Case Summaries

IRS Info. Ltr. 2010-0019 (Dec. 29, 2009)

(taxpayers, married couple, does not qualify for first-time homebuyer credit or long term homeowner credit because one spouse owned prior home in prohibited timeframe (resulting in denial of first-time homebuyer credit), and other spouse did not own the prior home (which bars long-term homeowner credit). 


Iowa Dept. of Rev. Memo. No. 093000091 (Dec. 28, 2009)

(winterizing services of plumbers and/or landscapers for pipes in buildings qualify as "plumbing" and are subject to sales tax; but, winterizing outside pipes is not taxable).


IRS Info. Ltr. 2010-0025 (Dec. 28, 2009)

(for taxpayer that places a small wind energy system in service, if the credit (2.1 cents/KwH of electricity produced) exceeds the taxpayer's tax liability, taxpayer may choose to take an energy investment tax credit (30 percent of the cost of the wind system) as an alternative - unused credits may be carried back one year and forward 20 years; there is no specifically required documentation needed to show that a wind energy system was placed in service during the tax year; tax credit not claimable for electricity that taxpayer uses in the taxpayer's business, but energy investment credit may be claimed on property that produces electricity for taxpayer's business; third incentive exists under ARRA 2009 for wind energy systems - taxpayer may apply for and receive a cash payment for 30 percent of the cost of a qualifying wind energy system; Form 3800 must be attached to return and Form 8835 may need to be included and to receive energy investment tax credit Form 3468 may need to be included with return).


C.C.M. 20102602F (Dec. 28, 2009)

(taxpayer, a licensed public warehouse, must capitalize and allocate to ending physical grain inventory in accordance with I.R.C. Sec. 263A the direct costs of acquiring grain for resale and the properly allocable share of indirect costs that directly benefit or are incurred in the resale of the grain).   


Payne v. Comr., 357 Fed. Appx. 734 (8th Cir. 2009)

(affirmance of Tax Court decision; discharge of credit card debt constituted discharge of indebtedness income and not a purchase price adjustment; I.R.C. Sec. 108(e)(5) applies only to direct agreements between purchaser and seller).


Bjelland, et al. v. Comr., T.C. Memo. 2009-297

(case involves unmarried parents with joint custody of son and court holds that mother is custodial parent for tax purposes due to having physical custody of son for greater part of year even though son spent more waking hours with the father).


Estate of Morgens v. Comr., 133 T.C. 402 (2009)

(amount of gift tax paid by recipients of deemed gifts of remainder interest in QTIP is included in decedent's gross estate via I.R.C. Sec. 2035(b); I.R.C. Sec. 2207A does not shift gift tax liability to QTIP recipients).


Vinatieri v. Comr., 133 T.C. 392 (2009)

(IRS held to have abused its discretion when it proceeded with levy to collect taxpayer's unpaid tax; taxpayer established that levy would create economic hardship - taxpayer couldn't find employment due to terminal illness; while taxpayer not current in filing tax returns, Tax Court could not find any cases in which requirement that taxpayer be current with filing returns be applied to taxpayers that meet economic hardship criteria).


IRS Letter on Conservation Easements (Dec. 17, 2009)

(IRS reveals that it currently has 244 taxpayer under audit on the issue of donated conservation easements, 84 of which are in Colorado).


Magdalin v. Comr., No. 09-1153, 2009 U.S. App. LEXIS 28966 (1st Cir. Dec. 17, 2009)

(expenses incurred for in vitro fertilization procedure not deductible medical expenses; expenses not related to treatment of medical condition). 


Consolidated Investors Group, et al. v. Comr., T.C. Memo. 2009-290

(petitioner, a partnership, can claim a charitable deduction for donation of land to state turnpike commission; land worth more than amount received and donative intent present; but, petitioner must make a pro rata apportionment of adjusted basis in land to the portion of transfer deemed to be a sale). 


