Justia U.S. 11th Circuit Court of Appeals Opinion Summaries

The Eleventh Circuit affirmed the decisions of the tax court upholding the Commissioner's transferee liability assessment against petitioners. Terry and Sandra Shockley sold their company, SCC, and reported their gains from this sale on timely federal income tax returns for calendar year 2001. The Commissioner assessed additional tax liabilities against SCC and thus asserted transferee liability under I.R.C. 6901 against each of eight of the largest selling shareholders of SCC. The court held that the tax court appropriately used substance over form and its related judicial doctrines to determine the true nature of the transaction at issue. The court agreed with the Commissioner, the tax court, and the Seventh Circuit that substance-over-form analysis was appropriate in context of the Wisconsin Uniform Fraudulent Transfer Act. Under the circumstances, the Commissioner was permitted to assess transferee liability for unpaid taxes against petitioners by applying the procedural device supplied by I.R.C. 6901. View "Shockley v. Commissioner of Internal Revenue" on Justia Law

The money that a homosexual man paid to father children through in vitro fertilization—and in particular, to identify, retain, compensate, and care for the women who served as an egg donor and a gestational surrogate—was not spent "for the purpose of affecting" his body's reproductive "function" within the meaning of I.R.C. 213. In this case, the Eleventh Circuit held that it was constrained by I.R.C. 213's plain language where taxpayer's own function within the human reproductive process was to produce and provide healthy sperm, and because taxpayer was and remained capable of performing that function without the aid of IVF-related treatments, those treatments did not affect any function of his body and did not qualify as deductible "medical care" within the meaning of Section 213(a). The court also held that the IRS's disallowance of taxpayer's claimed deduction neither violated any fundamental right nor discriminated on the basis of any suspect (or quasi-suspect) characteristic. View "Morrissey v. United States" on Justia Law

The Eleventh Circuit affirmed the Tax Court's determination that petitioner was liable as a transferee under 26 U.S.C. 6901 for his former employer's unpaid taxes. Because the state substantive law in this case does not require exhaustion for liability to exist, the court held that the Commissioner was not required to exhaust remedies against the company before proceeding against petitioner as a transferee. In this case, applying Florida law, the court held that petitioner could not definitively prove that the Dividend Payments were a part of his employment with FECP and because he did not raise any other argument for why FECP might have received reasonably equivalent value even if the dividends were not compensation, the court must conclude that they were dividends for which FECP did not receive reasonably equivalent value. As such, the court affirmed the Tax Court's determination that the reasonable-value element of constructive fraud under the Florida Uniform Fraudulent Transfer Act was satisfied for all of the Dividend Payments. When considered together, those dividend payments were substantial enough for the Tax Court to conclude that they led to the insolvency of FECP. View "Kardash v. Commissioner of IRS" on Justia Law

The government appeals the bankruptcy court's decision regarding the interest due from defendant for the taxable year 1998. In this case, the tax court never reached the issue of defendant's interest owed on the 1998 tax deficiency. Therefore, the bankruptcy court erred in deferring to the tax court for its calculation of the interest on defendant's underpayment for 1998. Accordingly, the court reversed the district court's judgment affirming the bankruptcy court. The court remanded for further proceedings. View "United States v. Beane" on Justia Law

Petitioner seeks review of the Commissioner's determination that he owes income tax deficiencies and related penalties for 2004, 2005, and 2006. Petitioner was the president, director, and sole shareholder of a Florida “S” corporation called Paragon Homes Corporation. I.R.C. 165(a) allows a deduction for “any loss sustained during the taxable year and not compensated for by insurance or otherwise.” The court concluded that the tax court did not clearly err in determining that Paragon did not abandon the properties at issue in 2008, and that the evidence amply supports this finding, along with the finding that the properties were not worthless to Paragon at the end of 2008. Accordingly, the court concluded that the tax court properly determined that petitioner had not met his burden of demonstrating that the Commissioner’s disallowance of the section 165(a) loss deduction was incorrect. The court affirmed the tax court's decision. View "Tucker v. Commissioner of Internal Revenue" on Justia Law

