Case Summaries 07/2015
The petitioner was a venture capitalist who had numerous start-up companies. He had a Cayman Island insurer establish two variable life policies on elderly relatives of the petitioner where there was no fixed premium and no fixed benefit. The petitioner put up the cash of approximately $700,000 to buy the policies through a grantor trust. The cash could be invested in hedge funds and privately owned companies, and the policy income is not income to the petitioner if the petitioner did not direct the investments of the policies. Here, all of the investments were in the petitioner's start-up companies and the evidence showed over 70,000 emails between the petitioner, his lawyer and the investment advisors. One of the trust's was named "Jeff's Wallet" - the petitioner's first name was Jeff. Via the investments, the petitioner generated about $12.3 million of wealth in eight years. The court held that under the "investor control" doctrine of Rev. Rul. 82-54, 1982-1 C.B. 11, the petitioner was taxable on the income earned on the assets during the tax years in issue - amounting to about $1 million in tax. Webber v. Comr., 144 T.C. No. 171 (2015).
The petitioner, a veterinarian, donated trilobite fossils and claimed a charitable deduction for the donation of $136,500 in one year and $109,800 in another year. The petitioner claimed that he had donated long-term capital gain property allowing for the deduction of the FMV of the trilobites with no inclusion of the appreciation in value in income. Trilobites have been found on every continent in the world, from mountaintops to deserts to oceans with many being instantaneously fossilized. The petitioner's expert appraiser recognized his signature on Form 8283, but could not remember signing it, and could not recognize the appraiser letters that contained his signatures. In any event, the appraisals were not contemporaneous because they did not state whether the charity had received any goods or services in exchange for the gift. Isaacs v. Comr., T.C. Memo. 2015-121.
The petitioner claimed that the capital gains generated by a brokerage account in the petitioner's name need not be reported by her because the account was opened in her ex-husband's name. The IRS claimed the gains should be reported by the petitioner. The court agreed with the IRS, noting that the account required her signature and photo i.d. to open. The petitioner had authorized her ex-husband to buy and sell stocks on the account, and it was implausible that ex-husband forged petitioner's signature. The petitioner also received monthly account statements and had knowledge of the account balances. The court held that the accounts and the income therein belonged to the petitioner. Read v. Comr., T.C. Memo. 2015-115.