Briefing Complete in Woods

The government has filed its reply brief in the Supreme Court in Woods.  See our reports on the opening briefs here and here.  The discussion of the jurisdictional issue focuses less on the textual analysis set forth in the government’s opening brief and more on the policy implications of adopting the taxpayers’ position.  The government asserts that the taxpayers’ reading of the statute would effectively “negate Congress’s grant of authority to courts in partnership-level proceedings to determine the applicability of penalties.”

On the merits, the reply brief devotes most of its attention to responding to the taxpayers’ threshold … Read More

Supreme Court Schedules Quality Stores for Conference

The taxpayer has filed its brief in opposition in the Supreme Court in Quality Stores.   (See our earlier report on the certiorari petition here.)  The government has the option of filing a reply brief, which has no specific due date, but likely would be filed no later than early September.

The brief in opposition argues at length that the Sixth Circuit’s decision is correct on the merits.  With respect to the government’s reliance on a circuit conflict, the taxpayer describes this as a “shallow conflict” that does not justify a grant of certiorari.  Specifically, the taxpayer … Read More

Taxpayers’ Brief Filed in Woods

The taxpayers have filed their response brief in the Supreme Court in the Woods case, contending first that the courts lacked jurisdiction to impose the penalties requested by the IRS and, second, that, if jurisdiction exists, the Fifth Circuit correctly held that the valuation misstatement penalty could not be imposed.

On the jurisdictional point, the brief emphasizes the same basic point made by the courts that have questioned jurisdiction in similar partnership cases (see our previous report here) – namely, that the statute allows for partnership-level jurisdiction in a TEFRA proceeding only over a penalty that relates to adjustment … Read More

Fifth Circuit Rules for Government in Rodriguez

The Fifth Circuit has issued its opinion in Rodriguez, unanimously affirming the Tax Court in an opinion authored by Judge Prado.  As forecasted in our earlier report on the oral argument (see here), the Court saw no way for the taxpayer to get around the technical obstacle that a section 951 inclusion is neither an actual dividend nor expressly denominated by Congress to be a “deemed dividend.”  On the first point, the court stated that “actual dividends require a distribution by a corporation and receipt by the shareholder; there must be a change in ownership of something … Read More

Eleventh Circuit Affirms Tax Court in Peco Foods

In an unpublished opinion, the Eleventh Circuit affirmed the Tax Court’s decision in Peco Foods.  As we described in our earlier coverage here, the Tax Court held that the taxpayer could not subdivide broader classes of assets acquired in two transactions into discernible subcomponents for depreciation purposes because the taxpayer had agreed to an express allocation (in both agreements at issue) to the broader classes “for all purposes (including financial accounting and tax purposes).”  The Tax Court decided that because of that express allocation, the Danielson rule and language in section 1060 prevented the taxpayer from subdividing the … Read More

Extension Obtained to Respond in Quality Stores

The taxpayer has obtained an extension until July 31 to respond to the government’s petition for certiorari in Quality Stores.… Read More

Both Parties Questioned Extensively at Rodriguez Oral Argument

The Fifth Circuit held oral argument in the Rodriguez case before Circuit Judges DeMoss, Dennis, and Prado.  As we have previously reported here and here, the issue in this case is whether the taxpayers can receive qualified dividend income treatment for amounts included in their income under section 951.  Taxpayers’ counsel stated that he had three main arguments:  (1) section 951 is just an anti-deferral statute, not concerned with characterizing the income as dividend or ordinary income; (2) Private Letter Rulings and other Executive Branch announcements had previously characterized section 951 inclusions as “deemed dividends”; and (3) it was … Read More

ExxonMobil Victory in Interest Netting Case Is Final

[Note:  Miller and Chevalier represented the taxpayer Exxon Mobil Corp. in this case.]

We previously reported on the Second Circuit’s consideration of the interest netting issue that had been resolved against the taxpayer by the Federal Circuit in FNMA v. United States, 379 F.3d 1303 (2004).  Although we did not follow up with a timely report on the Second Circuit’s decision in that case in favor of the taxpayer, the decision is now final, with the government having allowed the time to seek certiorari to expire.  To close the loop, we provide here a summary of the decision and … Read More

Supreme Court Briefing Underway in Woods on Penalty and TEFRA Issues

The government has filed its opening brief in the Supreme Court in the Woods case, which involves whether the 40% gross valuation overstatement penalty applies in the context of a basis-inflating transaction held not to have economic substance.  See our earlier report here.

The government’s arguments on the question whether the penalty can be applied in these circumstances are similar to those discussed here previously and addressed in several court of appeals decisions.  It relies on the “plain text” of the statute, arguing that “[t]he word ‘attributable’ means ‘capable of being attributed’” and therefore a finding of lack of … Read More

Petition for Certiorari Filed in Quality Stores

The government has finally filed its long-awaited cert petition in Quality Stores, asking the Supreme Court to review the Sixth Circuit’s ruling that severance payments paid to employees pursuant to an involuntary reduction in force are not “wages” for FICA tax purposes.  In our previous coverage, we have noted why this case is a strong candidate for Supreme Court review, and the cert petition sets those forth succinctly:  (1) “the Sixth Circuit’s decision in this case squarely conflicts with the Federal Circuit’s decision in CSX Corp.”; and (2) “the question presented here is both recurring and important.”  … Read More

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