Case Summaries

Priv. Ltr. Rul. 200944002 (Jul. 15, 2009)

(grantor's contribution to trust was taxable gift; no ruling made on whether trustee's discretion to distribute income and principal of trust to grantor causes trust's assets to be included in grantor's estate via I.R.C. Sec. 2036). Priv. Ltr. Rul. 200944012 (Jul. 27, 2009)(owner and lessor of condemned commercial real estate has three years to acquire qualifying like-kind replacement property; three-year period begins from the end of the tax year in which owner and lessor took actual or constructive receipt of the proceeds from the condemnation).

Merrill v. Comr., T.C. Memo. 2009-166

(petitioner, a millionaire homosexual activist who was also a tax protestor that refused to file tax returns as an act of civil disobedience must pay income tax deficiency of $836,304 plus penalties; while petitioner married to same-sex partner under California law for years at issue, taxpayer never filed return for years at issue and is, therefore, statutorily ineligible for married filing joint status; constitutionality of DOMA irrelevant).

IRS Info. Ltr. 2009-0155 (Jul. 10, 2009)

(taxpayers who obtain benefits and burdens of ownership of new home can claim first-time homebuyer credit even if seller still retains legal title; involved house purchased on contract for deed).

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).

Priv. Ltr. Rul. 200942022 (Jul. 9, 2009)

(farmers' cooperative that markets commodities for its members and provides supplies to its farmer members can treat its payments to members and participating patrons as "per-unit retain allocations paid in money"; for purposes of computing cooperative's domestic production deduction (I.R.C. Sec. 199) the cooperative's qualified production activities income and taxable income are to be computed without regard to any deduction for payments to members and participating patrons).

Priv. Ltr. Rul. 200940032 (Jul. 6, 2009)

(scholarship awards made by private foundation to qualifying students of higher education institutions do not constitute taxable expenditures; amounts excludible from recipient's gross income).

Priv. Ltr. Rul. 200940006 (Jul. 1, 2009)

(payments made by governmental entity to compensate survivors as part of settlement of wrongful death action on behalf of victims are excludible from gross income under I.R.C. Sec. 104(a)(2)).

Priv. Ltr. Rul. 200941003 (Jul. 1, 2009)

(infant formula is "food" for the infant and is not a deductible medical expense under I.R.C. Sec. 213).

Johnson, et ux. v. Comr., T.C. Memo. 2009-156

(settlement proceeds received from mortgage company over dispute concerning foreclosure of petitioner's home includible in petitioner's gross income because it was not compensation for physical injury or illness, but portion of settlement used to pay attorney fees is deductible; petitioner's spouse did not satisfy requirements for innocent spouse relief; spouse failed to testify as to why she had no reason to know of the understatement on the return).

Kyne v. Comr., T.C. Sum. Op. 2009-98

(court upheld IRS's disallowance of petitioner's medical expense, charitable contribution and miscellaneous itemized deductions for failure to provide substantiation for expenses beyond what IRS allowed).

IRS Info. Ltr. 2009-0135 (Jun. 24, 2009)

(divorced taxpayer ordered to vacate home more than three years ago not eligible to claim first-time homebuyer credit on purchase of new home because ownership interest retained in home during three year period before purchase of new home).

Priv. Ltr. Rul. 200939003 (Jun. 23, 2009)

(I.R.C. Sec. 6166 election not available to extend time for payment of generation-skipping transfer tax imposed on death of child as a result of the termination of the child's interest in the trust; I.R.C. Sec. 6166 election applies only to direct skips resulting at the death of an individual; thus, generation-skipping tax imposed on taxable termination is not eligible to be paid in installments).

I.L.M. 200940018 (Jun. 23, 2009)

(payments that a utility company receives as reimbursement for costs incurred in relocation of transmission facilities to accommodate municipal development projects are not, consistent with I.R.S. Notice 87-82, 1987-2 C.B. 389, non-shareholder contributions to capital under I.R.C. Sec. 118(a); amounts includible in income).

CCA Ltr. Rul. 200943029 (Jun. 23, 2009)

(grants contained in Sec. 1603 of ARRA of 2009 are not tax credits and receipt of grant is not taxable income to recipient; recovery by Treasury of any overpayment (or recapture) to be handled as a debt owed to the government requiring the Justice Department to sue to recover if not voluntarily repaid to Treasury).

IRS Info. Ltr. 2009-138 (Jun. 19, 2009)

(Iowa's one-time fee for new vehicle registrations is a sales tax (rather than an excise tax) that is deductible under I.R.C. Sec. 164).

IRS Info. Ltr. 2009-0132 (Jun. 15, 2009)

(taxpayer cannot qualify for first-time homebuyer credit on purchase of subsequent home if either taxpayer or taxpayer's spouse used mobile home as their principal residence within the three year period ending on the date of purchase of a new principal residence).

IRS Info Ltr. 2009-0131 (Jun. 15, 2009)

(taxpayer entitled to first-time homebuyer credit on home purchased from spouse's parents; taxpayer not related party to spouse's parents).

