Briefing Complete in Sophy on Treatment of Mortgage Interest Deduction for Non-Married Couples

The Government has filed its brief in the taxpayers’ appeal to the Ninth Circuit of the Tax Court’s decision that the mortgage interest deduction applies on a per residence rather than per taxpayer basis.  See our previous coverage here.   Section 163(h)(3) limits deductible mortgage interest to “acquisition indebtedness” of $1,000,000 and “home equity indebtedness” of $100,000.   With their Beverly Hills home and Rancho Mirage secondary residence, domestic partners Bruce Voss and Charles Sophy had considerably more indebtedness, and argued that, together, they should be able to deduct interest paid on up to $2.2 million of acquisition and home equity … Read More

Cert Petition in Quality Stores Now Due on May 3

The Supreme Court has granted the government’s request for a one-month extension to file its petition for certiorari in Quality Stores, extending the due date from April 4 to May 3.  As we have previously observed, we believe there is a strong likelihood that the government will petition in this case and that the Court will grant certiorari to resolve the circuit conflict on the treatment for FICA purposes of supplemental unemployment compensation benefits.  See our previous coverage here.

With this extension, however, the Court likely will not decide whether to grant certiorari until early October, after the … Read More

Government Files Opening Brief in Loving; Seeks Expedited Appeal

Two days after the D.C. Circuit denied its motion for stay pending appeal, the Government moved for an expedited appeal and concurrently filed its opening brief.  The Government seeks an expedited resolution of its appeal of the decision of the U.S. District Court for the District of Columbia (Judge James E. Boasberg) invalidating a licensing regime for paid federal tax return preparers.  Under the Government’s proposed briefing schedule, briefing would be complete by May 31, 2013.  The Appellees have consented to the Government’s proposed briefing schedule.

In its opening brief, the Government argues that the tax return preparer regulations are … Read More

Eleventh Circuit to Address Scope of Danielson Rule

With oral argument scheduled for April 18 in Peco Foods v. Commissioner, No. 12-12169, the Eleventh Circuit will soon decide a case that involves the scope of the Danielson rule.  That rule, established in Danielson v. Commissioner, 378 F.2d 771, 775 (3d Cir. 1967), provides that “a party can challenge the tax consequences of his agreement as construed by the Commissioner only by adducing proof which in an action between the parties to the agreement would be admissible to alter that construction or to show its unenforceability because of mistake, undue influence, fraud, duress, etc.”  The Eleventh Circuit … Read More

D.C. Circuit Denies Government’s Stay Request in Loving

The D.C. Circuit (Rogers, Tatel, and Brown, JJ.) has denied the government’s request for a stay of the district court’s injunction of the new registration regime for paid tax-return preparers.  The court did not give an elaborate explanation, simply stating that “[a]ppellants have not satisfied the stringent requirements for a stay pending appeal.”  Thus, the court did not indicate whether the government fell short because its motion was not sufficiently convincing that the district court was likely to be reversed on the merits or because it did not make a sufficiently compelling case of irreparable harm.

In any case, it … Read More

Supreme Court Agrees to Hear Penalty Issue in Woods

The Court this morning granted the government’s petition for certiorari in United States v. Woods, No. 12-562.  As we recently reported, the issue presented in the petition concerns the applicability of the valuation overstatement penalty — specifically, whether tax underpayments are “attributable to” overstatements of basis when the inflated basis claim has been disallowed based on a finding that the underlying transactions lacked economic substance.

The Court also added a second question for the parties to brief — “Whether the district court had jurisdiction in this case under 26 U.S.C. section 6226 to consider the substantial valuation misstatement … Read More

Supreme Court Denies Certiorari in Union Carbide

The Court this morning denied Union Carbide’s petition for certiorari that sought review of the Second Circuit’s denial of claimed research and experimentation credits for the costs of certain supplies used in production process experiments.  The petition had also asked the Court to consider the court of appeals’ application of Auer deference priniciples.  See our prior reports here.

The Court also entered an order denying a motion by the National Association for Manufacturers to file an untimely brief as amicus curiae in support of the petition.  Although the Court routinely grants motions for leave to file timely amicus briefs, … Read More

Reply Brief Filed on Stay Motion in Loving

Yesterday, in Loving v. IRS (the subject of a recent post), the Government filed its reply brief in support of its motion to stay the district court’s injunction of the new registration regime for paid tax-return preparers.  With respect to its likelihood of success on the merits, the Government argued the ambiguity of the statute authorizing Treasury to “regulate the practice of representatives of persons before” it.   With respect to the threat of irreparable harm, the Government argued that the injunction risked delaying the implementation of the regulatory regime until the 2015 return-preparation season and that the problem of unregulated … Read More

Government Seeks Appellate Stay of Order Enjoining Enforcement of New Registration Regime for Paid Tax Return Preparers

The Government has appealed to the D.C. Circuit from the district court decision enjoining the IRS from enforcing its new registration regime for paid tax return preparers.  Loving v. IRS, D.C. Cir. No. 13-5061.  The Government has also asked the court of appeals to stay the decision pending appeal, after the district court declined to grant a stay.  The Government’s stay motion recites that, the appeal has not yet been authorized by the Solicitor General’s office, but that, if the appeal is authorized, the Government intends to file its opening brief in March and to move for an expedited … Read More

Supreme Court Poised to Consider Penalty Issue in Woods

The government has asked the Supreme Court to resolve a longstanding conflict in the circuits on the applicability of the penalty for valuation misstatements in United States v. Woods, No. 12-562.

The Code contains a variety of civil penalty provisions for conduct connected with underreporting of tax.  The basic penalty is found in section 6662, which imposes an accuracy-related penalty for underpayments of tax “attributable to” different kinds of conduct, including negligence, substantial understatements of tax, and substantial overvaluations.  The penalty is 20% of the portion of the underpayment “attributable to” the misconduct.  I.R.C. § 6662(a), (b).  Section 6662(e) … Read More

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