Case Summaries

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).

Swift & Co., et al. v. Department of Revenue, et al., 773 N.W.2d 381 (Neb. Sup. Ct. 2009)

(cleaning service contracts for the cleaning of meat processing plants and the tangible personal property contained in the plants are subject to sales tax; Defendant's regulation so specifying upheld).

Missouri Dept. of Rev. Ltr. Rul. 5940 (Oct. 23, 2009)

(farmers who construct irrigation lakes may claim a sales tax exmption on supply and equipment purchases that are exclusively used for producing farm products). 

Field Att’y. Adv. 20103101F (Oct. 23, 2009)

(non-exempt cooperative not entitled to patronage dividend deductions claimed for amounts paid to members out of earnings that are not attributable to corn purchases made pursuant to purchase contracts with members or for amounts paid for corn purchases that exceed members’ committed bushels; cooperative’s primary asset is investment in ethanol plant LLC which is the cooperative’s wholly owned subsidiary). 

Deere & Co, et al. v. Comr., 133 T.C. 246 (2009)

(petitioner not entitled to millions of dollars in research credits claimed under I.R.C. Sec. 41; in calculating the amount of the credit, petitioner omitted annual gross receipts from petitioner's foreign branches (overseas divisions) in computing average gross receipts for the four preceding tax years; the Congress did not expressly exclude foreign receipts from the calculation).

McCormick v. Comr., T.C. Memo. 2009-239

(petitioner had only minimal amount of cancellation of debt income attributable to discharged credit card debt; petitioner reasonably disputed income reported on Form 1099-C and IRS failed to produce any reasonable and probative information independent of information returns).

Consolidated Edison Co. of New York, Inc., et al v. United States, 90 Fed. Cl. 228 (Fed. Cl. 2009)

(plaintiff's lease-in, lease-out transaction was true lease that possessed economic substance; related deductions allowable).

ILM 201005029 (Oct. 21, 2009)

(for bankruptcy cases filed after the effective date of the 2005 Bankruptcy Abuse and Consumer Protection Act of 2005, IRS details those situations where federal tax debt is no longer collectible once debtor completes a Chapter 13 plan and receives a discharge; IRS notes that non-dischargeable taxes include debts for withheld taxes, taxes associated with a non-filed return, taxes associated with late-filed return within two years of filing or related to the filing of a fraudulent return, and taxes associated with the debtor's attempt to evade tax; IRS determined that if tax is dischargeable in Chapter 13 case, pre and post petition interest also dischargeable as are accrued non-pecuniary interest and penalties).

IRS Notice 2009-84

(provides limited administrative exception to ability of IRS to examine Form 706 in connection with certain protective claims for refunds that are timely filed; if claim for refund ripens and becomes ready for consideration after expiration of period of limitations on assessment in I.R.C. Sec. 6501, IRS will limit review of Form 706 to evidence relating to deduction under I.R.C. Sec. 2053 that was the subject of the protective claim).

Bogus v. Comr., T.C. Sum. Op. 2009-160

(petitioner denied loss deductions arising from dog racing activity under passive loss rules; petitioner did not participate in the activity on a basis that was regular, continuous and substantial; only self-serving, undocumented and uncorroborated testimony presented as to level of petitioner's involvement in the activity).

Smith v. Comr., T.C. Memo. 2009-237

(petitioner not entitled to relief from joint and several liability under I.R.C. Sec. 6015).

Sloan v. Comr., T.C. Sum. Op. 2009-162

(petitioner not entitled to claimed business expense deductions for musician and band business, not entitled to deductions for business use of home, and is a common law, rather than statutory employee). 

Cavoto v. Hayes, No. 08 C 6957, 2009 U.S. Dist. LEXIS 96868 (N.D. Ill. Oct. 19, 2009)

(ex-mother-in law defendant's filing of Form 1099-C with her tax return reporting debt forgiveness income of ex-son-in-law not actionable fraud; even though defendant not "applicable entity" under I.R.C. Sec. 6050P that is required to make such filing, such filing not actionable under I.R.C. 7434 if filing is truthful and accurate).

Deneselya, et ux. v. Comr., T.C. Sum. Op. 2009-157

(petitioners (married couple) not entitled to automobile expense deductions associated with husband's appraisal business due to failure to meet strict substantiation requirements of I.R.C. Sec. 274(d).

Martin, et ux. v. Comr., T.C. Memo. 2009-234

(petitioner who incorporated his real estate business properly classified as employee because he was a corporate officer that performed substantial services for the corporation; corporation cannot deduct employment taxes and petitioner not entitled to additional business expense deductions beyond what IRS allowed).

