Justia Civil Procedure Opinion Summaries

The IRS assessed deficiencies against Williams in connection with his income tax for 1996-2005, totaling, with interest and penalties, about $1.3 million. He did not pay. The IRS filed tax liens in Clark County, Indiana, where Williams and his wife Leslie jointly own land. The state and county also filed liens. The district court entered an order that specifies how much Williams owes to each of the three taxing bodies, orders the property to be sold and the net receipts applied to these debts, and details how the money will be divided among the United States, the state, the county, and Leslie. The order states that it is the court’s final decision; the Williamses appealed. The mortgage lender argued that foreclosure governed by Illinois law is not final, and not appealable, because the amount of a deficiency judgment depends on the reasonableness of the sale price, and the validity of the sale itself is contestable to determine whether the outcome is equitable. Illinois provides debtors with multiple opportunities to redeem before a transfer takes effect. The Seventh Circuit affirmed. The foreclosure sale is governed by 26 U.S.C. 7403(c), which does not provide for deficiency judgments and does not give the taxpayer a right of redemption. View "United States v. Williams" on Justia Law

The IRS assessed deficiencies against Williams in connection with his income tax for 1996-2005, totaling, with interest and penalties, about $1.3 million. He did not pay. The IRS filed tax liens in Clark County, Indiana, where Williams and his wife Leslie jointly own land. The state and county also filed liens. The district court entered an order that specifies how much Williams owes to each of the three taxing bodies, orders the property to be sold and the net receipts applied to these debts, and details how the money will be divided among the United States, the state, the county, and Leslie. The order states that it is the court’s final decision; the Williamses appealed. The mortgage lender argued that foreclosure governed by Illinois law is not final, and not appealable, because the amount of a deficiency judgment depends on the reasonableness of the sale price, and the validity of the sale itself is contestable to determine whether the outcome is equitable. Illinois provides debtors with multiple opportunities to redeem before a transfer takes effect. The Seventh Circuit affirmed. The foreclosure sale is governed by 26 U.S.C. 7403(c), which does not provide for deficiency judgments and does not give the taxpayer a right of redemption. View "United States v. Williams" on Justia Law

The State Department of Revenue sought to hold the sole shareholder, director, and employee of a closely held Washington corporation personally liable for the corporation’s unpaid tax debts. The superior court pierced the corporation’s corporate veil, ruled that the shareholder’s successor corporation was liable for the tax debt, voided two contract transfers as fraudulent conveyances, and ruled that the shareholder had breached fiduciary duties to the corporation and the State as the corporation’s creditor. The shareholder and corporation appealed the superior court’s decision to pierce the corporate veil, arguing that the superior court erred by not barring the State’s suit under the principle of res judicata, by applying Alaska rather than Washington veil-piercing law, and by making clear factual errors. The shareholder and corporation also appealed the superior court’s finding that two contracts were fraudulently conveyed. After review, the Alaska Supreme Court concluded that res judicata did not bar the State from seeking to pierce the corporation's corporate veil to collect tax debt established in an earlier case. Furthermore, the Court held that the corporation's veil was properly pierced under both Alaska and Washington state law. Though the superior court's fraudulent conveyance determination contained errors of fact, the Supreme Court concluded that those errors were harmless. Therefore, the Court affirmed the superior court in part, reversed in part, and remanded for further proceedings. View "Pister v. Dept. of Revenue" on Justia Law

