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Summary Opinions for 4/25/2014

Posted on Apr. 28, 2014

Procedurally Taxing had some technical difficulties this week.  We thankfully were able to post, but our content wasn’t being pushed out through email or other means.  We will probably repost those next week and consider firing our blogmaster (me).  On the flip side, we had some wonderful content, including the second part of a two part guest post by Professors Stephanie Hoffer and Christopher Walker discussing Tax Court exceptionalism.

To the other procedure items from last week:

  • I’m sure most of you have heard about the Bobrow Tax Court case, where the taxpayer relied on IRS guidance that a second tax-free IRA rollover was allowable.   The Court held this was contrary to Section 408(d)(3)(B), and the taxpayer’s reliance on Publication 590 and the Proposed Regulations did not protect the taxpayer from the imposition of the accuracy related penalty.  While the taxpayer and IRS settled, the Court in its order noted that IRS guidance in publications is not binding and is not protective for penalty relief.  The motion for reconsideration was denied this week. There was excellent coverage of this by Janet Novack on the Forbes blog, see here, where Janet describes what seems like an unfair result and links to the orders and summarizes the IRS new position essentially adopting the Tax Court approach with IRA rollovers.
  • The District Court for Mass. in Rob Evans& Associates, LLC v. US held that the fraud of taxpayers is not automatically imputed to a receiver tasked with collecting assets of the fraudulent taxpayers and distributing them to those who had been defrauded.  This allowed the receiver to move forward with a refund claim under Section 1341, which generally does not allow for refunds of tax on fraudulently obtained income.  The Court looked to Cooper v. US, 362 F.Supp.2d 649, quoting to do so would be “to deprive the very victims of the fraud from recovering what is essentially and rightfully theirs.  Les recently wrote about Section 1341 in regard to the Nacchio insider trading case, which can be found here.
  • In Kraft v. Comm’r, the Tax Court has held that the IRS did not abuse its discretion in failing to levy only one asset, as requested by the taxpayer.  The asset in question was an interest in an irrevocable trust.  The Court found it reasonable that the IRS had concerns that the trustee may not agree to the payment of the amount due, and a thorough review of the asset had not yet occurred (and usually occurred later in the collection process).
  • From Jack Townsend’s Federal Tax Crimes Blog comes a guest post by Peter Hardy and Mehreem Zamen on virtual tax evasion.  Peter and Mehreem are white collar defense lawyers in the Philadelphia office of Post & Schell.  Peter is well known to the editors here at PT and is an adjunct Professor in the Villanova Graduate Tax Program, and this post is much like all of the content Peter works on; well written, informative, and insightful.
  • The Service has doled out millions in bonus dollars to over 1,000 employees who owe back taxes.  Although many of these may be minor issues, certainly some are not.  Similar policy concerns here as with hiring government contractors who fail to pay taxes.  This has been making the rounds in the new cycle.
  • Last week was oral argument in US v Clarke, where the Supreme Court is considering how much discretion district court judges will have in fashioning an evidentiary hearing when there is a plausible allegation that the IRS had an improper purpose in issuing the summons. Les will have a brief write-up with links this week; link to the audio of the oral argument is here.
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