Justia U.S. D.C. Circuit Court of Appeals Opinion Summaries

Articles Posted in Tax Law
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After the Commissioner issued tax adjustments to the partnership of BCP, members of BCP, themselves limited partnerships, challenged the adjustments, arguing they were untimely and that the Commissioner mistakenly determined that the investment partnership was a sham. The tax court found the adjustments timely and upheld the Commissioner's adjustments.The DC Circuit concluded that the tax court applied correct legal precedent and committed no clear error in its findings upholding the Commissioner's tax adjustments. The court explained that the tax court outlined various events that occurred before the taxpayers' individual extensions or the partnership extension were signed, all of which would have put the taxpayers on notice that they should not rely on E&Y's advice any longer. The court also concluded that there was no error in the tax court's determination that BCP was a "sham" partnership. The court explained that the tax court correctly applied Luna v. Commissioner, 42 T.C. 1067 (1964), to determine whether the parties intended to, and did in fact, join together for the present conduct of an undertaking or enterprise. In this case, the tax court correctly concluded that BCP failed the Luna analysis. Finally, the court concluded that the tax court did not abuse its discretion in denying a non-participating party's intervention. Accordingly, the court affirmed the tax court's judgment. View "BCP Trading and Investments, LLC v. Commissioner of Internal Revenue" on Justia Law

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The DC Circuit denied petitions for review challenging FERC's orders concerning SFPP's tariffs. SFPP challenges FERC's decisions to deny SFPP an income tax allowance, to decline to reopen the record on that issue, and to deny SFPP's retroactive adjustment to its index rates. Shippers challenge FERC's disposition of SFPP's accumulated deferred income taxes (ADIT) and its temporal allocation of litigation costs.The court held that FERC's denial of an income tax allowance to SFPP was both consistent with the court's precedent and well-reasoned, and that FERC did not abuse its discretion or act arbitrarily in declining to reopen the record on that issue. Furthermore, FERC reasonably rejected retroactive adjustment to SFPP's index rates. The court also held that FERC correctly found that the rule against retroactive ratemaking prohibited it from refunding or continuing to exclude from rate base SFPP's ADIT balance, and that FERC reasonably allocated litigation costs. View "SFPP, LP v. Federal Energy Regulatory Commission" on Justia Law

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The DC Circuit affirmed the tax court's judgment that certain partnership currency option transactions lacked economic substance and were shams designed to look like real world trades without any of the risk or concomitant opportunity for profit. The court held that the tax court did not clearly err in concluding that the parties agreed in advance on the exact rates to be used in determining earnings and losses under the option agreements, together with a related evidentiary point. In this case, the parties fixed the forward exchange rates, ensuring that they could predict the precise amount that the winning and losing trades would pay—and ensuring that the trades had no ex ante profit potential and lacked any other legitimate nontax business purposes. The court rejected the partnerships' remaining claims and held that the tax court did not err in any material respect. View "Endeavor Partners Fund, LLC v. Commissioner" on Justia Law

Posted in: Business Law, Tax Law
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The Institute filed suit under the Freedom of Information Act (FOIA), seeking information related to all records contained in the IRS's Asset Forfeiture Tracking and Retrieval System (AFTRAK). The DC Circuit reversed the district court's grant of summary judgment for the IRS, holding that whether the Open/Closed Report covers all records "contained in" AFTRAK was itself a material, genuinely disputed question of fact, and the answer in turn depended on other disputed and material facts. The court also held that whether AFTRAK was correctly classified as a database, a matter on which the IRS's Manual and other official documents contradict its legal denial here, appeared to be an intermediate fact with potential consequences for resolving the parties' claims. View "Institute For Justice v. IRS" on Justia Law

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Appellant asked to proceed anonymously before the tax court when challenging the IRS's denial of his application for a whistleblower award, but the tax court denied the request.Determining that it had jurisdiction to hear this interlocutory appeal under the collateral order doctrine, the DC Circuit held that the tax court abused its discretion because identifying the appellant was not necessary to enable the public to gauge the extent to which serial filers affect the work of the tax court or whether any particular petitioner was a serial filer. Accordingly, the court remanded for the tax court to reconsider whether appellant has otherwise made out a fact-specific basis for protecting his identity under Tax Court Rule 345(a). View "In re: Sealed Case" on Justia Law

Posted in: Tax Law
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26 U.S.C. 7623(b)(4) does not contain a "clear statement" that timely filing is a jurisdictional prerequisite to the tax court's hearing the whistleblower's case. In this case, the Irwin presumption has not been rebutted and the filing period in section 7623(b)(4) is subject to equitable tolling.After the IRS denied appellant's application for a whistleblower award, he sought relief from the tax court. The tax court found that his petition was untimely and dismissed it for lack of jurisdiction. Determining that it had jurisdiction, the DC Circuit reversed and remanded for further proceedings because, although the petition was untimely, the filing period was not jurisdictional and was subject to equitable tolling. View "Myers v. Commissioner" on Justia Law

Posted in: Tax Law
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Under the Internal Revenue Code's general rule, the geographic origin of the redemption income would be sourced according to the residence of the taxpayer. However, that general rule is subject to an exception known as the U.S. office rule, where income from any sale of personal property attributable to a nonresident's U.S. office is sourced in the United States (I.R.C. 865(e)(2)).The DC Circuit affirmed the tax court's holding that the U.S. office rule is not satisfied in this case, reasoning that the proper focus in the circumstances is where the redemption itself occurred, as opposed to where the activities causing appreciation of the redeemed partnership interest occurred. Here, the tax court held that the redemption itself should not be attributed to Grecian's U.S. office, and the income should be treated as a foreign source. View "Grecian Magnesite Mining, Industrial, & Shipping Co. v. Commissioner" on Justia Law

Posted in: Tax Law
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After RERI claimed a charitable contribution deduction of $33 million on its 2003 federal tax return, the IRS determined that RERI was not entitled to the deduction and imposed a 40% penalty for underpayment of tax. The DC Circuit affirmed the tax court's decision upholding the IRS's determinations and agreed with the tax court that RERI fell short of the substantiation requirements of the charitable contribution deduction by omitting its basis in the donated property. Therefore, the court did not reach the IRS's further argument that RERI failed to satisfy the substantiation requirements because the appraisal it submitted was not a "qualified appraisal" within the meaning of section 1.170A-13(c)(3) of the Internal Revenue Code. The court also agreed with the tax court's finding that RERI was liable for the 40% penalty reserved for a gross valuation misstatement and rejected RERI's claims to the contrary. View "Blau v. Commissioner" on Justia Law

Posted in: Tax Law
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Plaintiffs, a group of tax return preparers, filed a class action challenging the IRS's requirement that preparers pay a fee to obtain and renew their Preparer Tax Identification Number (PTIN). The DC Circuit held that the IRS acted within its authority under the Independent Offices Appropriations Act in charging tax return preparers a fee to obtain and renew PTINs. The court also held that the IRS's decision to charge the fee was not arbitrary and capricious, because the IRS sufficiently rooted its decision to assess a PTIN fee in justifications independent of those rejected in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014). In this case, the IRS explained that the fee was based on direct costs of the PTIN program. Therefore, the court vacated the judgment of the district court and remanded for further proceedings. View "Montrois v. United States" on Justia Law

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A member of the public cannot use a Freedom of Information Act (FOIA) request to obtain unrelated individual's tax records without his consent. The District Court affirmed the dismissal of EPIC's action seeking President Donald J. Trump's income tax records. The court held that the Internal Revenue Code's confidentiality protections extended to the ordinary taxpayer and the President alike. View "Electronic Privacy Information Center v. IRS" on Justia Law