Case Summaries

The petitioners got a refund of $54,507 in state (NY) income tax in 2008.  The refund was attributable to refunded state income tax credits which were based on state real property taxes that entities paid in which the petitioners had an ownership interest.  The property tax was paid and deducted at the entity level which decreased the entity income that ultimately passed through to the taxpayers, resulting in a lower tax liability.  The Court, agreeing with the IRS, determined that the petitioners received a tax benefit from the credits and, as such, the credits were income to them.  The court cited its prior decision in Maines v. Comr., 144 T.C. No. 8 (2015), which involved similar facts.  Elbaz v. Comr., T.C. Memo. 2015-49.   

The petitioner was a truck driver that spent 358 days on the road in 2009.  The company he worked for did not require him to return to base and told him where to go for his next trip after completing the current trip.  The petitioner used his mother's address to get his driver's license, but only stayed at her house rent-free while on jury duty and kept his personal effects in a storage locker.  The petitioner claimed over $27,000 as a deduction for unreimbursed employee business expenses, including over $19,000 for travel expenses while away from "home." The petitioner also claimed over $7,000 for truck stop "electrification" expenses (electricity provided by the truckstop so that the petitioner's truck didn't have to have its engine idle).  The court upheld the IRS denial of the per diem expenses and hotel expenses on the basis that the expenses were not incurred while away from home because the petitioner did not have a tax home.  To qualify as a tax home, the court noted that the petitioner needed to have incurred expenses associated with maintaining the home while away from it.  However the court allowed the deduction of expenses associated with truck stop electrification expenses.  Those expenses were deemed to be the functional equivalent of fuel expenses and were deductible subject to the two percent floor on itemized deductions.  The court, contrary to its own prior opinion in a different case, did not impose the negligence penalty because the petitioner had read IRS publications to determine how to handle the expenses and thus acted in good faith.  The court did uphold the substantial understatement of tax penalty.  Howard v. Comr., T.C. Memo. 2015-38. 

The plaintiff worked for an equestrian center as its barn manager.  The equestrian center operated on 200 acres and provided riding lessons, horse training and riding facilities with riding lessons being the center's predominant activity.  The plaintiff performed general maintenance work and other necessary daily tasks to prepare horses for riding privately and for camps.  While training a race horse, the plaintiff fell from a horse and was injured.  The center did not carry workers' compensation insurance, having been advised it was exempt from coverage based on the statutory exemption for "[a]ny person employed in agriculture" contained in Ky. Rev. Stat. Sec. 342.650(5).  For purposes of that provision, Ky. Rev. Stat. Sec. 342.0011(18) defined "agriculture" as the "operation of farm premises, including the planting, cultivation, producing, growing, harvesting, and preparation for market or agricultural or horticultural commodities thereon, the raising of livestock for food products and for racing purposes,...and any work performed as an incident to or in conjunction with the farm operations...."  An Administrative Law Judge dismissed the plaintiff's claim and the Workers' Compensation Board affirmed.  On appeal, the court affirmed.  The court noted that a prior decision of the court had held that "raising" of race horses included the boarding of the horses and that there is no distinction based on whether the employer owned the horses or they were owned by other persons.  The court also noted that the KY Supreme Court had held that the ag exemption included conditioning or exercising of race horses after they had been sold or released to racing but had returned to the farm for rehabilitative purposes.  As to the facts of this case, the court stated that, "the feeding, housing, caring for, and training of horses in a farm setting is agricultural in nature."  Horses used at an equestrian center, the court determined, were the same as the raising of livestock for racing purposes.  Thus, "training" of horses constitutes "agriculture" for purposes of the ag exemption from workers' compensation.  In addition, the court's opinion, means that the raising of livestock for purposes other than food or racing constitutes "agriculture" for workers' compensation purposes.  Hanawalt v. Brown, et al., No. 2014-CA-000744-WC, 2015 Ky. App. 36 (Ky. Ct. App. Mar. 13, 2015). 

