Annotations 07/2013

( IRS issuance of final regulations involving 50 percent deduction limitation for meal and entertainment expenses under I.R.C. Sec. 274; limit applies to reimbursement or other expense allowance arrangements between payor (could be agent of employer or third party) and employee; when independent contractor reimbursed, deduction limitation doesn't apply if contractor accounts to client under I.R.C. Sec. 274(d) and regulations; but limits to apply to independent contractor and not to client if contractor fails to account to client; multi-party reimbursement arrangements analyzed separately; effective to expenses paid or incurred in tax years beginning after Aug. 1, 2013, but regs. can be applied to expenses paid or incurred in tax years beginning on or before Aug. 1, 2013 for which the limitations period on credit or refund under I.R.C. Sec. 6511 remains open). 


(in transaction structured as like-kind exchange, sole country music radio station in Los Angeles exchanged for various other radio stations; plaintiff claimed that Los Angeles radio station contained no appreciable goodwill and, as such, no taxes triggered by transaction; bulk of purchase price allocated to FCC license with nothing attributable to goodwill in accordance with appraisal; IRS claimed that LA station had $73.3 million of goodwill and FCC license worth less than allocated by parties; plaintiff claimed no goodwill because change in LA radio station format would completely change listener base and, as such, no inherent value inherent attributable to future customer patronage as required by I.R.C. Sec. 197 and Treas. Reg. Sec. 1.197-2(b)(1); while court disagreed with plaintiff's assertion that change in format that eliminates customer patronage erases goodwill, court noted that broadcast stations can still have goodwill independent of that circumstance; while goodwill possible, court that there actually was no goodwill involved in transaction based on value of other assets of the seller and use of residual method for determining goodwill). 


(petitioner acquired tract in late 2003 in fee simple and conveyed conservation easement to qualified entity the next day; conservation easement deeds contained clause that easement could be terminated by mutual agreement of parties; gift to entity did not create charitable trust and remote possibility that easement would be terminated immaterial; transfer to entity is a restricted gift for preservation and protection of conservation of donated property; cy pres doctrine does not bar conservation easement in event it is not possible to carry out purpose of easement; conservation easement could be terminated by mutual agreement and easement fails to comply with perpetuity requirement of Treas. Reg. Sec. 1.170A-14(g); petitioner argued on reargument that court had not applied rule espoused in Kaufman v. Comr., No. 11-2017, 2012 U.S. App. LEXIS 14858 (5th Cir. Jul. 19, 2012), vac'g., 136 T.C. 294 (2011); however, court noted that Kaufman involved termination of scenic easement by reason of mortgagee's reservation of casualty insurance or condemnation proceeds (not involved in present case), and that deed of trust in Kaufman stated that nothing limited donee's right to give consent to changes in easement deed or abandon some or all of donee's rights; in present case, language in easement grant provided for extinguishment of easement by mutual agreement of parties, and nothing in easement grant limited discretion of parties to abrogate easement).


(partnership formation case; case arose primarily due to petitioner's failure to report W-2 wages; petitioner claims partnership existence so as to broker tax liability with partner; federal, not state, law controls classification of "partners" and "partnerships" for federal tax purposes; hallmark of partnership existence is two or more persons carrying on a business and divide the profits; no written agreement; while "partner" could sign checks he never testified; petitioner's recordkeeping poor to non-existent; court unable to tell what petitioner contributed or what "partner" contributed, and petitioner admitted to changing dates on various receipts provided to IRS so testimony not credible; petitioner failed to prove partnership existence).


(taxpayer sought waiver from 60-day period for rolling over distribution from retirement account; taxpayer received statement from former employer in December showing that distribution was made from account to taxpayer; taxpayer contacted former employer about the distribution because no check had been received and employer maintained that check had been mailed in December; check reissued in February and amount deposited into IRA in March - beyond 60 days after original check mailed; 60-day waiver not required because beginning of 60-day period not when check originally issued, but when taxpayer actually receives check). 


