoons until land application could be made; plaintiffs, environmental activist groups, claimed that manure constituted solid waste regulable under RCRA as being applied ("discarded") to farm fields at rates above acceptable agronomic rates and leaking from lagoons; defendants motioned for summary judgment, but court denied motion on basis that plaintiff's complaint contained well-plead allegations that defendants over-applied and improperly applied manure to fields and allowed it to leak from lagoons in manner that constituted a "discarding" of the manure which triggered RCRA "solid waste" provisions; court noted other courts providing framework for determining when reused material is "discarded" - Safe Air for Everyone v. Meyer, 373 F.3d 1035 (9th Cir. 2004) and Ecological Rights Foundation v. Pacific Gas & Electric Co., 713 F.3d 502 (9th Cir. 2013); court also noted Water Keeper Alliance, Inc. v. Smithfield Foods, Inc, No. 4:01-LV-27-H(3), 2001 U.S. Dist. LEXIS 21314 (E.D. N.C. Sept. 20, 2001) where court refused to dismiss RCRA claim that manure applied to fields at cattle feedlots were a solid waste). 


(appeal from disqualification from farm use special assessment; assessor disqualified 18 acres of subject property from farm use after discovery land no longer being used as farmland; on appeal court held cattle grazing occurred for some period of time on property, but extent of use was unclear; no evidence presented of cattle grazing activities, such as Schedule F; evidence showed property used for running motorcycles by grandchildren; court held extent of cattle grazing not sufficient to meet farm use; court also held cultivation of Himalayan blackberry on property (a noxious weed) not acceptable farm use either; appeal denied).


(plaintiffs own wells used to pump ground water for irrigating crops via pipeline across defendants’ property; defendants objected to pipeline and sued for removal after digging it up and disabling it; plaintiffs received preliminary injunction allowing repair and use of pipeline to prevent crop failure; plaintiffs then sought easement across plaintiffs’ property via eminent domain; trial court granted summary judgment for irrigators to use pipeline in conjunction with canal owned by irrigation district; on appeal, judgment affirmed except  that trial court, on remand, to consider plaintiffs’ trespass claim).


(petitioners, married couple, used husband's construction business to fund personal gambling habits; IRS failed to show that withdrawals from business bank account was taxable income to petitioners as opposed to a nontaxable return of capital or loan repayment; IRS bore burden of proof due to raising deemed distribution argument on post-deficiency basis). 


(petitioner prevailed in initial case (T.C. Memo. 2013-10) on issue of reasonableness of compensation, but IRS claims petitioner not entitled to administrative and litigation costs; court agreed with IRS because IRS position was substantially justified; reasonableness of compensation is a question of the facts and circumstances). 


(Federal Agriculture Reform and Risk Management Act)(House rejected "Farm Bill" on 195-234 vote; bill contained $955 billion in spending over the next 10 years primarily on Food Stamp programs with no mechanism to pay for the spending; bill represented a 57% increase in "Farm Bill" spending over the 2008 "Farm Bill"; bill would have given Obama Administration locked-in permanent increases in Food Stamp spending; while bill failed to garner sufficient Democrat support, Democrats largely voted against bill because it required, as a condition of receiving Food Stamps, that able-bodied recipients either be employed or be looking for work). 


(in a dissolution action, the court reversed a trial court’s property division order and remanded; trial court had originally awarded the marital residence to wife, with an unspecified 50 percent of the equity to be paid to husband; however, in a later nunc pro tunc order, the trial court stated that there was no equity in the marital residence because the wife contributed significantly more premarital funds toward the purchase than the husband; in reversing, the court could “not say for certain” that trial court properly considered evidence as to each statutory factor set forth in Ind. Code § 31-15-7-5, so to allow for an unequal division of property; trial court did not even acknowledge that this was an unequal division of property or provide a rational basis as to why deviating from the statutorily presumed equal division would be “just and reasonable”; such explanation was required by Indiana law). 


(advice sought on who can sign unfiled returns and Forms 870 and 872 after taxpayer’s death; decedent, non-filer, died intestate with bank account as only asset held by daughter and spouse; IRS determined that daughter could sign unfiled returns in accordance with I.R.C. Sec. 6012(b)(1); daughter should submit Form 56 to document fiduciary relationship as personal representative of mother’s estate and allow daughter to file Forms 870 and 872).


