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President Trump Announces Intent to Nominate Two More Tax Court Judges

by and | Nov 7, 2019 | , ,

On November 6, 2019, President Trump announced his intent to nominate Ms. Alina Ionescu Marshall and Mr. Christian N. Weiler to serve as Judges on the United States Tax Court (Tax Court). Mr. Travis Greaves was previously approved by the Senate Finance Committee to be a Tax Court Judge and is awaiting confirmation by the Senate. Judge Mark V. Holmes, who is currently a senior Judge on the Tax Court, was previously renominated by President Trump and is awaiting action by the Senate Finance Committee. For our prior coverage related to Mr. Greaves and Judge Holmes, see here.

According to the White House Announcement and other publicly available information, Ms. Marshall is currently Counsel to the Chief Judge of the Tax Court in Washington, DC, a position she has been in since 2013. Prior to that, she was an associate at West & Feinberg, P.C. (2012–2013), clerked at the Tax Court (2010–2012), was an associate at Freshfields Bruckhaus Deringer US LLP (2004–2009), and was an associate at Milbank, Tweed, Hadley & McCloy LLP (2002–2004). She also was an Adjunct Professor of Law at Georgetown University Law Center (2011–2013). Ms. Marshall obtained a JD from the University of Pennsylvania Law School (2002) and her undergraduate degree from Yale University (1999).

According to the White House Announcement and other publicly available information, Mr. Weiler is currently a partner at Weiler & Rees, LLC, in New Orleans, where he has practiced since 2006. His practice includes all areas of tax law, with an emphasis on tax controversy and litigation matters. Mr. Weiler obtained an LLM from Southern Methodist University Dedman School of Law (2006), a JD from Loyola University New Orleans College of Law (2005), and his undergraduate degree from Louisiana State University (2001).

The Tax Court is composed of 19 presidentially appointed members, as well as senior judges serving on recall and special trial judges. Currently, there are 17 presidentially appointed members, meaning that two vacancies exist. At first blush, it seems odd that there are four candidates for two vacancies.  However, under IRC Section 7447(b)(1), Tax Court Judges are subject to mandatory retirement upon attaining the age of 70. Judge L. Paige Marvel and Judge Albert G. Lauber will both turn 70 within the next few months; thus, it appears that the two new nominations will be for their positions on the Tax Court.

Practice Point: Since being sworn in, President Trump has nominated eight individuals to be Tax Court Judges (four nominees have previously been confirmed), and has taken an approach of announcing the nominations earlier rather than later. For more information on the Tax Court appointment and reappointment process, see here. As the make-up of the Tax Court changes, it is important for taxpayers and practitioners that may be appearing before the new Judges to familiarize themselves with the Judges and stay informed of recent developments regarding the Court.



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Finally the IRS Clarifies Its Position on Cryptocurrency

by and | Oct 10, 2019 | , , , ,

It took five years, but the Internal Revenue Service (IRS) has finally released some guidance on the taxation of cryptocurrencies! On October 9, 2019, the IRS released Revenue Ruling 2019-24 and several “frequently asked questions” (and answers) which deal with some (but not all) of the federal income tax issues involved with cryptocurrencies.

Over the years, we have reported on the issues involved with cryptocurrencies, including the potential controversies that have ensued because of a lack of guidance.

The new guidance is welcomed by tax professionals and taxpayers. The guidance adopts traditional tax principles to deal with some of the unique aspects of cryptocurrencies. For example, the guidance addresses the tax treatment of so-called “hard forks” and whether the value of the “fork” which is “airdropped” into the taxpayer’s wallet constitutes taxable income.

Practice Point: Cryptocurrencies are a brave new world for most of us. Having thoughtful, current guidance is helpful to tax professionals and taxpayers, and will (hopefully) lead to better and more efficient administration of our tax system.