(taxpayer's mother died naming taxpayer as beneficiary of non-qualified annuities that had not been annuitized; taxpayer elected to receive payout over taxpayer's life expectancy, but learned that she could obtain new annuity from a company with a higher payout than would be received from issuers of inherited annuities; taxpayer structured tax-deferred exchange under I.R.C. Sec. 1035 to obtain annuity with higher payout from different company with the money from original annuities sent directly to the different company; IRS approved transaction as tax-deferred if all requirements of I.R.C. Sec. 1035 satisfied; ruling provides additional option to taxpayers that inherit annuities other than either electing to annuitize the contract within 12 months or taking all of the money out within five years and pay tax on any deferred gains, or, in this instance since taxpayer was not spouse of decedent, wait at least five years and then liquidating the contract). 


(decedent died owning several IRA accounts with estate named as beneficiary; decedent’s will specified that all residuary assets  to be paid into trust with a charities to split the residuary; estate’s  personal  representative sought to assign IRAs to  charities; IRS determined that charities to include in gross income the amounts of IRD of the IRAs assigned to them when distributions from IRAs are actually received by charities). 


(taxpayer transferred closely-held stock to grantor trust (GRAT) in exchange for SCINs in five sets of transfers; transferor died in year after transfers; SCINs to pay interest only during term of notes and entire principal to be repaid at maturity; third set of transfers involved face amount of notes approximately double appraised stock value to reflect possibility that transferor might die before expiration of note's term; fourth set face amount equal to appraised stock value but had higher interest rate; decedent never received any payments under notes before death; decedent diagnosed with terminal illness after transfers; executor valued notes on Form 709 using I.R.C. Sec. 7520 tables with result that there were no taxable gifts; IRS concluded that (1) if FMV of notes was less than FMV of stock, difference was a gift; (2) Section 7520 tables not appropriate for valuing notes, but willing buyer/willing seller test is; (3) no estate tax consequence associated with cancellation of notes due to self-cancelling feature in accordance with Estate of Moss v. Comr., 74 T.C. 1239 (1980) and Estate of Musgrove v. United States, 33 Fed. Cl. 657 (1995)).  


(taxpayer's mother died naming taxpayer as beneficiary of non-qualified annuities that had not been annuitized; taxpayer elected to receive payout over taxpayer's life expectancy, but learned that she could obtain new annuity from a company with a higher payout than would be received from issuers of inherited annuities; taxpayer structured tax-deferred exchange under I.R.C. Sec. 1035 to obtain annuity with higher payout from different company with the money from original annuities sent directly to the different company; IRS approved transaction as tax-deferred if all requirements of I.R.C. Sec. 1035 satisfied; ruling provides additional option to taxpayers that inherit annuities other than either electing to annuitize the contract within 12 months or taking all of the money out within five years and pay tax on any deferred gains, or, in this instance since taxpayer was not spouse of decedent, wait at least five years and then liquidating the contract).


(plaintiffs purchased a pre-engineered building to serve as their personal residence and business location; contract entered into by plaintiffs personally and not their LLC, but defendant knew of dual purpose of building; quality issues arose with respect to building and plaintiffs refused to pay due to dissatisfaction with defendant's repair jobs; defendant filed mechanics' lien; plaintiffs and their LLC sued and trial court jury found in favor of plaintiffs for $108,017.13 in damages on breach of contract and warranty claims; trial court jury returned verdict for plaintiffs on deceptive acts and practices claim under KS Consumer Protection Act, and returned verdict on negligent misrepresentation claim for plaintiff's LLC of $149,824.65 in economic damages (due to need to rent space elsewhere, lost production, etc.); on appeal, defendant claimed that economic loss doctrine barred LLC's negligent misrepresentation claim because of lack of privity and appellate court agreed; on further review, KS Supreme Court rejected use of privity as bright-line test for determining application of economic loss doctrine; KS does not use economic loss doctrine to enforce boundary between contract and tort law, but KS courts determine nature of claim based on facts and pleadings with question one of whether defendant owed plaintiff duty imposed by law independent of contract; in present case, defendant owed LLC duty independent of contract; Court then determined that purpose of economic loss doctrine would not be furthered by applying it in this case).


