In this case, the plaintiffs cases were consolidated on appeal. They claimed that their on-the-job injuries should be covered under the state (NM) workers' compensation law. One plaintiff tripped while picking chile and fractured her left wrist. The other plaintiff was injured while working in a dairy when he was head-butted by a cow and pushed up against a metal door causing him to fall face-first into a concrete floor and sustain neurological damage. The plaintiffs' claims for workers' compensation benefits were dismissed via the exclusion from the workers' compensation system for farm and ranch laborers. On appeal, the court reversed. Using rational basis review (the standard most deferential to the constitutionality of the provision at issue), the court could find no rational purpose for the exclusion from workers' compensation for farm and ranch laborers, and noted that the purpose of the law was to provide "quick and efficient delivery" of medical benefits to injured and disabled workers. Thus, the court determined that the exclusion violated the constitutional equal protection guarantee. The court stated that the exclusion circumvented the policy of the Act which was to balance the interests and rights of the worker and the employer. While the court stated that the exclusion "results in expensive drawn out litigation being the only available option to the employee," the court failed to note that New Mexico is one of very few states that has adopted a "pure" comparative fault system whereby the injured party could be 99 percent at fault and still recover damages - although the recovery is reduced by the percentage of the injured party's fault. Such a system would seem to greatly enhance the likelihood of settlement of personal injury cases without protracted and expensive litigation. However, the state tort system went completely unmentioned by the court likely because it undercuts the court's claim that the exclusion results in "drawn out litigation." The court offered no citation to any scholarly research or statistics to back up its claim. The court further believed that the exclusion for workers that cultivate and harvest (pick) crops, but the inclusion of workers that perform tasks associated with the processing of crops was a distinction without a difference. However, the court made no mention (even though it was briefed) that farm laborers are more likely to be illegal immigrants than are workers that are engaged in crop processing activities, and made no mention that NM has at least four sanctuary cities or counties that harbor illegal immigrants. The processing of workers' compensation claims for such persons is not only illegal, it is more difficult due to the lack of documentation. Thus, an argument was provided to the court in briefs that the state had a legitimate interest in the farm laborer/processor distinction. The court did not address the point, holding the exclusion was arbitrary on its face. The court further dismissed the claim that the protection of the NM ag industry from additional overhead cost served a legitimate state interest. The court made no mention of the data indicating that the cost of workers' compensation insurance coverage rates for agriculture is commonly in the 6-8 percent of payroll range, with some states reporting the cost to be approximately 15 percent and, hence, did not address the argument that the exclusion had served a legitimate state interest in keeping food costs to the public down. The court did not address the point that has been made in similar cases that the ag exclusion slows down the mechanization of certain agricultural crop harvesting jobs as being a legitimate state interest. The court also made no mention that the highest court in numerous other states had upheld a similar exclusion for agriculture from an equal protection constitutional challenge. The court stated that its decision was applicable to workers' claims pending as of March 30, 2012. That's the date, because of litigation in a different case, that the Workers' Compensation Administration was on notice that the ag exclusion was unconstitutional. Rodriguez, et al. v. Brand West Dairy, et al., Nos., 33,104 and 33,675, 2015 N.M. App. LEXIS 69 (N.M. Ct. App. Jun. 22, 2015).
The debtors, a married couple, filed Chapter 12 bankruptcy on August 7, 2010 and submitted their reorganization plan on February 8, 2011. The plan was approved with some modifications on March 18, 2011. The confirmed plan contained a provision treating federal and state tax obligations attributable to the sale of farm assets occurring post-petition in 2010 and 2011 to be "classified, treated and discharged" as unsecured claims in accordance with 11 U.S.C. Sec. 1222(a)(2)(A) with the liability computed under the "marginal" method. The debtors received a tax refund for the 2010 tax year, and asserted a refund of almost $6,000 for the 2011 tax year attributable to the sale of farm property. The IRS claimed that the debtors owed over $66,000 of tax. For the 2012 tax year, the IRS did not issue a $5,706 refund, but rather applied it to the tax liability that IRS was asserting for the 2011 tax year. In May of 2013, the IRS demanded that the debtors pay the outstanding tax liability (including interest) of over $67,000. The debtors did not pay the tax claim, but then filed a 2013 return claiming a refund of almost $7,000. The IRS applied the amount of the refund to the outstanding tax liability and demanded payment in full of the outstanding tax liability of $65,431.85. The debtors sought to have the IRS held in contempt for violation of the debtors' reorganization plan on the basis that 11 U.S.C. Sec. 1222(a)(2)(A) made the IRS claim an unsecured claim not entitled to priority and subject to discharge. The court, after determining that it had jurisdiction, determined that the reorganization plan could not bind the IRS as to the post-petition tax claims. While the law in the Eighth Circuit at the time the tax was incurred was that taxes attributable to the sale of farm assets (and IRS did not challenge that the taxes at issue were attributable to farm assets) were unsecured, non-priority claims subject to discharge, the court held that a U.S. Supreme Court opinion decided in May of 2012 had abrogated the Eighth Circuit opinion. While the Eighth Circuit opinion was still applicable law at the time of plan confirmation and when the taxes at issue were incurred, the Court held that the U.S. Supreme Court opinion controlled. The court reached this conclusion by reasoning that the U.S. Supreme Court merely clarified what 11 U.S.C. Sec. 1222(a)(2)(A) had meant all along and, thus, had retroactive application. The court said this was the case "regardless of when the Plan was confirmed." The debtor then filed a motion asking the court to reverse its prior ruling because the court incorrectly retroactively applied the U.S. Supreme Court's holding in Hall to the debtors where the reorganization plan was confirmed before Hall was decided. The court agreed with the debtor and reversed its previous ruling. The court noted that the IRS need not be a "creditor" to be bound by a debtor's Chapter 12 plan in accordance with 11 U.S.C. Sec. 1222(a)(2)(A), and the debtor's plan contained a 11 U.S.C. Sec. 1222(a)(2)(A) provision. Thus, the IRS had violated the terms of the Chapter 12 plan. However, the court did not sanction the IRS. Thus, the IRS was bound the debtor's confirmed plan and any set-off or other action taken by IRS was reversed. In re Legassick, No. 10-02202, 22015 Bankr. 2239 (Bankr. N.D. Iowa Jul. 8, 2015, rev'g., 528 B.R. 777 (Bankr. N.D. Iowa 2015).
