Case Summaries

Darnall Ranch Inc. v. Banner County Bd. of Equalization, 753 N.W.2d 819 (Neb. Sup. Ct. 2008)

(residential homes near animal feedlot entitled to depreciation adjustment for property tax purposes for external (locational) factor).


Priv. Ltr. Rul. 200845008 (Aug. 1, 2008)

(wind turbine facilities of rural electric cooperative's subsidiary are qualified energy resources and facilities; sale of power generated by subsidiary to some members of cooperative will not be disqualified from I.R.C. Sec. 45 credit by application of I.R.C. §45(e)(7)(A)).


United States v. Mount Sinai Medical Center of Florida, Inc., No. 02-22715-CIV-GOLD, 2008 U.S. Dist. LEXIS 57808 (S.D. Fla. Jul. 28, 2008)

(plaintiff must refund $2.5 million in FICA taxes paid by defendant on its residents' stipends; residents are excepted from FICA taxation under I.R.C. §3121(b)(10) because the facility qualified as a school, college or university and the residents were students).


Winn, et ux. v. Comm’r., T.C. Memo. 2008-172

(taxpayer had cancelled debt income equal to the difference between settlement amount and amount owed at time of settlement).


Priv. Ltr. Ruls. 200843016 (Jul. 21, 2008)

(amount of domestic production deduction (I.R.C. §199) for patronage distributions qualifying under I.R.C. §1382(b) that is paid to a Subchapter T cooperative in money must be computed at the cooperative level to prevent double counting; no distributions will eligible for I.R.C. §199 in the patron's hands).


Priv. Ltr. Rul. 200841038 (Jul. 15, 2008)

(taxpayer does not qualify for exemption from federal income tax under I.R.C. §521 as a farmers’ cooperative; taxpayer’s activity of harvesting, processing and marketing of brine shrimp does not constitute engagement in farming activity).


Mobley, et al. v. Comr., 532 F.3d 491 (6th Cir. 2008)

(Tax Court’s decision dismissing taxpayer’s petition for lack of jurisdiction because taxpayer had not received notice of deficiency upheld, and Tax Court could not transfer case to Federal District Court because U.S. Tax Court is not a “court” under I.R.C. §1631 as the term is defined by I.R.C. §610).


IRS Announcement 2008-65, 2008-31 IRB 1 (Jul. 3, 2008)

(non-materially participating individual partner’s distributive share of the interest expense of partnership engaged in trade or business of trading securities is subject to investment interest limitation of I.R.C. §163(d)(1) and is a trade or business deduction that is deductible in determining AGI; accordingly, amount includible on Schedule E, Part II, Line 28, column (a)).


Justice Department News Release (Jul. 3, 2008)

(former treasurer, CFO and legal secretary for Catholic Diocese of Cleveland convicted on six charges of conspiracy to defraud IRS and filing false tax returns; could be sentenced to up to 20 years in prison).


IRS Notice 2008-62 (Jul. 2, 2008)

(I.R.C. §409A rules only applicable to taxpayers earning more than $186,000 for the school year).


Mitchell v. Comr., 283 Fed. Appx. 641 (10th Cir. 2008)

(court lacked jurisdiction to consider petitioner’s pro-se motion for reconsideration of Tax Court decision; motion untimely because post-mark date on envelope was more than 90 days after entry of Tax Court’s decision; under I.R.C. §7502(a)(1), postmark date on envelope is deemed to be the date of delivery to Tax Court).


Bachman v. Comr., 283 Fed. Appx. 636 (10th Cir. 2008)

(Tax Court’s award of summary judgment to government in tax protestor case upheld, but IRS not entitled to award of sanctions due to government’s failure to provide adequate factual support).


IRS Info. 2008-0023 (Jun. 27, 2008)

(I.R.C. does not impose dollar limitation on de minimis fringe benefits excludible from gross income for those fringes listed in Treas. Reg. §1.132-6(e)(1)). 


IRS Info. 2008-0021 (Jun. 27, 2008)

(bankruptcy of qualified intermediary used to facilitate I.R.C. §1031 exchange disqualifies taxpayer from achieving tax-deferred exchange status for transaction).


Ziegler v. Comr., 282 Fed. Appx. 869 (2nd Cir. 2008)

(application of passive loss limitations to partnership losses do not violate partner’s due process rights; application of the passive loss rules not impermissibly retroactive).


Brackey v. Washington County, No. C4-06-7837, 2008 Minn. Tax LEXIS 24 (Minn. Tax Ct. Jun. 23, 2008)

(land qualified for agricultural status and Green Acres tax benefits because land primarily devoted to agricultural use; land used for purpose of growing trees as well as weeding, mowing, spraying and overall maintenance for agricultural use).


Private Letter Ruling 200838011 (Jun. 18, 2008)

(cooperative patron may not count qualified payment received from cooperative in patron’s I.R.C. §199 computation whether or not cooperative keeps or passes through I.R.C. §199 deduction; the only way a patron can claim an I.R.C. §199 deduction for a qualified payment from a cooperative is for the cooperative to pass-through the I.R.C. §199 amount in accordance with the provisions of I.R.C. §199(d)(3); but, net proceeds distributed on patronage basis qualify as per-unit retain allocations because they were distributed with respect to products that the cooperative markets for its patrons and patrons receive payments based on quantity of product delivered to the cooperative and are not based on cooperative’s net earnings).