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Courtney Dunbar Jones and Emin Toro Confirmed to Tax Court

by | Aug 7, 2019 | , ,

On August 5, 2019, the Senate confirmed Courtney Dunbar Jones and Emin Toro as nominees to the US Tax Court in a voice vote before leaving for August recess. Jones and Toro will now each serve a 15-year term. President Trump had initially nominated each candidate in 2018, but the Senate was not able to confirm their appointments prior to the end of the last 2018 session—requiring the candidates to be renominated in February of 2019. We reported the initial nominations in “President Trump Announces Intent to Nominate Emin Toro to Tax Court” and “President Trump to Nominate Greaves to Tax Court; Senate Confirms Copeland and Urda.” Furthermore, we reported the renomination of these nominees in “Renominations to Fill Vacancies on the United States Tax Court.” (more…)



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Law360: Myers May Make It Easier to Find Equitable Relief in Tax Court

by | Jul 18, 2019 | , , ,

Laura L. Gavioli, PC, recently wrote an article for Law360 on a US Court of Appeals for the District of Columbia Circuit’s decision that may provide an equitable avenue for hearing of late-filed petitions in US Tax Court. The Law360 article, “Myers May Make It Easier to Find Equitable Relief in Tax Court,” can be accessed here.



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Court Rules That Wind Farm Did Not Provide Proof of Development Fee to Receive 1603 Cash Grant

by , and | Jul 2, 2019 | , , ,

On June 20, 2019, the United States Court of Federal Claims published its long-awaited opinion in California Ridge Wind Energy, LLC v. United States, No. 14-250 C. The opinion addressed how taxpayers engaging in related party transactions may appropriately determine the cost basis with respect to a wind energy project under the Internal Revenue Code (IRC). Central to the case was whether the taxpayer was allowed to include a $50 million development fee paid by a project entity to a related developer in the cost basis of a wind project for purposes of calculating the cash grant under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Section 1603). Section 1603 allowed taxpayers to take a cash grant in lieu of the production tax credit of up to 30% of the eligible cost basis of a wind project. The eligible cost basis under Section 1603 is determined in the same manner as under Section 45 for purposes of the investment tax credit (ITC). The Justice Department disagreed with the taxpayer’s position that the development fee should be included in the cost basis for calculating the Section 1603 cash grant. The Justice Department argued that the development fee was a “sham.”

The court agreed, and held for the government. The court’s opinion focused on the taxpayer’s failure to provide evidence that the payment of the development fee had “economic substance.” Indeed, the court was troubled that none of the taxpayer’s witnesses could explain what was actually done to earn the $50 million development fee. Other than a three‑page development agreement and the taxpayer’s bank statements identifying the wire transfers for payment of the development fee, which started and ended with the same entity, the court found that the taxpayer provided no other factual evidence to support the payment of the fee. Indeed, the court pointed to the taxpayer’s trial testimony, which the court found lacked the specificity needed to support the development fee. Because the taxpayer failed to carry its burden of proof and persuasion, the court concluded that the taxpayer was not entitled to include the $50 million development fee in the cost basis of the wind project for purposes of computing the Section 1603 cash grant.

Importantly, the court did not, however, rule that a development fee paid to a related party is not permitted to be included in the cost basis of a facility for purposes of determining the Section 1603 cash grant. Instead, the court simply ruled that the taxpayer failed to provide it with sufficient proof that in substance the taxpayer performed development services for which a development fee is appropriately considered part of the cost basis of a facility for purposes of determining the Section 1603 cash grant.

Practice Point: In court, the plaintiff has the burden of proving its entitlement to the relief sought. Before filing a case, it’s best to make sure that you have all of the evidence you need to prove your case. Without substantial and [...]

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Trust Wins Due Process Challenge to North Carolina State Income Tax

by and | Jun 26, 2019 | , , ,

Last week, the US Supreme Court ruled that North Carolina may not tax a trust’s income when the trust’s only contact with the state is the in-state residence of discretionary beneficiaries. The Due Process Clause requires a minimum connection between a state and the person it seeks to tax. The mere residency of the discretionary beneficiaries of a trust is not sufficient to satisfy this requirement.

Read the full article.