A foundation was established to develop and support an alumni association, with most of its income derived from sales at a weekly art and craft bazaar that includes a farmers' market and refreshment booths held at a parking lot on campus every weekend throughout the year. The university allowed the foundation to use the parking lot, and associated rest rooms and utilities without cost for two of the three years under examination. Vendors at the bazaar had to pay an application fee and then a monthly fee for space at the bazaar. The IRS, on examination asserted unrelated business income tax and rejected the foundation's view that the bazaar advanced the recruiting of students as mere speculation. The IRS also rejected the foundation's claim that the bazaar lessened the burdens of government, citing Rev. Rul. 85-2 primarily because the bazaar is not required by the associated community college district. Nor did the bazaar, as claimed by the foundation, relieve the distress of the elderly because they were the primary attendees at the bazaar. The IRS rejected this claim primarily based on Rev. Rul. 77-246 and its factual distinctions. The foundation made a fall-back claim that it was exempt from UBIT on the basis that its bazaar income was rent from real estate under I.R.C. Sec 512(b)(3). The IRS rejected this view because the vendor fees were paid to have the opportunity to sell merchandise rather than to use real property. Tech. Adv. Memo. 201544025 (Jul. 10, 2015).
A New York appellate court recently granted summary judgment to a farm in a wrongful death action stemming from the death of a woman who exited her car to help an escaped calf. A newly born calf escaped and wandered near to or onto the road. A woman driving by the farm stopped her car in the southbound side of the road and exited her vehicle in an attempt to assist the calf. The woman was killed when a car in the northbound lane struck her. The parties agreed that the decedent and the calf were both in the northbound lane when the woman was struck. The woman’s husband filed a wrongful death and personal injury action against the farm, and the trial court dismissed the farm’s motion for summary judgment. On appeal, the court reversed, stating that although a farm can be liable for an escaped animal, liability could not be imposed upon a party who “merely furnishes the condition or occasion for the occurrence of the event but is not one of its causes.” The court found that any negligence on the part of the farm in allowing the calf to escape merely created the opportunity for the decedent to be standing in the road. It did not cause her to stand there. One justice dissented, stating that the farm had failed to prove as a matter of law that the decedent’s conduct was “of such an extraordinary nature or so attenuated that responsibility for the injury could not be reasonably attributed to the farm. Hain v. Jamison, No. 14-02093, 2015 N.Y. App. Div. LEXIS 5939 (N.Y. App. Div. 4th Dep't July 10, 2015).
The plaintiff is a chicken grower that owned poultry barns and provided janitorial services with respect to raising chicks that the defendant supplied. The plaintiff typically had chicks for five to six weeks when the defendant would then pick up the chickens and pay the plaintiff for the services provided. The plaintiff would then prepare the facility for the next batch of chickens to be delivered. The defendant retained the power under the contract to determine how many chickens to be delivered and could terminate the relationship with the plaintiff at any time for any reason on 90-days written notice. In 2011, the defendant required its growers to upgrade their facilities to meet certain, heat, ventilation and other standards. Consequently, the defendant sent the plaintiff two written notices describing the upgrade requirement and asking the plaintiff to reply concerning its intent. However, the plaintiff never responded, claiming that it never received the notices. No further chickens were delivered and the plaintiff's growing contract was placed on its "inactive" list. The plaintiff sued for breach of contract and the defendant moved for summary judgment. The trial court denied the motion. At trial, the defendant moved for directed verdict which was denied. The defendant renewed the motion at the close of all evidence, which was denied. The jury ruled for the plaintiff finding that the defendant breached the contract for non-performance, that the plaintiff did not breach via repudiation, and that the plaintiff was entitled to $42,235.96 in damages. The defendant motioned for judgment notwithstanding the verdict, which was denied. The defendant appealed. On appeal, the court affirmed. The court noted that the contract stated that the defendant "agrees to deliver the FLOCKS (number and breed of which are to be determined by [defendant] in its sole discretion) to [plaintiff]." As such, the court determined that it was not optional for the defendant to not deliver any chicks. The court also reasoned that if the defendant had the right to not deliver any birds, that right would render other contract language meaningless - such as the language the gave the defendant the right to terminate the contract for with or without cause on 90 days notice. The court also determined that the plaintiff did not breach the contract by repudiation (other growers also testified as to not receiving letters about the required upgrades) and that the defendant never gave 90-days notice to terminate. The damage award was also upheld on the basis that the plaintiff was a top grower, could reasonable anticipate profits on chicks delivered to it and the jury award was based on the plaintiff's past performance. Brock v. Johnson Breeders, Inc., No. COA14-914, 2015 N.C. App. LEXIS 549 (N.C. Ct. App. Jul. 7, 2015).
Under the tangible personal property regulations that became effective in 2014, the IRS declined to provide a percentage test for determining when there has been a replacement of a major component (or unit of property if the item has no major components) or substantial structural part of an asset (Treas. Reg. Sec. 1.263(a)-3) which would cause the associated expense to be capitalized. However, in a guidance to examining agents, the IRS has established an 80 percent threshold for steam or electric generation property. Thus, if 80 percent or more of a component (or unit of property if there is no component) of such property is replaced, then the expense must be capitalized under Treas. Reg. Sec. 1.263(a)-3(k). If less than 80 percent is replaced, the associated expenses are currently deductible. LB&I-04-0315-002, impacting IRM 4.51.2 (Jul. 6, 2015).
he defendant established Total Maximum Daily Load (TMDL) limits on nitrogen, phosphorus and sediment entering in the Chesapeake Bay and associated rivers and streams annually. The impacted states also developed individual plans as to how they would achieve the regulatory limits along with establishing two-year milestones for achieving regulatory compliance. The plaintiffs challenged the defendant's regulatory limits as exceeding the defendant's authority, but the trial court upheld the limits. On appeal, the court affirmed on the basis that the limits did not eliminate state flexibility to make cleanup decisions and how to reach pollution reduction targets. American Farm Bureau Federation, et al. v. United States Environmental Protection Agency, et al., No. 13-4079, 2015 U.S. App. LEXIS 11548 (3rd Cir. Jul. 6, 2015).
