Case Summaries

IRS Notice 2010-75, 2010-48 I.R.B. 1

(I.R.C. Sec. 45Q credit for carbon dioxide sequestration inflation adjustment factor for 2010 is 1.0118 resulting in a credit of $20.24/metric ton of qualified CO2 under I.R.C. Sec. 45Q(a)(1) and $10.12/metric ton of qualified CO2 under I.R.C. Sec. 45Q(a)(2)).

Thomann v. Comr., T.C. Memo. 2010-241

(petitioners' lease of farm property to farming corporation under oral leases not eligible for expense method depreciation because non-corporate lessor rule violated (term of leases indefinite) and no exception applicable; penalty assessed (court did not discuss trade or business requirement)). 

Terrell v. Comr., 625 F.3d 254 (5th Cir. 2010)

(court reverses Tax Court ruling that dismissed petitioner's challenge of innocent spouse relief; IRS failed to send its determination to petitioner's last known address and petitioner actually filed a timely petition based on time notice received).

CCA 201043040 (Oct. 29, 2010)

(a claimant of the alternative fuel credit that is also a Form 720 filer for any I.R.C. Sec. 4041 tax must first offset that liability on Form 720 and may claim any remaining balance of the credit on either Form 8849 or Form 4136; if claimant is not a Form 720 filer for any I.R.C. Sec. 4041 tax, claimant can claim entire amount on Form 4136; claim can be made for any open year for which credit available after claimant obtains registration number).

Cheryl A. Mayfield Therapy Center v. Comr., T.C. Memo. 2010-239

(massage therapists, cosmetologists, and nail technicians (service providers)that operated on the petitioner's premises were determined to be independent contractors; case turned on the specific facts involved – providers were generally charged a weekly “booth rent” equal to the greater of approximately $80 base rent or 25 percent of the provider’s gross revenues; petitioner claimed that they had a landlord/tenant relationship with the service providers, but IRS claimed the providers were employees; court ruled for petitioner - providers were independent contractors). 

IRS Info. 2010-0237 (Oct. 27, 2010)

(taxpayer does not qualify for first-time homebuyer tax credit for failure to enter into binding purchase contract before May 1, 2010). 

Lewis v. Comr., T.C. Sum. Op 2010-156

(mortgage broker failed to substantiate many claimed business deductions, and expenses associated with "colorpuncture" therapy training cannot be deducted because, based on the facts involved, the training qualified the broker for a new trade or business).  

Molnar v. Comr., No. 8039-R, 2010 Minn. Tax LEXIS 27 (Minn. Tax Court Oct. 19, 2010)

(petitioners, married couple, could not claim business expense losses associated with horse ranch because ranch was operated for recreational purposes; profit intent not present).

ECC 201104037 (Oct. 19, 2010)

(storage shed does not qualify as a "principal residence" with result that taxpayer who used storage shed as "home" 40 percent of the time did not own principal residence in prior three years and taxpayer entitled to first-time homebuyer tax credit against cost of constructing permanent home on taxpayer's property). 

Priv. Ltr. Rul. 201105015 (Oct. 13, 2010)

(grain payments paid by cooperative to members and other patrons who share in patronage dividends are PURPIMs and, as a result, cooperative's QPAI and taxable income to be computed without any deduction for grain payments to such persons). 

Slota v. Comr., T.C. Sum. Op. 2010-152

(petitioners, farm couple, transferred proceeds from sale of crops (rather than crops themselves) and USDA payments to corporation; income taxable to couple on individual return under assignment-of-income doctrine rather than corporation; accuracy-related penalty upheld). 

IR 2010-103 (Oct. 12, 2010)

(IRS issues draft Form W-2 for 2011 and announces that it will defer the employer-reporting requirement of the cost of coverage under an employer-sponsored group health plan thereby making it optional for 2011; draft Form includes codes (DD) that employers may use to report the cost of coverage under an employer-sponsored group health plan). 

The Sherwin-Williams Co. v. Iowa Department of Revenue, 789 N.W. 2d 417 (Iowa 2010)

(manufacturing exemption can be utilized by paint manufacturer to exempt itself from use tax  on equipment, including tinting machines and mixers used in retail stores to process paint).

Bosamia, et ux. v. Comr., T.C. Memo. 2010-218

(court rules that IRS can make a an I.R.C. Sec. 481 adjustment to petitioners' (married couple) 2004 S corporation income in order to account for deductions that were taken in prior years even though the assessment period had already expired for some of the years at issue).  

Chiarito v. Comr., T.C. Sum. Op. 2010-149

(gain incurred on sale of residence does not qualify for I.R.C. Sec. 121 exclusion because taxpayers did not reside in the residence for the required two-year period before sale; prorated exclusion not available - no change in employment or health status and taxpayers’ need for larger kitchen to better service taxpayers' business not unforeseeable). 