Priv. Ltr. Rul. 200939001 (Jun. 11, 2009)

(60-day extension granted to trust to make election under I.R.C. Sec. 642(c) to claim a charitable deduction in year 1 for amount distributed to charity in year 2).

Beasley, et ux. v. Comr., T.C. Summ. Op. 2009-93

(taxpayer's charter fishing activity not engaged in for profit; taxpayer only allowed to deduct expenses to extent of income received from charter fishing activity).

Nelson, et al. v. Comr., 568 F.3d 662 (8th Cir. 2009)

(taxpayer not entitled to defer reporting crop insurance proceeds due to lack of business practice of deferring more than 50 percent of crop; Rev. Rul 74-145 upheld as reasonable; affirming 130 T.C. 70 (2008)).

IRS Info. Ltr. 2009-0155 (Jul. 10, 2009)

(taxpayers who obtain benefits and burdens of ownership of new home can claim first-time homebuyer credit even if seller still retains legal title; involved house purchased on contract for deed). 

Cox Enterprises, Inc., et al. v. Comr., T.C. Memo. 2009-134

(because the main purpose of a gratuitous transfer of a subsidiary company's assets to family partnerships in exchange for a majority interest was not economic benefit, there was no constructive dividend that would result in taxable gain; in addition there was no benefit to the shareholder trusts).

United States v. McFerrin, et ux., 570 F.3d 672 (5th Cir. 2009)

(district court applied incorrect definition for determining what research qualified for the I.R.C. Sec. 41 credit; Treas. Reg. Sec. 1.41-4 does not require qualifying research to go beyond the current state of knowledge in the field; appellate court applied the rule established in Cohan v. Commissionerand found that the taxpayer shouldn't be penalized for not keeping records of hours worked on a research project and that the court should instead rely on testimony to determine a fair estimate of what amount of credit is allowable; appellate court's opinion is consistent with Tax Court's opinion in Union Carbide Corp., et al. v. Comr., T.C. Memo. 2009-50 in which the taxpayer was allowed to use estimates to determine its qualified expenses for the I.R.C. Sec. 41 credit).

Priv. Ltr. Rul. 200936024 (Jun. 9, 2009)

(gain from sale of residence qualifies for exclusion from income under I.R.C. Sec. 121; taxpayer owned and used the property for at least for two years or more during the five-year period ending on date of sale).

Hakim v. Comr., T.C. Summ. Op. 2009-92

(petitioner not entitled to exclude discharge of indebtedness income because of failure to prove insolvency at time debt discharged).

Fuller v. Comr., T.C. Summ. Op. 2009-91

(petitioner not entitled to exclude discharge of indebtedness income stemming from unpaid car loan payments; failed to prove that outstanding debt was unenforceable under state law or that he was insolvent at time of discharge).

ILM 200937025 (Jun. 5, 2009)

(married couple sole owners of C corporation that employed several workers withheld federal income taxes and FICA taxes and issued forms W-2 to employees reflecting that the taxes had been withheld, but corporation did not pay any of the taxes or file forms 940 or 941 electing instead to use corporate funds to pay for the owners' personal expenses; owners determined to be aware of filing responsibilities, refused to cooperate with IRS and appear for scheduled appointments, used the withheld taxes for personal benefit and claimed income tax withholding despite knowingly never paying the taxes; corporation subject to penalties under IRS Sec. 6651 for fraudulent failure to file and failure to file quarterly returns and pay the withholding tax, Sec. 6656 for failure to deposit employment taxes, and Sec. 6672 for failure to collect and pay over FICA taxes).

Priv. Ltr. Rul. 200936005 (Jun. 4, 2009)

(concerns tax issues involved in proposed corporate reorganization and whether business purpose requirement of Treas. Reg. Sec. 1.355-2(b) is satisfied).

C.C.M. 200941011 (Jun. 3, 2009)

("black liquor" (byproduct of paper milling process in kraft mills) is a liquid fuel derived from biomass and, when combined with diesel fuel, creates an alternative fuel mixture for purposes of the alternative fuel credit under I.R.C. Sec. 6425(e) and may also qualify for the cellulosic biofuel producer credit under I.R.C. Sec. 40(b)(6), but not both). Download Memo

Rice v. Comr., T.C. Sum. Op. No. 2009-83

(petitioner not entitled to claim girlfriend's son as a qualifying child for purposes of child tax credit and earned income tax credit; relationship test of I.R.C. Sec. 152(c) not satisfied).

Shelton et ux. v. Comr., T.C. Memo. 2009-116

(damage award petitioner received in settlement of sexual harassment claim against petitioner's employer was taxable income and not excludible under I.R.C. Sec. 104(a)(2); payment not received for physical injury or sickness).

Elsayed v. Comr., T.C. Sum. Op. No. 2009-81

(petitioner, a truck driver, was entitled to a deduction for meals and incidental expenses at the per diem rate for employees in the transportation industry; IRS disallowance of other unreimbursed employee expense deductions and determination of filing status upheld).