(court denies reconsideration of its decision in 140 T.C. No. 1 (2013) in which the court held that petitioner was not entitled to charitable deduction for donation of conservation easement on 185 acres of golf course due to provision in grant allowing substitution of donated property; such power of substitution not consistent with Treas. Reg. Sec. 1.170A-14(b)(2) which requires that use restrictions of easement be perpetual). 


(contract dispute between grass seed broker and buyer; allegations were that lower quality seed from noncontract acres mixed with contracted seed; current lawsuit involved duty to defend by seed broker’s general liability insurance; issue was whether allegations were for selling wrong seed rather than breach of contract; court held under liberal application of a duty to defend, claim of damages for delivery of wrong seed triggers duty to defend and insured granted attorney fees for cost of bringing suit).


(petitioner inherited farmland in South Dakota and purchased additional South Dakota tracts from family members and enrolled the land in the CRP; petitioner lived in Texas and hired manager to establish cover crop and maintain weed control as required by CRP contract; petitioner reported CRP payments on Schedule E (no self-employment tax); IRS asserted that CRP income should have been reported on Schedule F (subject to self-employment tax); court determined that petitioner in trade or business of participating in the CRP with profit intent; court skipped over material participation requirement and determined existence of trade or business on either petitioner's personal involvement with CRP contract or via paid manager without noting that imputation of agent's activities is blocked when material participation requirement is routed through I.R.C. Sec. 1402; court cited Sixth Circuit decision in Wuebker as controlling even though taxpayer in that case was a farmer and petitioner here was a mere investor that never farmed). 


(quiet title action brought by purchaser of property to clear any cloud brought by neighbor’s declaration that lots purchased were never to be sold; court granted summary judgment for purchaser finding no restrictions in chain of title and defendant’s claim that he was given a sales brochure and spent money to develop his own tract did not establish existence of negative easement against purchaser’s lots; appellate court held brochure did not create restriction on adjacent property nor mislead him; defendant failed to establish any evidence of restrictions; summary judgment for purchaser affirmed).


(acquaintance of petitioner offered to roll over balance of petitioner's annuity into a better performing annuity; account liquidated and petitioner given cash-out check in amount of $67,440 which was deposited into petitioner's bank account; petitioner then learned that wife pregnant; petitioner didn't substantiate medical expenses on 2009 return and didn't claim any medical expenses on line 1 of Schedule A; pregnancy expenses approximately $6,000 and balance of funds from annuity cash-out spent on baby room; petitioner claims exemption from 10 percent penalty tax because amount used for qualified medical expenses; court disagreed due to no documentation and no proof that expenses unreimbursed or exceeded statutory floor of 7.5 percent; 20 percent accuracy-related penalty imposed). 


(petitioners, married couple, claimed NOL from LLC that was passed through to them; IRS denied NOL on basis that petitioner did not materially participate in the LLC; court determined that wife satisfied test by participating more than 500 hours during the year and satisfied the facts and circumstances test; petitioners' testimony credible; deductible losses limited by I.R.C. Sec. 1366(d)(1) to petitioners' adjusted basis of interest at end of LLC's tax year; 5 percent additional tax penalty applicable).


(IRA qualified for exemption from debtor’s bankruptcy estate under 11 U.S.C. §522(b)(3); trustee objected on basis that debtor had executed boilerplate lien provision in client services agreement which was required as condition of opening IRA account and pledging IRA as security for future debts constituted extension of credit that caused IRA to no longer be exempt; facts revealed, however, that debtor did not open any other account with or incurred any debt to firm so lien would not amount to anything; trustee’s position also contrary to presumption of exemption for IRAs). 


(decedent conveyed family farm to trust in 2008 with instructions that proceeds from sale of farm after her death be divided equally among three sons; in 2009, decedent changed her will to exclude one son; two sons probated 2009 will; trustee appeared in probate and stated farm had been conveyed to trust in 2008; trial held and court concluded farm was corpus of trust and should be divided equally; court’s opinion affirmed as reasonable interpretation of trust document). 


