Annotations 11/2015

The IRS has announced that it has changed its policy of not allowing defrauded taxpayers to see the tax return that had been fraudulently filed using the taxpayer's stolen identity number and name.  Now, a defrauded taxpayer will be able to see the fraudulently filed tax return, subject to certain redacted information (apparently so that the IRS can protect the identity of the defrauding party).  Requests to see the fraudulently filed return can be made for returns filed within the prior six tax years.  A request letter can be obtained at https://www.irs.gov/Individuals/Instructions-for-Requesting-Copy-of-Fraudulent-Retuns. 

 


The petitioner bought a business and along with the purchase came a contract giving the petitioner an exclusive right to tow cars for a local police department.  The petitioner amortized the contract over 15 years.  However, the contract expired after five years and the petitioner wrote off the unamortized amount.  The IRS claimed that value remained and that the unamortized amount, therefore, could not be written off.  The court agreed because it found that the petitioner retained the rights to tow and store vehicle even after the contract expired and until a new contract was entered into.  The court also determined that the willing-buyer/willing-seller test of Treas. Reg. Sec. 20.2031-1(b) did not result in the contract having no value.  Steinberg v. Comr., T.C. Memo. 2015-222.


The plaintiff was friends with the defendant's father and stored property on the father's acreage.  The plaintiff stored items on the property, including cars, an old motor home and other automotive and recreational vehicle parts.  The father died, and the executor allowed the plaintiff to continue to store his property there.  Ultimately, the defendant acquired title to the property and advised the plaintiff that he needed to remove his items from the property or buy the acreage for $50,000.  The plaintiff declined the purchase offer, and the plaintiff did not get his items removed before the winter.  In the spring of the following year (more than a year after the father died), the defendant notified the plaintiff that he owed $350 for the storage of the items ($50/month for seven months) to be paid to the defendant's lawyer within a week and that he should make arrangements to remove the items.  The storage fee wasn't paid and the items weren't removed.  Five months later, the plaintiff sued for conversion after seeing that at least some of his items were no longer on the acreage.  The defendant claimed that the plaintiff had abandoned the items, and sought damages for a reasonable storage fee and costs incurred in removing the property.  The trial court determined that the defendant removed the property in violation of Iowa Code Sec. 556B.1 for failure to give the proper notice, and entered judgment for the plaintiff of $10,800 (the value of the property less the reasonable storage fee and an adjustment for a skid loader).  On appeal, the court reversed.  The court noted that the defendant was a constructive or gratuitous bailee of the plaintiff's property and, as such, was only liable to the plaintiff if the property was lost or damaged through the defendant's gross negligence.  Here, the court noted, the defendant had stored the items for almost a year and stored them for more than six months after asking the plaintiff to remove the items, and didn't dispose of them until receiving a court order from the estate that any items on the property were property of the estate that he inherited.  Accordingly, the defendant did not illegally convert the plaintiff's property.  Theis v. Kalvelage, No. 14-1568 (Iowa Ct. App. Nov. 25, 2015).   