The debtor proposed a Chapter 12 reorganization plan under which he would avoid two secured debts. When the debtor was not able to avoid the debts, he initially wanted more time to appeal but neither appealed nor filed an amended reorganization plan. The bankruptcy trustee motioned to dismiss the case and the court agreed. The court noted that the goal of Chapter 12 was to move the case promptly through the confirmation process. The court noted that the debtor's failure to propose an amended plan after a year of Chapter 12 relief was grounds for dismissal under 11 U.S.C. Sec. 1208(c)(3). The court also noted that the debtor had unreasonably refused to cooperate with the trustee when he failed to appear for his deposition. The debtor had fired his legal counsel. In addition, the debtor had not timely filed monthly reports and the bankruptcy estate lost value during the times of delay. The court also believed that there was no reasonable likelihood of rehabilitation. In re Haffey, No. 14-50824, 2015 Bankr. LEXIS 1850 (Bankr. E.D. Ky. Jun. 5, 2015).
The taxpayer at issue in this advice from the National IRS office invested in a real estate transaction via a multi-member LLC taxed as a partnership. The transaction was financed and the creditors ultimately foreclosed. The foreclosure triggered income to the taxpayer that the taxpayer treated as cancelled debt income potentially excludible from income under the insolvency exception of I.R.C. Sec. 108(a)(1)(B) because, as the taxpayer claimed, the debt was recourse and the I.R.C. Sec. 752 rules applied due to the borrower being the LLC. On audit, the examining agent claimed that the debt was nonrecourse resulting in the income triggered on foreclosure being nonexcludible. On review by the National Office, the IRS did not make a determination as to the classification of the debt because that issue needed to be developed further, particularly because the debt did not impose an unconditional personal liability on the LLC. The National Office stated that the debt could be recourse because of the existence of guarantees and pledges, however. In addition, the National Office concluded that the regulations under I.R.C. Sec. 752 have no application in determining the classification of debt to a partnership. The National Office pointed out that it is improper to determine the status of debt at the partnership level for I.R.C. Sec. 1001 purposes based on whether the partners personally guarantee the debt. Taxpayers cannot rely on footnote 35 of Great Plains Gasification Associates v. Comr., T.C. Memo. 2006-276. In this situation, if the debt is nonrecourse, the entire amount of the debt is realized income eligible for long-term capital gain treatment, but cannot be excluded from income. CCM 201525010 (Mar. 6, 2015).
The petitioners, a married couple, owned five rental properties and had a $30,146 net loss on the properties which they deducted in full. The IRS disallowed over $28,000 of the loss on the basis that the loss was a passive loss. The court agreed with the IRS. The petitioners’ logbook, while showing that the petitioners spent 764 hours in rental activities during the tax year, illustrated that the work the petitioners performed were more akin to investor activities rather than material participation in the activity. A management company was hired to manage four of the properties and a separate company was hired to find tenants and lease the other property. The petitioners performed research activities with respect to investment opportunities. Padilla v. Comr., T.C. Sum. Op. 2015-38.
In the fall of 2014, Maui County adopted an ordinance that banned the cultivation of genetically modified engineered organisms (GMOs). In an earlier action, the court entered an injunction preventing enforcement of the ordinance until the court decided the merits of a challenge to the ordinance. In this case, the court invalidated the ordinance as unenforceable as being preempted by the Plant Protection Act and the regulations thereunder. The ordinance, the court held, also exceeded the authority that the state had delegated to the county and that the fines specified in the ordinance were excessive. Robert Ito Farm, Inc., et al. v. County of Maui, et al., No. 14-00511, 2015 U.S. Dist. LEXIS 84709 (D. Haw. Jun. 30, 2015).
The plaintiffs bought a 40-acre tract from the seller with the seller reserving all minerals and royalties except that the seller conveyed "a 1/4 non-participating royalty interest in and to all of the royalty paid on production." The seller then later conveyed his remaining mineral interest to the defendant. An oil and gas lease was executed on the property, and the plaintiffs claimed that they were entitled to 1/4 of the royalty actually received that was paid on production. The court agreed. Leal v. Cuanto Antes Mejor, LLC, No. 04-14-00694-CV, 2015 Tex. App. LEXIS 6724 (Tex. Ct. App. Jul. 1, 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.
In the fall of 2014 Missouri voters approved a constitutional amendment placing a right-to-farm provision in the state constitution. The plaintiffs brought a post-election challenge to the ballot title summary statement. While the court said that the challenge was permissible, the court also held that the ballot title was sufficient and fair and did not need to refer to article VI of the state constitution which governs local governments. The "right to farm" being "forever guaranteed" did not mean that the right would be unlimited or completely free from regulation. A dissent would have disallowed the challenge in its entirety as impermissible "sandbagging." Shoemyer, et al. v. Kander, No. SC94516, 2015 Mo. LEXIS 100 (Mo. Sup. Ct. Jun. 30, 2015).
