Appellate Law & Practice

CA1: big decision on sentencing review (and good works of defendant)

US v. Taylor, No. 06-2216 (8/16/07). I hereby apologize to my audience for not getting to this case within minutes after it came out, as I usually do that. I was seduced by the lure of a rehearing issue, as I thought it was really important. This is more important. Unfortunately, the First, as usual, defers to the government on what constitutes a “reasonable” sentence, in an “aiding and assisting in the preparation of false tax returns, a violation of 26 U.S.C. § 7206(2).” The District Court handed down a non-jail sentence. The First wants the taxpayers to pay to keep this part-time high school music teacher, part-time tax preparer in jail. Isn’t that ironic?

The defendant presented letters stating that he could continue as a teacher, 48 prominent people saying that he walked on water.  

Despite the result, the First does go about part of this somewhat intelligently. It splits with the Seventh and Ninth circuits, about whether Courts of Appeal should “engage in an independent review of whether a district court properly interpreted the Sentencing Commission's policy statements in determining a sentence.” The Seventh and Ninth say no. The First says yes. After that, the First holds, the review is for reasonableness.

Keep reading

A really interesting tax indictment dismissal.

TpB points to United States v. Cerullo, No. 05cr1190 (S.D. Cal. 8/9/07).  Apparently the government was not straight with the grand jury regarding the “Duberstein test” as applied to monies received by a preacher.  Judge Benitez wrote:

[T]his case illustrates the specter of a federal tax prosecution that faces every clergyman, minister, rabbi, and cleric who receives money after delivering a sermon. Such tax cases must be considered by government prosecutors with great care lest the Government trench on rights afforded by the Free Exercise Clause and convert that which is a guaranteed liberty into a federal crime. In this case, the prosecutor did not exercise that necessary care before the grand jury. Consequently, the grand jury was misled on the law, was unable to correctly adjudge the evidence, and no longer operated as an independent body and buffer between the Government and the Defendant. As a direct result, the Defendant has suffered substantial prejudice.

Update: I put the entire thing in Scribd's flash format below.  This is really freakin' cool.  So, check it out!

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Win for Tax Analysts on email disclosure (and PATRIOT ACT chart)

Tax Analysts is a commercial publisher that has a rather successful track record of suing the IRS to obtain its inside information. Now, to be sure the IRC has a number of self-contained disclosure provisions, so there isn’t much of a need to resort to FOIA or the First Amendment.

Anyway, TaxProfBlog reports that they won again in the DC Circuit, and the “IRS must disclose e-mail containing legal advice rendered in less than two hours by lawyers in the Office of the Chief Counsel and sent to field personnel.”  Tax Analysts v. IRS, No. 06-5136 (D.C. Cir. 7/24/07)

 

And in other news, LibraryLawBlog provides  charts of the “evolution” of the state of the law of “215” orders and NSL letters from before the Patriot Act to its reauthorization. 

 

DC Circuit: Nevermind what we said about part of definition of income being unconstitutional

If you are tired of talking about Libby, DotD points to the reveral, by the DC Circuit, of Murphy.  The new decision is here.  See our coverage here.

Update: TaxProf Blog explains why many professors think that the panel believes that it is self-serving, sanctimonious crapola.

CA1: pro se tax affirmance

Jordan v. CIR, No. 06-2318, ( 6/20/07 ) (unpublished). This case begins by saying “The appellant asserts that his 2002 tax liability should have been offset by an earlier overpayment because he was not indebted to the Department of Education.” See 26 U.S.C. § 6402. This makes sense, but it shows how it really is unfair to make people pay  first and sue for a refund in other fora, that might have jurisdiction over the DoE claims. The rest of the opinion is just as terse:

The appellant asserts that certain retirement-related distributions should have been construed as exempt loans. He fails to identify anything in the record tending to show both that the distributions were loans and that they satisfied exemption requirements. I.R.C. § 72. Finally, the appellant identifies no error in the Tax Court's determination that he did not satisfy requirements for head-of-household status or a dependency deduction. I.R.C. §§ 2, 151(c) & 152.

CA1: Canadian Micmacs have to pay taxes

Metallic v. Commissioner of IRS, No. 06-2387 (unpublished).  Affirming the Tax Court, the First holds that: 1) “the Tax Court... [correctly] pointed out that Native Americans, like ‘other U.S. citizens,’ are obliged to pay federal income taxes, and that while treaties might exempt them from taxation, the 1776 treaty [with the Micmac Indians] did not do so; but 2) the mere fact that the Tax Court suggested that he was a US Citizen (as opposed to a member of “a Canadian Micmac tribe”) doesn’t really prejudice him because he “acknowledges that he resides in this country, and so the tax laws apply to him even if he is not a citizen.”  TaxProfBlog comments here.

