Case Summaries

Johnson v. Comr., No. 8086-R, 2010 Minn. Tax LEXIS 5 (MN Tax Ct. Feb. 2, 2010)

(losses non-deductible under passive loss rules and cannot offset passive income; petitioners (married couple) failed to participate in the business for sufficient number of hours to satisfy passive loss rules under I.R.C. Sec. 469 (which state follows)). 


O'Donnabhain v. Comr., 134 T.C. 34 (2010)

(petitioner's medical expenses associated with psychological discomfort deductible medical expenses under I.R.C. Sec. 213; hormone therapy and sex reassignment surgery were expenses associated with curing petitioner's psychological disorder and were not non-deductible cosmetic surgery; but breast augmentation surgery was directed at improving petitioner's appearance and not associated with petitioner's psychological disorder; no mention of whether such expenses, if incurred by parents of newborn baby on behalf of baby, would be deductible medical expenses).


Priv. Ltr. Rul. 201021015 (Feb. 2, 2010)

(amount received from wrongful death action as a result of action of state legislature excludible from gross income under I.R.C. Sec. 104(a)(2); amount attributable to medical expenses that were deducted in prior year must be included in income). 


Vianello, et ux. v. Comr., T.C. Memo. 2010-17

(petitioner not engaged in trade or business of farming for tax years at issue and, therefore, cannot claim depreciation and expenses as Schedule F deductions; even though petitioner actively engaged in farming for purposes of USDA farm program payment eligibility, different test used to determine existence of trade or business activity for purposes of I.R.C. Sec. 162(a); under lease agreement with tenant, petitioner did not bear risk of loss from farming activity, petitioner lived 150 miles from farm and never met tenant; petitioner also not engaged in trade or business of loan acquisition and, thus, could not claim Schedule C loss deductions for years at issue).   


CCM 201013038 (Jan. 28, 2010)

(transaction didn't qualify for I.R.C. Sec. 1031 treatment; transaction violated related party rules). 


Priv. Ltr. Rul. 201022004 (Jan. 28, 2010)

(QTIP election for estate null and void for federal estate, gift and GSTT purposes; election not necessary to reduce estate tax to zero because no estate tax would have been imposed on assets in residuary trust (a credit shelter trust funded with amount not exceeding decedent’s exclusion amount) regardless of whether election was made; Rev. Proc. 2001-38 applied). 


IRS Info. Ltr. 2010-0022 (Jan. 27, 2010)

(taxpayer's purchase of home from taxpayer's mother is not eligible for first-time homebuyer credit; IRS focused on fact that mother is related person under statute, but ignored the fact that I.R.C. Sec. 36(c)(3) does not prohibit fair market purchases from related parties from being eligible for the credit). 


Mamoudou v. Comr., T.C. Sum. Op. 2010-9

(petition not allowed to claim girlfriend's children as his dependents, even though the children lived with him because girlfriend eligible to claim children as dependents).


Mysteryboy Incorp. v. Comr., T.C. Memo. 2010-13

(plaintiff incorporated under Iowa non-profit act for purpose of advocating for a change in the law that would allow sexual activities between children and adults not qualified charity under I.R.C. Sec. 501(c)(3); director previously convicted as sexually violent predator under Iowa law (before IA Supreme Court opinion of April 2009)).


ECC 201008043 (Jan. 26, 2010)

(DPAD for cooperative's patronage-sourced income does not offset nonpatronage income; according to Farm Service Cooperative v. Comr., 619 F.2d 718 (8th Cir. 1980), cooperatives cannot use patronage losses to offset nonpatronage gains).


Priv. Ltr. Rul. 201022006 (Jan. 24, 2010)

(based on cooperative's bylaws and operating agreement, grain payments to members and other patrons eligible to share in patronage dividends are PURPIMs and for purposes of computing DPAD, co-ops QPAI and taxable income should be computed without regard to any deduction for any grain payments to members and patrons eligible to share in patronage dividends). 