Lumber, a tax-exempt insurance trust (26 U.S.C. 501(c)(9)), purchased life insurance issued by GAMHC. GAMHC converted from an insurer owned by policyholders to one owned by stockholders. In 2003, Lumber received a $1,474,442.30 liquidating distribution and a statement that the entire “initial distribution . . . will constitute long-term capital gain.” Lumber reported the gain on its return for fiscal year 2004 and paid capital gains tax of $200,686. Lumber received additional distributions of $285,647 and $213,567, which it reported as taxable capital gains on its 2006 and 2008 returns. The IRS had adopted the position that a policyholder’s proprietary interest in a mutual insurance company had a tax basis of zero. In 2008, the Claims Court rejected that position. Lumber sought refunds for 2004, 2006, and 2008. The IRS delayed a ruling until the Federal Circuit affirmed, then allowed Lumber’s claims for 2006 and 2008 and refunded $42,847 and $32,035, but denied Lumber’s claim for 2004, citing the three-year limitations period. The district court granted Lumber summary judgment, concluding that the mitigation provisions, I.R.C. 1311-1314, permitted correcting the erroneous recognition of gain. The Eighth Circuit reversed. Allowing taxpayers to reopen closed tax years based upon a favorable change in, or reinterpretation of, the laws would be inconsistent with the congressional intent in enacting the mitigation provisions to “preserve unimpaired the essential function of the statute of limitations.” View "Ill. Lumber & Material v. United States" on Justia Law

Taxpayers petitioned the Tax Court for a redetermination of $18,030 in deficiencies and penalties for tax years 2009 through 2011. On the trial date, the IRs Commissioner submitted a “Stipulation of Settled Issues” signed by the parties. The document states that it “reflects” the parties’ “agreement as to the disposition of adjustments,” but contained no mention of agreement concerning the fact or amount of a deficiency for any of the relevant tax years. At the Commissioner’s request, the Tax Court granted the parties 30 days to file “decision documents” in lieu of trial. The Commissioner calculated a total deficiency of $12,252 and a penalty of $0. When the couple refused to agree to this amount, the Commissioner asked the Tax Court to enter a decision adopting the Commissioner’s figures. The taxpayers sought more time to produce an agreement, but the Tax Court granted the Commissioner’s motion on the ground that “the parties’ computations for decision and proposed decisions consistent with their settlement agreement” were overdue. The Seventh Circuit vacated. In light of the parties’ disagreement over the taxpayers’ liability, the Tax Court erred by entering a judgment without holding a trial. View "Hussain v. Comm'r of Internal Revenue" on Justia Law

Plaintiffs-appellants Donald Kipnis, Lawrence Kibler, Barry Mukamal and Kenneth Welt,appealedthe district court’s Federal Rule of Civil Procedure 12(b)(6) dismissal of their complaint against defendants-appellees Bayerische Hypo-Und Vereinsbank, AG and HVB U.S. Finance, Inc. (collectively, “HVB”) as barred by the applicable statutes of limitations. This appeal arose out of the parties’ participation in an income tax shelter scheme known as a Custom Adjustable Rate Debt Structure (“CARDS”) transaction. In short, Plaintiffs alleged that HVB and its co-conspirators defrauded Plaintiffs by promoting and selling CARDS for their own financial gain. Plaintiffs “paid a heavy price in damages” as a result of HVB’s wrongdoing, including “substantial fees (and interest payments)” they paid HVB and other CARDS Dealers to participate in the CARDS strategy and “hundreds of thousands of dollars in ‘clean-up’ costs” they incurred after HVB failed to advise them to amend their tax returns. Consequently, Plaintiffs sought to recover the “damages that reasonably flow” from HVB’s misconduct. These damages included fees they paid to HVB and other CARDS Dealers, attorney’s fees and accountant’s fees incurred in litigating against the IRS, back taxes and interest paid by Plaintiffs, punitive damages, treble damages, and attorney’s fees and costs incurred in the instant action. The district court rejected Plaintiffs’ argument that their claims did not accrue until November 1, 2012, because they did not sustain any damages until the tax court issued its final decision. By December 5, 2001 (plaintiffs’ mandatory repayment date) Plaintiffs had sustained part of the damages they sought to recover, including the fees they paid to HVB.The district court found Plaintiffs’ reliance on the Florida Supreme Court’s decision in "Peat, Marwick, Mitchell & Co. v. Lane," (565 So. 2d 1323 (Fla. 1990)), to be misplaced, and dismissed Plaintiffs’ complaint as time-barred. The parties agreed that Florida law controlled the sole issue in this appeal: when did Plaintiffs’ claims against HVB accrue for purposes of the statutes of limitations. It was not clear under Florida law when Plaintiffs first suffered injury, and thus when their claims against HVB accrued for purposes of the applicable statutes of limitations. Because the relevant facts were undisputed, and this appeal depended wholly on interpretations of Florida law regarding the statute of limitations, the Eleventh Circuit certified a question of Florida law to the Florida Supreme Court. View "Kipnis v. Bayerische Hypo-UND Vereinsbank, AG" on Justia Law