The plaintiffs buy bred heifers sell the cows as soon as possible after calving and then feed the calves for a while before selling the calves, hopefully at a profit.  The calves were not kept for breeding purposes, and the plaintiffs would simply start the process over the next year.  The plaintiffs ordered "creep feed" mixed with Rumensin from the defendant that was placed in creep feeders with the calves.  The calves showed signs of respiratory distress with numerous calves eventually dying.  The toxicology report on two of the calves showed toxic levels of Rumensin.  In total, 23 calves died.  The plaintiffs weaned and fed out the remaining 170 calves and sold them at auction with a disclaimer that they had been fed excess Rumensin and were sold "as is."  The plaintiffs then sued the defendant for negligence, breach of implied warranty of fitness for a particular purpose, and breach of a voluntarily assumed duty.  The plaintiffs also claimed that the defendant was strictly liable for the resulting damages from a hazardous and dangerous feed condition.  The trial court rejected all of the plaintiffs' claims except that based on breach of implied warranty and awarded damages of $164,072.54.  The court also denied the plaintiffs an award of attorney fees.  The plaintiffs appealed on the basis that the award was insufficient to make them whole for failure to award business interruption damages based on lost profits.  However, the appellate court refused to award such damages, noting that in order to recover lost profits on such a theory, there must first be an on-going business with an established sales record and a proven ability to realize profits at the established rate with proof of actual profits for a reasonable time before the breach.  Here, the appellate court determined that the plaintiffs were merely speculating in the calf market and did not have a cattle operation analogous to the swine operation in Ballard v. Amana Society, 526 N.W.2d 558 (Iowa 1995).  The appellate court also denied punitive damages on the basis that the defendant's conduct was not willful and wanton and was without malice, but that errors occurred due to extenuating, non-malicious factors.  The appellate court also upheld the trial court's denial of attorney fees for lack of wanton conduct on the defendant's part.  The court also denied additional damages based on an alleged mistake in the damages calculation because the claim was not raised in the plaintiffs' post-trial motion.  Swanson v. R & B Feeds, L.L.C., No. 14-1823 (Iowa Ct. App. Nov. 25, 2015).


In an attempt to decrease the administrative burden imposed by the repair and capitalization regulations, the IRS has increased the deminimis safe harbor for taxpayers without an applicable financial statement (AFS) from $500 to $2,500.  The safe harbor establishes a floor for automatic deductibility for costs associated with tangible personal property acquired or produced during the tax year that are ordinary and necessary business expenses associated with the taxpayer's trade or business. The safe harbor provides for automatic deductibility for amounts up to $2,500 for the acquisition or production of new property or for the improvement of existing property which would otherwise have to be capitalized.  The IRS Notice points out that deductibility is available for repair and maintenance costs irrespective of amount.  The higher threshold on the safe harbor is effective for costs incurred during tax years beginning on or after January 1, 2016, however, the IRS will not raise on exam the issue of whether a taxpayer without an AFS can use the $2,500 safe harbor if the taxpayer otherwise satisfies the requirements of Treas. Reg. Sec. 1.263(a)-1(f)(1)(ii).  In addition, if a taxpayer is under exam concerning the $500 safe harbor and the amount or amounts in issue do not exceed $2,500 per invoice, the IRS will not further pursue the matter.  IRS Notice 2015-82   


The petitioner operated a sports memorabilia activity that he claimed occupied 12 hours of his time daily, seven days a week.  The court didn't believe him because he had a different full-time job.  The court also noted that the petitioner didn't have any expertise in the sports memorabilia business.  Similarly, the petitioner did not follow accepted business practices, did not insure his inventory and didn't operate the activity in a business-like manner.  Akey v. Comr., T.C. Memo. 2015-227.


In this private ruling from the IRS, the taxpayer sought to use his IRA funds to buy a partnership interest.  The paperwork was prepared and the partnership interest was purchased with the IRA funds, with the result that the IRA held the partnership interest.  However, the advisor that prepared the paperwork failed to realize that the custodian could not hold the partnership interest (while other custodians could), and the IRA custodian reported a distribution by issuing Form 1099-R.  The taxpayer sought relief from the 60-day rollover provision based on the bad advice received.  The IRS denied relief on the basis that the IRA funds were used to start a business venture rather than being rolled-over exclusively for retirement purposes.  Thus, a taxable distribution occurred along with any earnings on the distributed amount.  Priv. Ltr. Rul. 201547010 (Aug. 26, 2015).

 