H.R. 4462 signed into law on Jan. 22, 2010

(permits calendar-year taxpayers to treat charitable contributions of cash made after January 11, 2010, and before March 1, 2010, as contributions made for 2009 tax year if such contributions were for the purpose of providing relief to victims in areas affected by the 1/12/10 Haiti earthquake; bill also clarifies recordkeeping requirement for such contributions and specifies that a telephone bill satisfies the recordkeeping requirement if it shows the name of the donee organization, and date and amount of contribution). Note: Haiti contributions are not deductible on the Iowa 2009 return.


IRS Info. Ltr. 2010-0040 (Jan. 22, 2010)

(taxpayer previously owned a home within three years of purchase of second home and is, thus, ineligible for first-time homebuyer tax credit; taxpayer purchased home before 11/7/09 and is, therefore, ineligible for long-term homeowner tax credit).


Priv. Ltr. Rul. 201017027 (Jan. 22, 2010)

(payments that a governmental entity makes as compensation as part of a settlement of a wrongful death action to victims' survivors are not included in gross income under I.R.C. Sec. 104(a)(2)). 


Adkison v. Comr., 592 F.3d 1050 (9th Cir. 2010)

(affirming Tax Court decision, court holds that Tax Court lacked jurisdiction to hear case concerning former spouse who once filed joint return and now, no longer married, and meets certain requirements to claim relief from joint and several liability for tax deficiency because deficiency stemmed from a partnership interest that is subject of an ongoing partnership proceeding; no remedy available until partnership proceedings have finished).


Sommerdorf v. Sherburne County, No. 71-CV-08-752, 2010 Minn. Tax LEXIS 3 (Minn. Tax Ct. Jan. 21, 2010)

(petitioners property satisfies statutory requirements for ag land classification; petitioners used property to board horses and raise pasture grass for horses).


Minick v. Comr., T.C. Memo. 2010-12

(petitioners, married couple, not able to deduct travel expenses because the husband failed to satisfy the I.R.C. Sec. 162(a)(2) test of being away from home while pursuing work; expenses not ordinary and necessary).


Priv. Ltr. Rul. 201017007 (Jan. 21, 2010)

(I.R.C. Sec. 469 does not prevent a taxpayer from carrying back NOLs that accrued in post C corporation years; consequently, the NOLs can be used to offset the taxpayer's portfolio income earned in years when it was a C corporation). 


IRS 2010-9 (Jan. 20, 2010)

(in accordance with the Department of Defense Appropriations Act of December 19, 2009, IRS announces the extension through February 2010 of the eligibility period for certain unemployed persons to qualify for a 65 percent subsidy on COBRA health insurance premiums; IRS also announces that the original nine-month subsidy period has been extended to 15 months for the newly eligible individuals and for those already receiving the subsidy).


Priv. Ltr. Rul. 201024035 (Jan. 20, 2010)

(QTIP election void for purposes of I.R.C. Secs. 2044(a), 2056(b)(7), 2519(a) and 2652 where election not necessary to reduce estate tax liability to zero, based on values as finally determined for federal estate tax purposes). 


Armbrust v. Comr., T.C. Sum. Op. 2010-5

(petitioner liable for 10 percent additional tax for $50,000 premature distribution from employer's qualified retirement plan; distribution did not qualify under exception for distributions used to pay for acquisition costs of first-time home purchase because funds withdrawn from employer-sponsored qualified retirement pension plan instead of from an IRA).


Thomas v. Comr., T.C. Memo. 2010-11

(divorced petitioner not entitled to either dependency exemption deduction or child tax credit for daughter; decree allowed petitioner to claim dependency exemption and child tax credit in even-numbered years if current on child support obligation; petitioner did not attach Form 8332 or similar document to return, but only attached copy of decree; child not petitioner's qualifying child under I.R.C. Sec. 152(c) and is, therefore, not entitled to child tax credit).