At issue in this case was a lease of 175 acres of farmland among family members. Dad died in 2003 and Mom died in 2007, and their beneficiaries were their five children. At the time of Dad's death, it was believed that Mom and Dad owned the farmland in joint tenancy. Accordingly, Mom put the farmland in a trust and retained a life estate. The land was leased to a daughter and the land was managed by another child of the parents. The daughter ultimately terminated the lease and the land was then leased to other family members. After Mom's death, it was discovered that the land was actually owned by Mom and Dad as tenants in common rather than in join tenancy. The existing lease continued, but then other family members sued for higher rent on the basis that the lease had actually terminated upon Mom's death. Under state (IL) law an exception from the statutorily-required notice of termination applies when the landlord dies holding merely a life estate. However, the court held that the exception did not apply because the trust owned the land, not the decedent. Thus, due to lack of termination notice being given under state law (at least four months before end of the lease calendar year), the lease had not been terminated. Lower v. Appel, No. 2-13-1288, 2015 Ill. App. Unpub. LEXIS 1458 (Ill. Ct. App. Jun. 29, 2015).
When developing regulations governing power plants, the Environmental Protection Agency (EPA) interpreted the Clean Air Act (CAA) in a manner that deemed the cost of the regulations imposed on a power plant to be irrelevant. The D.C. Circuit had held that the EPA regulations were valid. On further review, the U.S. Supreme Court reversed. The Court held that the EPA acted unreasonably because the directive in the statute (42 U.S.C. Sec. 7412(n)(1)(A)) to determine whether the regulation was "appropriate and necessary" meant that at least some attention had to be given to cost, which included more that the expense of a power plant in complying with the regulations. The Court held that the EPA regulations were not reasonable even under the deferential standard given the agency in Chevron. Michigan, et al. v. Environmental Protection Agency, et al., No. 14-46, 2015 U.S. LEXIS 4256 (U.S. Sup. Ct. Jun. 29, 2015).
The plaintiff filed a class action lawsuit against the defendant claiming that the defendant violated state (CA) law by marketing it's honey as "honey" without disclosing that it did not contain pollen (it is de-pollinated). The defendant motioned to dismiss the case for lack of class standing and on the basis that the plaintiff's claims were preempted by federal food and drug laws. The trial court granted the defendant's motion, and the appellate court affirmed. The court noted that the "common or usual name" as required by federal law under the Federal Food, Drug and Cosmetic Act, of de-pollinated honey is "honey." As such the defendant's product was appropriately labeled under federal law and the CA law that barred it from being labeled as "honey" was preempted. Brod v. Sioux Honey Association Cooperative, No. 13-15584, 2015 U.S. App. LEXIS 11114 (9th Cir. Jun. 29, 2015).
The plaintiffs asserted nuisance and negligence claims against the defendant with respect to the defendant’s hog farming operations in eastern North Carolina. The defendant motioned to dismiss all claims related to “annoyance damages” on the grounds that such claims are not compensable under NC law. The defendant agreed that damages in a temporary nuisance action such as this are allowed for “diminished rental value; reasonable costs of replacement or repair; restoration of the property to its pre-nuisance condition, and other added damages for incidental losses.” The court determined that NC law is not clear on the availability of annoyance and discomfort damages in temporary nuisance actions, including amounts for “fear” of damages. Thus, the defendant’s motion to dismiss was denied. In re NC Swine Farm Nuisance Litigation, No. 5:15-CV-13-BR, 2015 U.S. Dist. LEXIS 82601 (E.D. N.C. Jun. 25, 2015).
This case involves claims filed under the Arkansas Deceptive Trade Practices Act and other state law causes of action with respect to allegations that the defendant used deceptive and misleading labels on Hunt’s canned tomato products. The labels claim that the products are “100% Natural” and “free of artificial ingredients and preservatives.” The class claims that the defendant mislabeled the products so as to charge a premium price, but that the products contain artificial ingredients including calcium chloride. The defendant moved to dismiss the action on the grounds that the claim was preempted by the federal Food, Drug, and Cosmetic Act, failure to allege sufficient supporting facts and lack of standing. The court, in part, granted the defendant’s motion for judgment on the pleadings which dismissed the plaintiffs’ claims for breach of implied warranty of merchantability and violations of the Arkansas Deceptive Trade Practices Act and breach of implied warranty of merchantability. Other tort-based claims were preserved. Gabriele v. Conagra Foods, Inc., No. 5:14-CV-05183, 2015 U.S. Dist. LEXIS 82585 (W.D. Ark. Jun. 25, 2015).
A tract of land was owned by Mom and her eight kids. Together they owned 100 percent of the surface estate and 100 percent of the mineral estate. Mom and six of the children sold their interests in the surface and mineral estates to the remaining two children, reserving a royalty interest in the six children that sold their interests of "an undivided interest in and to the 1/8 royalties paid the land owner upon production of oil, gas and other minerals." The two purchasing children then sold their interest in the minerals to the plaintiff who entered into an oil and gas lease with an oil production company. The plaintiff claimed that the deed reserved a fixed royalty of 1/8 and, as such, each of the eight children held a 1/8 interest in a 1/8 royalty. The two children that sold their interest to the plaintiff claimed that they had a floating royalty of 1/8, and the court agreed. The court noted that at the time of the initial deed there was no existing lease in place and the usual royalty at that time contained in a mineral lease was 1/8. Thus, the deed's reference to a 1/8 royalty was based on the assumption that a landowner's royalty would always be 1/8. Thus, the 1/8 language referred to a future royalty that might be reserved. The deed also referred to "royalties paid to the landowner" and that royalties would be pooled and shared equally, which bolstered the selling children's argument. Medina Interests, LTD v. Trial, et al., No. 04-14-00521-CV, 2015 Tex. App. LEXIS 6382 (Tex. Ct. App. Jun. 24, 2015).
