Summary Opinions for End of December 2015

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Happy Presidents’ Day!  While some of you are at home celebrating the lives of Martin Van Buren, Chester Arthur, Tippecanoe and Tyler too, PT is still hard at work churning out tax procedure commentary.  In this SumOp, we cover a few remaining items from December that we didn’t otherwise cover (in detail).  Post includes more of Athletes, the IRS, and rich people behaving badly.  It also has a link to Frank Agostino’s January newsletter, which has a bankruptcy/OIC discussion that is really strong.

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  • The IRS has mud on its face again for wiping another hard drive, this time potentially destroying documents related to the IRS hiring of Quinn Emanuel.  Robert Woods at Forbes has coverage here.
  • Those of you who love the beautiful game should be excited Sepp’s on his way out, but worried that Mascherano’s stout defense won’t extend to his tax fraud conviction.  That’s three Barca players with tax troubles, including Messi and Neymar.  Barca should call me immediately, and bring me in house to review all their players’ finances (and/or play midfield).  Marketwatch has an article, found here, on why so many professional athletes get in tax trouble (recap:  their tax returns are more complicated than your tax return, they are super rich and young, and they often have issues handling their finances).
  • Agostino and Associates have issued their January tax controversy newsletter found here.  The bankruptcy/OIC discussion and which option to use is a great summary of something many of us probably grapple with on a weekly or even daily basis.
  • This is more substantive than procedural, but interesting.  Sometimes cases have the best names based on the underlying dispute.  Loving vs. Virginia is probably the best known.  Green v. US, a recent District Court case out of Oklahoma also fits the bill.  The case involves a bunch of green, in the form of a real estate charitable contributions (Hobby Lobby $$$ and land).  In Green, prior to the case, Chief Counsel had stated that a non-grantor trust could not deduct the full fair market value of appreciated property donated to a charity under Section 642(c)(1).  That section allows for a deduction, without limitation, for property passed to qualifying charities.  The CCA looks to various cases which indicated (tangentially) that the deduction was limited to the adjusted basis.  The District Court of the Western District of Oklahoma held that Section 642(c)(1) had no specific limitation on the deduction amount and the full FMV was allowed.
  • Morales v. Comm’r was decided by the Ninth Circuit in December.  Prior to the opinion, Carlton Smith has covered this case in detail for us, including this post in July, and he cited to it last week in discussing the 6676 penalty.   At issue in Morales was a Rand type case, where penalties were imposed on an “underpayment” created by a taxpayer improperly claiming and receiving the first time homebuyer credit. The question raised was whether a taxpayer must assign errors to each and every alleged error or whether pleadings are sufficient with only a general denial of liability. The Ninth Circuit in an unpublished opinion held that the Tax Court had properly denied the reconsideration of the penalty as the taxpayer had not specifically raised the argument that the credit did not give rise to an underpayment.
  • Before making flippant remarks about this case, I hope the US Attorney involved has obtained proper treatment for the mental illness.  Beyond the wellbeing of that individual, I do not feel terribly bad for the IRS in In Re: Murphy.  In February of 2015, the Assistant District Court found that the IRS violation of a preliminary injunction on collection actions could not be ignored due to the fact that the US Attorney was suffering from substantial mental health issues, including dementia.  In December, the Bankruptcy Court (sorry, no link) concluded it would not review the matter again, and the IRS was responsible for claims under Section 7433, even if the Service likely would have been successful in the case had the US Attorney been competent.  As we’ve seen many cases where taxpayer’s representatives have suffered from illness, but the IRS has still imposed substantial penalties, I’m not heartbroken to see the issue go the other way.
  • Way back in July of 2014, SumOp covered the tax problems of the Hit Dog, Mo Vaughn, where the Tax Court held he lacked reasonable cause for failing to file his tax returns and pay the tax due.  Mo took a swing and a miss with the Sixth Circuit also, which agreed with the Tax Court.  The Court held that simply hiring an attorney, financial advisor and accountant was not sufficient to show reasonable cause, and the fraud and embezzlement of those folks did not constitute disability.
  • Sumner Redstone did not have the best December and early January.  He probably lost a boatload in the stock market, and he was directed to undergo a mental exam to determine if he is incapacitated (his ex-ladyfriend is making this accusation – lover scorned!).  He was also found liable for gift tax from 1972!!!!!!.  Jack Townsend had coverage on his Federal Tax Crimes Blog here. Tax was around $740k.  The interest has to be pretty darn high.  There was one bit of good news, which was that no penalties were imposed.  As Jack notes, this is the interesting aspect of the case.  Underlying question involved the valuation of a closely held business interest, which was based on redemption price on intra-family sale.
Stephen Olsen About Stephen Olsen

Stephen J. Olsen’s practice includes tax planning and controversy matters for individuals, businesses and exempt entities for the law firm Gawthrop Greenwood, PC.

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Comments

  1. With an informal survey, I am researching whether law school professors at tax clinics get better treatment from the Taxpayer Advocate than I do. I filed a Form 911 for clients that was received by my local TA on Monday, February 8. I don’t expect the problem to be solved right away, but I would expect some sort of acknowledgment that they are working on it. In previous efforts, they have denied receiving anything from me and I have had to start again. Of course I don’t expect to hear anything today, because of the John Hanson et al holiday, but I wonder what SOP for the TA is elsewhere, for others.

    • Barry Goldwater says:

      I always call them the next day to confirm they received the 911. If they claim not to have received it I refax it with a request to call me. That way a week isn’t going by with nothing going on. When they see my name they give me priority.

  2. Carl Smith says:

    Bob,

    Although retired from running a clinic, I am still occasionally filing Forms 911 for friends and ex-clients. I know that TAS says they will get back to you within 48 hours, but I would say that 48-hous to 5 days is typical in my experience. I have not factored in that some of my requests are more urgent than others. I simply don’t remember whether urgent mattes got action faster than simply long-term festering problems.

  3. They received mine on Monday, February 8; their first call to me was Friday, February 19 to tell me that the refund will be issued next week.

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