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Tax Court Announces Limited Entries of Appearance

by , and | May 29, 2019 | ,

The concept of limited scope representation is not a new one in the legal arena. Rule 1.2(c) of the ABA Model Rules of Professional Conduct provides that “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” This rule has been broadly embraced by states. The idea of limited representation in Tax Court cases has been floating around for years. It has mostly come up in the context of pro se taxpayers who appear at calendars calls. There may be one or more volunteers willing to assist the taxpayer but are unable to enter an appearance on the spot for various reasons (e.g., inability to conduct a conflicts search, uncertainty as to whether the taxpayer will be responsive in the future, inability to determine whether case has merit). In this situation, the volunteer is usually not allowed to speak on the taxpayer’s behalf to the Court to try to assist with resolving the case and handling procedural matters.

In 2018, Special Trial Judge Carluzzo and Special Trial Judge Panuthos invited suggestions for better assisting unrepresented and low-income taxpayers in the Tax Court. In response, the American Bar Association Section of Taxation recommended that the Tax Court consider amending its rules to permit counsel to enter an appearance for a limited time or purpose. At the time of the recommendation, approximately 69% of all Tax Court petitioners and 91% of petitioners in small tax cases were self-represented. The Section of Taxation pointed out that many self-represented petitioners before the Tax Court do not understand the law or court rules and therefore are unable to make an effective legal argument. This results in inefficiencies in the Tax Court, as well as inequality because the IRS is always represented by counsel. (more…)



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Sacked in Tax Court! Procedural Missteps by the IRS Leave the Government’s Blindside Exposed

by | May 23, 2019 | , , ,

In Kearse v. Commissioner, T.C. Memo 2019-53, the Tax Court held the Internal Revenue Service (IRS) abused its discretion as part of the taxpayer’s Collection Due Process hearing (CDP hearing) because the Appeals officer failed to properly verify that the assessment of the taxpayer’s unpaid 2010 liability was preceded by a duly mailed notice of deficiency.

The taxpayer, well-known to sports fans, was Jevon Kearse. Mr. Kearse, nicknamed “The Freak” for his athletic ability, played for 11 seasons in the National Football League and tallied 74 career sacks as a dominating defensive end. Based on the description of events by the Tax Court, Mr. Kearse’s attorneys outmaneuvered the IRS similar to the way Mr. Kearse had offensive tackles tripping over their shoestrings. (more…)



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What Happens At Exam, Stays At Exam!

by and | Apr 25, 2019 | , , , , ,

A recent case decided by the US Tax Court reminds us that when you litigate a case in Tax Court, what happened during the Internal Revenue Service (IRS) examination and Appeals bears very little relevance (if any) once you get to court. Generally, Tax Court’s proceedings are de novo, and the court looks solely to the IRS’s position in the Notice of Deficiency (Notice). The Revenue Agent’s Report and other statements made by the IRS before the issuance of the Notice are typically ignored.

In Moya v. Commissioner, 152 TC No. 11 (Apr. 17, 2019), the IRS determined deficiencies related to the disallowance of certain business expense deductions. The taxpayer did not assign error to the disallowance, but instead argued that the Notice was invalid because the IRS had violated her right to be informed and her right to be heard under an IRS news release and an IRS publication outlining various rights of taxpayers. Specifically, the taxpayer asserted that she had requested that her examination proceedings be transferred to California after she had moved from Las Vegas to Santa Cruz, and that the IRS had violated the her rights by providing vague and inconsistent responses to, and by ultimately denying, her request. (more…)



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Tax Court Rules State Corporate Incentives Are NOT Taxable Income Under Federal Law

by and | Apr 11, 2019 | , , ,

Many states and localities give incentives for business to move or transact in their locations. There has always been a question of whether these incentives are taxable income under federal income tax law. Internal Revenue Code (IRC) section 118, as amended by the Tax Cuts and Jobs Act, P.L. 115-97, provides that “[i]n the case of a corporation, gross income does not include any contribution to the capital of the taxpayer….(b) For purposes of subsection (a), the term “contribution to the capital of the taxpayer” does not include—…(2) any contribution by any governmental entity or civic group (other than a contribution made by a shareholder as such).”

In a recent case, the US Tax Court ruled that certain cash grants given by the State of New Jersey fit squarely within IRC section 118, and were not taxable to the corporate taxpayer. Brokertec Holdings, Inc. v. Commissioner, T.C. Memo. 2019-32.

(more…)



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