The debtor claimed his 1997 Peterbilt truck as exempt under the Colorado homestead statute on his Chapter 7 bankruptcy schedules. The trustee objected, and the court agreed with the trustee. The court determined that the homestead statute (C.R.S. Sec. 38-41-201(a)) didn’t apply because only two types of personal property are specifically exempt as a homestead – mobile homes and manufactured homes. In addition, those two types of personal property are attached to land. The debtor’s truck did not qualify as a homestead because it is not permanently or semi-permanently installed on real property and has no regular site and is not located in a residential area or mobile home park. Colorado case law required an association with real estate to support a homestead exemption for the debtor’s truck. In re Romero, No. 15-11254 TBM, 2015 Bankr. LEXIS 2065 (Bankr. D. Colo. Jun. 24, 2015).
The petitioner suffered from Type 2 diabetes and lost his job as a result. He made a withdrawal from his IRA before reaching age 59.5 and claimed that he was exempt from the 10 percent early distribution penalty. Six weeks after the withdrawal, the petitioner went into a diabetic coma, was hospitalized for over a week and filed for disability. The IRS claimed that the petitioner was not disabled on the date of the distribution as required b y I.R.C. Sec. 72(t)(2)(A)(iii) and, thus, owed the 10 percent penalty. The court agreed with the IRS because the petitioner did not prove that he was disabled before and at the time of the distribution. Trainito v. Comr., T.C. Sum. Op. 2015-37.
The debtors filed Chapter 12 and had their reorganization plan confirmed, but defaulted on the payments they were required to pay under the plan. Two creditors had the automatic stay lifted with respect to them and the debtors did not request and receive their voluntary dismissal such that the refilling limitations of 11 U.S.C. Sec. 109(g)(2) were never triggered. Instead, the court determined that the filing by the creditors of affidavits of default that constituted the requests for relief. But, before the affidavits were filed, the debtors filed for a voluntary dismissal. The court granted the dismissal and lifted the stay. When the debtors re-filed Chapter 12 about a month later, the creditors claimed that the debtors were not eligible because of the 11 U.S.C. Sec. 109(g)(2) bar (180-day limitation). The court allowed the re-filed case because the debtors had filed their motion for voluntary dismissal before the creditor affidavits were filed. Thus, 11 U.S.C. Sec. 109(g)(2) was never triggered. In re Herremans, No. BG 15-01567, 2015 Bankr. LEXIS 2201 (Bankr. W.D. Mich. Jun. 23, 2015).
The plaintiffs operate commercial cattle operations and bought vaccines that were designed and manufactured by the defendant. After vaccinating their cattle, the cattle suffered symptoms of endotoxemia which lead to the death of several thousand cattle and the reduced performance of the balance. The plaintiffs sued in state court for breach of contract warranties, negligent design and manufacture, failure to warn, failure to comply with the Viruses, Serums, Toxins, and anti-Toxins Act (VSTAA) and unfair and deceptive trade practices. The defendant removed the case to federal court and motioned for dismissal. The defendant claimed that the plaintiffs’ claims were preempted by regulations of Animal and Plant Health Inspection Service (APHIS) (the regulatory body that tested the vaccines). The court disagreed, noting that the VSTAA does not contain any express attempt to preempt state law, and that the U.S. Supreme Court’s decision in Wyeth v. Levine, 555 U.S. 555 (2009) which held that a government agency’s intent to preempt is insufficient. The plaintiff failed to engage in any Wyeth analysis and the court denied the plaintiff’s motion to dismiss. The court also refused to dismiss the plaintiff’s failure to comply claim and held that the negligence and unfair and deceptive trade practices claims should likewise go forward. The court extended the discovery deadline. Franklin Livestock, Inc., et al. v. Boehringer Ingelheim Vetmedica, Inc., No. 5:15-CV-63-BO, 2015 U.S. Dist. LEXIS 80440 (E.D. N.C. Jun. 22, 2015).
The plaintiff operates a large-scale wind energy generation facility in Kansas. The defendant is a rural electric cooperative. The parties are subject to a Renewable Energy Purchase Agreement (REPA) that establishes the terms and conditions of sale of energy between the parties. Due to inadequate transmission capabilities and the relatively higher cost of energy production via wind, the grid operator did not allow the plaintiff to put power on the grid at various times between March 2012 and August 2014 and, as a result, the plaintiff lost nearly $2 million in revenue due to the reduced sales of energy and the loss of tax credits. Under the terms of the REPA, the defendant was to pay for curtailment losses that are economic and the plaintiff bears the burden with respect to emergency curtailments. The parties did not dispute that economic curtailments were at issue. However, the defendant maintained that the matter involved a question of federal law, but the court determined that was only the case if an emergency curtailment was at issue, which it was not. Thus, the case involved a matter of breach of contract to be resolved in state court. The court did not allow, however, the plaintiff’s request for costs, expenses and attorney fees. Smoky Hills Wind Farm, LLC, et al. v. Midwest Energy, Inc., No. 6:15-CV-1116-JTM-KMH, 2015 U.S. Dist. LEXIS 80365 (D. Kan. Jun. 22, 2015).
The plaintiff grew and packed raisins and refused to forfeit 47 percent of his crop in one year and 30 percent of his crop in another year to the USDA for the privilege of selling the balance of his crop not subject to the marketing Order implemented in 1949 that is based on the Agricultural Marketing Agreement Act of 1937 allowing the USDA to seize the specified percentages of his crop. The USDA fined the plaintiff $483,843.53 for the market value of the raisins he refused to give up, plus a $200,000 civil penalty for disobeying the marketing order. The plaintiff sued for a constitutional taking. Reversing the Ninth Circuit, the U.S. Supreme Court held that a physical taking was involved since title to the subject grapes had been taken by the government. As such, the plaintiff was entitled to "just compensation" under the Fifth Amendment. That amount was the market value of the amount of the grapes that the government seized. Horne v. United States Department of Agriculture, No. 14-275, 2015 U.S. LEXIS 4064 (U.S. Sup. Ct. Jun. 22, 2015).
