Carlo Marinello ran a small business in upstate New York. He also ran into tax trouble.
Marinello was charged and convicted for the willful failure to file personal tax returns and corporate tax returns for his business over a series of years, which are misdemeanor charges under the Internal Revenue Code. See I.R.C. § 7203. The government also charged Marinello with a felony, known as “tax obstruction.” Under section 7212(a) of the Code, tax obstruction occurs in two situations:
- Under the first clause of the statute, someone commits a felony if he “corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title.” I.R.C.
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William Kardash was a minority shareholder in a Florida company involved in the construction industry; the majority shareholders were skimming cash from the company, apparently without his knowledge or complicity. Kardash wound up with a significant tax bill for the company’s taxes, as the Eleventh Circuit ruled that he was liable as a transferee under section 6901 of the Internal Revenue Code and applicable state law. Kardash v. Comm’r, No. 16-14254, 2017 U.S. App. LEXIS 14389 (11th Cir. Aug. 4, 2017).
Transferee liability represents one of several theories that the IRS can use to hold one person liable for another person’s taxes.… Read More
When the IRS loses a pro se case in Tax Court, it’s noteworthy. When it loses to a prisoner who allegedly made frivolous tax filings, and the court issues a precedential opinion, something strange is going on. Last week that happened in a collection due process case. Vigon v. Comm’r, No. 28788-14L, 2017 U.S. Tax Ct. LEXIS 37 (July 24, 2017).
When the IRS files a notice of federal tax lien or a notice of intent to levy against a taxpayer’s property, it is required to provide the taxpayer with notice of his right to a collection due process hearing.… Read More
What is a tax? The Supreme Court has indicated that taxes are “pecuniary burdens laid upon individuals or their property, regardless of their consent, for the purpose of defraying the expenses of government or of undertakings authorized by it.” New York v. Feiring, 313 U.S. 283, 285 (1941). But the label that Congress applies counts too; that means something that looks like a tax may not be treated like a tax because Congress chose to call it something else. This point is illustrated by a recent district court case decided under the Affordable Care Act, which held that a mandatory reinsurance contribution imposed upon a self-funded, self-administered group health plan was not a tax recoverable through a refund action.… Read More
Bad tax advice can be expensive, but sometimes it’s better than no advice at all.
Last week, the Tax Court issued an opinion in a complicated international tax case that illustrates the principle that incorrect advice can still help a taxpayer, as it may support a defense to a penalty. Grecian Magnesite Mining, Indus. & Shipping Co. v. Comm’r, No. 19215-12, 2017 U.S. Tax Ct. LEXIS 36 (July 13, 2017).
In Grecian Magnesite, the taxpayer was a foreign corporation formed in the Hellenic Republic and based in Athens. 2017 U.S. Tax Ct. LEXIS 36 at *3. The taxpayer had an interest in Premier Chemicals, LLC (“Premier”), which was its sole connection to the United States.… Read More
The Pennsylvania Constitution imposes a requirement that taxes be uniform: “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” Pa. Const. Art. VIII, § 1. On July 5th, the Pennsylvania Supreme Court unanimously held that a tax authority cannot selectively target commercial property for assessment appeals in light of this uniformity requirement. Valley Forge Towers Ap’ts N. LP v. Upper Merion Area Sch. Dist., No. 49 MAP 2016, 2017 Pa. LEXIS 1520 (Pa. July 5, 2017).
Taxpayers who owned commercial property in Upper Merion School District brought an action for declaratory and injunctive relief asserting that the school district had a practice of discriminating against commercial properties by targeting them for assessment appeals, while ignoring the fact that many single family homes were significantly under assessed to a greater degree than commercial properties.… Read More
Taxpayers who are the subject of collection action by the IRS have the option of requesting a collection due process hearing before the IRS either files a tax lien or pursues a levy against the taxpayer’s property. I.R.C. §§ 6320; 6330. The Tax Court then has jurisdiction to review the administrative disposition. I.R.C. § 6330(d). Typically, these hearings (and the court’s subsequent review) focus on issues concerning the propriety of the proposed collection action, as well as potential collection alternatives.
The underlying merits of the tax assessment are usually not at issue because, in most cases, the taxpayer will have had a prior opportunity to seek Tax Court review of the assessment.… Read More
Whatever you may think about the wisdom of Philadelphia’s “Soda Tax,” the City has certainly done well against some fairly stiff opposition:
- The beverage industry spent millions lobbying against the ordinance creating the tax. It passed anyway. City 1, Industry 0.
- The beverage industry launched a case challenging the tax in the Court of Common Pleas. The plaintiffs’ complaint was promptly tossed as presenting no legally viable challenge to the tax. City 2, Industry 0.
- The beverage industry appealed, enlisting thirty-six state legislators as support. On June 14th, the Commonwealth Court rejected that challenge. Williams v. City of Philadelphia, No.
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The Tax Equity and Fiscal Responsibility Act (TEFRA) was enacted in 1982 to govern partnership audits. Despite its age, TEFRA still generates novel issues for courts. On June 7th, the Ninth Circuit affirmed the dismissal of a Tax Court petition brought by a taxpayer who owned his partnership interest through a limited liability company that was disregarded for tax purposes, ruling that form controls over substance, at least in this narrow context. Seaview Trading LLC v. Comm’r, No. 15-71330, 2017 U.S. App. LEXIS 10109 (9th Cir. June 7, 2017).
Robert Kotick and his father formed Seaview Trading, LLC, a Delaware limited liability company that was taxable as a partnership.… Read More
The recent opinion in Wells Fargo & Co. v. United States, No. 09-CV-2764 (PJS/TNL), 2017 U.S. Dist. LEXIS 80401 (D. Minn. May 24, 2017) provided a thoughtful application of the economic substance doctrine.
In the same opinion, the court also addressed the applicability of a negligence penalty for the underpayments associated with the aspects of the STARS transaction that lacked economic substance; the penalty potentially applied to its claims for foreign tax credits derived from the trust component of the transaction. Wells Fargo, 2017 U.S. Dist. LEXIS 80401 at *13. The question was what a taxpayer must establish to avoid a negligence penalty under section 6662(b)(1) of the Internal Revenue Code; Wells Fargo argued that it should not be penalized if the position it took on its tax return was objectively reasonable under relevant authority.… Read More