The petitioner donated a perpetual conservation easement on 22 acres to qualified charity - the North American Land Trust.  The easement grant, however, allowed the petitioner to make "minor alterations to the boundary of the Conservation Area" if certain requirements were met within the first five years of the grant.  The petitioner claimed a charitable deduction for the contribution and the IRS denied the deduction.  The court agreed with the IRS because the easement was not a "qualified real property interest" as defined by I.R.C. Sec. 170(h)(2)(C) because the petitioner could change the property subject to the easement.  The court noted that I.R.C. Sec. 170(h)(2)(C) specifies that a "qualified real property interest" is one that involves an identifiable, specific piece of real property.  The retained right to change the property boundaries violated that requirement.  Balsam Mountain Investments, LLC, et al. v. Comr., T.C. Memo. 2015-43.

The plaintiff, a nonprofit corporation, supplies water to approximately 12,000 persons and alleged that the defendant caused solid hazardous waste to be disposed of at it's manufacturing facility that contaminated the plaintiff's water supply in violation of the Resource Conservation Recovery Act (RCRA).  The plaintiff also alleged public and private nuisance, abnormally dangerous or ultrahazardous activity, conversion and unjust enrichment  The plaintiff sought injunctive relief and an order mandating the cleanup of the defendant's facility.  The defendant motioned for summary judgment on all claims.  The court granted the defendant's motion for summary judgment on the abnormally dangerous or ultrahazardous activity claim, as well as the unjust enrichment claim.  The defendant's motion was denied on other claims.  The Little Hocking Water Association, Inc. v. E.I. DuPont de Nemours and Co., No. 2:09-CV-1081, 2015 U.S. Dist. LEXIS 29200 (S.D. Ohio Mar. 10, 2015).     

The states of Colorado, Kansas and Nebraska executed a "water compact" in the 1930s concerning the apportionment of water in the Republican River between the states.  Under the compact, Colorado is to get 11 percent of the water, Nebraska 49 percent, and Kansas 40 percent for "beneficial consumptive use."  In the late 1990s, Kansas filed a complaint that groundwater wells in NE had pumped excess water from the Republican River which depleted stream flow as the river water flowed into Kansas.  The U.S. Supreme Court agreed with a  special master report upholding KS' claim.  The parties settled, with the settlement resulting in usage to be computed on a five-year running average (reduced to two years during drought).  Under the settlement agreement, groundwater pumping counted toward a state's water consumption.  KS later claimed that NE violated the first five-year review and a special water master agreed, determining that NE had "knowingly failed" to comply with the compact.  NE was found to have exceeded its allotment by 70,829 acre-feet (note - a four person family uses approximately one acre-foot of water annually).  The special master suggested an award of $5.5 million to KS ($3.7 million for loss and $1.8 million for disgorgement of gain), but did not issue an injunction.  Both NE and KS appealed.  The Court affirmed the special master's report, noting that NE had acted too slowly to come into compliance with the compact and had adopted a water management plan in 2005 that only required a 5 percent reduction in groundwater pumping without evidence that such reduction would bring the state into compliance with the compact.  In addition, the Court noted that NE had no way to enforce the 5 percent reduction other than to trust the irrigators.  The Court also agreed with the special master in that the settlement agreement should be reformed so that a state was not charged for using imported water.  The dissent disagreed on this latter point.  NE has 60 days from the date of judgment to pay.  In addition, the Court ordered each of KS and NE to pay 40 percent of the special master's fee, and assessed the remaining 20 percent to CO.  Kansas v. Nebraska, et al., No. 126, 2015 U.S. LEXIS 1835 (U.S. Sup. Ct. Mar. 9, 2015).     

Just like it said in Priv. Ltr. Rul. 200818028 (Feb. 8, 2008) (see our article at https://www.calt.iastate.edu/article/operator-farmer%E2%80%99s-market-not-tax-exempt), the IRS has again said that an organization that operates a farmers' market is not a tax-exempt charity.  The IRS noted that most of the market's funding came from vendor and membership fees with the primary benefit going to the vendors that profited at the market by selling their goods to the public.  While a part of the reason for forming the market was to promote "healthy" foods, the IRS determined that was only a minor part of the reason of formation.  Priv. Ltr. Rul. 201510058 (Oct. 16, 2014). 

