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Summary Opinions for 8/15/14 and 8/22/14

Posted on Aug. 25, 2014

In celebration of the unofficial end of summer (classes starting again),  a two week helping of the tax procedure items we did not otherwise touch on:

  • This guy may have mental health issues, so I will refrain from making (too many) jokes.  In “Ram Heram” v. US (sorry, no free link), a magistrate judge for the ED of Cal. granted the IRS’ motion for a more definite statement of the alleged collection related damages, and directed that the taxpayer could not proceed anonymously under his pseudonym.  The judge found that the taxpayer failed to show a legitimate risk in disclosing his name that could result in retaliation.  The judge discussed the five prong test under Kamehameha Schools, a 9th Circuit holding, for proceeding anonymously, which are: 1) severity of the threatened harm; 2) reasonableness of the fears; 3) vulnerability to the retaliation; prejudice to the opposing party; and 5) the public interest.  Ram alleged some serious harm, stating the government directed others to “[take] control of the property from plaintiff, and caused fire, Killing, damages and injuries [acting as a “KILLING MACHINE”].”  The taxpayer, however, failed to provide legitimate evidence of the danger, and seemed to fail reasonableness aspect of the five prong test.
  • Grover Norquist is headed to Burning Man.  Burning Man has a lot of nudity and body glitter.  Grover+nudity+body glitter = still no tax reform.
  • The Ninth Circuit has affirmed that a joint-tenant being sued for estate tax cannot contest the estate’s underlying tax assessment.  In US v. Cowles-Reed, in a very brief opinion, the Court stated that only the estate, and not an interested third party, may question the tax.
  • In Ashland v. Comm’r, the Ninth Circuit held that the tax court lacked jurisdiction to review an alleged guaranteed payment, finding that such payment would be a partnership item and properly decided under partnership-level proceeding, not a deficiency proceeding.
  • From the Tim Todd, Liberty U. tax prof, a nice write up of the split decision Bedrosian v. Comm’r, where the court held that the Service’s failure to allow sufficient time between notices in partnership TEFRA proceedings did not convert partnership items to nonpartnership items.
  • Tony Nitti on Forbes claims to have the complete guide to every tax reference in the Simpsons.  I am not sure if he has them all, but I am pretty sure it is “excellent”.  Given that one of the main characters is a billionaire energy mogul who is pretty hell-bent on maximizing profits, you would think there would actually be more tax references.
  • Judge Holmes has an interesting order this week in Renka, Inc. v. Comm’r, where he highlighted a significant Chenery issue, but failed to hold on the issue because the IRS’ motion clearly failed for other reasons.  Here is a write up by Lew Taishoff.  Mr. Taishoff indicates that the Chenery issue was not raised by the taxpayer, which could be problematic.  The underlying facts had the IRS initially making a determination regarding revocation of an ESOP’s exempt status based on 1998 circumstances, but on summary judgment basing its position on different 1999 circumstances.  Chenery states (oversimplified) that courts cannot affirm administrative action based on a different basis than the administration initially did, otherwise the court ends up acting as the agency.  We may have more on this topic over the next week or two, but for those of you who want some more background info on Chenery now, you can see Les’ post from last week on CDP cases that touches on the administrative law rule.
  • From Peter Harvey and his colleague at Post & Schell, a write up of the Fresenius Medical Care Holdings, Inc. v. US case, where the First Circuit held that silence in a False Claims Act settlement agreement regarding potential tax consequences did not preclude the company from deducting some of the payments under the agreement.  In general, no deduction is allowed for a fine or penalty paid to the government for any violation of the law – See 162(f). Compensatory damages are not included as a fine or penalty, though, and may be deductible.  As indicated in the case and article, the Court distinguished itself from the Ninth Circuit position.
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