The decedent died in early 2014 survived by three children.  Seven months after their mother's death, a daughter filed a petition for issuance of letters of administration (for which no statute of limitations applied) claiming that her mother died intestate and the value of her estate was approximately $250,000.  A brother objected, asserting that his sister's petition was basically a claim against the estate that was barred by the 6-month nonclaim statute of limitations contained in Kan. Stat. Ann. Sec. 59-2239.  The brother also asserted that the mother's estate did not have any substantial assets because the mother's real estate had been deeded to him before death and the remaining bank accounts had passed to him via payable-on-death designations established before death, and the remaining tangible personal property had been split between the three children.  The trial court denied the daughter's petitioner largely on the basis of its finding that the estate did not have any substantial assets.  On appeal, the court reversed.  The appellate court noted that the daughter's action was one seeking authority to marshal the estate's assets, if any, which did not trigger the nonclaim statute.  Furthermore, by waiting more than six months to file her petition, the daughter eliminated the need to notify creditors as well as the chance for creditors to file a claim against the estate.  The court also noted that the brother's claims could not be verified unless an administrator was appointed.  A dissenting opinion confused the need to administer the estate to verify the brother's claims (for which no statute of limitations applies) with a claim against the estate (for which the 6-month statute would apply) and asserted that there were no substantial assets in the estate.  In re Estate of Brenner, No. 113,288, 2015 Kan. App. LEXIS 81 (Kan. Ct. App. Nov. 20, 2015). 


In these companion cases, the taxpayers sought to acquire a low-speed electric vehicle (LSEV) by the end of 2009 to be able to offset it's cost with the credit then available through 2009 under I.R.C. Sec. 30D.  The taxpayers ordered and paid for a LSEV by the end of 2009, and title passed to them in 2009.  However, neither taxpayer actually received delivery of the LSEV until mid-2010.  I.R.C. Sec. 30D required that, to get the credit, the LSEV must have been placed in service by the end of 2009.  The court held that because the actual date of production occurred after 2009 and the taxpayers didn't actually take delivery of the vehicles under after 2009, that the credit was not available because the vehicles had not been placed in service as they were not available for the taxpayers' personal use by the end of 2009.  Trout v. Comr., T.C. Sum. Op. 2015-66 and Podraza v. Comr., T.C. Sum. Op. 2015-67. 


The decedent’ died in early 2012 and shortly thereafter, the estate filed the decedent’s 2011 individual income tax return which showed a tax liability of $495,096 and total tax payments of $924,411 which resulted in an overpayment of $429,315 for 2011.  According to the return, $25,000 was to be applied to the decedent’s estimated 2012 taxes with the balance of $404,315 to be refunded to the decedent’s estate.  On Form 706, the estate did not include the value of the tax refund in the gross estate or the value of the $14,126 individual income tax refund for 2012.  The IRS claimed that the individual income tax refunds should have been included in the gross estate value based on I.R.C. Sec. 2033, and assessed a deficiency of estate tax of $146,454.  The estate claimed that under state (KY) law, the refunds were not in existence as of the date the estate tax was due and was, therefore, only a mere possibility or expectancy and that no property interest existed until the time the IRS determined entitlement to the refund.  The court agreed with the IRS on the basis that I.R.C. Sec. 6402(c) specifies that, absent an offsetting liability, the IRS “shall” refund overpaid taxes to the taxpayer.  As such, the refund was not merely an expectancy but was estate property.  Estate of Badgett v. Comr., T.C. Memo. 2015-226.  


The petitioner made advances during the year in issue totaling $808,000 to a family-owned business that the petitioner was a part owner of.  The petitioner later claimed a bad debt deduction of $808,000 upon not being repaid. The note called for 10 percent interest, but no collateral was required and the line of credit remained unsecured.  The Tax Court determined that the petitioner failed to prove that the advances were loans.  There was no proof of repayment expectation or an intent to enforce collection.  In addition, there was no documentation of the business's credit worthiness.  The petitioner's conduct was inconsistent with that of an outside third party lender.  Also, the petitioner did not prove that the advances were worthless in 2009, the year for which the deduction was claimed.   The business had not filed bankruptcy even by mid-2011.  Thus, no default occurred in 2009 and the court denied the bad debt deduction.  On appeal the court affirmed.  Shaw v. Comr., No. 13-73687, 2015 U.S. App. LEXIS 20563 (9th Cir. Nov. 18, 2015), aff'g., T.C. Memo. 2013-70. 