The defendant was convicted under K.S.A. Sec. 21-6418(a) for allowing a dangerous animal (her dogs) to run at large when she knew they had dangerous or vicious propensities.  The defendant lives next to a sheep farm with many lambs.  The dogs had a history of predation upon the sheep and one dog had been shot while harassing the sheep on one occasion.  The farmer had often complained to the defendant about the dogs, but to no avail.  Ultimately, the county sheriff warned the defendant that the dogs could be considered dangerous and vicious and that the defendant needed to restrain the dogs.  The dogs again mauled some sheep, and the defendant was cited for the offense.  The rial court found that the defendant had violated the dangerous animal statute, imposed a sentence of 6-months in jail, one year of unsupervised probation and $192.85 in restitution.  On appeal, the court affirmed.  The appellate court determined that the trial court properly applied the plain language of the statute to the facts and that there was no need to resort to canons of statutory construction because the statute was not vague.  The appellate court also held that the evidence was sufficient to put the defendant on notice that the dogs had dangerous or vicious propensities.  The defendant had been warned numerous times about the dogs harming the sheep and lambs, the existing holes in the fence near the defendant's house and the unlikelihood of harm caused by coyotes.  State of Kansas v. Shell, No. 111,779, 2015 Kan. App. Unpub. LEXIS 153 (Kan. Ct. App. Mar. 6, 2015).     

The petitioner provided computer consulting services to family members without charge.  He deducted expenses associated with the activity, but the IRS denied the deductions on the basis that the petitioner was not engaged in the activity with a profit intent.  The court upheld the IRS position.  Shah v. Comr., T.C. Memo. 2015-31.

The defendants, from the Bel Air, California, area, were arrested in Illinois and charged in a two count indictment with violating the Animal Enterprise Terrorism Act (18 U.S.C. Sec. 43) (Act) for terroristic acts committed upon an Illinois mink farm.  In an earlier action, one of the charges involved using a facility of interstate and foreign commerce for the purpose of damaging and interfering with the operation of an animal enterprise under the Act.  Two cells phones were found in their car at the time of the arrest and the government searched those phones pursuant to a search warrant.  The search indicated contact with a third cell phone and the government sought an order seeking historical cell site and toll record information for the third phone.  The defendants claimed that the government had to obtain a search warrant to obtain that information because the defendant had a reasonable expectation of privacy in the information.  The court disagreed with the defendants, noting that no federal case had ever determined that obtaining such information implicated the Fourth Amendment's requirement of a search warrant.  The court held that the defendants did not have an expectation of privacy in historical cell site information.  The court also noted that the records were relevant and material to the ongoing criminal investigation of the defendants and that the third cell phone's number belonged to one of the defendants.  United States v. Lang, et al., No. 14 CR 390, 2015 U.S. Dist. LEXIS 7553 (N.D. Ill. Jan. 23, 2015).  In the present action, the indictment charged the defendants with damaging an animal enterprise (18 U.S.C. Sec. 43(a)(2)(A)) and conspiring to damage an animal enterprise (18 U.S.C. Sec. 43(a)(2)(C)).  The defendants moved to dismiss the indictment on the basis that the Act is facially overbroad because it criminalizes protected speech that causes an "animal enterprise" to lose profits or business goodwill.  They also challenged the indictment as being void for vagueness because it allowed for arbitrary and discriminatory enforcement against animal rights activists, and that it is violated substantive due process for punishing as terrorism non-violent damage to property.  The court rejected the overbreadth argument because the Act excludes purely economic damage.  The court also rejected the void for vagueness argument and the substantive due process argument under rational basis review.  United States v. Johnson, et al., No. 14-CR-390, 2015 U.S. Dist. LEXIS 26843 (N.D. Ill. Mar. 5, 2015).  

The petitioner made an initial contribution of $1000.00 to an IRA and did not claim any deduction for the contribution.  The petitioner took a distribution of $950.81 from the IRA in 2010 at a time when the petitioner was less than age 59.5.  The petitioner received a Form 1099-R for that amount, but did not include the amount in income.  The IRS claimed that the full amount should have been included in income.  The Tax Court concluded that I.R.C. Sec. 72(e) applied which allows the taxpayer's investment in the IRA to be taken into account when computing the amount of the distribution to be included in gross income.  The court rejected the taxpayer's argument that because the distribution was less than his investment that the distribution should be treated as a return of the petitioner's investment.  The court also rejected the notion that the distribution was fully taxable.  Instead, the court told the parties to compute the taxable amount by utilizing I.R.C. SEc. 72(e)(3) and include in income the untaxed increase in the IRA value attributable to interest and investment growth from 2008 until the time of the distribution.  Morles v. Comr., T.C. Sum. Op. 2015-13. 

