Case Summaries

Iowa Senate File 2380

(passed both House and Senate and expected to be signed into law; bill fails to eliminate various state tax credits as recommended by investigatory panel, and merely reduces certain credits and suspends for two years the state film tax credit which was riddled with fraud and spawned criminal investigations and related charges; certain caps placed on some credits and oversight board within the legislature created to review credits for their "effectiveness"). 


Weisberg, et al. v. Comr., T.C. Memo. 2010-55

(taxpayer's personal guarantee of S corporation's credit line did not give taxpayer basis so that taxpayer could claim loss; accuracy-related penalty imposed).


Crawford, et ux. v. Comr., T.C. Memo. 2010-54

(professional gambler subject to the limitations of I.R.C. Sec. 165(d) and cannot deduct net gambling losses; U.S. Supreme Court's opinion in Groetzinger defining the phrase "trade or business" only defined in context of I.R.C. Sec. 56(a) and Sec. 165(d) applies regardless of whether petitioner is in the business of wagering).


Banach v. Comr., T.C. Sum. Op. 2010-33

(petitioner's lump-sum payments made to former spouse not deductible alimony; petitioner's obligation to repay did not survive ex-spouse's death).


IRS PMTA 2009-165 (Mar. 22, 2010)

(Energy Star appliance rebates will be treated as purchase price reductions which requires purchasers to reduce the adjusted basis of purchased property by the amount of the rebate; rebate cannot be treated as an expenditure when determining tax deductions or credits). 


KS Dept. of Rev. Ltr. Rul. No. P-2010-001 (Mar. 22, 2010)

(canine and horse massage and pet sitting and taxi services are not subject to sales tax, but taxable services include grooming, haircuts and bathing). 


Robinson Knife Manufacturing Co., Inc., et al. v. Comr., 600 F.3d 121 (2nd Cir. 2010)

(court reverses the Tax Court and allows taxpayer, manufacturer of kitchen items, to currently deduct royalties paid it to put "Pyrex" and "Oneida" trademarks on taxpayer's kitchen tools; sales-based royalty payments are currently deductible because they are not allocable to property that the taxpayer produces which would require capitalization under I.R.C. Sec. 263A; appellate court focused solely on fact that royalty payments calculated on items that were sold rather than items that were produced and were, therefore, more properly characterized as marketing expenses rather than production expenses).


Missouri Dept. of Rev. Ltr. Rul. 6170 (Mar. 19, 2010)

(United Methodist Church that pays monthly fee to satellite television provider for satellite television (including HBO) on behalf of its pastor as part of his compensation, where account is in name of pastor and separately states amount charged for satellite television access and amount charged for satellite receiver, must pay sales tax on monthly rental fee for satellite receiver; pastor is not an exempt entity).


Iowa Dept. of Rev. Policy Ltr., Doc. No. 10450016 (Mar. 18, 2010)

(energy service company must pay sales tax on natural gas delivery charges; tax is imposed on transfer of title to ultimate user of natural gas and is imposed on delivery service if transport and sale done by different parties).


IRS Infor. 2010-0062 (Mar. 18, 2010)

(taxpayer not eligible for long-term homeowner tax credit because home purchased before Nov. 7, 2009).


Fisher v. United States, No. 1:08-cv-00908 (S.D. Ind. Mar. 11, 2010)

(gifts of LLC interests by couple to children failed to qualify as present interest annual exclusion gifts because the LLC interests remained subject to substantial restrictions in the hands of the donee children). 


Morgan v. Comr., T.C. Sum. Op. 2010-29

(petitioner must report in 2006 income amount of check received in 2006, but which was not cashed until 2007; check not subject to substantial restriction and petitioner failed to establish existence of agreement not to cash check until later year). 


IRS Info. 2010-0055 (Mar. 10, 2010)

(married couple did not qualify for long-term homeowner credit; wife did not reside in current home for five consecutive years in eight year period preceding purchase). 


Priv. Ltr. Rul. 201024031 (Mar. 9, 2010)

(taxpayer, agricultural marketing cooperative, and payments made to members for grain pursuant to marketing agreements constituted PURPIMs within meaning of I.R.C. Sec. 1382(b)(3); for purposes of computing cooperative's I.R.C. Sec. 199 deduction, cooperative's QPAI and taxable income to be computed without regard to any deduction for such payments to members for grain pursuant to marketing agreements). 


Purdy v. Comr., T.C. Sum. Op. 2010-26

(petitioner, employee of Merrill Lynch sued the company and received a $393,000 settlement ($120,000 of which was paid to petitioner's lawyer); petitioner deducted lawyer fees as Schedule C deduction for new investment advisory business that petitioner established, but court determined that lawyer fees were incurred by petitioner as employee rather than as independent contractor; thus, fees are deductible on Schedule A where they were limited). 


Priv. Ltr. Rul. 201024030 (Mar. 8, 2010)

(taxpayer, farmer's cooperative, may treat payments made for grain to members as PURPIMs for purposes of computing the taxpayer's I.R.C. Sec. 199 deduction; taxpayer's QPAI and taxable income to be computed without regard to any deduction for such payments). 