Defendant appealed the district court's grant of summary judgment in favor of the United States for unpaid federal income taxes, late penalties, and interest accrued, arguing that the district court erred because her affidavit created a genuine factual dispute about whether she had paid the taxes and penalties owed. Reviewing de novo, the court concluded that the district court did not err by entering summary judgment in favor of the United States where the United States submitted copies of defendant's federal tax returns, transcripts of her accounts for tax years 1996 and 1999 through 2002, and an affidavit from an IRS officer that established defendant had outstanding tax assessments. In this case, the evidence created a presumption that the assessments were proper and shifted the burden to defendant to rebut the presumption with evidence that the assessments were erroneous. The court concluded that defendant's affidavit failed to create a genuine factual dispute about the validity of the assessments, and defendant's general and self-serving assertions that she paid the taxes owed and related late penalties for tax years 1996 and 1999 through 2002 failed to rebut the presumption established by the assessments. The court vacated the part of the judgment addressing the amount of defendant's assessments and remanded for the district court to credit her payment and to recalculate her assessment for tax year 1996. The court affirmed the entry of summary judgment regarding defendant's liability. View "United States v. Stein" on Justia Law

The United States appeals the district court’s determination that commissions claimed by Defendant F. Gordon Spoor as personal representative of the Louise P. Gallagher Estate and as trustee of the Louise Paxton Gallagher Revocable Trust have priority over a special deferred estate tax lien on property designated by agreement under I.R.C. 6324A. The court agreed with the United States that special estate tax liens on property designated by section 6324A, unlike estate tax liens on the gross estate pursuant to section 6324, are not subject to an executor’s claims for administrative expenses. The court also held that Spoor’s administrative expenses do not take priority over income tax liens imposed pursuant to section 6321. Accordingly, the court reversed and remanded. View "United States v. Spoor" on Justia Law

Petitioners challenge the Tax Court's decision sustaining the Commissioner's determination of deficiencies in petitioners' 2007 income tax return due to an improper characterization of income from the sale of property as a capital gain rather than as ordinary business income. The Tax Court also imposed a 20% penalty for substantial understatement of income under I.R.C. 6662. The court concluded that the Tax Court correctly determined that petitioners were liable for the deficiency and affirmed as to this issue. However, the court found clear error in the Tax Court’s determination that petitioners failed to establish that they acted with reasonable cause and in good faith. In this case, there is no indication in the record that petitioners withheld any information from their accountant, and the Commissioner conceded at oral argument that petitioners did not provide any false information. Accordingly, the court reversed the Tax Court’s assessment of the substantial understatement of income tax penalty. View "Boree v. Commissioner" on Justia Law

The Commissioner appealed the tax court's judgment in favor of the Estate and the Government of the United States Virgin Islands. In 2010, the IRS issued notices of deficiency to Travis L. Sanders, before his death in 2012, alleging that he had not been a bona fide USVI resident during those years and that Madison, a USVI-based consulting firm that Sanders was a limited partner in, was an illegal tax shelter. Because Sanders was not a bona fide USVI resident, the Commissioner claims, Sanders was required to file tax returns with the IRS and was not entitled to the Economic Development Program (EDP) tax reduction. The court held that the statute of limitations was triggered only if Sanders actually was a bona fide resident of the USVI; in this case, the facts relied on by the tax court are insufficient to establish that Sanders ever became a bona fide resident of the USVI; and thus the court vacated the tax court's judgment. The court remanded for further proceedings. View "Commissioner v. Estate of Travis L. Sanders" on Justia Law

After the IRS assessed Trust Fund Recovery Penalty (“TFRP”) taxes against Ashley Scott for quarters covering a certain period, she filed suit seeking a refund of the $300 she paid for taxes owed and seeking an adjudication that she was not responsible or if she were deemed the responsible person, contribution from other responsible persons. Scott worked for her father’s business beginning shortly after her graduation from high school in 1995 until its closing in 2008. Within the company, Scott’s role was very limited. She did not make financial decisions or authorize the payment of any bills to vendors or creditors; she did not open or close bank accounts, or otherwise perform banking functions; she did not guarantee or co-sign loans; and she did not hire or fire employees. She wrote checks when directed to by her father, to buy office supplies, or to give herself advances on her salary. Principally at issue on appeal is whether Scott is a “responsible person” under 26 U.S.C. 6672. The district court granted partial summary judgment for the Government, holding that Scott was a responsible person. The court held that this case is too close to be decided on summary judgment where there are genuine issues of material fact relevant to whether Scott was a responsible person under section 6672. Therefore, the court vacated and remanded as to this issue. The court rejected Scott's arguments as to the willfulness issue and affirmed as to this issue. View "Scott v. US Dept. of Treasury" on Justia Law