The petitioner was a dressage trainer and rider and tried to deduct her horse-related expenses. Based on the nine factor analysis of the regulations, the court concluded that the petitioner did not conduct the activity with a profit intent. Importantly, the petitioner had only tack as an asset in the activity and there was no expectation that it would increase in value. The petitioner had no other successes in relevant businesses, and the horse-related expenses were far greater than income from the activity. The petitioner also had significant income from other sources and derived pleasure from the horse activity. McMillan v. Comr., T.C. Memo. 2015-109.
A father and two daughters drowned at a beach near a city dike. The surviving wife/mother sued the defendant city on a gross negligence theory for failure to post more warning signs that were posted or close the beach. The trial court dismissed the case and the state (TX) Supreme Court affirmed. There was no evidence that the defendant was aware that perils at the beach exceeded what a reasonable recreational user of the beach could expect - there was no extreme degree of risk. In addition, the mere fact that existing warning signs had been destroyed in a hurricane and had not yet been replaced (2 years later when the beach reopened and the drownings occurred) did not mean that the city had any actual knowledge of any risks beyond inherent risks of open-water swimming. In addition, the plaintiff failed to offer any evidence of the extent or nature of any previous drownings during the dike's 100-year existence. As a result the TX recreational use statute barred liability for the defendant. Suarez v. City of Texas City, 465 S.W.3d 623 (Tex. 2015).
The plaintiffs, a married couple, bought stock in a small company which later came under SEC scrutiny for a “pump and dump” scheme as a result of the corporate officers releasing false information about sales that never occurred which enhanced the stock price before the officers sold their stock at a large gain. The buyers of the stock, including the plaintiffs, suffered a total loss as a result of an SEC investigation that halted trading. The company involved eventually filed bankruptcy. The plaintiffs claimed a deductible theft loss (ordinary loss that was fully deductible). The IRS claimed that the loss was a capital loss (which would only offset other capital gains or $3,000 of other income annually). The court noted that for the loss to qualify as a theft loss, the wrongdoers must have acted with the specific intent to deprive the taxpayer of their property, and the taxpayer must have transferred their property to the wrongdoers. The court, agreeing with the IRS, determined that the second part of the test was not satisfied – the taxpayers’ stock was not transferred to the corporate officers but was sold to general investors in an open market. Thus, the taxpayers’ stock had not been stolen. Greenberger v. United States, No. 1:14-CV-01041, 2015 U.S. Dist. LEXIS 80643 (N.D. Ohio Jun. 19, 2015).
The plaintiffs, a married couple, were injured in an auto accident when the wife lost control of the couple's vehicle in a rural area when the vehicle came into contact with corn mash (a byproduct of ethanol production) that had spilled from a truck onto a roadway the day before. During the day before the accident, a state trooper was working a traffic stop in the area when he saw the mash spilling from the truck owned by the private party defendant. The officer completed his traffic stop and then closed the lane of the road in question. The local rural fire department responded to the spill and moved it onto the unpaved shoulder and into the ditch. The truck owner was not required to assist with the cleanup and was issued a citation after the cleanup was complete, with the roadway then reopened. As noted, the accident occurred the next day when the corn mash migrated back onto the traveled portion of the roadway. Eyewitness testimony noted that the plaintiffs' vehicle contacted the mash before losing control and sliding off the roadway. The trial court held that the political subdivisions (local town, county and rural fire department) were immune from liability under state law, and also held that the truck owner owed the plaintiffs no duty because any duty they owed the plaintiffs had been extinguished when the officer deemed the roadway safe and reopened it. On appeal, the court affirmed the trial court as to the grant of summary judgment to the truck owner because the truck owner did not owe any duty to the plaintiffs on account of the roadway being deemed safe for vehicular travel and the authorities had been actively engaged in removing the obstruction. However, the court reversed the grant of summary judgment to the political subdivisions. The court reasoned that there was a single incident("spot or localized defect) of spillage of corn mash and that the migration back to the roadway from the shoulder was not a separate incident. Thus, the political subdivisions were on notice of the incident and had reasonable time to correct the problem and had waived their sovereign immunity under Neb. Rev. Stat. 13-910(12). Kimminau v. City of Hastings, et al., 291 Neb. 133 (2015).
The plaintiff is a farming/ranching partnership consisting of brothers. The defendant owns about 33,000 acres of farmland. The parties entered into a cash lease in 2009 for over 10,000 acres and the lease terminated after the 2009 crop harvest, but required the defendant to give the plaintiff a first opportunity to rent the leased premises before renting it out for the 2010 crop year. The parties again entered into a leasing arrangement involving two leases for separate tracts totaling over 29,000 acres. One lease said the plaintiff again had the first opportunity to rent for the next crop year, and the other lease said the plaintiff had the option to rent for the '13, '14 and '15 crop year. In April of 2012, the defendant informed the tenant of the right of first refusal and inquired as to whether the plaintiff wanted to rent the land for the future. The parties met in person in late July after the plaintiff said they wanted to rent on the same terms as the previous year, but the defendant wanted to raise the cash rent amount. The plaintiff was told that a decision had to be made by August 1, 2012. The plaintiff did agree to the higher cash rent on August 1 by calling the defendant. The plaintiff then made financial commitments and purchases in anticipation of leasing the land. Just over a week later, the defendant sold the land and sought a court determination that the lease to the plaintiff had not been extended and told the plaintiff to cease farming operations. The defendant then served the plaintiff with notice to quit and vacate the property. A third party then took possession of the land and planted winter wheat on over 12,000 acres at a cost of over $1 million. The trial court found that the parties had an enforceable contract and that the plaintiff had exercised its option to lease the property for the '13-'15 crop years. A second trial resulted in a finding that the plaintiff was not damaged, was not unjustly enriched by receiving the proceeds of the winter wheat crop that the third party planted, and that the defendant had unclean hands. On appeal, the court affirmed. Dowling Family Partnership v. Midland Farms, LLC, No. 27114, 2015 S.D. LEXIS 82 (S.D. Sup. Ct. Jun. 17, 2015).