Priv. Ltr. Rul. 201021038 (Mar. 4, 2010)

(trust was beneficiary of IRA but did not have designated beneficiary and trustee pursued reformation action in state court to modify trust so that beneficiary designated and, thus, payout from IRA could be spread and tax deferred over lifetime of designated beneficiary; IRS ruled that retroactive modification would not be respected for federal tax purposes because there is no provision in the I.R.C. authorizing reformation that would qualify a trust as having a designated beneficiary). 


Priv. Ltr. Rul. 201023011 (Mar. 3, 2010)

(grain payments paid by farmers' cooperative are PURPIMs within meaning of I.R.C. Sec. 1382(b); for purposes of computing cooperative's I.R.C. Sec. 199 deduction, cooperative's QPAI and taxable income should be computed without regard to any deduction for grain payments to members).


IR 2010-25 (Mar. 2, 2010)

(IRS announcement that it agrees that medical students are not subject to FICA tax due to the student exception; applicable for tax periods ending before April 1, 2005 (effective date of current IRS regulations on the matter)). 


Congressional Research Service Report, R40155 (Mar. 1, 2010)

(CRS notes that a Congressional increase in the renewable fuel standard would increase corn-based ethanol production, which would, in turn, negatively impact the federal budget by approximately $200 billion for the 2009-2022 period by virtue of the application of the biofuels production tax credit).


Shiekv v. Comr., T.C. Memo. 2010-26

(taxpayer not entitled to depreciation deduction on personal residence, had unsubstantiated property tax deductions, and couldn't claim losses on rental properties due to the passive activity rules of I.R.C. Sec. 469).


Stadnyk, et ux. v. Comr., 367 Fed. Appx. 586 (6th Cir. 2010)

(taxpayers, married couple, liable for tax on settlement proceeds received by wife; proceeds not excludible under I.R.C. Sec. 104(a)(2) because they were not related to physical injury sustained by taxpayer).


Priv. Ltr. Rul. 201023008 (Feb. 26, 2010)

(Potter Children's Home & Family Ministries (PCHFM) is an integral part of Churches of Christ within meaning of Treas. Reg. Sec. 1.1402(c)-5(b)(2) such that rental allowances paid to managers, executives, supervisors or administrators who are ordained, licensed or commissioned ministers employed by PCHFM can be excluded from gross income under I.R.C. Sec. 107). 


Davidson v. Comr., T.C. Memo. 2010-38

(net operating losses from 2001 and 2002 returns which weren't filed until 2007 and were claimed against income on 2003 return which was filed in 2006 disallowed; while NOL carryback can be waived and elected to be carried forward, it must be done on timely filed return). 


Indiana Dept. of Revenue Letter of Finding, 09-0615 (Feb. 24, 2010)

(farmer's purchase of ring corn bin and truck adder exempt from sales tax because such items used directly in production of agricultural commodities).


IRS Info. Ltr. 2010-0013 (Feb. 24, 2010)

(purchase of home from parents does not qualify for first-time homebuyer credit; IRS did not provide any analysis of Sec. 36(c)(3) which, by its terms, does not apply to purchases for fair market value from related parties).


Priv. Ltr. Rul. 2010022005 (Feb. 24, 2010)

(payments made by farmers’ cooperative to members for purchase of grain are PURPIMs in accordance with I.R.C. §1382(b)(3); cooperative’s DPAD to be computed without regard to any deduction for grain payments). 


Priv. Ltr. Ruls. 201022009; 201022010; 2010022011 (Feb. 24, 2010)

(amounts received from wrongful death action that resulted from action of state legislature are excludible from taxpayer’s gross income under I.R.C. §104(a)(2); but, amounts attributable to medical expense that were deducted in prior year includible in income). 


Newell, et ux. v. Comr., T.C. Memo. 2010-23

(deducted losses not limited by passive loss rules; taxpayer satisfied material participation requirement; taxpayer held an interest as a managing member of an LLC under California law and did not hold a "limited partnership" interest; opinion follows that of Gregg, Garnett and Thompson). 


Matthies, et ux. v. Comr, 134 T.C. 141 (2010)

(valuation of life insurance policy determined to be cash value regardless of surrender value).  


Nebraska DOR Revenue Ruling 01-10-1 (Feb. 22, 2010)

(sales and use tax not imposed on sales and purchases of wood or corn used as fuel source if more than 50 percent of amount purchased is used directly in manufacturing or processing, refining, generation of electricity, irrigation, farming or by any hospital).


ECC 201012046 (Feb. 22, 2010)

(owner of single-member LLC that did not make elected to be treated taxwise as a corporation is liable for LLC's employment taxes; for wages paid after 2008, such LLCs are no longer disregarded as separate from their owners for employment tax purposes).


Missouri Dept. of Rev. Priv. Ltr. Rul. 6152 (Feb. 22, 2010)

(farmer eligible for farm machinery and equipment exemption from sales tax on purchase of pull scrapers; scrapers used to perform annual farm maintenance which was an exclusive farm use). 