IRS Info. Ltr. 2010-0038 (Jan. 19, 2010)

(IRS again expresses its belief that the first time homebuyer credit is not available for acquisitions from related parties (in whatever form); taxpayer cannot claim first-time homebuyer credit attributable to amount of mortgage assumed on mother's home; no analysis of the actual statutory language provided which does not bar arms-length, fair market value purchases from related parties).


Deutsche Bank National Trust Co. v. Internal Revenue Service, et al., 361 Fed. Appx. 527 (4th Cir. 2010)

(court upheld lower court's refusal to apply equitable subrogation where plaintiff sought to have its lien on property declared senior to existing IRS liens; subrogation would prejudice the IRS and plaintiff may have recourse against the loan recipient and title examiner).


IRS Info. Ltr. 2010-0027 (Jan. 14, 2010)

(taxpayer does not qualify for long-term homebuyer credit for home that ex-spouse purchased because taxpayer did not live in the home for the required five years; taxpayer may still qualify for first-time homebuyer credit if taxpayer did not have ownership interest in home in prior three years).


IRS Info. Ltr. 2010-0036 (Jan. 13, 2010)

(for tax years beginning after 2008, tax credit for qualified solar electric property available for part of qualified solar electric property expenditure made from subsidized energy financing; but taxpayer that buys or installs energy conservation measures does not include in income the value of any subsidy that a public utility provides for that expenditure).


IRS Info. Ltr. 2010-0031 (Jan. 13, 2010)

(divorced taxpayer who is sole owner of home purchased in January of 2009 not eligible for first-time homebuyer tax credit because taxpayer jointly owned home with former spouse during preceding three years).


Petaluma FX Partners LLC et al. v. Commissioner, 591 F.3d 649 (D.C. Cir. 2010)

(reversing the Tax Court, court holds that Tax Court has jurisdiction to determine that partnership should be disregarded for tax purpose, but lacks jurisdiction to determine partner's outside basis in partnership interest in LLC; accuracy-related penalties also reversed; LLC involved was alleged to be a Son-of-Boss tax shelter).


Berkery v. Comr., No. 2:09-cv-04944, 2010 U.S. Dist. LEXIS 2257 (E.D. Pa. Jan. 12, 2010)

(court lacks jurisdiction to hear plaintiff's claim that the IRS erred in finding that cancelled debt income was taxable income and in holding 2008 income tax refund).


IRS Info. Ltr. 2010-0033 (Jan. 12, 2010)

(married couple ineligible for first-time homebuyer credit due to ownership of prior home within three-year period before purchase of current residence; IRS position is that, for married taxpayers, both spouses must be first-time homebuyers as of the date of purchase (if both spouses' names are on the title).


Glatfelter v. Comr., T.C. Sum. Op. 2010-2

(taxpayer not entitled to deduction for alimony on amounts paid for former wife's legal fees incurred upon their divorce because obligation to pay would not have ended upon former spouse's death; thus, amounts paid did not meet definition of "alimony" under I.R.C. Sec. 71(b)(1)).


Armstrong v. Comr., T.C. Sum. Op. 2010-3

(taxpayer unable to deduct business, dental and medical expenses due to lack of substantiation).


Department of Revenue v. ABC Farms, Ill. Dept. of Rev. ALJ Ruling (Jan. 8, 2010)

(taxpayer, a farming business, that purchased bulldozer ineligible for farm machinery and equipment exemption from use tax; taxpayer did not prove that bulldozer used primarily for agricultural purposes).


IRS Info. Ltr. 2010-0024 (Jan. 8, 2010)

(a taxpayer that has purchased a solar electric system can either exclude a utility subsidy or rebate associated with the purchase, but the amount excluded is not eligible for the I.R.C. Sec. 25D credit). 


Priv. Ltr. Rul. 201022002 (Jan. 7, 2010)

(extension of time granted for decedent's estate to make QFOBI election under I.R.C. Sec. 2057).