Priv. Ltr. Rul. 200935019 (May 14, 2009)

(a cooperative group purchasing organization that had gain as a result of the sale of real property that it owned was patronage-sourced and, thus, eligible for the patronage dividend deduction).

Priv. Ltr. Rul. 200936023 (May 14, 2009)

(modification of trust will not result in gift tax to grantor or beneficiaries, or estate tax to the grantor).

Hughes v. Comr., T.C. Memo. 2009-94

($3,100,000 claimed charitable contribution deduction for grant of conservation easement to Colorado land trust reduced by $1,107,625; amount of contribution limited to basis at time of contribution reduced by percentage decrease in entire property's fair market value as a result of the easement because taxpayer held property for less than one year before grant of easement; respondent's valuation expert report more accurate).

Hansen v. Comr., T.C. Memo. 2009-87

(payment an individual received under a settlement agreement with his former employer for emotional distress and legal fees was not excludible from gross income under I.R.C. Sec. 104(a)(2) because it was not received on account of personal physical injury or physical sickness).

Seidel v. Comr., 324 Fed. Appx. 621 (9th Cir. 2009)

(money an individual received under settlement agreement with former employer was for emotional distress and, thus, not excludible from gross income under I.R.C. Sec. 104(a)(2)).

Zeigler v. Comr., 282 Fed. Appx., cert. den. (2nd Cir. 2009)

(passive loss rules not impermissible retroactive and did not constitute a Fifth Amendment taking; certioriari denied).

Capitol Machine & Equip. Co. LLC v. State Department of Revenue (decision by Administrative Law Judge, Apr. 20, 2009)

(individual members of a multimember LLC are not personally liable for taxes owed by the LLC based on Rev. Rul. 2004-41 (if, under state law, LLC members are not liable for LLC debts, then absent fraudulent transfers or other special circumstances, IRS is barred from collecting LLC's employment tax liability directly from the members).

Senra v. Comr., T.C. Memo. 2009-79

(passive losses from LLC not deductible against non-passive income; activities did not constitute "appropriate economic unit" eligible to be treated as single activity for purposes of assessing gains and losses under I.R.C. Sec. 469).

ECC 2010011032 (Apr. 15, 2009)

(employer-paid premiums not included in employees' gross income under I.R.C. Sec. 106, but disability benefits received under settlement agreement included in employees' gross income under I.R.C. Sec. 105(a)). 

Mannella v. Comr., 132 T.C. 196 (2009)

(Treas. Reg. §1.6015-5(b)(1), which imposes a two-year statute of limitations from the beginning of IRS collection action in innocent spouse cases, is an invalid interpretation of I.R.C. §6015; thus, plaintiff is not barred from receiving innocent spouse relief under I.R.C. §6015(f)).

Kerzner v. Comr., T.C. Memo. 2009-76

(plaintiff had no economic outlay and lacked sufficient basis in S corporation indebtedness to claim its passthrough losses because taxpayer loaned money to the S corporation that taxpayer had received from a partnership owned by the taxpayer to which the taxpayer also owed money which was then paid back to the partnership by the S corporation as rent).

The Home Depot, USA, Inc. v. Levin, 905 N.E.2d 630 (Ohio Sup. Ct. 2009)

(plaintiff not entitled to bad debt sales tax deduction because bad debt not carried on plaintiff's books; plaintiff's financial partner carried the debt and was entitled to refund of sales tax upon credit card purchaser's default; statute required that "amount of debt must be charged off as uncollectible on the books of the debtor").

Medical Practice Solutions, LLC, v. Comr., 132 T.C. 125 (2009)

(single-member LLC owner personally liable for LLC's unpaid employment taxes; "check-the-box" regulations upheld).

Zeigler v. Comr., 282 Fed. Appx., cert. den. (2nd Cir. 2009)

(passive loss rules not impermissible retroactive and did not constitute a Fifth Amendment taking; certioriari denied).

Steele v. Comr., T.C. Sum. Op. 2009-45

(couple's net income received for helping care for their granddaughter not subject to self-employment tax; taxpayers not engaged in trade or business of providing daycare for children).

ECC 200944049 (Mar. 30, 2009)

(taxpayer failed to provide clear and convincing evidence that payments made to executive were reasonable compensation).

Jones v. Comr., 560 F3d 1196 (10th Cir. 2009), cert. dem., 130 S. Ct. 302 (U.S. Sup. Ct. 2009)

(taxpayer not entitled to charitable deduction for charitable contribution of trial discovery material; such property is a "letter, memorandum, or similar property" that is "prepared or produced" for a taxpayer, and is excluded from the Code's definition of "capital asset" under Sec. 1221(a)(3)(B); as such allowable tax deduction limited to taxpayer's basis, which was zero).

United States v. Memorial Sloan-Kettering Cancer Center, et al., 563 F.3d 19 (2nd Cir. 2009)

(court rejects IRS position that medical residents not eligible for FICA student exception; case remanded for determinations regarding students' qualification for student exception).