Leedreau LLC v. Comr., T.C. Summ. Op. 2009-195

(sole owner of LLC personally liable for LLC's employment taxes; no election made to treat LLC as corporation and court noted that check-the-box regulations have previously been upheld as valid citing Medical Practice Solutions case). 


Kohli v. Comr., T.C. Memo. 2009-287

(securities trader did not make proper mark-to-market election under I.R.C. Sec. 475(f); election made after-the-fact more than one year late; substantial compliance argument rejected). 


McGowen, et ux. v. Comr., T.C. Memo. 2009-285

(petitioners (married couple) had income from indirect life insurance distributions; application of cash value against policy designed to eliminate one spouse's loan against policy value was not discharge of debt). 


Rohrs v. Comr., T.C. Sum. Op. 2009-190

(petitioner may claim casualty loss deduction for damage to vehicle incurred in traffic accident while driving under the influence of alcohol (loss claim filed with insurance company denied because blood alcohol level at time of accident over legal limit) negligence not bar to casualty loss deduction; no determination made as to whether accident caused by alcohol or weather conditions; penalties not imposed). 


ECC 200953023 (Dec. 9, 2009)

(IRS recommends treating cooperative associations as C corporations for purposes of small partnership exception of I.R.C. Sec. 6231(a)(1)(B)).


I.L.M. 201016054 (Dec. 9, 2009)

(taxpayer's corn-based ethanol production plants qualify for I.R.C. Sec. 179C(a) election to expense 50 percent of cost basis of new plant property; ethyl alcohol vapor produced from corn at taxpayer's plants during dry mill process constitute gas produced from biomass). 


IRS Info. 2009-0218 (Dec. 8, 2009)

(married couple does not qualify for first-time homebuyer credit with respect to home that was purchased for them by the wife's parents and for which the couple took title after November 6, 2009).


Petter v. Comr., T.C. Memo. 2009-280

(valuation formulas contained in estate plan not void as contrary to public policy; "charitable lid" estate planning concept upheld - follows 8th Circuit's opinion in Christiansen). 


Singelton-Clarke v. Comr., T.C. Summ. Op. 2009-182

(nurse may deduct education expenses incurred in obtaining MBA with a specialization in healthcare; degree of no value to nurse in qualifying her for a new trade or business).


Linkugel v. Comr., T.C. Sum. Op. No. 2009-180

(taxpayer did not have cancellation of debt income in 2006 as a result of foreclosure of taxpayer's home in 2000; IRS failed to meet burden of production under I.R.C. Sec. 6201(d) of showing that debt actually discharged in 2006). 


Iowa Dept. of Rev. Policy Ltr. 09300081 (Dec. 1, 2009)

("alley belting" (belting used in a mine on a conveyer to move minerals from underground to the surface) which is sold to cattle farmers who install the belting in cattle barns to provide a surface on which cow can walk that is less slippery, is exempt from sales tax because the belting equipment is used directly in livestock or dairy production).


Njoroge v. Comr., T.C. Sum. Op. 2009-177

(taxpayers could not deduct rental real estate activity losses due to lack of evidence that either spouse qualified as a real estate professional; taxpayers' modified adjusted gross income exceeded the offset phaseout limit of I.R.C. Sec. 469(i)(3)(A)). 


Priv. Ltr. Rul. 201010013 (Nov. 24, 2009)

(amounts paid to members of cooperative for their products qualify as per-unit retains paid in money and for purposes of computing cooperative's Sec. 199 deduction, cooperative's QPAI and taxable income are to be computed without regard to any deduction for such payments to members).


Brown v. Comr., T.C. Sum. Op. 2009-171

(I.R.C. Sec. 179 depreciation available in year that asset is placed in service defined as when property is in state of readiness for use in taxpayer's trade or business; IRS argument that property placed in service in earlier years rejected; taxpayer's arguments as to when property placed in service upheld).