(defendant charged with misdemeanor crime of keeping pygmy goat and chickens in home in violation of plaintiff’s ordinance; defendant challenged ordinance as unconstitutional on grounds that he lived in a free country and could do as he pleased on his property; court noted that state (OH) constitution also stated that private property is held subservient to the public welfare; right to maintain animals not a fundamental right entitled to strict scrutiny; ordinance rationally related to legitimate goal of government to protect public from unsanitary conditions and noxious odors by banning certain animals in urban areas; court noted that defendant could attempt to persuade policy-makers to allow such animals as pets). 


(plaintiff, rancher/farmer in fully appropriated area of the state (NM) brought facial constitutional challenge against state Domestic Well Statute (Sec. 72-12-1.1); statute requires State Engineer to issue domestic well permits without determining availability of unappropriated water; plaintiff claimed that statute violated state prior appropriated doctrine and plaintiff's due process of law rights; trial court ruled for plaintiff, but appellate court reversed on basis that prior appropriation doctrine is not system of administration and does not specify how senior rights are to be protected; accordingly appellate court determined that legislature could enact exception allowing additional appropriation for domestic purposes as long as senior water rights not impaired or subject to impending impairment; on further review, state Supreme Court affirmed; plaintiff could not show actual injury, and personally took advantage of Domestic Well Statute before bringing suit when developing portion of ranch; issuance of permit for domestic well is not, on its face, an absolute right to take and use water pursuant to the permit because permit could be issued but not allow for actual diversion; water rights are conditional in nature and, as such Domestic Well Statute not facially unconstitutional because it only concerns permitting and not administration; state constitution does not require identical permitting procedures for all appropriations; senior appropriators still have other remedies under law such as making a call on the water in the time of shortage, or make an as-applied challenge against the Domestic Well Statute; no due process violation because no deprivation of property involved). 


(petitioners, married couple, inherited 5.5-acre farm and operated as a dairy until 1997 when property converted to petting zoo, go-cart track and home sale activities; petitioners lost money and claimed deductions for expenses related to activities which resulted in substantial Schedule C losses; deductions denied on state return due to lack of substantiation; court affirmed denial and also affirmed imposition of accuracy-related penalty). 


(question submitted on “contiguous parcel rule” and “enhancement rule” of Treas. Reg. Sec. 1.170A-14(h)(3)(i) with respect to donation of permanent conservation easements; under contiguous parcel rule, if easement covers portion of contiguous property donor (and donor’s family) owns, amount of deduction is difference between FMV of entire contiguous parcel before and after easement grant; under enhancement rule, if easement grant increases value of donor’s other property, deduction to be reduced by amount of increase in donor’s other property; advice provided insight on who is member of donor’s family in context of ownership of contiguous parcel; mother part of family as is disregarded entity owned by donor’s daughter because daughter is member of family; donor’s wholly owned LLC also member of family; LLC taxed as partnership owned entirely by donor, donor’s wife and donor’s son is also member of family; LLC classified as partnership where 40 percent owned by unrelated persons and donor’s wife owns 60 percent also deemed to be related party; LLC taxed as partnership owns contiguous parcel and donor owns 50 percent of LLC as does unrelated person – LLC unrelated party and deduction equals difference between FMV of only parcel that donor owns pre and post grant; contiguous parcel owned by tiered LLCs (taxed as partnerships) that will have enhanced value due to development restrictions on parcel that donor owns outright – donor owns more than 50 percent of tiered LLCs and deduction reduced by value of enhancement to tract LLCs own; contiguous parcel owned by tiered LLCs taxed as partnership of which donor owns less than 50 percent are not related to donor and deduction is difference in FMV before and after easement grant).


(defendant charged with misdemeanor crime of keeping pygmy goat and chickens in home in violation of plaintiff’s ordinance; defendant challenged ordinance as unconstitutional on grounds that he lived in a free country and could do as he pleased on his property; court noted that state (OH) constitution also stated that private property is held subservient to the public welfare; right to maintain animals not a fundamental right entitled to strict scrutiny; ordinance rationally related to legitimate goal of government to protect public from unsanitary conditions and noxious odors by banning certain animals in urban areas; court noted that defendant could attempt to persuade policy-makers to allow such animals as pets). 


