Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

Acting on the bad advice of his accountant, plaintiff, the executor of an estate, filed the estate-tax return several months late. Consequently, the IRS assessed significant penalties against the estate. Plaintiff initiated this action seeking a refund of the penalty. The court concluded that it was plaintiff's duty to ascertain the correct extended filing deadline. By relying on his accountant's advice about that nonsubstantive matter, he failed to exercise ordinary business care and prudence, and he could not show reasonable cause to excuse the penalty. Therefore, the court affirmed the judgment of the district court. View "Knappe v. United States" on Justia Law

Petitioner sought innocent spouse relief, claiming that she did not understand the nature of her husband's business and claiming ignorance of his fraudulent actions regarding his tax liabilities. At issue was how the Tax Court should review appeals for equitable innocent spouse relief from joint and several liability for unpaid taxes under 26 U.S.C. 6015(f). The court joined the Eleventh Circuit and held that the Tax Court properly considered new evidence outside the administrative record. The court also concluded that the Tax Court correctly applied a de novo standard of review in determining the taxpayer's eligibility for equitable relief. Accordingly, the court affirmed the Tax Court's judgment. View "Wilson v. CIR" on Justia Law

Sideman, the legal representative for a taxpayer who was under criminal investigation by the IRS, appealed from the district court's order enforcing an IRS administrative summons to produce the taxpayer's documents. Sideman argued that producing the documents would be testimonial in violation of the taxpayer's Fifth Amendment rights. The district court's finding that the IRS could independently authenticate the tax records contained in the identified collection of boxes and folders currently held by Sideman was not clearly erroneous. Accordingly, the court held that the district court did not err in applying the foregone conclusion exception when enforcing Sideman's compliance with the summons. View "United States v. Sideman & Bancroft, LLP" on Justia Law

In this case, Metro disputed the determination of a deficiency by the Commissioner based on Metro's use of net operating losses (NOLs) accumulated in 2003 and 2004 to completely offset its 2002 taxable income. The court held that the plain meaning of the term "carryovers" prevented taxpayers from using NOLs that were carried back to 2001 or to 2002 from a later tax year to take advantage of section 56 of the Internal Revenue Code (the Relief Rule), which permitted taxpayers subject to the Alternative Minimum Tax to offset up to 100% of their taxable income with NOLs. Therefore, the court affirmed the Tax Court's assessment of a deficiency, because Metro could not take advantage of the Relief Rule with NOLs it carried back from the 2003 and 2004 tax years to 2002. View "Metro One Telecommunications, v. CIR" on Justia Law

This appeal presented the question, among others, of what event triggered the running of the statute of limitations for a claim for wrongful disclosure of a tax return pursuant to 26 U.S.C. 7431(d). The court concluded that the statute of limitations began to run when plaintiff knows or reasonably should know of the government's allegedly unauthorized disclosures. The court also concluded, in the circumstances presented in this case, that the statute of limitations did not begin to run when plaintiffs became aware of a pending general investigation that would involve disclosures, but only later when they knew or should have known of the specific disclosures at issue. Accordingly, the court affirmed in part and reversed in part. View "Aloe Vera of America, Inc., et al v. USA" on Justia Law

This dispute arose in the context of a multi-million dollar tax refund case pending in the district court. The government filed a petition for a writ of mandamus, requesting that the court vacate four district court orders directing the government to be represented at an initial court settlement conference by a representative with full authority to settle a civil tax refund lawsuit. The court held that the district court had the authority to order parties, including the federal government, to participate in mandatory settlement conferences, but that the exercise of such authority was subject to review for abuse of discretion. Based on the facts of this case, the court concluded that the district court abused its discretion in ordering a government representative with full settlement authority to appear at an initial settlement conference. Accordingly, the court granted mandamus relief and directed the district court to vacate the dispute orders. View "USA v. USDC, Mariana" on Justia Law

William Jefferson & Co., Inc. (William Jefferson) lost a state administrative appeal in which William Jefferson challenged the Orange County Tax Assessor's valuation of a parcel of real property. William Jefferson then filed a suit in federal district court, alleging that its procedural due process rights were violated in the course of the administrative appeal hearing. The court affirmed the district court's conclusion that the state administrative appeal did not deny William Jefferson procedural due process. In a separate memorandum disposition filed concurrently with this opinion, the court affirmed the lower court's grant of the agency's motion for a protective order and its denial of class certification. View "William Jefferson & Co., Inc. v. Board of Assessment and Appeal, et al." on Justia Law

This case stemmed from plaintiff's suit to recover overpayments from the IRS and his subsequent appeal of the district court's judgment which did not award him an overpayment related to his 1999 tax year. The court held that a taxpayer's claim for credit of an overpayment was limited to the amount of the overpayment made within the applicable look-back period in I.R.C. 6511(b)(2)(A). Any claim for refund based on an amount claimed as credit but paid outside of the look-back period was time-barred and uncollectible. Therefore, the court affirmed the district court's judgment where plaintiff's claim for credit of his overpayment of his 1999 taxes was time-barred under section 6511(b)(2)(A). View "Reynoso v. United States" on Justia Law

Petitioner appealed from a decision of the United States tax court concluding that he owed $128,292 in income tax for the 2004 taxable year. Petitioner entered into an agreement with Optech Limited pursuant to which he transferred floating rate notes (FRNs) worth approximately $1 million to Optech in return for a nonrecourse loan of ninety percent of the FRNs' value. The agreement gave Optech the right to receive all dividends and interest on the FRNs and the right to sell the FRNs during the loan term without Petitioner's consent. Instead of holding the FRNs as collateral for the loan, Optech sold the FRNs and transferred ninety percent of the proceeds to Petitioner. Petitioner did not report that he had sold the FRNs in his 2004 federal income tax return. The Ninth Circuit Court of Appeals affirmed the decision of the tax court, holding that Petitioner's transaction with Optech constituted a sale for tax purposes despite its taking the form of a loan because the burdens and benefits of owning the FRNs were transferred to Optech. View "Sollberger v. Comm'r of Internal Revenue" on Justia Law

The IRS issued a Notice of Deficiency (NOD) to Alex and Liset Meruelo a few days before the three-year statute of limitations expired. Alex was a partner in a partnership. The Meruelos petitioned the tax court challenging the deficiency contained in the NOD and subsequently moved to dismiss for lack of jurisdiction on the ground that the IRS issued the NOD prematurely, making it invalid. The tax court held that the NOD was valid and not premature and that the items were affected items. The parties later reached an agreement as to all issues, except the validity of the NOD. The tax court then entered a final decision holding that the Meruelos were liable for $1,387,006 in additional income tax and $277,401 in penalties. The Ninth Circuit Court of Appeals affirmed, holding that (1) a NOD issued when no partnership-level proceeding or final partnership administrative adjustment have been issued is valid; (2) a NOD issued when the normal three-year statute of limitations has not expired is valid; and (3) therefore, the tax court had jurisdiction. View "Meruelo v. Comm'r of Internal Revenue" on Justia Law