Edwin B. Lumpkin, Jr. appealed several Circuit Court orders dismissing three cases he had initiated challenging property-tax assessments made by the Jefferson County Board of Equalization and Adjustments. Lumpkin owned and operated Metro Mini Storage, a chain of self-storage facilities with locations throughout the Birmingham metropolitan area. In 2012, Lumpkin received notice from Jefferson County regarding the assessed value of three of his properties located in that county. Believing the assessed values of these properties to be too high, Lumpkin elected to protest their valuation, and the Board heard his arguments. Acting pro se, Lumpkin filed three appeals in the Jefferson Circuit Court (one for each of the three locations), arguing that the Board's decisions did not reflect the true market value of the properties and that a reduction in assessed value was warranted based on the evidence he had presented. Because Lumpkin's appeals are governed by section 40-3-25 and because he failed to comply with all the requirements of section 40-3-25 for perfecting his appeals, the Supreme Court concluded the trial court properly dismissed the cases. View "Lumpkin, Jr. v. Alabama" on Justia Law

The Fresno County Assessor audited the partnership regarding personal property for tax years 1994-2001, which resulted in assessment of additional taxes for farm equipment. In 2007, the partnership attempted to apply for changed assessment to cancel the assessment under Revenue and Taxation Code section 4986 on the ground that it did not own that personal property. The Assessment Appeals Board returned the applications as untimely. In 2010, the partnership sought a declaratory judgment that the subject properties did not exist and the assessments should be cancelled. The trial court dismissed on the ground that it was seeking to enjoin the collection of property taxes in violation of the California Constitution. The court concluded that the partnership was required to first pay the tax and then seek a refund. By checks in 2011-2012, the partnership paid the disputed taxes in full, with penalties and interest. The partnership’s refund claims were rejected, so it filed suit. The trial court concluded that the partnership was required to seek reduction of the assessment and that the action was barred for failure to do so. The court of appeal reversed, noting the partnership’s argument that it did not own the assessed property on the applicable dates, so that the assessments were “nullities.” View "Williams & Fickett v. Cnty. of Fresno" on Justia Law

In June 2011 the Department of Revenue assessed additional individual, sales, and corporate taxes against taxpayers Southside, Inc. d/b/a Wines, Etc. and Barry and Sarabeth Artz. They appealed a Board of Tax ruling without satisfying the statutory requirements of paying the disputed taxes under protest before appealing or posting a surety bond with their appeal. Because the chancery court lacked appellate jurisdiction to hear the appeal, the chancellor granted the Department of Revenue’s motion to dismiss. Finding no reversible error, the Supreme Court affirmed.View "Southside, Inc. d/b/a Wines, Etc. v. Mississippi Department of Revenue" on Justia Law

FFRF, a Wisconsin-based organization of atheists and agnostics, gives its co-presidents housing allowances. They paid income tax on that portion of their salaries. Neither sought to exclude this income on their tax returns and neither has claimed a refund. FFRF and the co-presidents challenged the parsonage exemption, 26 U.S.C. 107, which allows a minister to receive tax-free housing from his church, whether by giving the minister access to a church-owned residence or by giving the minister an allowance to obtain housing. Plaintiffs conceded that they lacked standing to challenge section 107(1), covering in-kind housing, but argued that they had standing to challenge section 107(2), which applies to rental allowances. The district court agreed and held that the subsection is an unconstitutional establishment of religion under the First Amendment. The Seventh Circuit vacated with instructions to dismiss. A person suffers no judicially cognizable injury merely because others receive a tax benefit that is conditioned on allegedly unconstitutional criteria, even if that person is otherwise “similarly situated” to those who receive the benefit. Only a person that has been denied such a benefit can be deemed to have suffered a cognizable injury. The plaintiffs were not denied the parsonage exemption.View "Freedom From Religion Found., Inc. v. Lew" on Justia Law