Category: Tax Controversy

Collection Actions Invalidated for Failure to Follow Required Procedures

Tax, Tax Controversy

The Tax Court recently issued decisions in Kearse v. Commissionerand Commission v. Romano-Murphy (“Romano-Murphy II“). Both cases involved review of administrative determinations made by IRS appeals officers in collections due process (“CDP”) proceedings. Section 6330(c)(1) requires appeals officers conducting CDP hearings to verify that the requirements of any applicable law or administrative procedure related to the assessment…
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Sixth Circuit Clarifies Substance Over Form Doctrine in “MidCo” Case

Business Transactions, Income Tax, Tax, Tax Controversy

After the Summa Holdings case, the substance over form doctrine was left with a significant black eye by the Sixth Circuit. On May 15, 2019, the Sixth Circuit, upheld a transferee liability claim against shareholders of a Tennessee corporation while also clarifying its holding is Summa Holdings. While the Summa Holdings discussion is certainly interesting, the…
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Tax Court Acknowledges Remote Material Participation

Income Tax, Tax, Tax Controversy, TCJA

Can the material participation tests of Section 469 be met remotely? The Tax Court says yes. In a recent Memorandum Opinion, the Tax Court (the “Court”) held that Fred Barbara (“Barbara”) satisfied the requirements for materially participating in his Chicago based business despite living in Florida approximately 60% of the year. The Internal Revenue Service (the…
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When Your Captive Is Not In the Insurance Business

Income Tax, Tax, Tax Controversy

In a recent Tax Court Memorandum opinion, the Tax Court (the “Court”) held that a microcaptive insurance arrangement did not meet the requirements to be classified as insurance for federal income tax purposes, and thus upheld the Internal Revenue Service’s (the “IRS”) Notice of Deficiency (the “Notice”) against the company and its related taxpayers who…
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Cavanaugh – Deduction Denied for CEO Misconduct Settlement Payments

Income Tax, Tax Controversy

In Cavanaugh v. Commissioner, the Fifth Circuit Court of Appeals addressed the deductibility of settlement payments made by a corporation to avoid liability arising from the misconduct of a shareholder-employee. Affirming the Tax Court ruling from 2012, the Fifth Circuit held that the settlement payments at issue in Cavanaugh were not deductible under IRC § 162(a) because the…
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Assignor Beware: Partnership Interest Held to be Limited Partner Interest Rather than Assignee Interest 

Estate Planning, Tax, Tax Controversy

Overview The Tax Court recently held that a partnership interest assigned to a revocable trust was not an assignee interest but rather was a limited partnership interest, and as result, the discounts for lack or marketability and lack of control were reduced and eliminated respectively. The Estate of Frank D. Streightoff (the “Estate”) argued that…
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The Fight Against Secret Tax Law

State and Local Tax, Tax, Tax Controversy

One of the most difficult aspects of state and local tax practice is the lack of publicly available guidance addressing a client’s situation. One potentially rich source of guidance are orders issued by administrative tribunals in taxpayer appeals. These orders are similar in form and function to judicial opinions. Unlike judicial opinions, however, these orders…
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High Stakes 1031 Goes Bust: Exelon

Income Tax, Tax, Tax Controversy

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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