Original Tax Court Opinion I have previously written about the case of Wendell Falls Development, LLC v. Comm’r, T.C. Memo 2018-45. In that case, the Tax Court denied a charitable conservation easement deduction relating to a 125-acre parcel that was part of a total 1,280-acre development outside of Raleigh, North Carolina. I noted that the…
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Background Surprising to many, qualified retirement accounts received by a spouse in divorce may lose creditor protection, a significant beneficial feature of retirement accounts. In the case of In re Lerbakken, filed on October 16, 2018, the Bankruptcy Appellate Panel of the Eighth Circuit held that qualified accounts received by the non-participant spouse pursuant to…
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Background In a recent case out of the Seventh Circuit, a large corporate taxpayer lost a involving three like-kind transactions under IRC 1031. Applying the substance over form doctrine, the Court upheld the imposedtax liability of approximately $437,000,000 and accuracy related penalties under IRC 6662(a) of approximately $87,000,000. In this case, Exelon Corporation (“Exelon”) sold…
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Last week the Tax Court handed down its opinion in Melasky v. Comm’r, 151 T.C. 9 (Oct. 10, 2018). The important issue in Melasky relates to the application of the proceeds of a levy. Four days prior to the date the levy was made, the taxpayer hand-delivered a check to the IRS and properly designated…
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Introduction In tax planning, it always has been important to determine whether an activity qualifies as a “trade or business.” There are a number of consequences. An important consequence is being able to deduct “ordinary and necessary” business expenses under Sec. 162. Others are the applicability of the 3.8% net investment income tax, hobby loss…
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In the recent Harbor Lofts case, the Tax Court clarified that a long-term lessee of real property is not entitled to take a deduction with respect to a grant of a conservation easement on that same property.With this case, we are reminded again that easements can be completely denied, even when a substantial interest in…
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The Internal Revenue Service (“IRS”) recently issued proposed regulations on the new deduction for qualified business income (“QBI”) under new Code section 199A. Among other things, the proposed regulations address the hotly debated interpretive issue regarding the term “specified service trade or business” (“SSTB”). SSTB is a key term under section 199A because, if an…
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On August 14, 2018 the 5th Circuit upheld the Tax Court’s September 9, 2016 bench opinion in PBBM-Rose Hill, LTD v. Comm’r. The case involved a $15,160,000 conservation easement deduction under IRC § 170(h) that was denied based on a technicality relating to strict compliance with the extinguishment regulations under Treas. Reg. § 1.170A-14(g)(6)(i) and a rejection of…
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Where does your trust reside? Does it reside in more than one state? Does it reside nowhere? What are the implications of a trust’s residence? One important implication is how the trust will be taxed for state income tax purposes. With a varied approach to the income taxation of trusts among the states, it is…
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Background The traditional estate planning game has been to: (1) ensure client wishes were achieved by drafting wills and trusts such that the assets within the client’s estate served the intended purposes and landed in the hands of the desired beneficiaries, and (2) minimize or eliminate estate (and generation skipping) taxes. Since 2000, a few…
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