Case Summaries

The petitioner withdrew funds from his IRA before reaching age 59.5 to pay delinquent mortgage payment so as to avoid a mortgage foreclosure on his home.  The exception from the 10 percent penalty under Treas. Reg. Sec. 1.401(k)-1(d)(3)(iii)(B)(4) for withdrawals so the funds can be used to prevent eviction from the taxpayer's principal residence due to foreclosure did not apply.  The exception has no application, the court held, to financial hardship.  Kott v. Comr., T.C. Sum. Op. No. 2015-42.

On certified question from the federal district court as part of a class action, the court held that an agricultural employer has a legal obligation to separately pay piece-rate workers for their rest breaks.  On a second certified question, the court held that, in the absence of a separate agreement, the rate of pay for rest breaks must equal at least the greater of the applicable minimum wage or the pieceworker's regular rate of pay (calculated as the worker's total weekly piece work earnings, divided by the hours worked by the worker during such period, excluding break times).  Under state regulatory law, an employer must cover the cost of 10-minute rest breaks every four hours for all workers in all industries.  The court was silent as to whether the court's ruling was to be applied retroactively.  It is anticipated that the court's decision could lead to lawsuits against agricultural operations claiming pay for workers' unproductive activities such as walking to and from fields, emptying picking bags and moving ladders, etc.  It is also anticipated that the court's decision will result in higher harvest costs for apples in the amount of approximately $1 per apple bin.  Demetrio, et al. v. Sakuma Brothers Farms, Inc., No. 90932-6, 2015 Wash. LEXIS 807 (Wash. Sup. Ct. Jul. 16, 2015).  

The plaintiff's three ag buildings and equipment in the buildings were destroyed by fire.  The buildings were used to dry, process and store hop crops and the equipment was used to store hop bales.  The plaintiff had the buildings and equipment insured under a fire policy issued by the defendant for the cash value of the buildings and equipment, not to exceed the policy limit.  The plaintiff's appraiser determined that the cash value of the buildings and equipment was $1.41 million and the defendant's appraiser severely low-balled the value, pegging it at $380,909.  The defendant paid the $380,909 to the plaintiff.  The defendant hired another appraiser who, expectedly, determined that the plaintiff's appraisal was too high.  The plaintiff sued to recover the balance of what it claimed was owed under the policy, plus prejudgment interest.  The defendant revised its values upwards and paid an additional $85,330.  The matter was submitted to arbitration as the policy required, and the arbitrator set the value at $1.055 million.  The defendant paid an additional $588,761.  The court awarded the plaintiff attorney fees of $82,059.75, but no prejudgment interest.  On appeal, the court affirmed that the plaintiff was not entitled to prejudgment interest because such amount was not due until the amount of loss was ascertained by arbitration.  Jackson Hop, LLC v. Farm Bureau Mutual Insurance Company of Idaho, No. 42384-2014, 2015 Ida. LEXIS 188 (Jul. 16, 2015).

The plaintiff owned 120 acres of farmland that was mostly irrigated by pivot irrigation.  However, the pivot could not reach a 6.5 acre corner which was irrigated by gravity irrigation fed by a pipe running along a fence line.  The defendant allegedly damaged a section of the pipe while removing and replacing fence.  The plaintiff discovered the damage in July of 2011 and the damaged pipe needed to be repaired by June 1 of 2012 to avoid crop damage in the 6.5 acre corner.  The plaintiff took the pipe in for a repair estimate on May 15 of 2012 and was told that the repair could be completed by June 1 at a cost of $1,772.40.  However, the plaintiff did not authorize the repair because he believed that the defendant's insurance company needed to approve the repairs.  The plaintiff had the financial ability to pay for the repair at that time.  On June 5, 2012, the defendant requested an estimate and offered to pay the plaintiff $1,772.40 to fix the pipe and offered the same amount in writing on August 21, 2012.  The pipe was not repaired in time for the 2012 crop year, but was repaired in time for the 2013 crop year at a cost of $2,854.83.  The plaintiff paid for the repair and was not compensated by the defendant.  The plaintiff sued in May of 2013 seeking $13,578.62 in damages for the cost of the pipe repair and the lost 2012 crop profits.  The trial court awarded the plaintiff $2,854.83 for the cost of the pipe repair, but nothing for lost profits because the plaintiff did not seek to repair the pipe within a reasonable amount of time. On appeal, the court affirmed.  The court determined that the plaintiff failed to mitigate damages by not simply paying for the pipe repair before June 1, 2012, and then being able to profit from the crops planted on the 6.5 acre tract.  The court noted that the plaintiff stood to profit from the impacted tract nearly four times the cost of repairing the pipe.  In addition, the defendant did not do anything to prevent the plaintiff from paying for the repair to the pipe to avoid the lost profits from the 2012 crop year.  Tedd Bish Farm, Inc. v. Southwest Fencing Services, LLC, 291 Neb. 527 (2015). 