(state law, effective in Nov. of 2008, prohibited use of gestation crates in which a pregnant pig couldn't turn around in freely; defendant operated mass pork production operation utilizing gestation crates at time legislation passed in 2002; defendant relied on producing pigs in high volume and gestation crates and associated improvements to facility were designed to facilitate that outcome; defendant shut down business in 2003 due to change in law and resulting inability to compete; defendant that started raising peanut hay on tillable portion of land; pork production facility had no alternative use and was removed; defendant submitted compensation claim to legislature and appropriation bills passed in 2004 and 2005, but governor vetoed bills; facilities and structures sold for salvage value; defendant sued state in 2010 for inverse condemnation and compensation due to loss of structures (but not for value of land itself); defendant estimated cost of converting operation to pen-raising of hogs would be $600,000; while no categorical taking occurred, but trial court determined that regulatory taking had occurred and entered judgment in defendant's favor of $505,000 plus interest; on appeal, court affirmed; state offered no evidence that facility could be used for any other practical use or that defendant could have converted to pen-raising of hogs). 


(private equity funds that actively manage operations of their portfolio companies are engaged in trade or business under ERISA and are not merely passive investors; immaterial whether fund has employees or if its management company has such employees and offices, but key is whether fund's activities exceed those of typical investor; impact of decision is that private equity funds may be liable for unfunded pension liabilities of their portfolio companies, and income from such fund is potentially subject to UBIT or withholding taxes; in addition court's decision means that income of private equity managers taxed at ordinary income rates rather than capital gain rates)


(petitioner made advances during year in issue totaling $808,000 to family-owned business that petitioner was part owner of and later claimed bad debt deduction of $808,000 upon not being repaid; note called for 10 percent interest, but no collateral required and line of credit remained unsecured; petitioner failed to prove that advances were loans - no proof of repayment expectation or intent to enforce collection; no documentation of business's credit worthiness; petitioner's conduct inconsistent with outside third party lender; advances not worthless in 2009, the year deduction claimed; bankruptcy had not been filed even by mid-2011; no default occurred in 2009; deduction denied). 


(IRS guidance to auditors trying to determine which contracting party qualifies for I.R.C. Sec. 199 where one party contracts manufacturing out to another party; auditors to request information in writing explaining support for position that taxpayer bears burdens and benefits of ownership in tax year; certification statement to be completed by taxpayer as well as other contracting party; certification to be that taxpayer has determined it bears burdens and benefits of ownership over qualifying property and that taxpayer not required to record reserve for financial statement purposes for such determination; certification to be provided to auditor within 30 days of date information requested or by Sept. 30, 2013 if under exam as of July 24, 2013; once certification provided, IRS not to challenge taxpayer on benefits and burdens issue; if certification not provided, auditors to apply regular audit procedures to determine which taxpayer bears benefits and burdens of ownership; supersedes LB&I-4-0112-001). 


(passive loss case involving real estate professional test; petitioners, married couple, owned three rental houses that wife took care of and had no other paid employment (so 50 percent test automatically satisfied); log created using petitioner's cell phone and "Outlook" software; log not created contemporaneously with events described therein and with little to no explanation of how activity described related to particular property; log lacked sufficient detail; no grouping election made and many of the 750 hours required to satisfy second branch of real estate professional test did not count towards material participation test; 20 percent penalty applicable).


(IRS could collect estate tax via estate tax lien more than 12 years after taxes assessed; decedent died in 2000 owning assets via revocable trust of approximately $4.57 million and IRA worth $3.85 million; estate tax determined to be approximately $2.47 million; four years of extensions granted via I.R.C. Sec. 616 due to market value decline of publicly traded securities; $200,000 of estate tax paid and insufficient assets in trust to pay balance; IRS sought payment of tax from transferee of IRA under I.R.C. Sec. 6324 estate tax lien; IRS not bound by four year assessment period of I.R.C. Secs. 6501 and 6901(c) and could proceed under I.R.C. Sec. 6324 (10-year provision); 10-year provision extended by four year extension period that had previously been granted to estate, and IRA transferee liability was derivative of estate's liability; immaterial that transferee may have not known of unpaid estate tax; amounts withdrawn from IRA to pay estate tax liability also subject to income tax in transferee's hands; while income tax deduction for estate taxes attributable to IRA available under I.R.C. Sec. 691(c), deduction could be limited due to failure to match tax year of deduction and income).