The settlor of an intervivos trust named herself as trustee and three other persons as successor trustees.  One of those successor trustees was the settlor's son.  Several years later, the settlor executed a general power of attorney (GPOA) in which she directed that the son was to be the executor of her estate and trust.  The settlor, as principal, and the son, as agent, signed the GPOA.  The legal question was whether the GPOA was sufficient to amend the trust.  The court held that it was because, in accordance with the trust language, the settlor reserved the right to amend the trust "by a duly executed written instrument...".  Strange v. Towns, 330 Ga. App. 876 (2015).   

The defendant held a grazing permit to graze cattle on federal land.  One of the permit conditions required the defendant to erect a fence, maintain it and remove abandoned fence wire and steel posts, etc.  The plaintiffs were riding a motorcycles on the federal land where they collided with an uncharged electric fence that the defendant had erected in accordance with the permit.  The plaintiffs sued the defendant for negligence on the basis that the defendant created a dangerous condition that the defendant should have discovered and remedied.  The trial court granted summary judgment for the defendant and the plaintiffs appealed.  On appeal, the court assumed that the plaintiffs had the status of "invitees," but affirmed the trial court on the basis that as a permit holder, the defendant was a mere licensee and was not an owner or possessor of the land at issue.  The permit also did not give the defendant an easement in the federal land at issue, and the defendant did not violate any of the standards and requirements associated with establishing fences on the property.  As such, the defendant lacked intended control sufficient to give rise to a duty to the plaintiffs.  There was also no duty that arose from the relationship of the parties as there was no "special" relationship between the parties.  Furthermore, there was no duty based on public policy.  Smith v. Almida Land & Cattle Company, LLC, No. 1 CA-CV 13-0757, 2015 Ariz. App. Unpub. LEXIS 283 (Ariz. Ct. App. Mar. 3, 2015). 

A group of farmers contracted to deliver cotton grown during the 2010 and 2011 crop years to the U.S. Cotton Growers Association (USCGA), a marketing pool that the appellant owned.  A dispute arose concerning performance under the contracts ultimately resulting in the farmers suing the appellant and the USCGA.  The farmers alleged breach of contract, fraud, violations of the state (TX) Deceptive Trade Practices Act, conversion, negligent misrepresentation, breach of fiduciary duty, conspiracy and civil fraud.  Each contract contained a provision stating that "any and all disputes arising between" the parties "shall be resolved...exclusively by binding arbitration pursuant to the arbitration rules of the American Cotton Shippers Association."  The appellant and the USCGA sought an order compelling arbitration, but the trial court held that the arbitration clause was unconscionable, unenforceable and void.  On appeal, the court reversed.  The appellate court noted that after the case had been briefed and submitted, the TX Supreme Court had decided Venture Cotton Coop v. Freeman, 435 S.W.3d 222 (Tex. 2014) in which the Court noted that an unconscionable or illegal contract provision could be severed if it does not constitute the essential purpose of the agreement.  The appellate court noted, based on the TX Supreme Court's analysis, that numerous factors had to be considered to determine unconscionability, including whether the farmers knew of the ramifications of agreeing to arbitrate before signing the contracts.  Other factors to be considered are the commercial atmosphere in which the agreement was made, the available alternatives, and the ability of the farmers to bargain.  Accordingly, the court reversed the trial court's decision and remanded for further proceedings in light of the TX Supreme Court's 2014 opinion.  Ecom USA, Inc., et al. v. Clark, et al., No. 07-14-00240-CV, 2015 Tex. App. LEXIS 1817 (Tex. Ct. App. Feb. 25, 2015).

The IRS Chief Counsel's Office has issued guidance to IRS agents to assist in determining whether the TEFRA audit procedures apply to a partnership.  The Chief Counsel's Office noted that the TEFRA/non-TEFRA determination is to be made at the beginning of the audit of the partnership.  The small partnership exception of I.R.C. Sec. 6231 is then determined to apply or not based on the partnership return.  As such, the small partnership exception is only for purposes of the partnership being exempt from the TEFRA audit procedures and does not mean that the entity is not a partnership for other purposes.  C.C.A. 201510046 (Jan. 23, 2015).   

