Summary Opinions for 6/27/14

We hope you all had a wonderful 4th of July!  Here is the Summary Opinions for two weeks ago, which would have been posted last week but we had too much other great content.  Last week’s SumOp will be posted later this week.

Special thanks to our guest posters from two weeks ago.  Stu Gibson wrote a really wonderful post on Clarke, highlighting the pros and cons of the decision.  Not to be outdone, Professors Stephanie Hoffer and Christopher Walker provided additional commentary on the Kuretstki decision, including responses to comments made by Patrick Smith and Kristin Hickman.

• From the Post and Shell E-Flash, comes an excellent write up of the In Re Kellogg Brown & Root case decided by the DC Circuit Court of Appeals reaffirming attorney-client privilege to documents created for internal investigations for corporate compliance.  The post contains a nice summary of the background on privilege and the four main holdings in the case.  The last of which the authors found to be the most important, where the Court reversed the District Court in applying the “primary purpose” test as a “but for” test or a “sole purpose” test. The post also contains a number of practice tips I would commend to readers, including when to mark documents as privileged and when to include counsel to ensure protection of communications.

• Wells Fargo had a busy week last week.  We will be writing up a post on a case decided last week in favor of Wells Fargo regarding what constitutes the “same taxpayer” in a merger, when offsetting underpayments and overpayments.  The case was very timely, as it impacts interest calculations, and Les just submitted a revised Chapter 6 on Interest for Saltzman and Book, which should be available this fall.  The US District Court for the District of Minnesota ruled against WF’s last week on its objections to the master’s application of privilege.  The Court did not put stock in WF’s claim that the master lacked the authority to determine the matter, and quickly moved to the privilege question.  The Court found there was no evidence that the in-house lawyers were reviewing the documents in question for legal accuracy or for legal advice, but instead only for factual accuracy.  It is worth mentioning that the attorneys were not the original drafters off the board memorandums in question, and that the Court did not find actual evidence that the memorandums were actually reviewed by in-house counsel.  I would suggest in-house and corporate counsel review the suggestions in the Post and Shell blog post above, as it is possible that these memorandums could have been privileged if handled in a different manner.

• On Jack Townsend’s Federal Tax Crimes Blog, he has posted a letter from the IRS to Congressman Bill Posey defending the implementation of FATCA.  And, also from Jack’s blog, an excerpt from the JCT report on proposed changes to the multilateral convention on tax administration, which has a summary of the laws of international enforcement.

• Paul Daugerdas was sentenced last week to 15 years in the slammer for orchestrating one of the largest tax fraud schemes in US history.  Here is the DOJ release.  Tax Girl has some wonderful and comprehensive coverage here.  Every time I see white collar criminals going to jail, I immediately think of Office Space.  I would link to the scene, but I think it is too inappropriate for our blog.

• I’m not sure this counts as procedure or policy, but we’ve reserved the right to write about other things that interest us.  In United States v. Peters, the ED of Missouri, has held that a taxpayer could not characterize a sale forced by a court as an involuntary conversion under Section 1033.  It appears that the taxpayers did not actually follow the Section 1033 requirements, which was probably fatal, but what I found interesting was that the holding states this would not have qualified because the taxpayers originally agreed to the sale of the property.  Around closing, the taxpayers walked away from the sale, and the purchaser sued for specific performance, and won.  The Court concluded that was a voluntary sale, and the other court was simply enforcing the terms of the contract.   This makes sense to me, but I had never researched the issue and found the holding interesting.  I couldn’t find a free link yet, but the case number is 4:12CV01395 AGF.

• I am working with Les on Chapter 5 of Saltz and Book right now, which deals with statutes of limitations, and I think this Chief Counsel Advice will make its way into the revised chapter, as well as the revised chapter on returns (Chapter 4).  In CCA 201425011, the Service indicated a P’ship or LLC return that was filed but not signed by an authorized  person is not a valid return, but this does not impact the limitations period for the partners, as the partners’ returns are the applicable return for starting the statute.  This does not offer any new guidance, but in the CCA the pass-through nature of the return alters the general rule that would otherwise provide that the failure to submit a valid return triggers an indefinite SOL on assessment.

• If you intentionally ignore your mail and actively thwart delivery, you aren’t going to be able to claim you never received notice of your notice of deficiency and question the underlying tax.  See Onyango v. Comm’r.

• Daisy Barton, from www.accounting-degree.org, asked me to post this infographic her page created on tax policy and income inequality.  I have not fact checked this content.