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Summary Opinions for 12/14/2014

Posted on Dec. 24, 2014

Merry Christmas, Happy (last day of) Hanaukka, Joyous Holidays and a wonderful Festivus for the restofus.

A quick note on posting; we probably will not have regular substantive content up over the next few days, and perhaps not until January 5th – although we do have one guest post we may put up before then because it is somewhat time sensitive.

1314snowI am a little behind on SumOp again after spending a few days in the Upper Peninsula of Michigan last week for my brother-in-laws graduation from his Ph.D. program (he still has to defend, so I don’t have to call him doctor yet).  It was in the mid to high-20s, sunny, and there was no snow.  Apparently, that is not the norm for the UP in the winter.
Michigan is a huge state, and, interestingly, it is further to drive from Houghton, Michigan (where I was- and in that band that got over 341 inches of snow last year — can that be correct?!) to Detroit than it is from Detroit to Washington DC.  Thankfully, we flew.

To the procedure.

  • In response to SECC Corp v. Comm’r, which we discussed before in SumOp here,  Chief Counsel has issued a notice to its lawyers as to when to advise the Service to issue a Notice of Determination of Worker Classification under Section 7436, and how to handle docketed Tax Court cases where employment taxes are at issue with similar facts as SECC.  In SECC, the Court found that an informal letter from the Service indicating worker classification was a sufficient determination to confer jurisdiction, and a Formal Letter 3523, Notice of Determination of Worker Classification was not required.   Notice CC-2014-011 can be found here.  Chief Counsel urged its lawyers to distinguish SECC where possible, and otherwise acknowledge SECC Corp. v. Comm’r, but indicate the IRS does not agree and argue that only a Notice of Determination of Worker Classification is sufficient to confer jurisdiction.  It will be interesting to see how the Circuit Courts shake out on this.
  • Frank Agostino of Agostino & Associates has published his December newsletter.  Unfortunately, no hot tubbing, but, as always, the content is great, and like mini-law review articles.  A fitting follow to the first item above, one of the two articles in the newsletter is a comprehensive review of employment misclassification issues.
  • The Eastern District of Michigan, in Field v. US (13-cv-12605), has held that a deed severing tenants by entireties property was not intended to go into effect until the death of the first spouse, which worked to extinguish the tax lien filed against the first spouse to die.  Both spouses signed the deed, but it was given to their lawyer to hold in escrow until one of them died.  At that point, it was transferred to a revocable trust.  The Court found that the issue was whether or not the deed was “delivered.”  Looking to Michigan law, the Court found that a deed takes effect from the time of delivery, and not the date of execution.  Sorry no free link.
  • The District Court for Idaho held that a largely uninvolved investor was a responsible person for employment tax purposes.  Shore v. United States seems like an unfortunate case, but the result is not surprising.  Shore funded a company, and hired a gentleman named Lewis to run the company.  Although Shore was named as President, and owned all the shares, Lewis was completely in charge and both Shore and Lewis assumed he would purchase the company.  Lewis also held himself out as the owner.  When Shore was informed by the IRS that employment taxes had not been paid over, he realized that Lewis had been embezzling substantially from the company (amazing how often this fact pattern occurs).  Shortly thereafter, Shore paid creditors other than the IRS.  The company then didn’t pay all the taxes.   The Court found that Shore was clearly a responsible person under Section 6672.  Shore attempted to argue that the Slodov v. US, 436 US 238, applied, which limits the imposition under Section 6672 in limited circumstances when new management takes over and pays creditors (allows new management to attempt to salvage a company without fear of personal liability for TFRP).  The Court, citing to the 9th Circuit, declined to extend  the exception to situations where the “new management” was the existing president. Joe Kristan’s RothCPA blog has coverage.
  • I wasn’t familiar with the name Jon Edelman, but a quick Google search showed that he really screwed over the government.  The Feds caught on, and assessed a whole bunch of tax, and then Mr. Edelman got to spend some time doin time in Texarkana.  The IRS is still trying to collect some of the hundreds of millions of dollars, and Mr. Edelman is apparently trying to minimize that.  The Tenth Circuit affirmed the district court, finding that Mr. Edelman moved funds from one trust (presumably reachable by the IRS) to another trust (presumably less reachable).  The district court applied a constructive trust on the current and future assets of the second trust.  The trustee of the trust and Mr. Edelman raised on appeal that the funds could not be traced.  The Circuit Court held it would normally apply the plain error standard, but this was not urged by Mr. Edelman.  It further held that this was not raised at the lower court, and was therefore not properly reviewable by the Appeals Court.
  • The IRS is expanding its pilot post appeals mediation program for OIC and TFRP cases that Appeals could not settle, which will now be available throughout the U.S.  The new rules can be found here.  An Appeals officer trained as a mediator will serve as mediator, and the taxpayer can elect to hire a second outside mediator.  Certain topics cannot be mediated, a list of which is found here, along with a summary of the program.  Although I haven’t seen numbers lately, my understanding is that mediation is fairly successful, but probably underutilized by taxpayers.  From a quick review of the Rev. Proc., it doesn’t appear like anything has drastically changed, except for the nationwide rollout.
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