CA1: watch me snark on partnership taxation

Burke v. Commissioner of IRS, No. 06-1865.  This is a partnership taxation case.  Even if you read this blog for the stuff on criminals, I urge you to read the rest of this post.  Why?  Because I am like that, and criminal lawyers need to get out more.

First of all, let me see if I can explain partnership taxation in a nutshell.  The general “rule” of partnerships is that income and losses are taxed to the partners.  The “game” is to allocate (via written instruments) income to partners that have less income (and pay lower marginal rates) and losses to partners with higher incomes (and higher marginal rates).  Congress and the IRS, on the other hand try and figure out who really is bearing the risk or earning the money.  And this is what confuses law students and makes lawyers rich.  Like every other area of taxation, timing is important.

Now, there are hybrids of partnership and corporations, and they make life more complicated. 

Anyhow, on to our story:

Burke formed a partnership with Jeffrey Cohen named "Cohen & Burke," agreeing to split the proceeds of the enterprise evenly after allocating a ten percent origination fee to the partner who generated new business. In 1998, a dispute arose between the two partners when Cohen allegedly refused to comply with a superseding partnership agreement that linked the distribution of the partnership's proceeds more tightly to each partner's individual efforts and stole money received by the partnership.

CA5: Respect Wikipedia's authority!

The Fifth Circuit takes a break its usual shenanigans and cites Wikipedia for a term of art:

The word “accrue” is an accounting term that means to record or calculate an item of income or expense that has not yet been paid. http://en.wikipedia.org/wiki/Accrual (accessed: March 23, 2007).

Exxon Mobil Corp. v. Commissioner, No. 06-60276, n. 1 (5th Cir. 4/10/07)

Tnx TaxProfBlog.  I think this is the most egregious use of Wikipedia to date by a Court of Appeals.  I am not even sure that this definition is completely correct within the meaning of the Tax Code, but I am not going to get into a “revert war.”  Most of the time, they are used to explain pithy slogans. Most uses of Wikipedia as a factual basis have been reversed.  This seems to be the first time that a term of art (in which real money for real litigants) is defined by reference to Wikipedia.  (For a list of characteristics of Wikipedia contributors, go here.)

 

Finally, I need to put something in perspective:

Trent Lott (United States Senator that kept his job): When Strom Thurmond ran for president, we voted for him. We’re proud of it. And if the rest of the country had followed our lead, we wouldn’t have had all these problems over the years, either

Don Imus (radio personality that lost his job):  Blah blah blah, basketball, hair, hos.

 

CA1: Collection Due Process, Notice, Mailing, and bankruptcy all collide for tax fun!

Haag v. US, No. 06-2200.  There seem to be a lot of balls dropping in this one.  Unfortunately, despite appearing to be a neat issue of tax procedure, it is just a “notice” and “summary judgment” case, with a two neat twists, one involving how to defeat a “mailing” affidavit and the other involving bankruptcy.  Anyway, some tax payers didn’t pay their taxes.  The government brought suit to reduce to judgment federal tax assessments against them.  It seems that the government prevailed, but it wasn’t appealed.  While that action was pending the defendants sued the US saying that the tax liens were invalid because they didn’t get a Collection Due Process ("CDP") hearing before the IRS, and the IRS didn’t notify them of their right to have one before an “unbiased officer.”  See 26 U.S.C. § 6320.

CA1: when the IRS should settle (and administrative law)

Murphy v. CIR, No. 06-1109.  The court upholds the Tax Court’s decision that a denial of an offer in compromise ($10,000 for $250,000 of tax liability) was an abuse of discretion.  The First provides an overview of the Collection Due Process hearing process and appeals to the Tax Court.  The taxpayer, before the tax court offered evidence about why he couldn’t offer the IRS more money, but, the First Circuit, holds that the Tax Court should have been limited to the record, based on “administrative law principles” to which no exception applies in this case.  (This creates a bit of a problem for counsel, as most “hearings” are off the record, though counsel can submit written material.)

The court also holds that the IRS appeals officer didn’t abuse his discretion in conducting the “hearing” which went on for eight months, with repeated extensions to submit documents.

Substantively, the court finds that the rejection was not an abuse of discretion, because the taxpayer didn’t really dispute the calculations, and the IRS’s procedures (though not regulations) specify that “the agency will not accept a compromise that is less than the reasonable collection value of the case, absent a showing of special circumstances.”  Rev. Proc. 2003-71(2)