Schizophrenic Application of Tax Penalties (Part I)

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July 29, 2010

Based our recent post on the Sala decision here, we have had several comments inquiring about the varied application of penalties in the “tax shelter” cases.   This is the first in a planned series of responses to those comments that will try to explain, iron out, or at least flag, some of the irregularities. 

When looking at the application of penalties to ”shelter” cases generally, procedural posture matters.  A good example of this is Sala.  Why did the 10th Circuit discussion in Sala omit penalties?  Because it was a refund case in which the taxpayer appears to have … Read More

Appellees’ Response Filed in Virginia Historic

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July 27, 2010

The Appellees filed their response brief yesterday in Virginia Historic Tax Credit Fund 2001 LP v. Comm’r, No. 10-1333 (4th Cir.) (linked below).  Our previous discussion of the case is here.

The government has advanced two basic arguments.  First, it argues that the partners of the state tax credit partnerships were not bona fide partners that made capital contributions; rather, the government contends, the alleged partners were, in substance, purchasers of state tax credits.  As such, the proceeds of these sales transactions are gross income to the partnerships, not non-taxable contributions to capital.  In making this argument, the … Read More

Tenth Circuit Reverses District Court in Sala

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July 26, 2010

In a brief (and some might say terse) opinion, the Tenth Circuit has reversed the District Court in Sala v. United States, 552 F. Supp. 2d 1167 (D. Colo. 2008)  (decision linked below).  As many readers will recall, Sala was considered an outlier among the tax shelter cases litigated over the past few years, with the taxpayer winning at trial in a Son-of-BOSS case.  See our prior discussion of the case here.

Citing to Coltec Indus., Inc. v. United States, 454 F.3d 1340, 1356 (Fed. Cir. 2006), and Black & Decker Corp. v. United States, 436 F.3d … Read More

Welcome to the Tax Appellate Blog!

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July 23, 2010

The Tax Appellate Blog is a new blog dedicated to covering important tax cases pending before the various federal  courts of appeals that are of interest to practitioners and others who follow the development of federal tax law. We will try to post regularly as developments warrant, and we welcome commentary from the broader tax law community. We also plan to provide links to the pleadings and other pertinent documents in those cases.  So, welcome aboard.… Read More

Tenth Circuit Engaged in Lengthy Deliberation in Sala

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July 23, 2010

In what is considered by many an anomaly among the so-called “Son-of-BOSS” cases, the IRS lost the trial of a refund claim before the United States District Court for the District of Colorado in 2008.  See Sala v. United States, 552 F. Supp. 2d 1167 (D. Colo. 2008).  As many readers are no doubt aware, “Son-of-BOSS” is the nickname given to a type of loss-generating transaction described in IRS Notice 2000-44 (“BOSS” stands for “Bond and Option Sales Strategy”).  In one variation of such transactions, a taxpayer both buys and sells options on a given position and then contributes … Read More

U.S. Opening Brief Filed in Quality Stores

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July 22, 2010

On July 13, 2010, the government filed its opening brief in the Sixth Circuit in In re Quality Stores, Inc:  United States v. Quality Stores, Inc., No. 10-1563.  In that case, the government is appealing the district court’s surprising decision holding that severance payments made to employees pursuant to an involuntary reduction in force are not “wages” for FICA tax purposes if they qualify for exclusion from income tax withholding as “supplemental unemployment compensation benefits” (“SUB pay”) under Code section 3402(o)(2).  As the district court acknowledged, its decision directly conflicts with the Federal Circuit’s ruling in CSX Corporation v. Read More

D.C. Circuit Declines to Follow Textron

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July 6, 2010

The D.C. Circuit has now decided the Deloitte case that was previously discussed on this blog.  (See D.C. Circuit Considers Work Product Issues in Deloitte for that discussion and links to the briefs in the case.)  The decision addresses two basic issues, and on both scores it gives comfort to taxpayers who do not want to furnish the IRS with their counsel’s candid assessment of litigation prospects on potential tax disputes.

With respect to the mental impressions of taxpayer’s counsel embodied in documents that are acknowledged to be work product, the court held that a taxpayer does not waive the … Read More