Proposal by Iowa Dept. of Revenue (Oct. 6, 2010)

(IDOR proposes to amend assessment practices concerning valuation of ag land; proposal is to remove the crop and livestock reporting service as a source of data for assessors and use other USDA sources for assessors to use). 

Dennis v. Comr., T.C. Memo. 2010-216

(horse breeding activity engaged in with intent to make profit; losses from activity deductible; court analyzed each factor of the nine factors). 

Priv. Ltr. Rul. 201103006 (Oct. 5, 2010)

(taxpayer, real estate developer, allowed to treat five condominiums as one "building" for purposes of I.R.C. Sec. 168(e)(2) - i.e., whether the "building" is residential or non-residential property). 

Rev. Proc. 2010-39, 2010-42 I.R.B. 1

(IRS publishes updates rules for determining amount of an employee's ordinary and necessary business expenses for lodging, meals and incidental expenses incurred during travel that will be deemed substantiated under Treas. Reg. Sec. 1.274-5; high per diem allowance is $233 and low rate is $160, effective for travel after Sept. 30, 2010).

Rev. Proc. 2010-36, 2010-42 I.R.B. 1

(IRS guidance on tax treatment of amounts homeowners pay to repair damage caused by corrosive drywall building materials (i.e., Chinese drywall); safe harbor provided allowing homeowners to treat some damage as casualty loss and method provided for determining amount of loss; applicable to amounts paid to repair damage to personal residence or household appliances as a result of the corrosive drywall; amounts within safe harbor can be treated as casualty loss in year of payment; amounts paid to restore residence to condition immediately before damage may qualify for casualty loss treatment; losses claimed for replacement of household appliances limited to lesser of current cost to replace or basis; guidance effective for all returns filed after Sept. 29, 2010). 

H.R. 6190 signed into law (Sept. 30, 2010)

(eliminates scheduled 9/30/10 sunset of  taxes on aviation-related fuel and ticket prices and extends them through December 31, 2010).

Schwass v. Township of Riverton, 290 Mich. App. 220 (Mich. Ct. App. 2010)

(real estate owned by two partnerships was deeded to individual partners and their spouses, and state then reassessed the parcels and raised their taxable values; conveyance by deed was a transfer that removes cap on reassessment; joint tenancy exception inapplicable).  

ECC 201041040 (Sept. 27, 2010)

(taxpayer's loan of securities to S corporation did not create basis in S corporation stock; no details on transaction provided – taxpayer apparently not “at risk”). 

Info. Ltr. 2010-0209 (Sept. 24, 2010)

(first-time homebuyer tax credit not available on home taxpayer purchased from taxpayer's father; IRS referenced I.R.C. Sec. 36(c)(3)(A)(i) to reach its conclusion, but failed to note that I.R.C. Sec. 36(c) does not bar fair market value sales between related parties where buyer's basis is a purchase price basis).

Info. Ltr. 2010-0207 (Sept. 24, 2010)

(election to carry back a 2008 or 2009 net operating loss for one of the available periods (3, 4 or 5 years) is irrevocable and cannot be changed once the taxpayer makes the election (simply reiterates statute and prior IRS communications on the issue)).

Summerfield v. Comr., T.C. Sum. Op. 2010-143

(tax home of petitioner, a pipefitter, is his principal place of employment; thus, petitioner may deduct expenses incurred while traveling away from home except for personal living expenses). 

Sandoval, et ux. v. Comr., T.C. Memo. 2010-208

(petitioner, pastor of family-run church, not entitled to casualty loss deduction of $119,304 for loss of personally-owned cabin used for church purposes; petitioner did not rent the cabin with profit intent or use it in connection with a trade or business). 

In re Dealer Direct, LLC, No. 2010-300-2-0244 (Iowa Dept. of Rev. Sept. 23, 2010)

(advertising company's call tracking service sold to car dealerships is exempt from sales tax; tracking service is non-taxable information service).  

U.S. Treasury Inspector General for Tax Administration Memo (Sept. 23, 2010)

(TIGTA reports notes that IRS has no ability to verify if taxpayers are eligible to claim more than the maximum amount for various education credits with the result that taxpayers that were really not qualified for education credits received $55.8 million in Hope credits that they should have in tax year 2008 alone). 

ILM 201049026 (Sept. 23, 2010)

(taxpayer is operator of adult home-care business offering full-time care; customer payments made monthly for room rent and services provided; taxpayer depreciated out business portion of home over 27.5 years and IRS agent rejected that, claiming it was 39-year property; on review by National Office of IRS, conclusion was that bedrooms constituted "dwelling units" under I.R.C. Sec. 168(e)(2) and that all of the gross rental income (not counting monthly fee for services) is "rental income" from the "dwelling units"; home qualifies as "residential rental property" depreciable using 27.5-year recovery period). 

Hall v. Comr., 135 T.C. 374 (2010)

(two-year statute of limitations applicable to claims for equitable innocent spouse relief is invalid; holding contrary to the Seventh Circuit Court of Appeals in Lantz). 

