Government’s Opening Brief Filed in Container

The government has filed its opening brief (attached below) in the Fifth Circuit in Container, challenging the Tax Court’s decision to treat loan guarantee fees as foreign-source income.  As discussed in our previous post, the Tax Court concluded that such guarantee fees are best analogized to compensation for services. 

The brief is unusually concise, using barely half of the maximum available pages.  As it argued in the Tax Court, the government maintains on appeal that the fees are better analogized to interest, which would result in treating them as U.S.-source income.  It emphasizes three elements of the fees … Read More

Response Brief Filed in Castle Harbour Redux

On September 14, 2010, the tax matters partner (“TMP”) for Castle Harbour LLC filed its response brief in TIFD III-E Inc. v. United States, No. 10-70 (2nd Cir.) (brief linked below).  For our prior coverage of this case, see here.  As many readers are no doubt aware, this is the second time this case is before the Second Circuit.

In the response brief , the TMP frames the issues as: (1) whether the district court, upon remand, correctly determined the investment banks were partners under I.R.C. section 704(e)(1), (2) whether the IRS can reallocate income under I.R.C. section … Read More

Schizophrenic Application of Tax Penalties (Part III)

We have been promising a post on the application of the section 6664 reasonable cause and good faith defense to tax penalties as it relates to reliance on tax advisers.  Here it is.

There has been much activity in this area in the district courts and the Tax Court and not much winnowing or rule setting in the circuits.  This is understandable; the application of the standards is highly factual and is well-placed in the hands of trial judges.  We will analyze here some potential inconsistencies in two recent high-profile section 6664 decisions, Canal Corp. v. Commissioner, (Slip … Read More

Securities Loan Case Before the Ninth Circuit

Lately, the IRS has had a successful run of attacking transactions involving purported securities loans.  See Anschutz Co. v. Commissioner, 135 T.C. 5 (July 2010); Calloway v. Commissioner, 135 T.C. 3 (July 2010); Samueli v. Commissioner, 132 T.C. 4 (March 2009).  Two of the cases, Samueli and Anschutz, involve the construction of I.R.C. section 1058, which provides for non-recognition treatment of a loan of securities that meets the following criteria: (1) the loan agreement provides for the return of securities identical to the securities transferred; (2) the agreement provides for payments to the transferor of amounts … Read More

The Best Minds in Transfer Pricing Spar Over the Income Method

Practitioners interested in the more interesting conceptual aspects of transfer pricing should mark October 27th on their calendars.  On that day, the International Fiscal Association is sponsoring a debate on the usefulness of the income method to value intangibles in the transfer pricing context.  Dubbed “The Great Debate” by IFA, this year’s event will pit the best transfer pricing practitioners in the world (including Miller & Chevalier’s Bob Kirschenbaum and Baker & McKenzie’s Jim O’Brien) against each other.  Neither will know which position they are arguing prior to a coin toss.  The gloves will surely come off and our current … Read More

Reply Brief Filed in Virginia Historic

The government filed its reply brief in Virginia Historic Tax Credit Fund 2001, LLC v. Commissioner, No. 10-1333 (4th Cir.), on September 1, 2010.  The brief is linked below.

In its reply, the government argues that the tax characterization of the investor transactions, i.e., whether the investments were equity contributions or merely the purchase of state tax credits, is subject to the de novo standard of review.  Accordingly, the government contends that the Tax Court’s determination that the taxpayers were bona fide equity investors is a question of law not subject to the more deferential “clear error” standard of … Read More

Supreme Court in the Future for Kawashima?

On August 30, 2010, the Ninth Circuit granted Petitioner’s Motion to Stay the Mandate in Kawashima.  This stays the mandate in the case pending the filing of a petition for writ of certiorari and confirms our prior speculation that petitioner is going to try to make a run at the Supreme Court.  We will be watching the case with interest and will post the petition when it appears.… Read More

Mayo Foundation Oral Argument Scheduled for November 8

The Supreme Court has released the oral argument schedule for its November session.  The argument in Mayo Foundation is scheduled as the second case on Monday November 8, meaning it will begin around 11:00.  A decision is expected to issue in the spring, almost certainly no later than June 2011.  We will provide a report on the argument in November.… Read More

No Rehearing in Deloitte

Confounding the expectations of this observer (and others), the government has allowed the deadline to pass without seeking rehearing of the Deloitte case in the D.C. Circuit.  That development does not mean, however, that the government has decided to live with the Deloitte decision.  To the contrary, the most likely explanation for the government’s inaction is that it plans to seek Supreme Court review and does not want to delay that process.  A petition for certiorari is currently due on September 27.  If the government files by that time, the Court will act on the petition in enough time for … Read More

It’s No Fun Being a Legal Alien Either (If You Plead to a Tax Crime)

On August 4, 2010, the Ninth Circuit denied panel and en banc rehearing in a case applying 8 U.S.C. § 1101(a)(43)(M)(i) to hold that a tax offense other than tax evasion is a crime involving fraud or deceit and thus an aggravated felony under the immigration laws (which allows for deportation).  Kawashima v. Holder, 2010 U.S. App. LEXIS 16125 (9th Cir. Aug. 4, 2010).  This is actually the fourth opinion issued by the Ninth Circuit in the case, appending a three-judge dissent from denial of en banc rehearing to the third panel opinion issued back in January 2010. Kawashima … Read More

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