The plaintiff is an energy company that owns numerous oil and gas leases.  The defendant entered into a contract with the plaintiff to buy numerous of the plaintiff's leases for $35 million plus wells, pipelines and related property.  The defendant placed $3.5 million in escrow.  The plaintiff provided the defendant with a list of assets and title limitations related to the leases, and the defendant found title defects in 40 percent of the leases that they claimed lowered the value of the leases being purchased by 55 percent.  The defendant did not seek dispute resolution as specified in the contract and unilaterally terminated the contract.  The plaintiff attempted to invoke the dispute resolution process, but the defendant didn't respond.  The plaintiff sued and the trial court awarded the plaintiff the escrow funds, plus interest.  On appeal, the court affirmed noting that the parties were sophisticated and that the contract did not provide for unilateral termination based on the defendant's own determination of title defects and impact on lease value.  Broad St. Energy Co. v. Endeavor Ohio, LLC, No. 14-4278, 2015 U.S. App. LEXIS 19751 (6th Cir Nov. 13, 2015).


The parties were neighbors in a subdivision with a homeowner’s association. To live in the subdivision, the parties had to sign a waiver stating that they would not take any action to contest or interfere with any development in the community “so long as such development is consistent with the Land Use Approvals.” The plaintiff challenged a decision from the local development review board granting the defendants a permit to build a pole barn on their property. The plaintiff also filed a civil action against the defendants, contesting their building of the pole barn. The defendants filed counterclaims alleging breach of contract, abuse of process, and other torts. Specifically, the defendants argued that the plaintiff had violated the association’s waiver by challenging the construction of their pole barn. The trial court granted summary judgment in favor of the plaintiff on the counterclaims, and the appellate court affirmed. The court ruled that a waiver of a right to participate in a municipal land use permit proceeding would have to be “unmistakable,” a standard that this waiver did not meet. Plaintiff was not given full notice of its meaning. The court also found that judgment was properly entered on the abuse of process claim because there was no evidence supporting the claim. Free and uninhibited access to the courts was an important right for all citizens, and the fact that the plaintiff was an attorney did not lessen her rights. Weinstein v. Leonard, No. 15-075, 2015 VT 136, 2015 Vt. LEXIS 114 (Vt. Sup. Ct. Nov. 13, 2015).


The Environmental Protection Agency (EPA), in 2010, unconditionally approved the registration of sulfoxaflor in accordance with the Federal Insecticide, Fungicide, and Rodenticide Act which bars the sales of pesticides that haven’t been approved and registered by the EPA.  The plaintiffs, commercial bee keepers and bee keeping organizations, challenged the approval based on studies which showed that sulfoxaflor was highly toxic to bees.  The court determined that the EPA’s approval was not supported by substantial evidence and that the approval posed the potential for more environmental harm than vacating the approval.  Pollinator Stewardship Council, et al. v. United States Environmental Protection Agency, No. 13-72346, 2015 U.S. App. LEXIS 19945 (9th Cir. Nov. 12, 2015).


After nearly 40 years of marriage, the wife filed a dissolution action against the husband. During the parties’ marriage, the wife’s mother had given her and the husband title to a farm. During the pendency of the divorce, the wife asked the husband to transfer ownership of the farm to her via quitclaim deed. He complied with her request, but later sought to claim a portion of the property as marital property. He argued that the wife had committed fraud by falsely promising to attend counseling in exchange for the deed. He also argued that because of their confidential relationship, she had unduly influenced him to deed the property to her. The trial court ruled that the transfer of the farm from the husband to the wife was a gift, and the appellate court affirmed. Accordingly, the court classified the farm as the wife’s separate property. The appellate court did remand the case, however, for reconsideration as to whether the husband’s contribution to the separate property during the marriage should have resulted in his receiving a larger share of the marital estate.  Draper v. Draper, No. E2014-02224-COA-R3-CV, 2015 Tenn. App. LEXIS 905 (Tenn. Ct. App. Nov. 12, 2015).