The county auditor included the plaintiff's grain storage bins in the valuation of the plaintiff's real property for tax purposes.  On review, the Board of Revision affirmed.  On appeal, the Board of Tax Appeals (BTA) reversed.   The BTA determined that the grain bins were personal property under state (OH) law and reduced the valuation of the plaintiff's real property by $1.1 million - the value of the grain bins.  On further review by the OH Supreme Court, the Court affirmed the BTA.  The court reasoned that when the legislature amended the pertinent code provisions (O.R.C. Sec. 5701.02(A) and O.R.C. Sec. 5701.03(B)) in 1992 it clearly defined "business fixture" (which is classified as personal property) to include storage bins.  Thus, real property tax did not apply to them.  The definition, the Court noted, categorized personal property as that type of property that primarily benefitted the business owner rather than the real estate.  Metamora Elevator Company v. Fulton County Board of Revision, et al., No. 2014-0874, 2015 Ohio LEXIS 1835 (Ohio Sup. Ct. Jul. 15, 2015).  

The parties, owners of adjacent residential tracts, were in a battle over water drainage.  The plaintiffs claimed that the defendants unlawfully constructed an earthern berm that obstructed the flow of water in a drainageway and caused the water to back-up onto the plaintiffs' property.  The plaintiffs also claimed that the defendants altered the course of another drainageway, moving it closer to the plaintiffs' property line which would endanger their property in the event of a major rainfall.  The defendants sought an injunction to stop the plaintiffs from pumping water onto their property and an order for money damages for loss of trees due to excessive water. The plaintiffs were discharging water via a sump pump through an underground pipe so that water would not get into their basement.  The pipe was connected to another pipe beneath the defendants' property, but the system failed and the plaintiffs began discharging the water at the property line.  The defendants then obtained a permit to build a second culvert and an earthen berm where the plaintiffs' dewatering well discharged the groundwater.  A pipe was installed through the berm to facilitate drainage.  Ultimately, water backed-up onto the plaintiffs' property.  When the plaintiffs discontinued the use of their dewatering well, problems ceased.  The trial court denied the plaintiffs' request for injunctive relief and also denied the defendants' counterclaim for tree damage/loss and denied an injunction that would bar the plaintiffs from discharging water via the dewatering well.  On appeal, the court affirmed.  The court noted that the water at issue was comprised of both surface and ground water, but the pooling issue involved groundwater that was pumped from the plaintiffs' sump pump and dewatering well.  The court applied the common enemy rule to the ground water and held that the defendants were free, as owners of the servient estate, to dam the water if necessary and reasonable under the circumstances.  The court held that the defendants' conduct was reasonable.  Thus, the plaintiffs were not entitled to an injunction on that issue.  The court also determined that the defendants were not entitled to money damages for their trees due to a lack of proof of causation.  The court also determined that the defendants were not entitled to injunctive relief stopping the plaintiffs from using their dewatering well.  Kobza v. Bowers, 23 Neb. App. 118 (2015).