CCA Memo. 201003001 (Nov. 23, 2009)

(IRS lists factors affecting IRS's ability to collect after default of Chapter 11 reorganization plan; IRS notes that there are four post-BAPCPA aspects of bankruptcy cases that could limit the IRS's ability to collect from the debtor after default on the Chapter 11 plan - (1) discharge injunction (confirmation of the plan does not discharge debts until court grants discharge upon completion of all plan payments, but debtor may seek hardship discharge); (2) binding effect of the plan (upon default, plan generally not binding - IRS directed to try to have default provisions included in Chapter 11 plans); (3) stay of acts to collect pre-petition debts (stay terminated upon discharge or closing of the case); (4) stay of acts against estate property (does not end until property no longer in estate - IRS position is that, in the absence of binding precedent or contrary language included in the plan or confirmation order, bankruptcy estate after confirmation is limited to portion of debtor's income or other earnings necessary to fund the plan - if plan provides that all of debtor's property remains property of the estate, to be protected by the stay, IRS's only recourse may be to file a motion for relief from stay, or motion to convert or dismiss; memo notes that if IRS not bound by plan, the discharge or the stay, IRS could proceed with collection remedies against debtor to collect pre-petition debts).


Iowa Dept. of Rev. Policy Ltr. No. 09201080 (Nov. 20, 2009)

(nonresident limited partner in foreign investment partnership not required to file an income tax return to report capital gains because the nonresident partner does not have Iowa-source income). 


IRS Info. 2009-0236 (Nov. 20, 2009)

(electric golf cars do not qualify for plug-in electric drive vehicle credit under I.R.C. Sec. 30D; such golf carts not manufactured for use primarily on public streets and cannot reach stopped of 20 mph; to be eligible, manufacturer must certify that vehicle manufactured for use primarily on public streets and not for off-road use via IRS Notice 2009-54).


IRS Infor. 2009-0223 (Nov. 19, 2009)

(taxpayer can claim first-time homebuyer credit on purchase of home from mother's estate in satisfaction of pecuniary bequest).


IRS Info. 2009-0225 (Nov. 18, 2009)

(taxpayer not eligible for first-time homebuyer credit on purchase of home because wife had ownership interest in a principal residence in prior three years; no discussion of married filing separately status).


CCM 201014050 (Nov. 16, 2009)

(gross receipts derived from sale of taxpayer's tangible personal property developed via scientific process that is sold in commercial quantities which is then resold to end-users qualifies as DPGR; royalty income and technology fees from licensees that use taxpayer's product not DPGR because licensing of intangible right is not a disposition that gives rise to DPGR; but taxpayer's product to which item developed in scientific process is affixed is tangible personal property from which the gross receipts derived from the sale count as DPGR). 


TG Missouri Corp. v. Comr., 133 T.C. 278 (2009)

(production molds that petitioner purchased and that were later sold to customers are not assets subject to depreciation; thus, petitioner properly included costs of molds in petitioner's cost of supplies in determining amount of research credit).


Bellco Credit Union v. United States, 735 F.Supp.2d 1268 (D. Colo. 2009)

(on plaintiff's motion for summary judgment that income from its "extracurricular" activities are not subject to unrelated business income tax court ruled that brokerage services income and commissions are tax-exempt when earned from member activity, but is subject to UBIT when earned from non-member activity with no deminimis exception; UBIT applicable to 4 percent interest that credit union owned in a partnership consisting of a group of credit unions; case remanded for trial on whether income related to credit life and disability insurance products subject to UBIT).


IRS Info. 2009-0229 (Nov. 12, 2009)

(company's disposition of part of mortgage portfolio via foreclosure does not bar deduction of passive losses if income is recognized from the activity, the entire interest is disposed of, or taxpayer has other passive income).


S. 475, The Military Spouses Residency Relief Act, signed into law on Nov. 11, 2009 as Pub. L. No. 111-97

(specifies that when service member leaves home state in accord with military or naval orders that service member's heterosexual spouse may retain residency in home state for voting and tax purposes after relocating from the home state to accompany the service member).