The IRS, in this case, reclassified a significant portion of the taxpayers' (a married couple) income from non-passive to passive resulting in an increase in the taxpayers' tax liability of over $120,000 for the two years at issue - 2009 and 2010.  The husband had practiced law, but then started working full-time as President of a property management company.  He was working half-time at the company during the tax years in issue.  He also was President of a company that provided telecommunications services to the properties that the property management company managed.  The couple had minority ownership interests in business entities that owned or operated the rental properties and adjoining golf courses that the property management company managed, and directly owned two rental properties, two percent of a third rental property and interests in 88 (in 2010) and 90 (in 2009) additional entities via a family trust.  They reported all of their income and losses from the various entities as non-passive, Schedule E income on the basis that the husband was a real estate professional under I.R.C. Sec. 469(c)(7) and that they had appropriately grouped their real estate and business activities.  The IRS claimed that the husband was not a 5 percent owner of the property management company, thus his services as an employee did not constitute material participation.  IRS also claimed that the husband was not a real estate professional and that the activities were not appropriately grouped.  The court agreed with the taxpayers, determining that the husband was a real estate professional on the basis that he owned at least 5 percent of the stock of the property management company.  The court determined that he had adequately substantiated his stock ownership and he performed more than 750 hours of services for the property management company - a company in the real property business.  The court also determined that the taxpayers had appropriately grouped their rental activities, rejecting the IRS argument that real estate professional couldn't group rental activities with non-rental activities to determine income and loss.  The court held that that Treas. Reg. Sec. 1.469-9(e)(3)(i) only governs grouping for purposes of determining material participation, and doesn't bar real estate professional from grouping rental activity with non-rental activity when determining income and loss (as the IRS argued).  Accordingly, the taxpayers had appropriately grouped their renal activity with the activities of the telecommunications company and the adjacent golf courses as an appropriate economic unit.  As such, the grouped non-rental activities were not substantial when compared to the aggregated rental activity.  The activities were under common control and, under Treas. Reg. Sec. 1.469-9(e)(3)(ii), the husband could count as material participation everything that he did in managing his own real estate interests - his work for the management company could count as work performed managing his real estate interests.  Note - in CCA 201427016 (Apr. 28, 2014), the IRS said that the aggregation election under Treas. Reg. Sec. 1.469-9(g) has no bearing on the issue of whether a taxpayer qualifies  as a real estate professional and the 750-hour test is not applied as to each separate activity.  This was not involved in the case.  Stanley v. United States, No. 5:14-CV-05236, 2015 U.S. Dist. LEXIS 153166 (W.D. Ark. Nov. 12, 2015). 


The plaintiff and defendant were brothers who owned adjacent family properties that had once belonged to their parents. The plaintiff owned the farm house and one acre of property. The defendant and his wife owned the surrounding farmland. In 1996, the plaintiff, with the defendant’s permission, razed a barn on the defendant’s property and replaced it with a pole shed for his own use. A water well on the defendant’s property also serviced the plaintiff’s property. After 2010, a dispute arose between the brothers when the plaintiff refused to allow the defendant to drive his large manure tanker on a blacktop driveway the plaintiff had constructed between the two properties. In response to the dispute, the plaintiff filed an action against the defendant and his wife, arguing that he was entitled to approximately one-half acre of the defendants’ property under an adverse possession theory. The trial court entered judgment for the plaintiff, but the appellate court reversed. The court ruled that the plaintiff had failed to prove by clear and convincing evidence that the common law elements of adverse possession had been established. The court ruled that because the plaintiff had used the property with the permission of his brother, his claim was defeated. Moreover, the plaintiff had not used all of the contested property for the 20-year period required by state (WI) law.   Rudnick v. Rudnick, No. 2014AP2893, 2015 Wisc. App. LEXIS 796 (Wis. Ct. App. Nov. 10, 2015).


The petitioner had an unpaid tax liability exceeding $600,000 and submitted an offer-in-compromise (OIC) at a collection due process (CDP) hearing.  The OIC was for $2,938.  The IRS rejected the OIC on the basis that the petitioner had withdrawn over $400,000 from his retirement accounts and that the reasonable collection potential exceeded over $500,000.  The court held that the IRS did not abuse its discretion in rejecting the OIC.  Chandler v. Comr., T.C. Memo. 2015-215


The petitioner claimed deductions for meals and entertainment, parking fees, tolls and transportation-related expenses, cost-of-goods sold for solar panels and a home office.  As for the solar panels, the only documentation provided was a quote for 1,000 units.  Concerning the home office, the only substantiation was the petitioner's testimony and the floor plan and area used for the office.  No business interest deduction was allowed because there was no evidence that the use of the loan proceeds was for something other than personal purposes.    The court agreed with the IRS position on the deductibility of the expenses (some were allowed, but most denied).  Smith v. Comr., T.C. Memo. 2015-214. 