This case involved multiple cases that were consolidated involving the "Sterling Benefit Plan."  The plan was a purported welfare benefit plan consisting of separate plan that each employer that participated in the plan tailored to its employees concerning the payment of death, medical, and disability benefits.  An employee would designate a beneficiary that the plan would pay benefits to, and the death benefit was the face amount of the life insurance policy that the plan bought on the employee's life.  The premiums were paid by the employer via plan payments and the policy typically had a cash value that increased on an annual basis.  Non-death benefits were limited to cash value, and an employer could end plan participation and trigger full vesting of an employee in the life insurance policy.  An employee could take the policy in satisfaction of a post-death retirement death benefit upon retirement.  The case involved three corporations that were each wholly owned by a sole person, and an S corporation owned by three other persons.  The court determined that the plan was a split-dollar arrangement under which the shareholder/employees with insurance on their lives had compensation income in accordance with Treas. Reg. Sec. 1.61-22.  In addition, the payments to the plan were not deductible and the policies did not qualify as group term policies because they were individually underwritten.  The plan was a listed transaction, and the 30 percent accuracy-related penalty applied.  Our Country Home Enterprises, Inc., et al. v. Comr., 145 T.C. 1 (2015). 

This case involved construction of a clause contained in oil and gas leases that computed the royalty owed to lessors in a class action suit.  The producer, Oil Producers, Inc. of Kansas (OPIK) is a small producer that produces gas in areas served by midstream companies (third-party purchasers).  OPIK owns the well and the midstream companies own the gas gathering and processing facilities.  Thus, OPIK sells the gas at the wellhead to the midstream companies who process the natural gas for eventual delivery into the interstate pipeline system.  The price that OPIK receives for the raw gas it sells to the midstream companies is based on a formula that allows OPIK (and royalty owners) to jointly share in "downstream" market values as the gas gets closer to the consumer after deduction for expenses to account for services provided by the midstream companies to process the gas and transport it from the wellhead to the downstream resale location.  OPIK pays the royalty owners a percentage of what OPIK receives, thus the royalty owners share in the expenses incurred to get the gas to consumers.  Many of the leases contained a provision stating that, "The lessee shall pay lessor as royalty 1/8 of the proceeds from the sale of gas at the mouth of the well where gas only is found."  Another lease document provided for "one-eighth (1/8) of the proceeds if sold at the well...".  The royalty owners claimed that they should not have to share in the production expenses because the duty to market the minerals produced was on OPIK and that duty meant that OPIK solely bore the burden of the expenses necessary to make the gas marketable.  The trial court and court of appeals agreed with the royalty owners, effectively negating the "at the well" language of the oil and gas leases.   The lower courts held that OPIK had to take the proceeds it received from the midstream companies and add to it the amounts that the midstream companies spent to make the gas marketable so as to obtain higher prices downstream.  This had the effect of making OPIK pay a royalty on selling prices of gas that it did not receive.  On further review, the Kansas Supreme Court reversed.  The Court noted that prior Kansas caselaw held that the term "proceeds" in a royalty clause similar to the clause involved in this case referred to gross sale price in the contract between the first purchaser and the operator (except for the statutorily withheld conservation fee which is borne by the operator as a mill levy on gas the operator sells).  The Court held that OPIK satisfied its duty to market minerals by entering into the purchase agreements with the midstream companies for sale of gas at the wellhead.  That is when gas has been "marketed."  Thus, where, as in this case, the lease provides for royalties based on a share of proceeds from the sale of gas at the well, the post-production, post-sale processing expenses deducted by the third-party are taken into account when computing the "proceeds" paid to OPIK and impact the amount of the royalty paid to the lessors.  Fawcett v. Oil Producers of Kansas, No. 108,666, 2015 Kan. LEXIS 376 (Kan. Sup. Ct. Jul. 2, 2015).

In this case, the parents had three children and 138 acres of farmland along with various farm property and four certificates of deposit (CD) at a local bank worth $160,000.  They also transferred the farmland to the son, and executed wills that left the farm equipment to the son and other property to the daughters.  Mom died in early 2011, and Dad and the son went to the bank and executed documents indicating that the son was being added as a joint co-owner on each CD.  Dad died in mid-2013 and the bank filed a petition for guidance on distribution of the CDs.  The court determined that the CDs belonged to the son as the surviving joint tenant.  The sisters appealed attacking the process that was utilized to add their brother as joint co-owner on the accounts such that the accounts should be determined to be assets of their father's estate that would pass as part of the residuary of the estate.  The appellate court affirmed on the basis that the daughters lacked clear and convincing evidence of a different intent of their father other than to add their brother as a joint co-owner.  That was the requirement under the state (IN) probate code.  In re Estate of Herin, No. 39A-5-1411-ES-537, 2015 Ind. App. LEXIS 491 (Ind. Ct. App. Jun. 29, 2015).  