The decedent's surviving spouse found a copy of the decedent's will on his desk among his papers. The original could not be found and the attorney that drafted the will had died several years earlier. Two nephews of the decedent petitioner the court for formal probate of the copy of the will and the surviving spouse petitioned the court for an informal intestate probate. The trial court held that the nephews had overcome the presumption that the original was revoked. Both of the nephews had a close relationship with the decedent and helped him with farming and farmland was left to them under the terms of the will. The surviving spouse did not know about the existence of the will. On appeal, the court affirmed. Estate of Deutsch, 2015 S.D. LEXIS 81 (S.D. Sup. Ct. Jun. 17, 2015).
In this case, a married couple executed a transfer-on-death (TOD) deed naming the husband's daughter and her husband as beneficiaries of a farm that the husband owned. The farm was owned solely by the husband even though the TOD recited that both the husband and wife owned the farm. An initial draft of the TOD gave the wife a life estate in the farm upon the husband's death when the TOD would become effective to transfer the farm. A subsequent version (the version at issue) eliminated the life estate in favor or an oral understanding that the wife could live on the farm as long as she desired. The husband died the sole owner of the farm, and the surviving wife claimed that the TOD was ineffective because it stated that both the husband and wife owned the farm. The wife also attempted to revoke the TOD after her husband's death. The trial court held that the wife had no marital interest in the farm and that the TOD was effective to transfer the farm to the husband's daughter and her husband. The trial court also determined that the TOD designation was not the result of undue influence and that reformation to grant the wife a life estate was not warranted by the evidence. The trial court denied reconsideration. On appeal, the court affirmed. It was sufficient that the actual owner of the farm was named as an owner of the farm and the TOD was not invalidated simply because it also said that other people had an ownership interest in the farm. The court also determined that the evidence did not support an undue influence claim, and that the wife had no ability to revoke the TOD. The evidence also did not support a reformation of the TOD designation. Sarow v. Vike, No. 2014AP1476, 2015 Wisc. App. LEXIS 427 (Wisc. Ct. App. Jun. 11, 2015).
The petitioners claimed deductions for business travel and medical expenses. However, they did not prepare mileage logs as the trips were incurred and did not record the business purpose of trips. In addition, logs maintained did not provide the names and addresses of customers or the businesses that were visited or the business purpose of the trips. Claimed medical expenses did not list the name of the patient, the medical purpose of the service or expense and did not list the doctor visited. The court upheld the denial of the deductions. Renner v. Comr., T.C. Memo. 2015-102.
The IRS claimed that the petitioner had a tax deficiency of $2,500. The return was prepared by a return preparation service known as "Tax Whiz," and claimed a $2,500 American Opportunity Tax Credit (AOTC) which resulted in the return showing a $1,853 refund due to petitioner. However, the petitioner admitted that he did not have any qualified educational expenses for the year in issue and was not entitled to the credit. The petitioner also admitted that he did not examine the return before Tax Whiz filed it. The petitioner did not receive the refund because IRS intercepted it and had it applied to the petitioner's outstanding child support debt. The court held that the petitioner was not entitled to the AOTC, and was liable for the resulting deficiency. Reliance on a tax return preparer does not absolve a taxpayer from the responsibility to file an accurate return, the court noted. The court lacked jurisdiction to review the reduction of the petitioner's overpayment to pay his child support debt. Devy v. Comr., T.C. Memo. 2015-110.
As part of an estate plan, a husband created a trust for the benefit of his wife and their descendants. The trustee could pay to or use for the benefit of any of the beneficiaries any amount of the trust income and principal as the trustee determined necessary for a beneficiary's support, health and education. The husband also established two grantor retained income trusts (GRATs) with the remaining trust assets at the end of the GRAT term paid to the trust. The couple filed gift tax returns and elected to split the gifts to the trusts such that one-half of each gift would be deemed to have been made by each spouse for purposes of gift tax. The IRS, citing, I.R.C. Sec. 2513 and Rev. Rul. 56-439, denied split gift treatment because the spouse was a beneficiary of the trusts. A split gift election is only permissible for gifts to someone other than a spouse. No gifts were eligible for split gift treatment. Priv. Ltr. Rul. 201523003 (Jan. 28, 2015).
The debtor filed Chapter 12 bankruptcy and listed a bank debt in his schedules. The bank debt was secured by real estate. The bank was notified of the deadline to file claims and was also notified of the meeting of creditors. The bank filed a proof of claim more than a month after the deadline, but the bank's attorney did timely file a notice of appearance identifying the bank as a creditor. The debtor proposed a reorganization plan that provided for no payments on the bank's disallowed claim, but the plan did retain the bank's lien and did provide for post-bankruptcy payments on the bank debt. The bank objected and the debtor asserted that the bank's claim was untimely. The court disallowed the bank's claim as untimely because the bank had done nothing that could be treated as the equivalent of filing a proof of claim on a timely basis. An entry of appearance and request for notice were insufficient to qualify as an informal proof of claim. The court also determined that the debtor's motives for objecting to the late filed claim had no bearing on whether the late filed claim should be allowed. The court held that 11 U.S.C. Sec. 502(b)(9) required that the bank's claim be disallowed. In re Swenson, No. 14-40173-12, 2015 Bankr. LEXIS 1922 (Bankr. D. Kan. Jun. 12, 2015).
The decedent had four children and gave one daughter a power of attorney and established a joint checking account with another the daughter. Two other children alleged that the decedent’s funds had been misappropriated and two daughters had received almost $300,000 combined. A forensic CPA was not able to determine if the transfers were appropriate or reasonable. On an action for the removal of the personal representative, the trial court determined that there could not be any undue influence if the principal is lucid. On appeal, the court reversed. The court stated that, under state (ND) law, the trial court was to determine whether the two daughters assumed a confidential relationship with the decedent and, if so, a presumption of undue influence would apply as to any and all benefits the daughters obtained on account of that relationship. In re Estate of Bartelson, No. 20140244, 2015 N.E. LEXIS 157 (N.D. Sup. Ct. Jun. 11, 2015).
