Government Brief Filed in MassMutual

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February 27, 2014

The government has filed its opening brief in MassMutual contesting the Court of Federal Claims’ conclusion that the taxpayer could accrue the amount of certain policyholder dividends in the year before they were paid.  See our prior post on this case and the New York Life case here.  The government’s brief raises three distinct objections to the decision.

The primary argument is that the liability to pay the dividends was not “fixed” under the all-events test.  The government contends that no individual obligation was fixed at the close of the year, even if all the premiums had been paid, … Read More

Briefing Underway in Barnes as Second Circuit Considers Application of Step-Transaction Doctrine to Impose Dividend Treatment on Movement of Foreign Cash

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February 21, 2014

In Barnes Group v. Commissioner, the Tax Court (Goeke, J.) looked askance at the taxpayer’s strategy for minimizing the tax consequences of a movement of foreign cash to U.S. affiliates.  As the taxpayer explained it, its foreign subsidiary in Singapore had excess cash and borrowing capacity that Barnes wanted to use to finance international acquisitions.  For the time being, however, there was no suitable acquisition target, and the cash was earning only 3% in short-term deposit accounts while it could have been used more profitably in the U.S. to reduce Barnes’s expensive long-term debt.  Barnes hired PricewaterhouseCoopers to help … Read More

Federal Circuit to Consider Accrual of Policyholder Dividends

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February 12, 2014

The Federal Circuit is preparing to consider a government appeal in Massachusetts Mutual Life Ins. Co. v. United States, on an issue involving accrual of annual dividends paid by a mutual insurance company to its policyholders.  This issue was also recently addressed by the Second Circuit, and it turns on an application of the “all events test.”

First, a quick refresher course.  The “all events test” is described as the “touchstone” for determining when a liability has been incurred and a deduction can be accrued.  Dating back to United States v. Anderson, 269 U.S. 422, 441 (1926), and … Read More

D.C. Circuit Holds in Loving that IRS Lacks Authority to Regulate Tax-Return Preparers

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February 12, 2014

Yesterday, the D.C. Circuit unanimously held in Loving v. IRS, that the IRS lacks statutory authority to regulate tax-return preparers.  See our previous coverage here.  In its February 11 decision, the court characterized the IRS’s interpretation as “atextual and ahistorical,” and, more humorously, as a large elephant trying to emerge from a small mousehole.

In 2011, the IRS for the first time attempted to regulate tax-return preparers, issuing regulations requiring that paid tax-return preparers pass an initial certification, pay annual fees, and complete at least 15 hours of continuing education courses each year.  The IRS estimated that the … Read More

Supreme Court to Address the Right to an Evidentiary Hearing in Summons Enforcement Proceedings

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February 3, 2014

The Supreme Court has granted certiorari in United States v. Clarke, No. 13-301, to explore the circumstances under which an entity is entitled to an evidentiary hearing before an IRS summons is enforced, so that it can question IRS officials about their motives for issuing the summons.  The parties’ different views of the case are aptly captured by the dueling questions presented.  The government says the case presents the question “whether an unsupported allegation” that the IRS issued a summons for an improper purpose entitles an opponent to examine IRS officials at an evidentiary hearing.  The entities contesting … Read More

Fifth Circuit Upholds Penalties in NPR

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January 31, 2014

The Fifth Circuit has finally issued its opinion in NPR (as reflected in our prior coverage, this case was argued almost two years ago), a case involving a Son-of-BOSS tax shelter in which the district court absolved the taxpayers of penalties.  The taxpayers were not as fortunate on appeal, as the Fifth Circuit handed the government a complete victory.

The court’s consideration of the two issues before the court of broadest applicability were overtaken by events — specifically, the Supreme Court’s December 2013 decision in United States v. WoodsSee our report here.  In line with that … Read More

Taxpayer’s Opening Brief Filed in BMC Software

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January 28, 2014

The taxpayer filed its opening brief in the Fifth Circuit appeal of BMC Software v. Commissioner.  As we described in our earlier coverage, the Tax Court relied on the legal fiction that accounts receivable created pursuant to Rev. Proc. 99-32 in a 2007 closing agreement were indebtedness for earlier years (2004-06) in order to deny some of the taxpayer’s section 965 deductions.  There are three main avenues of attack in the taxpayer’s brief.

First, the taxpayer argues that the Tax Court incorrectly treated those accounts receivable as “indebtedness” as that term is used in the exception to section … Read More

Ninth Circuit Sides with Government’s Interpretation of QAR Regulations in Bergmann

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January 16, 2014

That didn’t take long.  Less than two weeks after learning that the parties would not be mediating their dispute (see our previous report here), the Ninth Circuit issued a brief five-page unpublished opinion affirming the Bergmann case in favor of the government.  The court held that the time for filing a qualified amended return for an undisclosed listed transaction terminates when the promoter (here, KPMG) is first contacted by the IRS about examining the transaction, not when the IRS later determines the transaction is a tax shelter.

To recap the issue (see our original report here), … Read More

Supreme Court Hears Oral Argument in Quality Stores

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January 15, 2014

The Supreme Court heard oral argument on January 14 in Quality Stores.  Whether it was because of a lack of interest in the subject matter or because it was the third argument of the day at the unusually late hour of 1:00 (the Court’s usual schedule in recent years calls for two (sometimes only one) arguments in the morning that finish before lunch), the Court was less active than usual in its questioning.  Indeed, the government’s counsel began to sit down after using only five of his alloted 30 minutes for his opening argument (though he was then persuaded … Read More

Ninth Circuit Consideration of Bergmann Is Back On

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January 8, 2014

A court can lead the parties to mediation, but can’t make them drink.  We reported last month that, after oral argument, the Ninth Circuit had suspended its consideration of the Bergmann case so that the parties could pursue court-sponsored mediation.  Apparently, that effort never got off the ground.  Yesterday, the Ninth Circuit entered a new order:  “We previously withdrew submission pending an opportunity for mediation.  Because mediation has not resolved this appeal, the case is ordered resubmitted as of the date of this order.”  The Court will now proceed to write an opinion and issue its decision in due course.  … Read More

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