The U.S. Court of Appeals has now joined the Ninth and Eleventh Circuits, in finding that inserting a qualified intermediary between related parties does not avoid I.R.C. Sec. 1031(f).  The plaintiff, a subsidiary of a Caterpillar dealer that sold Caterpillar equipment, ran the dealer's rental and leasing operations.  The plaintiff sold used equipment to third parties who then paid the sales proceeds to a qualified intermediary.  The qualified intermediary forwarded the sales proceeds  to the dealer who then purchased new Caterpillar equipment for the plaintiff and then transferred the new equipment to the petitioner through the qualified intermediary.  The arrangement provided favorable financing from Caterpillar and the dealer had up to six months from the invoice date to pay Caterpillar for the petitioner's new equipment.  The petitioner claimed the transaction was non-taxable as a like-kind exchange.  The trial court agreed with the IRS that the transactions failed I.R.C. Sec. 1031(f) and the appellate court agreed.  The court determined that the case was factually similar to Ocmulgee Fields (10th Cir 2010) and Teruya Bros. (9th Cir. 2009).  North Central Rental and Leasing v. United States., No. 13-3411, 2015 U.S. App. LEXIS 3383 (8th Cir. Mar. 2, 2015), aff'g.,  No. 3:10-cv-00066 (D. N.D. Sept. 3, 2013).

The plaintiff, a small town of 230 people, sued the defendants, a married couple, for violating a town ordinance which declared commercial farming within the town boundaries to be a nuisance. The defendants bought a 57-acre farm, six acres of which were within the town's boundaries. The tract had been a commercial nursery for trees and prairie grass. After buying the property, the defendants removed the trees, leveled the property and prepared the ground for planting corn and soybeans. Nine months after the defendant's purchase, the town enacted the ordinance at issue expanding the definition of nuisance to include engaging "in any commercial farming for the production and harvesting of any agricultural or horticultural products on any private or public property within" the town's limits. The defendant's planted a corn crop about six weeks later and the town sent them a notice to abate their nuisance. The town then filed a complaint seeking a penalty for violating the ordinance and an injunction. The matter ended up in court and the trial court acquitted the defendants based on lack of notice, but then issued an injunction barring farming on the portion of the property within the town's borders. The trial court held that the state (IL) Farm Nuisance Suit Act (Act) did not apply to block the town's ordinance from applying. On appeal, the court reversed. The court noted that the town had the authority to enact the ordinance at issue, but that the Act preempted the ordinance from applying because the Act specified that a farm would not become a nuisance because of any changed conditions in the surrounding area. The enactment of the ordinance was a changed condition that the Act applied to. The court also noted that the Act's purpose was to protect and conserve the development and improvement of agricultural land, and that the tract in issue had been used continuously for commercial agricultural purposes. A dissenting judge would have held that the Act did not apply to preempt the ordinance because the tract in issue had not been used to produce corn and soybeans for at least a year before the enactment of the ordinance, and because the defendants changed the use of the tract. The dissent also believed that there were no changed conditions in the "surrounding area" such as neighborhood surrounding the farm changing. The dissent's view would basically have given the town a year after the defendant had started raising row crops to zone the defendant's farming activity out of existence. Village of Lafayette v. Brown, No. 3-13-0445, 2015 Ill. App. LEXIS 120 (Ill. Ct. App. Feb. 25, 2015).

