Summary Opinions 03/21/2014

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To start off SumOp this week, we have a PSA from Portlandia about tax attorneys and the dangers of playing bass guitar (hat tip to Les’ daughter, Sophie).   My favorite part may be the talented Annie Clark from the band St. Vincent’s explaining the danger of playing bass, and how that likely caused Lauryn Hill to be jailed.  My wife has been trying to remove my musical instruments from the house for years.  Before jumping into other new content, I have to add a special thanks to Susan Morse for her very well received guest post on the need for the Service to add storytelling and narrative to its tool kit. Very much worth a read if you have not yet checked it out.

The procedure this week includes some interesting cases, including third party liability for taxes, lots of info on Bitcoins, and appraisers behaving badly (drugs, guns, prostitutes…you all know what appraisers are like).  To the roundup:

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  • Being an executor is a pain in the a$$ in general, but it gets worse when you personally have to pay the dead guy’s taxes.  In United States v. Shriner, the federal District Court for Maryland held that the Shriners (Robert and Scott, not the Ancient Arabic Order of the Nobles of the Mystic Shrine) who were named administrators of the Estate of Carol Shriner were responsible for the income tax debts of the estate because they paid other unsecured debts before satisfying the tax debts.  Section 6901(a)(1)(B) and 31 USC § 3713(b) both provide that a fiduciary paying any part of a debt of an estate before paying a claim of the government is responsible for the unpaid claim.  Chapter 16.09 of Saltzman and Book covers this in great detail.  One of the conditions is that the fiduciary must have known or had reason to know of the government’s tax.  The Shriners claimed they may not have known about the taxes, but the Court imputed the knowledge of their attorney who had received multiple IRS notices regarding the taxes.  The Shriners also claimed they had erroneous advice as to the extent of the liability, and therefore could not be found responsible, but the Court was not persuaded since they knew some tax amount was outstanding and still transferred funds.
  • The Jack Townsend had various great posts over the last week, but I found his commentary on his Federal Tax Crimes Blog for the Humboldt Shelby Holding Corp. v. Commissioner case really informative.  The case involved a BS tax shelter, where the defendant was also a witness in another criminal prosecution (and perhaps being investigated himself).  The taxpayer requested his tax case be stayed until after the conclusion of the criminal matter, and the Tax Court found that did not serve the interest of justice.  Mr. Townsend’s thoughts are found towards the bottom of this post.
  • Appraisers behaving badly.  In an announcement on March 19th, OPR has disclosed its settlement agreements that bared some appraisers for overly aggressive façade easements.
  • F. Lee Bailey is making tax news.  Gone are the days defending The Fugitive, Patty Hearst, the Boston Strangler, and the Juice.  The First Circuit held that Mr. Baily was collaterally estopped from claiming funds he received from a trust were a loan that he intended to repay because multiple prior federal holdings had found that he inappropriately used the trust assets (sorry, I couldn’t find the case for free on line yet).
  • Make your 2010 refund claims if you haven’t already.  The Service is claiming that it has a ton of taxpayer cash it wants to give back.
  • Chief Counsel has issued guidance, indicating the Service’s position that taxpayers cannot file amended returns after the filing due date if the amended return switches the filing status from joint to head of household. See CCA 201411017.  The taxpayer attempted to do this within the three year statute, but the Service stated the election is irrevocable once made, relying on Reg. 1.6013-1(a)(1) and Ladden v. Comm’r, 38 TC 530.  This is somewhat similar to the Ibrahim case, which Professor Sedo and Frank DiPietro blogged for us earlier this year.  In Ibrahim, the taxpayer was trying to switch from head of household to married filing jointly after a petition was before the Tax Court.
  • Nina Olson presented at Temple University on March 20, where she discussed her 2013 report, including the hope for a new taxpayer bill of rights to increase trust and strengthen its ability.  TaxProfBlog has additional coverage, and we posted a link to an upcoming conference this Thursday where NTA Olson and others will discuss the prospects of a new taxpayer bill of rights.
  • Lots of coverage about the IRS phone scam.  See Politico and TIGTA’s notice.  I had a client who was contacted by one of these spammers late last year, which I blogged about here.
  • So apparently, the internet has an old couch somewhere in cyberspace, where people lose Legos, candy, and hundreds of thousands of dollars in Bitcoins in an “old wallet”.  I am not really following this story beyond the headlines, but it would be interesting to see how the company treats the loss of the remaining missing virtual currency.  Simply misplacing something does not result in a deduction.  More importantly, the Service has indicated Bitcoins and other virtual currency will not be treated as currency, and instead will be treated as property for tax purposes.
  • Sort of similar to that point, at the Villanova Law  2014 Jeffrey S. Moorad Sports Law Journal Annual Symposium, ex-Villanova running back, Brian Westbrook mentioned the Eagles giving him his signing/roster bonus twice.  The Eagles figured this out the following year, and requested repayment.  Probably added slightly to Mr. Westbrook’s accounting and legal fees that year, and is somewhat connected to Les’ post last week on former Qwest CEO having to give back millions in stock gains and how one gets a deduction when one gets something that has to be returned.
  • IRS tips on how to choose a tax preparer. I did a chamber of commerce panel discussion a few weeks ago, and this was a big portion of the topic.  I was surprised at how many people were nervous about signing returns because of a lack of faith in their accountant and a feeling of not fully understanding the returns they were signing.
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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