The petitioner was a surgeon that had a private practice in one location and also was an “on-call” surgeon at a hospital about 25 miles away from his private practice location.  At the hospital he had to work a 24-hour period three days monthly and had to be available during emergencies.  He had various medical conditions and bought a motor home that he could park near the hospital that he could use for rest and sleep during the 24-hour shifts.  He reviewed patient charts in the motor home and referred to his medical books and other information while in the motor home.  He did maintain mileage logs that separated out the business and personal use of the motor home.  On audit, the IRS allocated the allowable depreciation (including expense method) between his business and personal use.  The petitioner claimed that he used the motor home for business purposes 85% of the time during his 24-hour work days.  The court upheld the IRS position, noting that the motor home was used only 27 days for business in 2008 and 36 days in 2009.  The petitioner’s own logs showed that his business use was approximately 20 percent for the two tax years in issue.  Cartwright v. Comr., T.C. Memo. 2016-212. 


In the facts of this ruling,  the question arose as to whether notices of a non-judicial sale could be delivered to the IRS by private delivery services such as United Parcel Service (UPS) or FedEx.  The IRS noted that under I.R.C. §7425(c), the notice of sale must be given in writing, by registered or certified mail or by personal service, not less than 25 days prior to sale.  The fact that the IRS actually received the documents does not matter.  Delivery by private delivery service such as FedEx or UPS didn’t count.  C.C.A. 201545025 (Jun. 12, 2015). 


The petitioner was a licensed real estate appraiser and director of real estate valuation at two national CPA firms, but did not own an equity interest in either businesses.  After getting married, the petitioner had three condominiums that he and his wife rented out.  He claimed that he put in more than 750 hours in managing the rental activities and that he spent most of his time on rental activities, but did not provide any log to document his time.  His wife had some notes, but nothing that carefully substantiated the time she spent on rental activities.  However, she did construct an activity log after the IRS selected their return for audit.  For the year at issue, the petitioner and spouse claimed about $40,000 in losses from the rental activity.  The IRS denied the losses due to failure to satisfy the real estate professional exception to rents being passive.  The court agreed, and noted that the petitioner's work for the CPA firms did not count toward the750-hr test because he didn't have an ownership interest in those businesses.  The evidence also did not support the argument that petitioner's wife met the 750-hr requirement.  The court upheld the imposition of an accuracy-related penalty.  Calvanico v. Comr., T.C. Sum. Op. 2015-64.


The plaintiff leased land from the defendant, a company that his father owned and operated.  A one-year lease was signed in 2003 for rice and soybean and crawfishing rights.  Another one year lease was signed for 2004.  The plaintiff claimed that he made improvements to the property in 2004 in exchange for the promise of a new five-year lease.  A five-year lease was never drafted, but one year leases were drafted for 2005, 2006 and 2007, but were never signed.  The plaintiff was evicted from the land in 2006, before the 2007 crawfish harvest.  The plaintiff sued for damages and the defendant sought damages for the plaintiff's failure to pay fees for rice storage and drying, fuel expenses, off-loading expenses and rental expenses.  The trial court dismissed the claims and the plaintiff appealed, claiming that a five-year lease began in 2004 via the oral modification and that he was entitled to the 2007 crawfish harvest.  On appeal, the court affirmed.  The court noted that there was no ambiguity in the parties' intent to create an annual lease and that the failure to agree to a lease term meant that the lease was for one year under state (LA) law.  Once the tenant was properly evicted from the property, the tenant lost any ability to claim entitlement to an unharvested crop such as the crawfish.  McCraine v. Voyellesland Farms, Inc., No. 15-396, 2015 La. App. LEXIS 2165 (La. Ct. App. Nov. 4, 2015).