The decedent's estate contained her Ohio residence, a California condominium in which her brother lived and a state teachers' retirement account.  The residuary of the decedent's left $50,000 to her brother that lived in the condominium with the balance of the residuary estate passing to charity.  The estate received a distribution from the retirement account of $243,463 and set aside $219,580 of it “permanently” for charity by placing it in an unsegregated checking account.  Under I.R.C. Sec. 642(c), an estate can claim a charitable deduction for an amount that is set aside for charity, but hasn't yet been paid if, under the terms of the governing instrument, the possibility that the amount set aside will not be devoted to the charitable purpose or use is so remote as to be negligible.  Treas. Reg. Sec. 1.642(c)-2-(d).  When the estate income tax Form 1041 was filed on July 17, 2008, the charitable gift had not been completed, but the estate claimed the charitable deduction on the estate's Form 1041.  The IRS denied the deduction.  The court noted that for the deduction to apply, the charitable distribution must come from the estate's gross income, must be made pursuant to the governing instrument, and must be set aside.  The court determined that the charitable amount did come from gross income (pension distribution which is IRD) and was made according to the decedent's will.  However, the decedent's brother refused to move out of the condominium and claimed that existence of a resulting trust.  In state court litigation, the brother prevailed, but also caused the estate's funds to deplete sufficiently such that the charitable bequest was never paid.  The court noted that the brother's legal claims were public at the time the 1041 was filed and he had refused a buy-out to move out of the condo and the charity had refused to trade the monetary bequest for a life estate/remainder arrangement in the condominium.  Apparently, the CPA in Ohio knew none of this at the time the 1041 was filed.  The estate claimed that the "unanticipated litigation costs" were unforeseeable but, based on the facts and circumstances at the time Form 1041 was filed, the court held that the "so remote as to be negligible" requirement was not satisfied and upheld the denial of the charitable deduction.  The funds had not been permanently set aside.   The charity ultimately did receive a bequest, although it was less than initially anticipated, and the estate did not get a charitable deduction.  Estate of Belmont v. Comr., 144 T.C. No. 6 (2015).

The petitioner was an art teacher who inherited a hobby store from her father upon his death.  At the time, the petitioner was an art teacher in Nevada.  The hobby store was in Idaho, but was adjacent to a residence that she owned and lived in.  The petitioner hired a volunteer to watch over the store on a daily basis and she assisted with the business when she was in Idaho.  The store was open daily from 8-5, but incurred small net losses for each of the years in issue which the IRS denied under the hobby loss rules.  However, based on the nine factors of Treas. Reg. Sec. 1.183-2(b), the court determined that the petitioner operated the hobby business as a business with a profit intent.  She conducted the activity as a profitable business, retained the volunteer who had worked with her father, took over the business aspects after her father's death, developed the customer base, did not have substantial income from other sources and did not derive personal pleasure from the activity.  Savello v. Comr., T.C. Memo. 2015-24.

The plaintiff is a participant in the Tennessee walking horse industry as a buyer, seller and exhibitor of horses.  The Horse Protection Act (HPA) prohibits the practice of "soring" horses, and requires the USDA to establish regulatory requirements for the appointment by the management of any horse show, exhibition, sale or auction of persons that are qualified to detect and diagnose a horse that is sore or to otherwise inspect horses purposes of enforcing the HPA.  The USDA's Animal Plant Health Inspection Service developed regulations creating horse industry organizations (HIOs) which develop and enforce penalties for soring.  Specifically, the management of each horse show is the primary enforcer of the HPA, and the horse industry administers inspectors' training and criteria for qualifications and performance.  The horse industry imposes penalties for soring violations and sets procedures for appealing the penalties.  Penalties would vary from suspensions to disqualifications depending on the particular horse industry organization that managed a horse show.  In 2012, the USDA finalized regulations that required HIOs to adopt mandatory minimum penalties for various soring violations as a conditions certification for being a qualified inspector.  The regulations also required the HIOs to provide copies of their rulebooks to the USDA and establish uniform appeals procedures for disputes over soring.  The regulations also allowed the USDA to initiate its own investigations and prosecutions even if an HIO had already issued a penalty for soring or cleared a potential violator of soring.  The court was unimpressed with USDA's attempted regulatory takeover of the horse show industry by creating new liability provisions and noted that the USDA has arbitrarily injected itself into each layer of enforcement absent any authority in the HPA to do so.  The court held that the HPA merely allows the USDA to establish a regulatory program for managers of horse shows to hire qualified persons to detect horse soring.  The court reversed the trial court's decision, vacated (wiped off the books) the 2012 USDA regulations, and remanded the case for the trial court to enter judgment for the plaintiff.  Contender Farms, L.L.P. v. United States Department of Agriculture, No. 13-11052, 2015 U.S. App. LEXIS 2741 (5th Cir. Feb. 19, 2015).   