In this case, the son had farmed with his father for 25 years until the father's death. The father's will left one-half of the farm personal property to the son with the other half passing to the son's three non-farm siblings. The will also left the farmland to the four children equally with the son having a right of first refusal with respect to any sale of the farmland. The son filed a claim in the probate estate that he was entitled to all of the farmland based on an oral promise from his parents and that he had detrimentally relied on that promise. The trial court denied the claim and the son appealed. On appeal, the court affirmed on the basis that the evidence failed to establish a clear and definite promise that the son would receive the farmland without paying for it. The court also held that the evidence failed to support the son's claim that he was entitled to be reimbursed for funds he spent on machinery and buildings over the prior 25 years. In re Estate of Beitz, No. 14-1492, 2015 Iowa App. LEXIS 519 (Iowa Ct. App. Jun. 10, 2015).
The plaintiffs owned a vacation property bordering a lake and received a permit to maintain a boat dock and stone steps on the public land between their property and the lake. The lake and shoreline is managed by the defendant. The defendant revoked the plaintiffs' permit, after conducting a hearing, for causing herbicides to be sprayed on public property and for removing brush (and mowing the shoreline) from the previously sprayed land. The plaintiffs challenged the revocation for lack of due process. The trial court held that the defendant had not acted arbitrarily or capriciously and that the plaintiffs' constitutional due process rights had not been violated. The appellate court affirmed. The court noted that the plaintiffs had no property interest in the permit to which due process rights could attach, and that the permit clearly specified the conditions that had to be satisfied to keep the permit. McClung v. Paul, No. 14-3463, 2015 U.S. App. LEXIS 9491 (8th Cir. Jun. 8, 2015).
The taxpayer took a distribution from his IRA and then suffered a work-related injury that put him on medical leave. The leave period expired after the 60-day IRA rollover period. But, the taxpayer was also caring for his disable wife at the same time. The taxpayer sought relief from the 60-day rule, but IRS determined that relief would not be granted because the taxpayer used the withdrawn funds to pay personal expenses during the 60-day period and didn't return the funds to the account for more than six months after the 60-day period had expired. Thus, the funds had, in effect, been used as a short-term, interest-free loan that the taxpayer used to pay personal expenses. U.I.L. 201523025 (Mar. 13, 2015).
The petitioner built a commercial building and entered into a 10-year lease with the lessee. Under the terms of the lease, monthly rent payments were to be paid but the lessee could make a one-time payment to the petitioner which could be used in calculating rent and thereby reduce the amount owed under the lease. A $1 million payment was made and the IRS claimed that the petitioner should have reported it as income. The petitioner claimed that the amount was a reimbursement of construction costs or, if it was rental income, could be reported over the life of the lease. The Tax Court agreed with the IRS that the amount was rental income that was to be fully reported in the year received under I.R.C. Sec. 467. The rental agreement did not specify any specific allocation of fixed rent. Thus, the rent allocated to a rental period is the amount of fixed rent payable during that rental period. The constant rental accrual and proportional rental accrual methods were inapplicable to the lease at issue. Stough v. Comr., 144 T.C. No. 16 (2015).
Iowa HF 661, effective July 1, 2016, instead of repealing the inheritance tax, the Bill specifies that a step grandchild is exempt from Iowa inheritance tax rather than being subjected to the tax along with siblings, nieces and nephews and unrelated persons. In addition, the Bill allows a surviving spouse to relinquish the elective share amount of a deceased spouse's estate upon being notified of the rights being relinquished.
The petitioner used funds in his IRA to start a business via an LLC. The initial capital contribution to the LLC was $319,000 of the petitioner's IRA funds. The IRA was created after the LLC with funds from the petitioner's 401(k) with a prior employer. The LLC was created and the petitioner directed the IRA custodian to acquire LLC shares, reporting the transactions (there were two of them) as non-taxable rollover contributions with the IRA now owning LLC interests. The LLC employed the petitioner as its general manager, and also employed the petitioner's spouse and children. The LLC paid a salary to the petitioner for his services as general manager. The IRS asserted a tax deficiency of $135,936 plus an accuracy-related penalty of over $26,000. The Tax Court agreed with the IRS, holding that the payment of a salary and the directing of compensation from the LLC violated I.R.C. Sec. 4975(c)(1)(D) and I.R.C. Sec. 4975(c)(1)(E) as a prohibited transaction. On appeal, the court affirmed. The payment of salary amounted to an indirect transfer of the petitioner's income and assets of his IRA for his own benefit and indirectly dealt with the income and assets for his own interest or his own account in a prohibited manner. As a result, the IRA was terminated with the entire amount taxable income, plus penalties. Ellis v. Comr., No. 14-1310, 2015 U.S. App. LEXIS 9380 (8th Cir. Jun. 5, 2015), aff'g., T.C. Memo. 2013-245.
The Iowa legislature has passed HF 624 which allows custom farming contracts with beginning farmers to last for 24 months rather than the current requirement that they be an annual contract.
SF 512 exempts all-terrain vehicles that are "used primarily in agricultural production" from sales tax.
The Iowa legislature unanimously passed HF 661 which allows a deduction on the Iowa Form 1041 for administrative expenses that were not taken or allowed as a deduction in calculating net income for federal fiduciary income tax purposes. Thus, deductions taken on the Federal Form 706 can be claimed on the Iowa 1041 (Iowa has no estate tax). The bill also allows administrative expenses to be deducted that would otherwise be disallowed for exceeding the 2 percent of adjusted gross income floor. The effective date of the Bill is for tax years ending on or after July 1, 2015.
An S corporation had rental income from a property that it leased to others. The S corporation, through its officers, employees and independent contractors, provides various services with respect to the property including janitorial and trash removal, maintenance and repairs and inspection services. The S corporation also provided security services. The IRS determined that the rental income was not passive. Priv. Ltr. Rul. 201523008 (Feb. 4, 2015).