The settlors created a dynasty trust in 1993 with terms authorizing the trustee to make charitable distributions out of the trust's gross income at the trustee's discretion.  The trust wholly owned a single-member LLC and in 2004, the LLC donated properties that it had purchased to three charities.  Each property had a fair market value that exceeded basis.  The LLC received the funds to buy the properties from a limited partnership's distribution to the trust in which the trust was a 99 percent limited partner.  The limited partnership owned and operated most of the Hobby-Lobby stores in the U.S.  The IRS claimed that the trust could not take a charitable deduction equal to the full fair market value, but should be limited to the trust's basis in each property.  The trust claimed a charitable deduction in excess of $20 million on Form 1041 for 2004, and later filed an amended Form 1041 increasing the claimed charitable deduction to just shy of $30 million, and seeking a tax refund of over $3 million.  The IRS denied the refund, claiming that the charitable deduction was limited to cost basis.  The trust paid the deficiency and sued for a refund.  On the trust's motion for summary judgment, the parties agreed that the donated properties were acquired by the trust with funds coming from gross income from a pre-2004 tax year.  Thus, according to the trust, I.R.C. Sec. 642(c)(1) allowed the charitable deduction to be computed based on the donated property's fair market value.  The court agreed, noting that I.R.C. Sec. 642(c)(1) allowed a deduction without limitation contrary to the basis limitation contained in I.R.C. Sec. 170, and that charitable deduction provisions are to be construed liberally in the taxpayer's favor.  The court noted that the donated properties were all acquired with distributions from the limited partnership to the trust, and each distribution was part of the LLC's gross income for the year of distribution.  Thus, the donated properties were clearly bought with funds traceable to the trust's gross income and were donated under the terms of the trust.  The court noted that the IRS admitted that there was no caselaw or other substantial authority that supported the government's position.    The court granted summary judgment for the trust.  Green v. United States, No. CIV-13-1237-D, 2015 U.S. Dist. LEXIS 151539 (W.D. Okla. Nov. 4, 2015). 


 The parties are friends and neighbors and are both farmers.  The plaintiff has raised various types of livestock, but the summer of 2012 was his first time raising sheep.  The defendant had bred sheep for over 30 years.  On occasion, the plaintiff allowed the defendant to keep livestock on the plaintiff's property.  In the summer of 2012, the parties went together to a livestock yard where the defendant bought a lamb ram to replace his existing ram.  The ram showed no vicious tendencies.  After ewes had been put in the pasture with the ram, the plaintiff was butted repeatedly by the ram as he attempted to turn on sprinklers in the pasture.  At the time of the incident, the plaintiff was 82 years old.  He suffered a concussion, five broken ribs, a broken sternum and a broken shoulder.  The plaintiff was hospitalized for 16 days.  The plaintiff sued based solely on a theory of gender based strict liability irrespective of whether or not the defendant knew the ram was abnormally dangerous.  The trial court granted summary judgment for the defendant.  On appeal, the court affirmed.  The appellate court noted that the standard of care under state (WA) law is ordinary care if the animal is not inclined to commit mischief, unless it is shown that the animal's owner knew that the animal had vicious tendencies.  In that event, strict liability is the rule.  The court noted that this approach was consistent with Restatement (Second) of Torts Secs. 509 and 518.  Under Restatement (Second) of Torts Sec. 509 comment e, rams have not historically been regarded as being inherently dangerous animals, but comment 23 of the Restatement (Third) of Torts propose a possible gender-or-breed-based modification of the general rule treating domestic animals as not excessively dangerous.  The court, however, referenced the policy reasons for not holding owners of male domestic livestock to a strict liability standard.  In addition, the court noted that the legislature could modify the law and had already done so with respect to dogs in certain situations.  Rhodes v. MacHugh, No. 32509-1-III, 2015 Wash. App. LEXIS 2687 (Wash. Ct. App. Nov. 3, 2015).  


CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

RSS​ Facebook Twitter