The petitioner held a patent for a "smokeless tobacco vaporizer."  He had many years of low sales and claimed a $1 million deduction on his return for a "loss arising from theft."  He blamed the lack of success of his invention and the resulting "theft" loss on pirates stealing his intellectual property associated his patent.  The IRS disallowed the theft loss based on a complete lack of evidence of patent infringement or that the petitioner had suffered actual damages.  The petitioner claimed that Internet search engines had intentionally demoted his product, that social media had conspired to diminish his product's visibility, that the U.S. Postal Service intentionally misspelled the name of his business and that his computer had been continually hacked, among other claims.  He estimated his theft losses from $282 million to $294 million annually, but only claimed a deduction for $1 million to "prevent further victimization."  The court upheld the IRS determination, noting that the petitioner had not demonstrated that a theft had occurred as required by I.R.C. Sec. 165(e).  The court also noted that the petitioner had failed to show that he discovered the theft in the years in which the deduction was claimed rather than other years since his patent was filed.  The court upheld an accuracy-related penalty.    Sheridan v. Comr., T.C. Memo. 2015-25.

In this case, the court held that the majority owners of a corporation were personally liable for the unpaid employment taxes of the corporation.  The court noted that under state (CA) the corporate veil is pierced if the creditor establishes the existence of unity of interest and ownership between the owners and the corporation such that the separate personalities of the corporation and the individual no longer exist, and that if the corporate acts are treated as those of the corporation alone, an inequitable result would follow.  The Court, upholding a trial court decision, noted that the majority shareholders exercised substantial control over the corporation's operations, and regularly drew on corporate funds to finance personal expenses.  The majority shareholder also borrowed corporate funds without proper documentation.  In addition, the majority shareholders facilitated the transfer of funds between the corporation and another corporation where there was a unity of interest and ownership.   As such, the majority shareholders were the corporation's alter egos and the corporate veil was pierced resulting in the shareholders being personally liable for the corporation's unpaid employment tax.  Politte v. United States, No. 12-55927, 2015 U.S. App. LEXIS 2380 (9th Cir. Feb. 17, 2015).   

The defendant, a pipeline company, sought to construct a carbon dioxide pipeline across the plaintiff's cattle ranch and rice farm.  The plaintiff barred the defendant from surveying the property and the defendant received a temporary injunction against the plaintiff.  The trial court determined that the defendant was a "common carrier" which carried with it the power of eminent domain.  Accordingly, the trial court permanently enjoined the plaintiff from interfering or attempting to interfere with the defendant's right to enter and survey the plaintiff's property.  On appeal, the appellate court affirmed.  On further review the TX Supreme Court reversed, establishing a new test for determining common carrier status.  On remand, the trial court determined that the defendant was a common carrier that had the right of eminent domain.  On appeal, the court determined that before the defendant can obtain common carrier status, the affected property owners can demand that the party seeking common carrier status be established at a jury trial.  In the prior Supreme Court case, the Court held that the designation of common carrier by the Texas Railroad Commission was inadequate and that it was up to the pipeline company to establish common carrier status as part of a condemnation case.  Under the Supreme Court test, a pipeline company must establish a "reasonable probability" that the pipeline will, at some point after the pipeline is constructed, serve the public "by transporting gas for one or more customers who will either retain ownership of their gas or sell the gas to parties other than the carrier."  This must be shown, the court held, at the time the company intends to build the pipeline.  Thus, the "reasonable probability" question is a fact issue to be determined by a jury.  Texas Rice Land Partners, Ltd., et al. v. Denbury Green Pipeline-Texas, LLC, No. 09-14-00176-CV, 2015 Tex. App. LEXIS 1377 (Tex. Ct. App. Feb. 12, 2015). 

While a landlord who is not a possessor is not liable for injuries sustained by the tenant or third parties on the property, there are exceptions.  Those exceptions include the landlord's retention over part of the leased premises and injury occurs on that part, and agreeing to keep the premises in good repair and failing to do so and injury results from that failure.  Here, a portion of a former supermarket was leased to a tenant under an "as is" lease.  However, the landlord, under the terms of the lease, agreed to keep the ceiling, floors, lighting and other fixtures, in good repair.  The ceiling and fixtures were not in good condition when the tenant took possession and the tenant did not ask the landlord to make repairs.  The plaintiff, an employee of the tenant, was injured when light fixtures fell on her.  The trial court granted summary judgment for the landlord (defendant), but the appellate court reversed on the basis that the defendant had agreed to keep light fixtures in "good repair" but had failed to do so.  The court reversed the trial court and remanded for trial.  Benson v. 13 Associates, LLC, No. 14-0132, 2015 Iowa App. LEXIS 102 (Iowa Ct. App. Feb. 11, 2015).