Case Summaries

Tax Law

[09/08] In re: Paolo
A debtor's appeal of a district court's decision to abstain from deciding a tax dispute with the government as an adjunct to the debtor's personal bankruptcy proceeding is dismissed as the appeal is barred by section 1334(d) .

[09/07] Henry E. & Nancy Horton Bartels Trust for the Benefit of Cornell Univ. v. US
In a university trusts' tax refund suit, the Court of Federal Claims' denial of its claim is affirmed as the securities purchased on margin by otherwise tax-exempt organizations are debt-financed property, and thus, income from an unrelated trade or business, which is subject to the UBIT.

[09/02] Bale Chevrolet Co. v. US
In a petition for review of intentional disregard penalties issued against petitioner for failing to file required Forms 8300 information returns with the IRS, the petition is denied where the government's positions were substantially justified.

[09/01] Hongsermeier v. Comm'r of Internal Rev.
The tax court's determination of petitioners' federal income tax deficiencies and liability for underpayment of interest is affirmed where: 1) the tax court's determination of the percentage deduction in the taxpayers' deficiencies, plus other benefits, accorded with the court's mandate in Dixon and was not an abuse of discretion; 2) the IRS Commissioner's position did not constitute fraud on the court or bad faith; and 3) the Tax Court did not abuse its discretion in relying on the materials available to determine a settlement fraction.

[08/30] US v. Blanchard
Conviction of defendant for failure to account for and pay over-withholding and FICA taxes and making and causing the making of a false claim for a tax refund is affirmed where: 1) offenses under section 7202 are covered by section 6531(4)'s six-year limitations period; 2) district court did not err in admitting evidence regarding discretionary expenditures; 3) while a defendant's inability to pay taxes when due bears on the willfulness of his act, it is not an element of the offense under 26 U.S.C. section 7202; 4) district court did not err in refusing to give defendant's proposed jury instructions; 5) sufficient evidence supported defendant's convictions under section 287; and 6) district court's restitution order is vacated and remanded.

[08/30] US v. Kloehn
Defendant's conviction and sentence for four counts of causing tax evasion are reversed where the district court abused its discretion and prejudiced defendant's ability to present his defense when it refused to continue the trial for two days to allow him to see his dying son.

[08/27] US v. Pfaff
In a tax evasion prosecution, the fine imposed on one defendant is vacated where the district court plainly erred in imposing a fine, pursuant to 18 U.S.C. section 3571(d), based on the court's finding that defendant caused a certain pecuniary loss, when that fine exceeded the maximum fine that would have been permitted absent the finding.

[08/27] Russell v. Comm'r of Internal Rev.
In taxpayers' appeal from the tax court’s decision that several loans did not constitute "indebtedness of the S corporation to the shareholder" such that taxpayers could claim losses incurred by the Missouri River Royalty Corporation (MMRC), the order is affirmed where the court's review of the record revealed no error in the tax court's rulings.

[08/25] Giacometti v. Aulla, LLC
In employees' suit for professional negligence against an accounting firm, claiming that the firm negligently or fraudulently over-reported income on their W-2 forms by including tip money taken by the restaurant managers as income to the employees, trial court's order sustaining the demurrer to the employees' second amended complaint against the firm for professional negligence without leave to amend is affirmed where: 1) there are no allegations in the charging complaint that the accountants knew that the restaurant's representation of employees' income was wrong at the time they prepared these documents, and there are no allegations that the accountants were hired to calculate, or in fact did calculate, employees' income for purposes of year-end reporting; and 2) the accountants did not owe the employees a duty of care under the negligence theory alleged in the second amended complaint.

[08/19] US v. Kottwitz
Defendants' convictions for tax fraud-related charges are affirmed in part where the circumstantial evidence was sufficient for the jury to have concluded beyond a reasonable doubt that defendants entered into the charged conspiracy. However, the convictions are vacated in part where: 1) the district court erred in refusing to give defendants' requested special instruction to the jury on their good faith reliance on their accountant's advice; and 2) the evidence was insufficient for a properly instructed jury to convict on the charge of aiding and assisting in the filing of a materially false corporate tax return.

[08/17] City of N.Y. v. Permanent Mission of India to the U.N.
In an action by New York City against certain foreign missions for unpaid property taxes, a denial of defendants' motion to dismiss is reversed where the Notice issued by the Department of State was a lawful exercise of the Department's authority under the Foreign Missions Act, and the Notice operated in this case to render appellants exempt from the property taxes imposed by the City, and so nullified the City's existing tax liens against appellants.

[08/17] Farr v. County of Nevada
In a property owner's challenge of the Nevada County Assessment Appeals Board's property tax assessment decision for his owner-occupied, single family home, trial court's judgment in favor of the Board is reversed and remanded as the Board violated section 167(a) and failed to accord plaintiff the presumption affecting the burden of proof in is favor as required by section 167(a).

[08/16] Found. of Human Understanding v. US
United States Court of Federal Claims' decision that a nonprofit organization did not qualify as a "church" under section 170(b)(1)(A)(i) of the Internal Revenue Code for the period from January 1, 1998 through December 31, 2000 is affirmed where: 1) the record supports the trial court's finding that the in-person services conducted during the years in question were merely incidental to plaintiff's primary purposes, and were therefore insufficient to demonstrate that the organization was a "church" for tax purposes; and 2) disseminating religious information, whether through print or broadcast media, does not fulfill the associational role required to qualify as a "church" under section 170.

[08/16] US v. Hall
In debtors' appeal from the district court's reversal of the bankruptcy court's order sustaining the IRS's objection to debtors' proposed reorganization plan, the order is reversed where, since the chapter 12 estate is not a taxable entity, the chapter 12 estate cannot "incur" a tax.

[08/16] Phelps v. Orange County Assessment Appeals Bd. No. 1
In a trustee's challenge to a county assessor's reassessment of a shopping center complex held by the trust upon the death of an income beneficiary of trust, claiming that the transfer of the beneficiary's interest as an income beneficiary to his four children did not qualify as a change of ownership under Revenue and Taxation Code section 60, trial court's judgment denying plaintiff's writ petition is affirmed where: 1) the beneficiary held a present interest in the property's improvements, which passed to the new income beneficiaries; 2) the beneficiary had the beneficial use of the property that was transferred to the income beneficiaries; 3) the value of a lifetime interest in income is substantially equal to the value of a fee interest; and 4) the transfer of the beneficiary's interest as a trust beneficiary to the current beneficiaries constituted a change of ownership under section 60.

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