(ordained minister began employment with church in 2005 and employment agreement showed monthly housing allowance of $500 for six months with possibility of extension as approved by church; no extension executed; audit of minister's return revealed unreported income,  and lack of substantiation for business deductions, charitable contributions and additional expenses; during audit, petitioner amended return to reflect "unreported income" identified in part by audit and claimed that $33,126 of the corrected amounts constituted housing allowance; such amount adjusted on amended return as "returns and allowances"; second agreement (dated in 2012) executed after the date of audit specifying additional items identified as parsonage allowance, not allowed as a retroactive agreement; petitioner did not establish entitlement to parsonage allowance; accuracy related penalty assessed, due to inadequate records to substantiate expenses or income). 


(petitioner worked 25-40 hours weekly as real estate agent and an additional 25-30 hours weekly in horse activity and worked part-time preparing tax returns; petitioner sustained losses in horse activity and claimed associated deductions; IRS denied deductions; while IRS didn't question hours petitioner spent in horse activity, IRS determined that petitioner lacked profit intent; petitioner prepared business plan for horse activity after IRS audit began and petitioner had only accomplished one of 10 items on business plan; no separate bank account maintained for horse activity, but expenses run through petitioner's personal account; gross receipts from activity only reported in one of seven years; court sustained IRS position and imposed 20 percent accuracy-related penalty). 


(adverse possession/boundary by acquiescence case involving small tract conveyed in 1970 based on legal description only with no boundary marker identifying southern boundary; fence erected on south side to keep cattle out; tract sold in 1976 and then sold again in 2001, 2004 and 2006; survey performed in 2007 that located southern boundary about 43 feet south of fence; “no trespassing “ signs then erected consistent with surveyed boundary and quiet title action filed to establish fence as boundary; notice and hostility elements of adverse possession for continuous 10-year period not satisfied; no notice given of adverse claim; no boundary by acquiescence because fence established as barrier fence and not necessarily treated as boundary).


(undivided one-half interest in 15,000-acre cattle ranch owned in trust, but trustees (children of decedent) ran ranch as though trust did not exist; trustees engaged in self-dealing by leasing trust ground to themselves and breached fiduciary duty by not leasing trust ground to surviving spouse (mother of the trustees) at higher rental rate; no contract existed between mother and son for mother to make a will leaving son her portion of ranch in return for his ranching services; son lacked standing to sue mother for quantum meruit compensation for working and managing ranch and for expenses incurred).     


(asset division in divorce proceeding; husband presented sufficient evidence that funds in joint bank account was husband’s separate property). 


(decedent had executed his will in 1996 and learned of two biological children in 2006; decedent is survived by 11 children, but one received the entire estate; two "new" children assert recognition as "after-born" (pretermitted heir) child status with the result that they inherited essentially as legally adopted children; court applied the plain meaning of the statute and denied rights of "after-born" children).


(plaintiff owned several tracts of real estate and transferred seven tracts to family members; gift tax return filed for transfers; IRS challenged valuation of real estate as reported on Form 709 and increased total value by almost $5 million (later reduced by about $3 million), and increased tax by over $1 million; 75 percent civil fraud penalty imposed under I.R.C. Sec. 6663(a) in amount of $781,000 plus almost $500,000 of interest; plaintiff paid deficiency plus fraud penalty and interest and sued for refund; plaintiff's motion to remove fraud penalty not granted because IRS proved by "clear and convincing evidence" that taxpayer intentionally underpaid taxes; county valuation significantly higher than values plaintiff reported, sales contracts on parcels were at much higher value than what plaintiff reported; valuation at over 10 times the reported value could be interpreted by jury as fraud; plaintiff had written letters to appraiser to set value at specific low numbers). 