The plaintiff operated a Christmas Tree farm on his 110-acre property.  Neighbors complained about the additional noise and traffic associated with the plaintiff's use of the farm for weddings, and business and educational events.  The local zoning board held that the plaintiff could not hold such events on his premises, rejecting the plaintiff's argument that his event business activity constituted agritourism under state law which allowed such activity on farm land as a farming activity.  The plaintiff appealed and the trial court upheld the zoning board's finding.  The trial court determined that the zoning board's decision was reasonable, and that the petitioner could not argue that the event business was an accessory use of the farm land or that the event business was subordinate or incidental to the use of the land as a Christmas tree farm.  The trial court made a specific finding that guests were more attracted to the view rather than the Christmas trees.  The evidence also showed that no other farms in the area marketed wedding and other events as accessory uses.  The trial court, however, did not uphold the zoning board's attempt to fine the plaintiff for violation of the local zoning ordinance.  On appeal, the court affirmed.  There was no longstanding practice of using farms for weddings and meetings that would have been allowed as an exceptional use as ancillary to the use of the land as a farm.  Forster v. Town of Henniker, No. 2013-893, 2015 N.H. LEXIS 54 (N.H. Sup. Ct. Jun. 12, 2015).

The petitioner, an ex-NFL player, co-founded a non-profit business in 1997 to train at-risk persons to be automotive technicians.  Upon the death of the co-founder, the petitioner handled fundraising until he resigned in 2010.  The petitioner received a base salary and a business credit card for payment of business expenses.  However, the petitioner also charged personal expenses on the card.  The non-profit treated the personal expense charges as advances for future wages or business expenses.  Beginning in 2005, the non-profit started withholding money from the petitioner's salary for purposes of paying back the advances.  The petitioner resigned in 2010 at the time that the balance due on the credit card was $83,000.  The non-profit issued a Form 1099 to the petitioner for 2010 for the $83,000.  The petitioner did not include the $83,000 in income and IRS, upon audit, assessed additional taxes and penalties for 2010 based on the $83,000 being an advance and not a loan.  The court agreed that the $83,000 was taxable as an advance, but that it was taxable in the years received.  Those years were 2003 through 2006.  However, the only year in issue was 2010, so the case was dismissed.  If the tax years 2003-2006 were closed due to the statute of limitations, the IRS is barred from assessing any additional tax for those years (unless, of course, fraud (no SOL) or substantial understatement of tax is involved (six year SOL) - which also requires fraud to be present).  Starke v. Comr., T.C. Sum. Op. 2015-40. 

The plaintiff is a medical marijuana facility operating in a state where such activity is legal.  It sold medical marijuana and provided vaporizers, food and drink, yoga, games, movies and counseling at no cost to patrons.  I.R.C. Sec. 280E disallows a deduction for amounts incurred by a business that traffics in a controlled substance.  The Tax Court noted that marijuana is a controlled substance and held that it was irrelevant that 15 states had legalized marijuana sales for medical purposes. Accordingly,  the Tax Court denied 100 percent of the petitioner's deductions associated with operating the vapor room were not deductible business expenses.  The Tax Court held that the petitioner failed to adequately substantiate revenue (and was not entitled to keep less formal documentation because the business is primarily a cash business) and must include all revenue in income that was reflected on its business ledgers (which exceeded the amount on the return).   The Tax Court did allow the petitioner to deduct it cost of goods sold (COOGS) as estimated by the court pursuant to the Cohan Rule, with a reduction of COGS by the amount of products given away. No operating expenses were deductible.  On appeal, the court affirmed.  The appellate court determined that the petitioner's business activity solely consisted of selling medical marijuana.  The other activities were not conducted for-profit.  As such, the petitioner's only business activity involved trafficking in a controlled substance, the I.R.C. Sec. 162 expenses for which were disallowed under I.R.C. Sec. 280E.  The court viewed it as immaterial that medical marijuana facilities did not exist at the time I.R.C. Sec. 280E was enacted.     Olive v. Comr., No. 13,-70510, 2015 U.S. App. LEXIS 11812 (9th Cir. Jul. 9, 2015), aff'g., 139 T.C. No. 2 (2012).

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 ChevronMichigan, 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).