Stevens v. Comr., T.C. Sum. Op. 2008-61

(“short-sale” of residence held for investment purposes resulted in cancellation of indebtedness income (CODI); taxpayer failed to prove that any exception from the general rule of recognition applied; accuracy-related penalty upheld).


Watkins v. Jesse, et al., No. A-07-548, 2008 Neb. App. LEXIS 115 (Neb. Ct. App. Jun. 3, 2008)

(plaintiffs’ use of particular route established a prescriptive easement, but did not establish the element of adverse use with regard to the claimed easement for cattle driving – use was permissive).


In re Marriage of Reuter, No. A07-0338, 2008 Minn. App. Unpub. LEXIS 574 (Minn. Ct. App. May 20, 2008)

(trial court erred in computation of self-employed farmer’s net monthly income by failing to take into account depreciation deductions for dairy cows, farm buildings and farm equipment).


Birdsill, et al. v. Com’r., T.C. Summ. Op. 2008-55

(court upheld IRS’s decision to require depreciation recapture on taxpayer’s vehicle for which taxpayer claimed expense method depreciation; taxpayer failed to meet substantiation requirements of I.R.C. §274(d)).


Kentucky Department of Revenue, et al. v. Davis, et ux., 553 U.S. 328 (U.S. Sup. Ct. 2008)

(state has constitutional authority to tax interest on municipal bonds sold by other states, while not taxing in-state bonds; no dormant commerce clause violation – issuing debt securities to pay for public projects is a public function).


American General Financial Services, Inc. v. Carter, 184 P.3d 273 (Kan. Ct. App. 2008)

(real estate foreclosure case involving relative priorities of a lien for unpaid sales tax and later purchase money mortgage given by defaulting taxpayers to acquire the property which is later sold at foreclosure; court held that mortgage given to secure the loan used by taxpayer to buy the property has priority).


Teigen, et al. v. State, 749 N.W.2d 505 (N.D. 2008)

(state statute requiring state to use a portion of wheat tax funds for policy and promotion activities and to award contracts to two domestic trade associations did not violated state constitutional provisions prohibiting special laws, gifts and special privileges and immunities). 


Astleford v. Comr., T.C. Memo. 2008-128

(Substantial discounts for gifts of farmland to FLP granted – 33.9 percent for one year and 35.6 percent for another year (saving taxpayer about $2 million); FLP operated like a business and not taxpayer’s personal bank account; non-tax avoidance reasons for establishing the FLP present).


Mollica v. Division of Property Valuation and Review, 955 A.2d 1171 (Vt. Sup. Ct. 2008)

(“Christmas Cottage” on Christmas tree farm used as sales office and warming hut for customers during Christmas season and rented guest house during off-season remains eligible for enrollment in tax abatement program as farm property; property used as “rental property” only during “non-farm” season and still remained actively used in a “farming” operation during the Christmas tree harvesting season).


L & L Holding Co., L.L.C. v. United States, et al., No. 05-0794-A, 2008 U.S. Dist. LEXIS 35229 (W.D. La. Apr. 30, 2008)

(sole member of LLC personally liable for payroll taxes; LLC was disregarded entity because owner failed to elect to have it treated as a corporation under the check-the-box regulations).


Christenson v. Comr., 523 F.3d 957 (9th Cir. 2008)

(innocent spouse relief under I.R.C. §6105 only available if joint return filed for year in question; while taxpayer faced joint liability under state community property law, plain language of I.R.C. §6105 provides relief only to spouses who file a joint return).


In re Goddard, 180 P.3d 604 (Kan. Ct. App. 2008)

(sawmill operation not “farming” for purposes of state ad valorem property tax exemption; however, yarding tractor used to harvest trees is exempt farm equipment).


Regents v. United States, No. 06-cv-5084, 2008 U.S. Dist. LEXIS 26263 (D. Minn. Apr. 1, 2008)

(University of Minnesota entitled to refund of FICA taxes paid on medical residents’ stipends because payments qualify for student exclusion from FICA taxation; amended regulations disqualifying residents from the exclusion have been held invalid). 


Estate of Claeyssens v. California, 161 Cal. App. 4th 465 (Cal. Ct. App. 2008)

(state law allowing collection of filing fees and surcharges for estate claims held unconstitutional; “pick-up” tax amounted to an unconstitutional estate or inheritance tax masquerading as a graduated probate court user or filing fee; in CA, legislature, acting alone, cannot impose an inheritance or estate tax; in this case, calling a $74,762 filing fee a “court user fee” disingenuous).


Priv. Ltr. Rul. 200826024 (Mar. 19, 2008)

(primary reason for selling home that taxpayer owned and lived in for fewer than two out of five years before selling the home qualifies as an unforeseen circumstance that makes taxpayer eligible to exclude a reduced amount of gain under I.R.C. §121(c); taxpayer got married, and home not large enough for blended family; also, under local government school enrollment policies, son of spouse of taxpayer would have to move to a new school).  


Priv. Ltr. Rul. 200826005 (Mar. 17, 2008)

(undivided fractional interest in rental properties that are co-owned by unrelated business entities does not constitute an interest in a business entity under Treas. Reg. §301.7701-2(a) and, therefore, does not qualify the undivided fractional interest as eligible replacement property under I.R.C. §1031(a)). 


Priv. Ltr. Ruls. 200810016 and 200810017 (Dec. 6, 2007)

(exchange of property between partnerships controlled by related persons qualifies for like-kind treatment). 


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