(a mother died, leaving 117 tillable acres to her three surviving children; a probate court determined (and an appellate court affirmed) that the will gave the brother the right to farm the land for the remainder of his life, but provided that his sisters would equally share in the farm proceeds, each receiving one-third of the landlord’s share; when the brother failed to pay the sister for several years, she filed an action against him, seeking her proceeds under the doctrine of the “law of the case”; in affirming the trial court’s judgment in favor of the sister, the court held that the brother was precluded from challenging his obligation based on res judicata, specifically, issue preclusion; the record contained evidence supporting the trial court’s determination that the fair market rental value of the property was $140/acre; the trial court did err in awarding prejudgment interest because the amount of damages was based upon an exercise of judgment, not “simple math”).


(appellate court affirmed trial court’s cancellation of an oil and gas lease as to 150 acres of a 160-acre tract; lessee’s predecessors had secured the lease on the 160-acre parcel in 1950, but had only developed 10 acres; trial court’s finding that lessee had breached its implied covenant for reasonable exploration and development was supported by substantial evidence; lessee’s claim that it could not conduct the 3D seismic study required for future development because the adjacent landowner blocked its efforts was unavailing because lessee had undertaken no exploration or production for nearly 60 years; trial court properly considered that termination of the lease would probably allow landowner to conduct further development; trial court did not err in ordering lease cancellation instead of a cancellation conditional upon future development; because the lessee had no plans for further development in the foreseeable future, a conditional remedy would not have been practical or adequate). 


(defendant’s own farm ground on which they keep horses and plaintiff hired to perform maintenance work and care for horses at horse center in Lexington; defendant asked plaintiff to come to defendant’s farm to assist in trail ride on defendant’s property; plaintiff injured on trail ride and sued under premises liability theory – negligence for failure to mow tall grass and/or remove debris; trial court granted defendant’s motion for summary judgment; appellate court affirmed on basis that injury caused by natural outdoor hazard that was apparent and obvious to plaintiff; defendant did not breach duty of care owed to an invitee).


(plaintiff sister filed a breach of fiduciary duty action against defendant brother, individually and as trustee of several family trusts established by their deceased parents; the lawsuit alleged, inter alia, that defendant had failed to provide a proper accounting, distribute trust income, and provide for support; in granting summary judgment to defendant, the court found that plaintiff’s lawsuit was barred by a 2003 family settlement agreement authorized by 760 Ill. Comp. Stat. 5/16.1(d)(4)(J); under Illinois law, “family settlements are especially favored on grounds of public policy upholding the honor and peace of families”; court also found no evidence that plaintiff entered into the family settlement agreement under duress and that even if a breach of fiduciary duty had occurred, plaintiff suffered no damage).


(upon settlor's death (the last of the spouses to die), trust beneficiaries disagreed over distributions and entered into settlement agreement that distributed trust assets disproportionately among beneficiaries; after IRS issued clearance letter, second dispute arose; successor trustee proposed distribution plan, as did a beneficiary; beneficiary opposed successor trustee's proposal because it would provide successor trustee with greater share of bank stock and allowed valuation to be at time of settlor's death rather than subsequent time when value was lower; trial court determined that objection was basically an equity argument and upheld successor trustee's proposed distribution because it was consistent with trust language and settlement agreement even though inequitable; trustee had discretionary power to make distributions as determined by trustee; trial court decision affirmed on appeal).


(plaintiff attempted to assist defendant in corralling defendant’s horse, but was injured in the process when horse spooked; defendant moved for summary judgment on basis that defendant had no notice of horse’s vicious propensities or history of dangerous behavior; ; motion denied; on appeal, court affirmed; conflicting testimony present about the horse’s propensities; defendant couldn’t establish absence of knowledge of vicious propensities sufficient to be awarded summary judgment motion; case proceeds, with plaintiff bearing burden to establish that defendant had notice of horse’s vicious propensities).


(court has jurisdiction to review order staying judicial proceedings and compelling arbitration under crop insurance policy; Nebraska Uniform Arbitration Act which precludes arbitration agreements for future controversies relating to insurance policies is pre-empted by the Federal Crop Insurance Act regulations; trial court did not err in compelling plaintiffs to arbitrate their disputes with the defendant). 


