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

A challenge to the timeliness of a partnership proceeding must be raised in the partnership proceeding itself and that failure to do so results in a forfeiture of the argument. The Ninth Circuit affirmed the tax court's dismissal of taxpayers' petition challenging adjustments to a Final Partnership Administrative Adjustment (FPAA) involving taxpayers' partnership. In an earlier appeal, the panel upheld the validity of the partnership proceeding and the adjustments made therein. The panel held that taxpayer's challenges in this case essentially amounted to a collateral attack on the partnership proceeding. In this case, the taxpayers had an opportunity to challenge the FPAA during the partnership proceeding, but elected not to do so. View "Bedrosian v. Commissioner" on Justia Law

The Ninth Circuit affirmed the district court's dismissal of a securities fraud action because it was barred by the act of state doctrine. Plaintiffs alleged that defendants knowingly failed to disclose legal deficiencies under Mexican tax law in the 2012 APA Ruling and sold shares knowing these legal deficiencies existed.The panel held that plaintiffs' claims under the Securities Exchange Act of 1934 would require a United States court to pass judgment on the validity of a 2012 ruling by Mexico's tax authority. In this case, the mandatory elements of applying the act of state doctrine were satisfied and the policies underlying the doctrine weighed in favor of applying it to bar plaintiffs' claims. Agreeing with its sister circuits, the panel held that the district court was not required to consider the Sabbatino factors. The panel declined to reconsider whether a tax ruling by the Mexican government, that remains valid in Mexico, complied with Mexico's tax laws. View "Royal Wulff Ventures LLC v. Primero Mining Corp." on Justia Law

Amazon filed a petition in the tax court challenging the IRS's valuation of a buy-in payment for pre-existing intangibles related to the company's contribution to a cost sharing arrangement, whereby Amazon and a holding company for the European subsidiaries would be treated as co-owners of the intangibles. The tax court ruled primarily with Amazon and the Commissioner appealed.The Ninth Circuit affirmed the tax court's decision and held that the definition of "intangible" in the applicable transfer pricing regulations did not include residual-business assets. Although the language of the definition is ambiguous, the panel held that the drafting history of the regulations shows that "intangible" was understood to be limited to independently transferable assets. View "Amazon.com v. Commissioner" on Justia Law

The Ninth Circuit affirmed the district court's grant of summary judgment for the United States in a tax refund action. On appeal, taxpayer argued that the penalties were wrongly imposed because it did not actually participate in a listed transaction and thus had nothing to disclose, and that its due process rights were violated because it was not afforded an opportunity for pre-collection judicial review.The court found neither contention meritorious, holding that taxpayer was required to disclose its participation in the transaction at issue because it was similar to the listed transaction identified in Notice 2007-83. The court held that taxpayer could not evade a finding of substantial similarity solely by claiming a deduction on a different basis or by using a different intermediary to complete the transaction. The court also held that taxpayer received all the process it was due where the combination of pre-collection administrative review plus post-collection judicial review satisfied the requirements of the Due Process Clause. View "Interior Glass Systems, Inc. v. United States" on Justia Law

At issue was the validity of the Treasury regulations implementing 26 U.S.C. 482, which provides for the allocation of income and deductions among related entities. The Ninth Circuit reversed the tax court's decision that 26 C.F.R. 1.482-7A(d)(2) was invalid under the Administrative Procedure Act (APA).The panel held that the Commissioner did not exceed the authority delegated to him by Congress under section 482. In this case, section 482 did not speak directly to whether the Commissioner may require parties to qualified cost-sharing arrangements (QCSA) to share employee stock compensation costs in order to receive the tax benefits associated with entering into a QCSA, and the Treasury reasonably interpreted section 482 as an authorization to require internal allocation methods in the QCSA context and concluded that the regulations are a reasonable method for achieving the results required by the statute. Therefore, the panel held that the regulations were entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The panel also held that the regulations at issue were not arbitrary and capricious under the APA. View "Altera Corp. v. Commissioner" on Justia Law

The Ninth Circuit reversed the district court's judgment in favor of taxpayers in their tax refund action. The panel held that the district court lacked the authority to hear this action because, as a prerequisite to bringing this action, taxpayers first had to file a timely claim for a refund with the IRS.The panel held that Treasury Regulation 301.7502-1(e)(2) provided the exclusive means to prove delivery, and recourse to the common law mailbox rule was no longer available. In this case, taxpayers relied on the common law mailbox rule to establish that the document was presumptively delivered to the IRS. Accordingly, the panel remanded with instructions to dismiss because taxpayers had not filed a timely claim for a refund with the IRS. The panel also reversed the award of litigation costs to taxpayers because they were no longer the prevailing party. View "Baldwin v. United States" on Justia Law

The Ninth Circuit affirmed the tax court's decision to sustain a deficiency against an estate for overstating the amount of a charitable deduction and to sustain an accuracy-related penalty. In Ahmanson Foundation v. United States, 674 F.2d 761, 772 (9th Cir. 1981), the panel underscored the principle that the testator may only be allowed a deduction for estate tax purposes for what was actually received by the charity. Applying Ahmanson, the panel held that the tax court correctly considered the difference between the deduction and the property actually received by the charity due to the executor's manipulation of the redemption appraisal value. The panel also found nothing in the record that suggested that the tax court's findings were clearly erroneous. Finally, there was no error in the tax court's holding that the commissioner properly imposed the accuracy-related penalty under I.R.C. 6662(a). View "Dieringer v. Commissioner" on Justia Law

The Ninth Circuit affirmed the district court's order quashing the IRS's subpoena to the California Supreme Court that sought documents in connection with a tax audit. The panel held that "reasonable notice in advance" means notice reasonably calculated, under all the relevant circumstances, to apprise interested parties of the possibility that the IRS may contact third parties, and that affords interested parties a meaningful opportunity to resolve issues and volunteer information before third-party contacts are made. Reviewing the totality of the circumstances in this case, the panel held that Publication 1 did not provide taxpayers with the requisite reasonable advance notice. The panel explained that a reasonable notice must provide the taxpayer with a meaningful opportunity to volunteer records on his own, so that third-party contacts may be avoided if the taxpayer complies with the IRS's demand. View "J.B. v. United States" on Justia Law

The Ninth Circuit affirmed the tax court's conclusion that taxpayer was liable for the pre-notice interest component of West Side's tax liability. The panel held that because taxpayer received transferred assets worth more than West Side's total federal tax liability, the federal Internal Revenue Code determined pre-notice interest, and the availability of interest under state law was irrelevant. In this case, after West Side received a $65 million litigation settlement that exposed it to significant tax liabilities, taxpayer sold his stock in West Side. When the IRS was unable to collect corporate taxes from West Side, the IRS issued a notice of transferee liability to taxpayer for the unpaid taxes. View "Tricarichi v. Commissioner" on Justia Law

Plaintiff appealed the district court's judgment in favor of the Government in his tax refund action. Plaintiff argued that the net income for the subchapter S corporation, of which he was the sole shareholder, was substantially overstated on the corporation's tax return by the bankruptcy trustee who filed the return, resulting in personal income tax payments by plaintiff that were substantially more than he actually owed.The Ninth Circuit reversed the district court's judgment and held that the filings by plaintiff satisfied the requirement for a "statement identifying the inconsistency" pursuant to 26 U.S.C. 6037(c)(2)(A)(ii). In this case, the filings sufficiently identified the inconsistencies between plaintiff's tax returns and those of the S corporation. The panel affirmed as to plaintiff's abandoned appeal of his refund claim for tax year 2001 and remanded for further proceedings. View "Rubin v. United States" on Justia Law