IRS Notice 2009-83

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

N.D. Atty. Gen. Op. No. 2009-L-14 (Oct. 9, 2009)

(for purposes of the $40,000 non-farm income limitation to be eligible to claim the tax exemption for a farm residence, homeowner may defer W-2 income in an amount which lowers the off-farm income to less than $40,000, can offset W-2 non-farm income with Schedule C or D non-farm losses to reduce the net non-farm income, and can offset Schedule C income so that the resulting total net of non-farm income is less than $40,000).

Iowa Dept. of Rev. Policy Ltr. 09300065 (Oct. 8, 2009)

(out-of-state photographer providing services in Iowa must collect and remit use tax on purchase price of a disc mailed to a customer in Iowa because the photographer distributed tangible personal property).

FAA 20095001F (Oct. 7, 2009)

(tax-exempt farmers' cooperative does not qualify for small ethanol producer credit because it was not an eligible small ethanol producer under I.R.C. Sec. 40(g) for a portion of the tax year at issue). 

Hegarty v. Comr., T.C. Sum. Op. 2009-153

(reliance by IRS on I.R.C. Sec. 469(h)(2) to treat members of LLCs as automatically limited partners for passive loss purposes misplaced; general tests for material participation apply and petitioners (married couple) determined to have materially participated in charter fishing activity for tax year at issue - petitioners participated more than 100 hours and their participation was not less than the participation of any other individual during tax year; follows prior opinions in Garnett and Thompson).

Wauwatosa Avenue United Methodist Church v. City of Wauwatosa, 776 N.W.2d 280 (Wisc. Ct. App. 2009)

(residence of plaintiff's janitor owned by plaintiff not tax-exempt; state statute only provides tax exemption for property that is used as an integral function of the church; church custodian not integral to function of church).

Estate of Angle, et al. v. Comr., T.C. Memo. 2009-227

(petitioner liable for tax deficiency resulting from sale of family-owned almond business; sale transaction involved exchange of shares through foreign corporations and trusts for private non-taxable annuities which resulted in recognition of gain; accuracy-related penalty applied).

Forrest v. Comr., T.C. Memo. 2009-228

(petitioner, a lawyer who worked as a contract attorney during the tax year at issue, cannot deduct certain business expenses under I.R.C. Sec. 162(a); petitioner's activity not regular and continuous).

American Boat Co. v. United States, 583 F.3d 471 (7th Cir. 2009)

(taxpayer not liable for accuracy-related penalties for engaging in Son-of-Boss tax shelter (involving transfer to a partnership of assets with significant liabilities) because taxpayer reasonable relied on tax opinion of law firm).

LaPlante v. Comr., T.C. Memo. 2009-226

(petitioner liable for tax deficiency from underreporting of gambling income which increased amount of petitioner's social security benefits included in petitioner's income; no accuracy-related penalty imposed because petitioner acted in good faith).

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). 

Priv. Ltr. Rul. 201002009 (Oct. 1, 2009)

(grain payments made to member of farmers' cooperative and eligible non-member patrons are PURPIMs 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 grain payments to members and eligible non-member patrons).

ILM 201003013 (Sept. 30, 2009)

(Canadian retirement account containing holdings in U.S. corporations not subject to U.S. estate tax; Canadian mutual funds holding stock in U.S. corporations are deemed to be Canadian corporations under the I.R.C. Sec. 301 regulations).  

Jordan v. Comr., T.C. Memo. 2009-223

(petitioner did not satisfy the material participation test for passive loss purposes with respect to losses incurred in horse breeding and raising activity; accuracy-related penalty applied).

Blue Bell Creameries LP v. Chumley, No. M2009-00255-COA-R3-CV, 2009 Tenn. App. LEXIS 655 (Tenn. Ct. App. Sept. 29, 2009)

(parent corporation's redemption of stock held by subsidiary not subject to excise tax because parent and subsidiary not part of unitary business relationship).

Ormond, et al. v. Anthem, Inc., et al., No. 1:05-cv-01908, 2009 U.S. Dist. LEXIS 90837 (S.D. Ind. Sept. 29, 2009)

(court refused to certify class of plaintiffs that claimed defendant (insurance company) provided them with negligent tax advice connected with defendant's conversion from mutual insurance company to stock insurance company; certification allowed on other non-tax claims).

