Summary Opinions for the week ending 04/03/15

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FullSizeRenderYikes, this post is getting a little stale, as it relates to early April, but it still has a lot of great info.  Before getting to the other tax procedure items from the week of April 3rd  that we didn’t otherwise cover, there are a few housekeeping items to touch on.

On April 22nd, Les Posted about the ATPI Conference.  Since then, various folks have asked about a link to the audio.  Les has tracked down a link, and for those of you interested, you can listen to the full webcast here.

Les and Keith are currently on their way to the ABA Tax Section Meeting in DC.  Please let them know your thoughts on the blogs, what topics you would like to see us cover in greater detail, and if you have any interest in guest posting.

I will sadly be missing the meeting this year, but for a wonderful reason.  My wife gave birth to our first son, Oliver, who is pictured to the above. Both mother and babe are doing great, and Oliver has been close to perfect over his first two weeks of life; however, taking a three day trip away from them (on mother’s day weekend) just wasn’t in the cards.

We also had a few guest posters from around the week of April 3rd that I haven’t highlighted yet.  We were very pleased to have Villanova professor Tuan Samahon, co-counsel for the Kuretskis, posting on the Solicitor General’s brief opposing cert.  Also posting was Sean Akins of Covington & Burling, writing on when to seal the Tax Court record.  We are, as always, very appreciative of their efforts.

To the other procedure:

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  • I don’t do much bankruptcy work, so perhaps this is run of the mill, but I found the facts of In re: Elrod, pretty interesting as they related to an IRS levy.  In Elrod, the IRS issued a broad levy to a chapter 13 trustee.  The levy sought to collect taxes owed by a creditor (not someone in bankruptcy) of various individuals who had filed for chapter 13 bankruptcy.  The trustee filed a motion to quash the levy, which the Court granted.  The Court found that the levy violated the automatic stay under 11 USC 362(a).  As I said, this is not my area and those who do bankruptcy may be thinking I am quite uninformed, but I was initially surprised that the automatic stay protected someone other than the debtor in this way.  Most of the provisions under (a) relate to the debtor, but (a)(3) includes as  being prohibited “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”  The Court found that based on other BR sections, “property of the estate” was defined very broadly, and found it inappropriate for the trustee to have to hand the creditor’s payments over to anyone other than the creditor.  The holding also noted that the levy did not specify which cases it applied to, which was one of a few factors that created substantial administrative burden for the trustee.  This also potentially opened the trustee up to personal liability for failure to properly comply with the levy, which was unfair and too onerous.
  • Usually when you set up a BS tax shelter, and you get caught, substantial penalties are headed your way.  In CNT Inv. LLC, v. Comm’r (loyal SumOp readers will remember this case from the last SumOp, dealing with statutes of limitations) however, the taxpayer was able to get out of the gross valuation misstatement penalties where the Tax Court found the taxpayer relied on competent advisers.  Facts worth noting: the taxpayer did fail to hand over some information to his lawyer; the CPA involved was admittedly confused by what was happening; and the lawyer involved was not a tax lawyer.  I’ll admit, this opinion is pretty long, and I did not read it all in great detail.  From a quick review though, it seems like the taxpayer’s current counsel earned his fee, as those facts can often tank a reliance/reasonable cause argument.
  • The IRS has issued PMTA 2014-018, which addressed an interesting statute of limitations issued, specifically:

Does section 6501(c)(8) operate to extend the period of limitations for the assessment of tax with respect to an estate’s Form 1041 or Form 706 if the executor of the estate files the deceased individual’s final Form 1040 and fails to provide information required to be furnished with the final Form 1040 under the provisions of section 6038D?

The Service determined that this would extend the limitations period.  For those unfamiliar with Section 6501(c)(8), the Code provides that if certain foreign transfers are required to be disclosed to the Service and are not, “the time for assessment of any tax…with respect to any return, event, or period to which such information relates shall not expire before the date which is 3 years after the date on which the [Service] is furnished” with the required information.  This applies to the entire return, in general, unless the failure was due to reasonable cause, in which case the extended period only applies to the undisclosed information.  The Service found that where the executor is required to file the decedent’s last lifetime return under Treas. Reg. 1.6012-3(b)(1), and fails to disclose information required under Section 6038D on the Form 1040, the statute of limitations will be extended for the Form 1040, the estate’s Form 1041 (interesting because the estate is a separate legal entity), and Form 706.  The Service stated the broad language under the statute indicates that “any return” should mean at a minimum all returns required to be filed by the taxpayer “to which such information relates”.  The notices indicates this is very fact specific.  In addition, if a surviving spouse, who was not the executor filed the Form 1040, the result could be different, since the executor wouldn’t be filing the Form 1040.

  • The Service has issued final regulations on the extended statute of limitations under Section 6501(c)(1) on assessment and collection for taxpayers who failed to disclose involvement in listed transactions.  The regs are similar to the proposed regulations, with a  few modifications on how the one year extension works with the normal period when disclosure by an advisor occurs.
  • Over at one of my favorite tax blogs, Jack Townsend’s Federal Tax Crimes Blog, Jack has some thoughts on the recent oral argument in BASR Partnership v. US.  We’ve touched on the issue in BASR a few times, most notably in Les’ initial coverage of the case found here.  For those interested in the issue, Jack’s post is not long but provides some good insights into the positions being offered on whether or not the unlimited statute of limitations for fraud under Section 6501 extends to actions taken by someone other than the taxpayer.
  • The Service lost (again) arguing federal law applied to show transferee liability under Section 6901.  The Court, in Stuart v. Commissioner, held that state law applied to determine the third prong of whether liability existed for the other party, and again rejected the Service’s two step process where it first recasts a transaction with the substance over form doctrine, and then applies state law to determine if the other party is liable.  We’ve touched on prior cases out of the tax court, First, Second, and Forth Circuits.  This case would be appealable to Eighth Circuit.
  • From fivethirtyeight.com, an updated look at exactly when the marriage penalty and bonus go into effect.  I emailed this to a friend who is about to get hitched, and was assuming a tax savings…marriage would have cost him $3k this year.  Bye the way, Nate Silver’s page has won me multiple Oscar pools (I’ve never seen any of the movies), and sports wagers – none of which were for money, of course.
  • And now for something completely different, Andrew Brandt touches on legal issues in the NFL for Sports Illustrated.  Not tax procedure whatsoever, but Mr. Brandt is the Director of the Jeffry Moorad Center for the Study of Sports Law at Villanova University School of Law, where Les and Keith hangout while thinking about PT posts.  The article provides some insights into a host of hot legal topics in the NFL currently, including the unfortunate cases of Aaron Hernandez and Darren Sharper (who Mr. Brandt knew fairly well).
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. Illya Kuryakin says

    I too was in DC today on my way to China (am I taxed on the money I saved with American’s $480 RT business class mistake fare?) and spent a couple hours at the Tax Court satisfying my curiosity about a couple cases. The tips posted here a year or so ago by Napoleon Solo were useful. The docket room is also where walk-in petitions are filed, and I ended up answering some questions and volunteering to help a 94-year-old. Her family says she has not slept soundly since receiving a notice of deficiency. Something to do with preparer error on sale of residence.
    Both cases were “out to the judge” but images of all documents were available on the computer terminal — not just those found online.
    Next week I will try to find out how much Mainland Revenue spends to collect 100 yuan.

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