(residential tenant's dog mauled and severely injured plaintiff; landlord moved for summary judgment on basis that plaintiff failed to establish that landlord had actual knowledge of dog's dangerousness; PA law requires that for landlord to be liable, landlord must have actual knowledge of dog's dangerousness; facts failed to establish that landlord never had notice of dog's dangerous propensities; immaterial under PA law that landlord should have known of dog's dangerous propensities).


(plaintiff, defendant’s employee, injured while operating a tractor; summary judgment for defendant upheld on basis that plaintiff’s injuries were proximately caused by plaintiff’s own negligence).


(auction sale of lake and farm property held by plaintiffs, family LLC and LP; bids received at auction lower than expected and failed to meet reserve amount; family members of plaintiff consulted one another with one member stating she would be comfortable with whatever the remainder of the family decided to do; defendant announced that all property would be sold that day and the family member signed purchase agreements with high bidders on behalf of plaintiff; plaintiff later sought to nullify sales; purchase agreement valid under state (IN) law and family signatory had apparent authority to sign purchase agreements; court noted that question of whether defendant breached contract with plaintiff and violated fiduciary duty not before court).


(decedent’s step-daughter claimed post-death that decedent step-mother’s marriage to father was void due to step-mother’s lack of mental capacity to marry shortly before death; father entitled to spousal share of estate (in this case everything); trial court held it could not annul marriage because decedent had died; on appeal, court drew distinction between annulment and declaration that marriage was void; action under Uniform Declaratory Judgment Act (UDJA) is appropriate manner to challenge validity of marriage post-death; legislative amendment to annulment statute did not evidence intent to limit judiciary’s ability to declare rights and status with respect to marriages, and UDJA does not conflict with annulment statute; trial court decision reversed and case remanded; on remand, marriage presumed valid and step-daughter bears burden to prove marriage should be voided upon presenting clear and convincing evidence that decedent lacked mental capacity to enter into marriage). Annotation


(petitioner failed to satisfy real estate professional test under passive loss rules due to failure to establish that more than 50 percent of his services in were in real estate trade or business; facts indicated that taxpayer spent most of time in non-real estate beverage distribution business and home loan business; 750-hour test also not satisfied due to lack of substantiation even under lax standard of Treas. Reg. Sec. 1.469-5T(f)(4); fallback text of active participation not available due to AGI in excess of $150,000).


(taxpayer is a pharmacy care provider that also processes photos for customers at its retail stores, and sought DPAD deduction attributable to photo processing activities; IRS determined photo processing constitutes MPGE of QPP because photos created from raw materials (paper, ink chemicals, etc.), but that affixing resulting processed photo and/or movie files onto photo CDs and movie DVDs is a non-qualified service activity because intangible files, CD or DVD not changed in form).


(son sued mother both personally and in mother’s capacity as trustee of two trusts in which she disinherited son pursuant to will and trust; while actions pending, mother died and son’s siblings substituted as defendants; son claimed that mother breached joint, mutual and contractual will made with his father entered into 15 years before execution of documents disinheriting him; trial court ruled against son and case affirmed on appeal on basis that irrevocable trust executed seven years after joint and contractual will which revoked or modified join and contractual will; on further review by state Supreme Court, Court determined that joint and contractual will not fully revoked and son could still possibly establish breach of contract as to provisions not revoked; case remanded). 


(court determined there was complete lack of statutory basis for exempting biogenic carbon dioxide from carbon emissions requirements; decision will result in ethanol fuel industry will be subject to carbon emissions regulations; ruling also applicable to paper and lumber manufacturers; court noted that atmosphere doesn't distinguish between CO2 molecules produced by fermenting plant matter to produce ethanol or by coal plant; since Supreme Court ruling in Massachusetts v. EPA where Court held that carbon dioxide could be regulated as air pollutant, argument was that EPA could not exempt biogenic carbon dioxide producers from regulations applicable to traditional carbon dioxide emitters). 


