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Tax Procedure Roundup 9/27/13 –aka Recaptured Ox aka Procedure Notes Weekly

Posted on Sep. 29, 2013

Still working on the name of this weekly or biweekly summary of procedure items that piqued our interest.  Please feel free to keep suggesting names.  Attorney Bob Kamman thought we should come up with a clever anagram instead of a bad pun, which I like, but I am failing to generate any good ideas myself.  To the content.  Here are some of the items we read last week:

  • Sticking with being enlightened by Mr. Kamman, late last week he highlighted the order in AD Investment 2000 Fund, LLC, which is getting a lot of buzz.  Order can be found here.  Bob’s comment was, “what happens when taxpayer’s key witness takes the Fifth, because the federal government is conducting a criminal investigation of him and refuses to grant immunity?  Tax Court Judge Halpern found it appropriate this week to order under Rule 142(a)(1) that the burden of proof shifts to IRS.”  Mr. Jack Townsend has a great write up of this, which can be found on his tax procedure blog here.
  • This one is a bit old, and we may do a more in depth summary in the future, but TaxProf Blog has a write up of Professor Richard Harvey’s article, Worldwide Taxation of U.S. Citizens Living Abroad: Impact of FATCA and Two Proposals.  As many of you probably know, there are few, if any, people who are more knowledgeable about this topic.
  • If Loving You (tax preparer regs) is Wrong, I Don’t Want to Be Right, but it appears that most commentators think Dan Alban’s argument for the return preparers will carry the day as the Court of Appeals for the DC Circuit seemed to side with him.  See Reuters, (Hey) Tax Grrrl at Forbes, Miller and Chevalier here, and TaxProf Blog has a summary of a few others here.  If the Circuit Court upholds the lower court holding that the regs are invalid, will SCOTUS review?  Les’ prior coverage of the oral argument can be found here.
  • Reviewing US v. Clarke, an 11th Circuit decision where the Court vacated and remanded a summons enforcement, holding taxpayer was entitled to evidentiary hearing on its allegation of improper purpose of summons or the summons was used for retribution for failing to extend limitations period.  The Service has, or likely will soon, filed a petition for cert in the Supreme Court.
  • Jack Townsend reviews Lee Sheppard’s article on privilege in the wake of the Wells Fargo case out of the District of Minnesota.  The opinion is long, and, as Mr. Townsend indicates, really is not important for his blog post discussion.  The thrust of his post, found here, is that Sheppard’s statement that incompletely filed UTPs, or non-filed UTPs, do not specifically raise a penalty is not 100% accurate.  We discussed this case, although not that particular point, in Saltzman and Book, ¶13.11[2].  This case is very interesting for a handful of other reasons in addition to the discussion above.  One, it highlights that the Eighth Circuit follows the “because of” approach to determine if something is prepared in anticipation of litigation for the work product doctrine to apply (circuit split).   It is also important because work product was extended to some tax accrual workpapers and the Schedule UTP of the taxpayer, and also to the tax accrual workpapers of the taxpayer’s accountant.  This is an area that in house tax counsel is very interested in.
  • Reed v. Comm’r, where the Court held it had jurisdiction to review the Service’s refusal to reconsider a three year old offer-in-compromise during a later CDP levy hearing. The Service argued that since the taxpayer had not proposed a new offer-in-compromise, the Court had nothing to consider.  The Court did not agree, but the Service prevailed in the end, as it did not abuse its discretion.
  • At the intersection of two of my favorite topics (estates and tax procedure), Winford v. United States  was an interesting deposit/payment case decided by the Western District of Louisiana, where the taxpayer argued that its remittance with its extension request should be treated as a deposit, so it could obtain a refund outside of the statutory period.  Court held arguments failed under Rev. Proc. 84-58.  Service argued that all payments with an extension should be per se payments, not deposits.  The Court would not agree to that per se rule.
  • In Redondo v. United States, the Federal Circuit held that a taxpayer failed to meet the requirements of Section 6511(h), “financial disability”, because his doctor’s letter failed to meet the requirements of Rev. Proc. 99-21.  The doctor’s letter did not have the signed certification, and was not specific about the time period.  This is an unfortunate result if this individual was suffering from a debilitating disease.  The Court states he was suffering from Meniere disease (hearing and inner ear issues, including tinnitus and vertigo) and depression.  Depression is an uphill battle in these cases, and you need good physician testimony.  Keith posted on financial disability recently, which can be found here.
  • Notice 2013-61 provides guidance to employers and employees to make claims for refund or adjustments of overpayments of Federal Insurance Contributions Act (FICA) taxes and Federal income tax withholding (employment taxes) resulting from the Supreme Court decision in United States v. Windsor, 133 S.Ct. 265 (2013), and the holdings of Rev. Rul. 2013-17.
  • The Court held that the Dude (Phillips v. Comm’r) must abide the Commissioner, and his deductions for part-time bowling were not deductible because he lacked profit motive. That is a Big Lebowski reference; I suspect Mr. Phillips is not really like the Dude, just an avid bowler who can probably best my 89s and doesn’t need the bumpers.  This is more of a tax court procedure issue, but the Service was allowed to amend its pleading to conform to the evidence, which showed additional disallowed deductions.  The Court found implied consent by Mr. Phillips (who was Pro Se) for failing to object to the evidence during the proceeding.
  • New Jersey Court decides that civil union statute is unconstitutional because it does not provide equal tax benefits to marriage. CNN provides coverage.  The Governor of Pennsylvania is hiring a law firm to appeal the decision and defend the statute…not really.
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