Divided Ninth Circuit Reverses Tax Court in Sophy on Question of Mortgage Interest Deduction Limits for Unmarried Taxpayers
October 13, 2015
We previously reported (see here and here) on the Ninth Circuit’s consideration of an appeal involving the mortgage interest deduction – specifically, whether the statutory limits on that deduction apply on a per-taxpayer or per-residence basis. The unmarried taxpayers here (Charles Sophy and Bruce Voss) argued that they were each entitled to take a deduction up to the $1.1 million limit for the residence that they co-owned, and thereby receive double the tax benefit that a similarly situated married couple would receive, but the Tax Court disagreed. The briefing in this case was completed in April 2013, but … Read More
Federal Circuit Set to Address Post-Merger Application of “Same Taxpayer” Requirement for Interest Netting
October 9, 2015
The Federal Circuit is now considering an appeal by the government that seeks to restrict the availability of interest netting following mergers. Section 6621(d) provides for a “net interest rate of zero” on “equivalent underpayments and overpayments by the same taxpayer.” As we previously reported here and here, the government declined to pursue an appeal in Magma Power Co. v. United States, 101 Fed. Cl. 562 (2011), in which the Court of Federal Claims held that the “same taxpayer” requirement did not prevent interest netting where the taxpayer was a member of a consolidated group with respect to … Read More
Tax Court Relies on APA to Invalidate the Cost-Sharing Regulation Governing Stock-Based Compensation
October 2, 2015
We present here a guest post from our colleagues Patricia Sweeney and Andrew Howlett. A longer version of this post is published here.
In Altera Corp. v. Commissioner, 145 T.C. No. 3 (July 27, 2015), the Tax Court put the IRS and Treasury on notice that, when promulgating regulations premised on “an empirical determination,” the factual premises underlying those regulations must be based on evidence or known transactions, not on assumptions or theories. Otherwise, the regulations do not comply with the requirements of the Administrative Procedure Act (“APA”), 5 U.S.C. § 551 et seq. Applying the arm’s-length standard … Read More
August 31, 2015
The government has filed its opening brief in the Eleventh Circuit in the Clarke case. The case is now back in that court for the second time after a remand from the Supreme Court that did not persuade the district court to retreat from its prior denial of an evidentiary hearing. See our previous report here.
On the merits, the appellants’ primary argument is that they are entitled to a hearing to explore their allegation that the government is misusing the summons enforcement process to obtain discovery for pending Tax Court proceedings. To that end, the appellants ask the … Read More
July 27, 2015
For those who have been wondering why they have seen no reports on the evidentiary hearing in the Microsoft summons enforcement case (see our previous report here), the hearing was postponed at the request of both parties. It has been rescheduled for August 25.… Read More
July 16, 2015
[Note: Miller & Chevalier filed an amicus brief in this case on behalf of the National Association of Publicly Traded Partnerships]
As discussed in our previous report here, Comptroller of Maryland v. Wynne presented the Supreme Court with a tricky constitutional issue because it implicated some fundamental principles found in the Court’s precedents, but those principles did not all point in the same direction. In particular, Maryland relied on a state’s unquestioned power to tax the income of its domiciliaries wherever earned, while the taxpayers relied on the Commerce Clause’s limitations on double taxation.
The Court’s 5-4 May 18 … Read More
July 9, 2015
While the Eleventh Circuit begins the process of reconsidering the Clarke summons enforcement case following the Supreme Court’s remand (see our prior reports here), a federal district court is poised to address similar issues much sooner in a case that has garnered extensive publicity. (Incidentally, briefing is now underway in Clarke, with the respondents’ opening brief on appeal due on August 14.).
As most readers probably know, the government is engaged in a major transfer pricing audit of Microsoft in connection with its cost-sharing arrangements with affiliates in Puerto Rico and Asia. The IRS has hired the … Read More
Eleventh Circuit Set to Consider Whether IRS Impermissibly Used Summons Power to Obtain “Discovery” in the Tax Court
July 1, 2015
As we previously reported, the Supreme Court’s decision in the Clarke summons enforcement case was not a complete victory for the government. The Court set forth a standard that appeared to leave a little more room than before for summoned parties to obtain an evidentiary hearing in resisting summons enforcement actions. The Court left open the possibility that the lower courts on remand could require a hearing in Clarke itself at which IRS officials would have to testify.
The Eleventh Circuit elected not to address this question in the first instance after the Supreme Court remand. Instead, it sent … Read More
Denial of Rehearing in MassMutual Tees Up Government Decision on Seeking Supreme Court Review of All-Events Test Issue
June 29, 2015
Let me just begin with a brief apology to the regular readers of this blog for the infrequency of postings over the past several months. A variety of factors and the press of other matters have interfered with blogging, but we are resolved to get back up to speed in the upcoming months by providing some analysis of intervening developments and posts on some new pending cases.
As we previously reported here, the Second Circuit and the Court of Federal Claims reached different results in considering the application of the all-events test to annual policyholder dividends paid by mutual … Read More
March 17, 2015
The Fifth Circuit reversed the Tax Court’s decision in BMC Software yesterday. As we speculated that it might at the outset of the case here, the Fifth Circuit’s decision hinged on how far to take the legal fiction that the taxpayer’s accounts receivable created under Rev. Proc. 99-32 were deemed to have been established during the taxpayer’s testing period under section 965(b)(3). While the Tax Court treated that legal fiction as a reality that reduced the taxpayer’s section 965 deduction accordingly, the Fifth Circuit treated that legal fiction as just that—a fiction that had no effect for purposes of … Read More