(case involves state (OH) Ag Commodity Handler law designed to provide protections to farmers conducting business with grain elevators or handlers; statutory priority lien provided for grain depositors that has priority over conflicting security interests; case involved bank creditor of defendant that was secured to extent of $425,691; court held that statutory lien for grain depositors had precedence over bank’s claim; prior to court’s ruling, legislature clarified law to state that lien had priority over all competing lien claims asserted against ag commodity assets; amended language effective October 11, 2013; dissent opined that lien statute was silent on issue of priorities between farmers and competing parties with security interests in proceeds of defendant). 


(plaintiff’s predecessor in ownership of tract bought tract from seller with seller reserving one-half of mineral rights and deed was recorded;  plaintiff bought tract “save and except” the reserved one-half mineral interest and deed recorded; land subsequently divided into lots with the deeds using various language to point out the reserved mineral rights; plaintiffs executed oil and gas lease with energy company to lease the reserved mineral interest; energy company later became concerned that plaintiffs didn’t actually own undivided one-half of mineral interest; plaintiffs filed trespass action against lot owners to determine title to mineral interests; trial court ruled for lot owners; on appeal, deed language did not effectively reserve the mineral estate).


(state charged defendant with animal torture when he killed Boston terrier puppy with baseball bat; dog was not house-trained and was biting children with dog’s behavior worsening and not responding to training; animal torture statute required state to prove that defendant inflicted “severe physical pain with a depraved or sadistic intent to cause prolonged suffering or death”; trial court in non-jury trial found defendant guilty of animal torture; an appeal, court reversed; evidence insufficient to establish that defendant acted with depraved intent to cause dog’s death, rather defendant killed dog in response to dog biting child in home and after dog had become more aggressive over time and unresponsive to remedial measures; case dismissed).


(plaintiff  fell off horse while engaged in sport or recreational activity;  defendant asserted assumption of risk as defense; court determined that risks of falling from horse or horse acting in unintended manner are inherent in sport of horseback riding; plaintiff  was experienced horseback rider and was aware of risk of falling off horse; summary judgment for defendant granted).


(plaintiff fell off horse while engaged in sport or recreational activity;  defendant asserted assumption of risk as defense; court determined that risks of falling from horse or horse acting in unintended manner are inherent in sport of horseback riding; plaintiff  was experienced horseback rider and was aware of risk of falling off horse; summary judgment for defendant granted). 


(Chapter 12 plan confirmation case; debtor acquired property to grow trees for eventual harvest; initial question involved debtor’s eligibility for Chapter 12; while no question existed that family members owned all interests in debtor, creditor questioned whether debtor engaged in farming; court distinguished the two cases that have discussed whether a tree farm constitutes a farming operation; testimony about amount of plantings contradictory; no harvesting has yet occurred, and only slight tree farming activity had occurred; shortfall of creditor payments under plan to be made up from non-farm job; confirmation denied).


(Chapter 12 case; under 11 U.S.C. Sec. 1222(a)(2)(A), debtors' tax liability attributable to prepetition sale of farm assets reported on lines 13 and 14 of Form 1040 eligible for non-priority treatment (long-term capital gains derived from Schedule D (sale of land)and Part 1 of Form 4797 (sale of swather), and ordinary gains from Parts 2 and 3 of Form 4797 (sales of business property - breeding livestock, equipment, shed and land); prepetition sales of feeder cattle and crop sales do not qualify for non-priority treatment because, while farm assets, they were not used in the debtors' farming operation, but were end products of the operation (such items were reported as farm income on Schedule F); receipt of crop insurance proceeds and federal crop disaster payments are the same as income from the sale of farm products and are not entitled to priority; debtors propose to utilize off-farm employment income for post-confirmation income rather than using proceeds of sale of assets to support reorganized operation; amount of priority and non-priority taxes to be computed under marginal method rather than proportional method; due to graduated tax rates, proportional method would dramatically and artificially increase debtors' adjusted gross income and inflate debtors' priority tax obligation; priority tax amount to be computed by preparing return recognizing all of debtors' ordinary farm income and gain income and comparing it to hypothetical return recognizing only ordinary farm income; proportion method does not measure what income "causes" which portion of the tax claim).


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