Evans, et ux. v. Comr., T.C. Memo. 2010-207

(charitable deduction for donated facade easement denied; no credible evidence of fair market value of easement offered; underpayment penalty not applicable because reliance on appraisal was in good faith). 

Smith v. Comr., T.C. Sum. Op. 2010-142

(petitioner failed to convince court that his weed-pulling activity at his property that generated tax loss was sufficient to satisfy 750-hour test for purposes of passive loss rules; court checked state highway map and confirmed that property visits petitioner claimed with associated weed-pulling activity were simply not possible). 

Towell v. Comr., T.C. Sum. Op. 2010-141

(charitable deduction denied for cash donation and for donation of petitioner's timeshare on Miami Beach to charitable foundation; petitioner failed to show reasonable cause for failure to provide a qualified appraisal). 

Moss, et ux. v. Comr., 135 T.C. 365 (2010)

(time spent "on-call" with respect to rental property does not count toward 750-hour test of passive loss rules; passive loss rules apply). 

Saunders v. Comr., T.C. Sum. Op. 2010-138

(petitioner's claimed $1,500 Hope education credit on 2002 return disallowed and amount included in underpayment for purposes of negligence penalty; petitioner conceded disallowance but challenged negligence penalty because he thought credit was some sort of manipulation by accountant of tax code). 

IRS LMSB 04-0910-024 (Sept. 14, 2010)

(any proposal to impose penalty via I.R.C. Sec. 6662(b)(6) at examination level must be reviewed and approved by appropriate field operations director). 

Priv. Ltr. Rul. 201050027 (Sept. 14, 2010)

(farmers' cooperative may treat payments it makes for grain delivered to it by members and other participating patrons as "per-unit retain allocations paid in money" with the result that the co-op need not take into account any deduction for such grain payments when computing the co-op's DPAD). 

Hill v. Comr., T.C. Memo. 2010-200

(petitioners, married couple, cannot deduct losses for wife's rental real estate activity due to limitations of passive loss rules and can't deduct them as start-up costs under I.R.C. Sec. 195; petitioners could not claim first-time homebuyer exception to 10 percent penalty under I.R.C. Sec. 72(t) because they had already received the $10,000 exception for first-time homebuyer at earlier point in time). 

Javorski, et ux. v. Comr., T.C. Sum. Op. 2010-136

 (no bad debt deduction for non-bona fide debt; capital loss claimable, however). 

In re Lipson, 238 P.3d 757 (Kan. Ct. App. 2010)

(value of petitioner's intangible right to lot lease not subject to ad valorem tax; value of petitioner's mobile home reduced; leasehold interest not subject to tax, just land and improvements). 

Adams, et ux. v. Comr., T.C. Sum. Op. 2010-134

(petitioners, married couple, improperly deducted personal expenses as business expenses and did not maintain sufficient records to substantiate expenses in accordance with I.R.C. Sec. 274; accuracy-related penalty imposed).

Lord v. Comr., T.C. Memo. 2010-196

(charitable deduction denied for donation via deed over to exempt entity; qualified appraisal contained insufficient information to substantiate deduction).   

Holland v. Comr., T.C. Sum. Op. 2010-132

(most employee-related business deductions denied for lack of substantiation). 

ECC 201040013 (Sept. 8, 2010)

(as applied to partners in pass-through entities, IRS must separate trade or business income that would be subject to self-employment tax if any partner is an individual or pass-through partner; interesting implications can result from this, but were not explored by IRS). 

ECC 201040012 (Sept. 8, 2010)

(value of health benefits for “domestic partner” who is also a dependent of an employee as defined under I.R.C. Sec. 152 is not subject to FUTA tax). 

Priv. Ltr. Rul. 201048045 (Sept. 8, 2010)

(organization that accepts donated conservation easements not a qualified charity; organization could not establish that it could meet the requirements of I.R.C. Sec. 170 to preserve the conservation purposes of donated easements). 

Estate of Le Cear, et al. v. Comr., 135 T.C. 288 (2010)

(estate's credit for estate taxes paid limited by I.R.C. Sec. 2013(b) and (c); taxpayer, surviving spouse, had created intervivos trust with spouse that divided four ways on death of first spouse; first spouse made QTIP election on one of the shares and estate of survivor claimed credit for estate taxes paid in first spouse's estate but full credit not available because credit computed incorrectly and no credit available for state taxes paid by first spouse's estate - credit applies to federal estate tax paid only).

Cicciarella, et ux. v. Comr., T.C. Memo. 2010-195

(petitioner not entitled to deduction for medical expenses attributable to purchases and improvement to residence; petitioner failed to prove that such expenses related to son's medical condition and were not reimbursed by insurance). 

Leathley v. Comr., T.C. Memo. 2010-194

(accrued interest on tax liability not dischargeable in bankruptcy; interest and penalties not treated similarly for purposes of discharge).