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Summary Opinions for 03/07/2014

Posted on Mar. 11, 2014

Post covers a diverse and interesting range of cases and news.  Seemingly important bankrutcy decision out of the 7th Cir., Lil Wayne being Lil Wayne when it comes to taxes, interesting Chief Counsel notice on amended S-corp returns after the statutory period has passed, people getting choked, employment tax audits…

  • First up is In re Equipment Acquisition Resources, Inc., a 7th Circuit bankruptcy holding from early February that did not land on my radar until a recent article was published in the Legal Intelligencer.  In the case, the Circuit Court held that a debtor in possession could not attempt to recoup federal tax payments pursuant to Section 544(b)(1) of the Bankruptcy Code ( authorizing a trustee to bring a state law fraudulent transfer claim).  Other lower courts had held that Section 106(a)(1) of the Bankruptcy Code extended the waiver of sovereign immunity to Section 544 also, but the 7th Circuit disagreed, stating the bankruptcy provision requires a valid paid creditor under state law, which would not extend to the United States because of sovereign immunity.
  • Joshua Blank, of NYU, added his article “Tax Privacy and Tax Compliance in the United States” to SSRN.  This article appears to borrow from Mr. Blank’s prior scholarship on this topic, and was put together for a symposium in Brazil on tax administration.  The impact on compliance of privacy of tax information or public disclosure is a topic often discussed in our blog, and this article provides a nice summary.
  •   In CCA 201409005, the Service has indicated it will review on a case by case basis the processing of amended S corporation returns after the period for assessment under Section 6501 and the period for a refund under Section 6511 have both run when the return shows no change in the amount of tax due by the corporation.  The Service decided it has no obligation to accept the return, and it found no prohibition.  Why would you file such a return?  In this case, the amended return modified flow through income and credits passing to a shareholder who had made a timely personal refund claim based on these flow through.  The shareholder needed/wanted the Form 1120S to back up his claims on the personal return.  Although not binding, the Service did state that that since the late amended Form 1120S would impact the timely filed personal return, that may provide justification for processing the amended Form 1120S.  A fairly taxpayer favorable decision, if implemented.
  • Lew Taishoff on the Taishoff Law Firm blog has posted regarding Murphy v. Comm’r, where Judge Holmes did not allow the taxpayer to change her legal argument at the calendar call.  The post is worthwhile.  It does shed some light on the use of Rule 41.  More importantly, it involves black magic, a stalker, and Mr. Taishoff used two words in just the first sentence that I had to look up.
  • Mr. Jack Townsend offered a lot of great content this week on both his federal procedure and his federal tax crimes blog.  Our favorite for the week may have been the review of the Motion for Summary Judgment in the Zwerner case.  Jack has some great comments on the standard the Service is claiming is applicable, and the Service’s view on willfulness.
  • From Mauled Again, on March 7, Professor James Maule provides additional discussion of the Waltner tax protestor case, which we discussed before because of the time devoted by the Court to discussing protestor arguments, in particular the B.S. offered by author and tax protestor Peter Hendrickson. Prof. Maule has had a bunch of great posts over the last week, including the tax treatment of the found gold bullion in California.  From his February 28th post, there is a sad study showing that Philly has lost a substantial portion of its middle class.  I (a New Yorker) have to stop making jokes about Philly being low class.  Feels less funny when it is true.
  • Welcome to the internet Tax-Expatriation Blog.  A nice collections of articles and opinions on expatriation so far.
  • I found this summary of reasonable compensation for s-corporation shareholders who are also employees through LinkedIn.  The article has some helpful pointers in documenting the amount of work the shareholder does prior to audit, and some information on handling an audit on this point.  The article doesn’t discuss much of the case law in this area, but does have a nice discussion on the Davis v. Comm’r case from 2011, and affirmed in 2013, discussing arm length transactions in this context.
  • To quote Lil Wayne, “you got money and you know it.  Take it out your pocket and show it and throw it”…just not at the IRS.  I honestly do not read TMZ, even if my posts would indicate otherwise.  The Journal of Sophistication and High Class is reporting (?) that the Service has slapped a tax lien on Mr. Carter for close to $12MM.
  • If you haven’t seen this Pittsburgh criminal lawyer’s advertisement it is worth three minutes of your day.  “I may have a law degree, but I think like a criminal.”  So, he possibly has a law degree?
  • As the father of three very strong-willed young women, I am fairly conscious of the different reactions that others have to their behavior and the behavior of boys of their age.  This WSJ essay by Sheryl Sandberg and Anna Maria Chavez discusses our use of the term “bossy” when describing confident, decisive girls, and the subtle (or not so subtle) constraints this puts on them.  I completely agree…but…my four year old is bossy.
  • March Madness is almost here, and last week we covered accountants being downers, and blocking access to the games during work hours.  This week, we have lawyers being completely uncool, and explaining why bracket pools are probably illegal.
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