(Red River Interstate Water Compact allocates water in Red River which divides Oklahoma and Texas which gives signatory states (AR, LA, OK, TX) "equal rights" to excess water in a sub-basin of river with no state entitled to more than 25 percent of excess water no matter where located; TX argued it was entitled to withdraw water from any part of the river including a tributary to take up to 25 percent, including sub-basin within OK and that Compact preempted OK state water law; court disagreed with TX position; TX cannot take water located in OK without OK's permission; OK state law which regulated out-of-state water users not pre-empted by Compact).


(Red River Interstate Water Compact allocates water in Red River which divides Oklahoma and Texas which gives signatory states (AR, LA, OK, TX) "equal rights" to excess water in a sub-basin of river with no state entitled to more than 25 percent of excess water no matter where located; TX argued it was entitled to withdraw water from any part of the river including a tributary to take up to 25 percent, including sub-basin within OK and that Compact preempted OK state water law; court disagreed with TX position; TX cannot take water located in OK without OK's permission; OK state law which regulated out-of-state water users not pre-empted by Compact). 


(declaratory judgment case in which oil and gas rights between subsequent owners were subject of dispute; issue stemmed from 1907 deed conveying surface only; trial court held precedent, Ramage v. South Penn Oil Company,  118 S.E. 162 (1923)required finding word "surface" ambiguous and extrinsic evidence should be used to determine meaning; on appeal, court held “surface” when used as a term of conveyance is not presumptively ambiguous and expressly overruled Ramage; 1907 deed unambiguous and to be enforced; result was that deed specifying "surface only" did not convey oil and gas interests).


(Chapter 13 case in which debtor claimed exemption for inherited IRA; debtor's reorganization plan cannot be confirmed if IRA not exempt asset; exemption allowed on basis that statutes involving debtor's exemptions to be construed broadly in favor of debtor and exemption; court determines that inherited IRA is exempt asset and follows decisions of Eighth Circuit (In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010) and Fifth Circuit (In re Chilton, 674 F.3d 486 (5th Cir. 2012)). 


(married couple owned real estate as tenants by the entirety; husband owed IRS $436,849 in income tax; husband transferred his interest in the real estate to his wife for $1; IRS then placed lien on the real estate; husband died with no distributable assets and no other assets with which to pay tax lien; surviving spouse died within year after husband’s death and property passed to son, defendant in this case; son was named as a co-executor of mother’s estate;  IRS claimed that tax lien applied to real estate before legal title passed to mother and that executors had to satisfy lien out of assets of mother’s estate; executors conveyed real estate to son for a dollar after receiving letters from IRS asserting lien; son later sold real estate and invested proceeds in stock market, subsequently losing his investment; IRS brought collection action for 50 percent of sale proceeds from executors under federal claims statute (31 U.S.C. §3713 via I.R.C. §6901(a)(1)(B)); trial court ruled for IRS and appellate court affirmed; under federal claims statute, executor has personal liability for debts and obligations of decedent, and fiduciary that disposes of assets of estate before paying government claim is liable to extent of payment for unpaid governmental claims if fiduciary distributes assets of estate, distribution rendered estate insolvent, and distribution took place after fiduciary had actual or constructive knowledge of liability for unpaid taxes). 


(petitioner purchased home and used it as principal residence before moving away renting home out; as rental, petitioner earned rental income and claimed depreciation; after rental activity ceased, petitioner stopped paying mortgage on home at time when mortgage exceeded petitioner’s basis in home; lender brought foreclosure action and issued petitioner Form 1099-A; IRS asserted $737 tax deficiency; petitioner claimed ordinary loss of over $100,000 and IRS claimed capital gain; foreclosure constituted sale or exchange under Treas. Reg. Sec. 1.1001-2(a)(1); depreciation claimed added to basis for purposes of gain calculation; ordinary loss not available upon abandonment of property subject to recourse or non-recourse mortgage). 


(final regulations on “tanning” tax imposed on pale people via I.R.C. 5000B; final regulations adopt temporary regulations; tax applies to prepaid monthly membership and enrollment fees even if tanning services not utilized; tanning services received at qualified physical fitness facility (QPFF) exempt; QPFF is business that doesn’t charge separately for indoor tanning services, offer them to general public or offer different membership fee rates based on access to indoor tanning services; bundled service formula adopted by final regulations; tax inapplicable to tanning service where no fee charged or redemption of “bonus points,” but tax applicable to promotions that entitled customer to “free” tan with purchase of set number of tans; tax inapplicable to purchase of gift certificates, gift cards or similar items, but tax imposed when card, etc., redeemed to purchase indoor tan).