Ragassa v. Comr., T.C. Summ. Op. 2009-166

(court applied Cohan rule to estimate petitioner's unsubstantiated charitable contributions).


Byers v. Comr., 351 Fed. Appx. 161 (8th Cir. 2009), aff'g, T.C. Memo. 2007-331

(petitioner determined to be self-employed truck driver and not employee of trucking company with result that income subject to self-employment tax; petitioner determined which route to take and order of pick-ups; petitioner not paid set wage, but percentage of gross; no accrual of vacation or pension benefits; petitioner never sent a W-2 and didn't object to receiving Form 1099).


Enbridge Energy Co., et al. v. United States, 354 Fed. Appx. 15 (5th Cir. 2009)

(IRS could ignore existence of corporation formed to buy target company's stock which would then sell the stock to the actual buyer of the stock; income on asset sales is ordinary income to and seller and seller on asset sale and subsequent distribution of proceeds from the corporation; no new basis for buyer; penalties applicable; sham transaction arranged by PriceWaterhouse Coopers).


CCM 201013036 (Nov. 10, 2009)

(taxpayer's basis in subsurface estate is greater of value of subsurface estate on either date of conveyance or time of first commercial development; taxpayer's basis in subsurface estate is value on date subsurface estate is sold to state of Alaska). 


UTAM Ltd., et al. v. Comr., T.C. Memo. 2009-253

(IRS's notice of final partnership administrative adjustment to a partnership held to be untimely because IRS issued the notice after the three-year statute of limitations expired; basis overstatement did not trigger six-year statute of limitations; opinion follows court's prior holding in Bakersfield Energy Partners and other cases). 


Lenard, et ux. v. Comr., T.C. Summ. Op. 2009-165

(unreported payments received by insurance agent upon termination of agency agreement are ordinary income and not capital gain; payments subject to self-employment tax because they were based on quality and quantity of agent's prior work; accuracy-related penalty upheld). 


IRS Info. 2009-0224 (Nov. 9, 2009)

(taxpayer not eligible for first-time homebuyer credit on purchase of home from certain relatives, including parents; no analysis of I.R.C. Sec. 36(c)(provided)).


Bruen, et al. v. Comr., T.C. Memo. 2009-249

(petitioner entitled to equitable innocent spouse relief from one-half of joint income tax liability owed with former spouse because petitioner did not have reason to know that former spouse would not pay one-half of tax liability as ordered by family court during divorce proceedings).


Barr, et ux. v. Comr., T.C. Memo. 2009-250

(petitioners, married couple, had ordinary rather than capital gain income from the surrender of life insurance policy; surrender not a sale or exchange of a capital asset; accuracy penalty upheld for failure to report).


IRS Notice 2009-83

(interim guidance relating to credit for carbon sequestration under I.R.C. Sec. 45Q).


Iowa Dept. of Rev. Policy Ltr. No. 09300073 (Nov. 2, 2009)

(sales of facial wrinkle removal product are not subject to sales tax because product requires doctor's prescription and product impacts structure of human body).


Neb. Dept. of Rev. (Rev. Rul. 01-09-02 (Oct. 30, 2009)

(involves construction of state net metering statute - states sales tax is imposed on the gross amount of electricity sold to a customer-generator because value of excess purchased by local distribution utility is separate transaction that does not reduce gross receipts of local distribution utility).


Ind. Dept. of Rev. (Ltr. of Finding 09-0546 (Oct. 28, 2009)

(taxpayer not entitled to exemption from sales and use tax on purchase of ATV; taxpayer failed to prove that ATV was used directly in farm production).


Priv. Ltr. Rul. 201005015 (Oct. 28, 2009)

(payments for commodities from farmers' co-op qualify as PURPIMS and that farmers' I.R.C. Sec. 199 deduction to be computed without deducting amount of such payments).


SS8 2010020002 (Oct. 26, 2009)

(musician paid by church to play in Sunday morning services is employee of church rather than independent contractor; church exercised control over mode and manner of work such that musician's income is subject to employment taxes).


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