Priv. Ltr. Rul. 201023012 (Feb. 22, 2010)

(payment received by decedent's estate for wrongful death of decedent is excludible from gross estate's gross income under I.R.C. Sec. 104(a)(2), except for amounts attributable to medical expenses that decedent deducted on a prior year's federal tax return).


Purdy, et ux. v. Comr., T.C. Memo. 2010-27

(legal fees that petitioner paid are deductible on Schedule A as an unreimbursed employee business expense (as opposed to being deductible as an ordinary and necessary business expense) because the fees were the result of petitioner's relationship with financial services firm).


IRS Info. Ltr. 2010-0009 (Feb. 17, 2010)

(I.R.C. Sec. 30D credit for plug-in electric vehicles expired at the end of 2009, and IRS does not have the authority to extend it to vehicles acquired after 2009).


Estate of Goldberg v. Comr., T.C. Memo. 2010-26

(unclear language in deed resulted in creation of tenancy-by-the-entirety between decedent and his wife; upon wife's first death, her interest, as a tenancy-by-the-entirety property, was not devisable and passed entirely to decedent as survivor and property included in decedent's estate at death).


Colosimo v. United States, 707 F.Supp.2d 926 (S.D. Iowa 2010)

(plaintiff, owner of Des Moines delivery business, personally liable for approximately $700,000 of unpaid payroll taxes; while lack of payment started with bookkeeper, plaintiff personally liable for taxes and willful failure to remit taxes).


IRS Info. Ltr. 2010-0005 (Feb. 16, 2010)

(taxpayer who qualified to claim, and did claim, the first-time homebuyer tax credit for a purchase after April 9, 2008 and before January 1, 2009, is subject to the 15-year recapture provision; IRS does not have administrative authority to waive repayment requirement).


IRS Info. Ltr. 2010-0012 (Feb. 16, 2010)

(taxpayer who purchased home before effective date of long-term homebuyer credit is not eligible for the credit; IRS does not have the authority to extend the availability of the credit to purchases before the effective date of the credit - Nov. 7, 2009).


Farber v. Comr., T.C. Memo. 2010-37

(petitioner's candle-selling activity not conducted in business-like manner and was not engaged in for profit; expenses only deductible to extent of income from activity). 


Nestle Purina Petcare Co. v. Comr., 594 F.3d 968 (8th Cir. 2010)

(court affirms Ralston Purina Co. v. Comr., 131 T.C. 29 (2008) in holding that petitioner could not deduct payments for cash distribution redemptive dividends - such dividends are not within the exceptions of I.R.C. Sec. 162(k)).


IRS Notice 2010-16, 2010-06, IRB ___ (Feb. 8, 2010)

(designation of the Haiti earthquake as a qualified disaster for federal tax purposes).


Rev. Proc. 2010-14, 2010-12 I.R.B. 1

(IRS provides safe harbor method for reporting gain or loss for taxpayers that initiate an I.R.C. Sec. 1031 exchange but fail to complete the exchange because a qualified intermediary fails to acquire replacement property and transfer it the taxpayer).


Missouri Dept. of Rev. Ltr. Rul. 6124 (Feb. 5, 2010)

(farmer's purchase of a soil scraper exempt from sales and use tax under MO Rev. Stat. 144.030.2 (22) and 12 CSR 10-110.900 because scraper to be used exclusively for agricultural purposes - moving dirt to construct drainging and terraces on farmer's farm). 


Priv. Ltr. Rul. 201020004 (Feb. 4, 2010)

(amount received on account of wrongful death action via enactment of state legislation is largely excluded from income under I.R.C. Sec. 104(a)(2); amounts attributable to medical expenses that were deducted on prior year's federal return not excludible). 


Durrance v. Comr., T.C. Sum. Op. 2010-12

(expense deductions disallowed for travel to job; job not temporary). 


Prough, et ux. v. Comr., T.C. Memo. 2010-20

(distributions from retirement account did not qualify as "substantially equal periodic payments"; distributions subject to early withdrawal penalty and accuracy-related penalty applied because petitioner did not have reasonable cause to not report the distributions). 


IRS Notice 2010-19, 2010-7 IRB 1

(IRS announces its plans to publish regulations on its position that transfers made during 2010 to a grantor trust that are not treated as completely owned by the transferor or the transferor's spouse are to be treated as a transfer by gift of the entire property interest under I.R.C. Sec. 2511(c); IRS notes that the federal gift tax still applies in 2010). 


Administration small business tax proposal (Feb. 2, 2010)

(proposal would provide $5,000 for each new hire a business makes in 2010 and provide for refunds on Social Security taxes if a business increases wages or expands hours for existing workers, capped at $500,000 per business; mirrors similar credit from 1970s that failed; White House projects that credit could create between 165,000 and 297,000 jobs in 2010, and also projects that measure will reduce tax revenue by $33 billion for a cost of $111,000 to $200,000 per job created). 


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