(plaintiffs are raisins growers against with the USDA brought administrative proceedings alleging that plaintiffs were subject to the Agricultural Marketing Agreement Act of 1937 (AMAA) which regulates “processors, associations of producers, and others engaged in the handling” of certain agricultural commodities by subjected, in this case, plaintiffs to the California Raisin Marketing Order which established a Raisins Administrative Committee which sets up reserves pools that keep a percentage of raisins (approximately one-third to one-half of plaintiffs’ crop in particular years without compensating plaintiffs) off the domestic market and imposes an assessment on “handlers” to cover the RAC’s administrative costs; plaintiffs were subjected to six figure fines for non-compliance with marketing order; plaintiffs claimed they were producers and not “handlers” and were, therefore, not subject to the AMAA; plaintiffs also claimed that the Order violated plaintiffs’ Fifth Amendment rights against the taking of private property without just compensation; USDA determined that plaintiffs were handlers and rejected takings defense; trial court affirmed USDA administrative decision and granted USDA summary judgment; on appeal, Ninth Circuit Court of Appeals affirmed on the “handler” issue, but determined that only U.S. Court of Federal Claims had jurisdiction on takings issue; on further review, U.S. Supreme Court unanimously reversed; plaintiffs were subject to final USDA order that imposed fines and penalties and AMAA provides comprehensive scheme for remedies that provides jurisdiction to appellate court rather than Court of Federal Claims; takings claims can be raised during administrative process and Congress removed jurisdiction from Court of Federal Claims in such situations; Ninth Circuit decision reversed and case remanded).


(appeal from dismissal by district court; declaratory judgment sought by organic producers, association, and seed sellers to prevent patent infringement suits by defendant for inadvertent infringement caused by contamination of conventional and organic crops with GM traits; possibility of suit for inadvertent infringement through use or sale could be infringing use under Patent Act; court dismissed suit for lack of controversy after judicial reliance on statement by Monsanto that it would not take legal action against growers whose crops might inadvertently contain trace amounts of Monsanto biotech genes; court declares 1% equals trace amount for purposes of this representation).


(debtor, a farming partnership, filed Chapter 12; petition signed by one partner; creditor filed motion to dismiss case because it was not properly authorized because debtor, as partnership, unanimous consent was required to authorize bankruptcy filing of partnership under state (OR) law; while filing bankruptcy not in ordinary course of partnership business and unanimous consent would normally be required, unanimous consent not necessary if partnership agreement allows less than unanimous consent; partnership agreement did not so provide, so motion granted to dismiss Chapter 12 case). 


(taxpayer proposes to create charitable lead trust with required distributions from lead interest made to family private foundation or which taxpayer is founder/manager; IRS noted that tax benefits of trust during life and exclusion of trust property from grantor's gross estate at death can be achieved if donor acts appropriately with trust and foundation to ensure that gift is complete; IRS noted that grantor must separate himself from trust management (including trust funds received from foundation; IRS specified that donor cannot serve as trustee; while donor can be director of foundation, donor cannot vote on issues involving disbursements or decisions to distribute trust funds; under facts of ruling, quorum of foundation's Board, except the donor, established committee with sole authority to receive, invest and make all investment and administrative decisions, and distribution decisions on foundation's behalf; funds foundation receives to be segregated into separate account and committee will administer and distribute separate account, and donor will not have power over account). 


(appeal of summary judgment motion in case involving multiple parties after unidentified cow in highway caused injuries to plaintiff after striking cow with automobile; defendant contracted with power company to install power lines along the highway on which accident occurred four months before plaintiff’s injuries; defendant was successful in having claim severed from remaining claims in suit then moved for summary judgment claiming plaintiff had no evidence to establish claim against defendant; appellate court upheld grant of summary judgment due to lack of non-speculative evidence that defendant actually cut fence or that if fence was cut, it was proximate cause of cow wandering onto highway four months after work was finished).


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