Priv. Ltr. Rul. 201022002 (Jan. 7, 2010)

(extension of time granted for decedent's estate to make QFOBI election under I.R.C. Sec. 2057).


IRS Info. Ltr. 2010-0029 (Jan. 6, 2010)

(military personnel must meet consecutive five-year ownership requirement for long-term homeowner credit; taxpayer at issue failed to meet test).


Rev. Proc. 2010-13

(specification of how a taxpayer is to report changes in the manner of how the taxpayer is grouping activities for purposes of the passive loss rules; beginning with 2011 returns, taxpayers must report changes in groupings; failure to report whether activities are grouped for taxpayers with two or more trade or business activities or rental activities will result in each trade or business activity or rental activity to be treated as a separate activity under the passive loss rules).


Vlock, et ux. v. Comr., T.C. Memo. 2010-3

(taxpayers (married couple) not entitled to business expense deductions for payments to corporation created for tax avoidance purposes; taxpayers also not entitled to payments to their daughters due to lack of proof of legitimate business expense).


Cavaretta, et ux. v. Comr., T.C. Memo. 2010-4

(repayments made to insurance company for fraudulently billed amounts are fully deductible business deductions (rather than non-business deductions which generate net operating losses to extent of non-business income) on joint return; deductions generated net operating loss which taxpayer carried back and claimed refunds on prior year returns; taxpayer's wife had billed the fraudulent amounts for taxpayer's dental office and taxpayer had included the fraudulent payments on his Schedule C; while wife could not deduct such amounts had she filed a separate return, court cited Helvering v. Janney, 311 U.S. 189 for proposition that the deductions to which either spouse is entitled on a joint return derive from the couple's aggregate gross income).


Wells v. Comr., T.C. Memo. 2010-5

(taxpayer's receipt of settlement payment for emotional distress includible in gross income; amount did not result from physical injury).


ECC 201005052 (Jan. 5, 2010)

(IRS determines that decedent's heirs have right to examine estate tax return as filed by the executor under I.R.C. Sec. 6103 (e)(3)(B) and are entitled to a copy of the return information).


Priv. Ltr. Rul. 201015018 (Jan. 5, 2010)

(cash advances from taxpayer, a cooperative, to its members in exchange for products grown in the U.S. are PURPIMs; advances are included in QPAI and taxable income of taxpayer for purposes of calculating, at the taxpayer's level, the allowable I.R.C. Sec. 199 deduction).


IRS Info. Ltr. 2010-0026 (Jan. 5, 2010)

(casualty loss deductible for year in which loss sustained that is not compensated for by insurance or otherwise; any expected reimbursement must be subtracted from the deductible loss).


Anderson, et al. v. Comr., T.C. Memo. 2010-1

(taxpayer who worked as crew member on fishing boat had self-employment income; accuracy-related penalty inapplicable to former spouse).


Price, et ux. v. Comr., T.C. Memo. 2010-2

(gifts of limited partnership interests to taxpayer's children were not gifts of present interests).


IRS Info. Ltr. 2010-0035 (Dec. 30, 2009)

(IRS has no discretionary authority to waive the recapture provision applicable to the 2008 version of the first-time homebuyer credit).


I.L.M. 201017043 (Dec. 30, 2009)

(landfill gas, in order to qualify for the I.R.C. Sec. 45 credit, must be energy-production grade, and taxpayer must have an ownership interest in the equipment producing the fuel that qualifies for the credit). 


CCA Ltr. Rul. 2010004035 (Dec. 29, 2009)

(flow-through loss from tier one is a partnership item of tier one that can only be disallowed by issuing an FPAA to tier one; Section 469 is an affected item with both partnership level components).


IRS Info. Ltr. 2010-0018 (Dec. 29, 2009)

(individual that inherited partial interest in residence is not eligible for first-time homebuyer credit, even if the individual purchases the remaining interests from the taxpayer's siblings; no rationale provided as to how siblings are related parties under the statute). 


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