Priv. Ltr. Rul. 200953006 (Sept. 28, 2009)

(taxpayer not given extension of time to make mark-to-market election under I.R.C. Sec. 475(f); request for relief filed late and lateness gave taxpayer benefit of several months of hindsight to review and consider whether results of securities trading transactions would benefit from the election).

Wheeler v. Comr., T.C. Sum. Op. 2009-151

(petitioner failed to substantiate deductible vehicle expenses as required by I.R.C. Sec. 274(d) and 280F(d)(4)).

Woodard v. Comr., T.C. Sum. Op. 2009-150

(petitioner subject to accuracy-related penalties related to underpayment of tax attributable to unreported income resulting from failure to report income IRA distributions; reliance on information obtained by Google search not substantiated so no reasonable cause for failing to report income from distributions).

Illinois Dept. of Rev. Policy Ltr. (St. 09-0126-GIL, Sept. 28, 2009)

(helicopter used in production agriculture for aerial surveillance and pollination may qualify for farm machinery and equipment exemption from retailers' occupation tax under 86 Ill. Adm. Code Sec. 130.305).

IRS Info. 2009-0255 (Sept. 24, 2009)

(IRS considering application of automobile standard mileage rate rules to motorcycles).

Priv. Ltr. Rul. 200953005 (Sept. 23, 2009)

(indebtedness secured by interest in entity that owned real estate is deemed to be secured by the real estate under I.R.C. Sec. 108(c)(3)(A); debt must be allocated between qualified acquisition debt and non-qualifying debt).

Helmick v. Comr., T.C. Memo. 2009-220

(based on all of the facts and circumstances, petitioner's horse-breeding and boarding operation was an activity engaged in for profit under I.R.C. Sec. 183 for the years at issue). 

IRS Info. Ltr. 2009-0175 (Sept. 21, 2009)

(taxpayer not entitled to first-time homebuyer credit on purchase of home from grandmother; no analysis given as to why not).

Jefferson County Commission, et al v. Edwards, et al., 32 So.3d 572 (Ala. Sup. Ct. 2009)

(state legislature repealed plaintiff's authority to impose occupational tax).

Hoosier Energy Rural Electric Cooperative, Inc. v. Hancock Life Insurance Co., et al., 582 F.3d 721 (7th Cir. 2009), aff'g, 588 F. Supp. 2d 919 (S.D. Ind. 2008)

(court upholds trial court's award of preliminary injunction for plaintiff so that plaintiff can have more time to argue its case and avoid immediately paying $120 million to defendant; dispute between parties arose from sale-in-lease-out (SILO) transaction established between the parties in 2002 as a tax shelter for the defendant, but deal soured when a partner had its credit rating downgraded).

Freeman v. Comr., T.C. Memo. 2009-213

(petitioner can deduct mileage expenses related to petitioner's auto parts delivery business because petitioner maintained adequate records, but no deduction allowed for mileage expenses related to commuting to and from home; no deduction allowed for wife's mileage expenses incurred in connection with business deliveries and her income is not excludible).

Iowa Dept. of Rev. Policy Letter, 09300059 (Sept. 16, 2009)

(bottled beverage comprised mostly of water and without sweeteners (Evolv) is considered food for human consumption that is exempt from sales tax).

Tech. Adv. Memo. 201004022 (Sept. 15, 2009)

(estate not entitled to charitable deduction under I.R.C. Sec. 2055(a) for amounts paid to charitable trust under settlement agreement with decedent's son; charity lacked enforceable right under state law to amount received; will failed to dispose of residuary of estate and son claimed residue but charity argued that omission was scrivenor's error and that decedent intended charity to receive residue; IRS took position that residue passed by intestacy and that court would not substitute residuary beneficiary to fill the omission, thus charity had no enforceable right to residue and estate could not claim deduction for amounts charity received via settlement between parties). 

Simmons v. Comr., T.C. Memo. 2009-208

(petitioner entitled to charitable deductions for conservation easements donated to trust; petitioner's valuations accepted and 5 percent discount applied).

Save v. Comr., T.C. Memo. 2009-209

($500,000 payment petitioner received in settlement of whistleblower retaliation claims against county government includible in gross income; petitioner failed to show that the county intended to compensate petitioner for personal physical injury or personal physical sickness).

Estate of Melcher v. Comr., T.C. Memo. 2009-210

(legal expenses arising from taxpayer's divorce not deductible as ordinary and necessary expenses, but a portion of the expenses related to the defense of interests in taxpayer's ex-wife's bankruptcy estate are deductible; no accuracy related penalties applied because matter so complex).