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

Christine C. Peterson and Roger V. Peterson challenged the tax court's determination that deferred compensation payments under corporate plans made after Christine's retirement from Mary Kay, Inc. in tax year 2009 were derived from her former Mary Kay association, making them subject to self-employment tax. The court held that the percentage commissions received by Christine, a retired National Sales Director, under the Family Program and Futures Program are subject to self-employment tax, because they are classified specifically as deferred compensation, derived from her prior association with Mary Kay. Because the Petersons did not pay the self-employment tax Christine owed for her 2009 commission payments from two post-retirement, deferred-compensation programs, the Family Program and Futures Program, “the tax court did not err in upholding the additional tax imposed by the IRS,” including interest and penalties. Therefore, the appeal from the decision of the tax court upholding Christine’s self-employment tax for 2009, Appeal No. 14-15774, is affirmed. The consolidated appeal from the decision of the Tax Court relating to tax years 2006 and 2007, Appeal No. 14-15773, is dismissed as improperly filed. View "Peterson v. Commissioner" on Justia Law

On remand from the Supreme Court, these consolidated appeals challenge six actions brought by the district court to enforce summonses issued by the IRS in an investigation of DHLP and Beekman. The court remanded the case to the district court to determine whether defendants’ allegations of improper purpose were improper as a matter of law or sufficiently supported under United States v. Clarke to require a hearing. The district court enforced the summonses, finding that defendants neither alleged improper motives as a matter of law nor met their burden under Clarke. The court concluded that issuing a summons for the sole purpose of retaliation against a taxpayer would be improper as a matter of law; issuing summons in bad faith for the sole purpose of circumventing tax court discovery would be an improper purpose as a matter of law; the district court's decision not to hold a status conference or permit additional evidence is appropriate in light of the summary nature of a summons enforcement proceeding; and, although the district court erred in finding that the allegations set forth by defendants could not constitute an improper purpose as a matter of law, the district court correctly found that defendants failed to meet their burden under Clarke. Clarke permits a taxpayer challenging the enforcement of a summons “to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith.” In this case, defendants' submissions suggest that the summonses were issued in bad faith anticipation of tax court proceedings rather than in furtherance of Agent Fierfelder’s investigation. Conjecture and bare allegations of improper purpose are insufficient as a matter of law. Accordingly, the court affirmed the judgment. View "United States v. Clarke" on Justia Law

The IRS sent petitioner a Letter 1153 (notice of proposed assessment) informing her that, pursuant to 26 U.S.C. 6672(a), she - as the chief operating officer of NPRN - was personally responsible for the company’s unpaid trust fund taxes for the second quarter of 2005. The IRS then made an assessment against her in the amount of $346,732.38. The court held that a taxpayer is entitled to a pre-assessment administrative determination by the IRS of her proposed liability for trust fund taxes if she files a timely protest. Therefore, in this case, the IRS erred by not making such a determination for petitioner after she filed a timely protest. The court vacated the judgment of the tax court and remanded so that it can address whether the IRS’ error, under the circumstances, is harmless or requires setting aside the 2007 assessment (or some lesser form of corrective action). View "Romano-Murphy v. Commissioner of IRS" on Justia Law

This case stems from a dispute regarding Palmer Ranch's residential development (B-10). Palmer Ranch argued that B-10’s highest and best use was residential development under a Moderate Density Residential (“MDR”) zoning designation, which would allow between two and five units per acre, or 164 to 410 units total. Based on this highest and best use, Palmer Ranch stuck to its initial $25,200,000 valuation. The IRS countered with a maximum highest and best use of 100 units and a corresponding valuation of $7,750,000. The tax court held in favor of Palmer Ranch. The parties cross-appealed. The court affirmed the tax court's determination of B-10's highest and best use. However, the court reversed the ensuing valuation and directed the tax court on remand to either stick with the comparable-sales analysis or explain its departure. Whatever the tax court chooses to do, the tax court must keep its sights set strictly on the evidentiary record for purposes of selecting an appreciation rate, and ensure that it crunches the numbers correctly. View "Palmer Ranch Holdings v. Commissioner" on Justia Law

Plaintiffs filed suit challenging the Notices of Final Partnership Administrative Adjustment (FPAAs) the IRS issued disallowing all items they claimed on their partnership returns on the ground that partnerships constituted an abusive tax shelter designed to generate artificial, noneconomic tax losses desired by the taxpayer. The district court upheld the administrative adjustments to the partnerships’ returns and entered judgment for the Government. The court concluded that the district court's Memorandum Opinion and Order correctly resolved these questions; and therefore, the court affirmed on this basis. The district court concluded that the FPAAs properly found that the partnerships lacked economic substance and made adjustments accordingly. However, the FPAAs improperly imposed penalties. View "Kearney Partners Fund v. United States" on Justia Law

Defendant was convicted of conspiracy to defraud the United States, in violation of 18 U.S.C. 371, and four counts of filing false individual income tax returns, in violation of 26 U.S.C. 7206(1). The court concluded that there was sufficient evidence for a reasonable jury to find that defendant was guilty of conspiracy to defraud the United States where she and her husband owned two medical schools in the Caribbean, made millions of dollars from operating and selling them, and then, instead of reporting and paying taxes on any of that money, the couple followed "a common design" to hide it in multiple offshore accounts. Further, there was sufficient evidence for a reasonable jury to convict defendant of the four counts of filing false individual income tax returns where she failed to disclose her financial interest in foreign bank accounts. Finally, the district court did not err in denying defendant's motion for a new trial, the district court properly admitted the husband's out-of-court statements, e-mails, and other correspondence under Federal Rule of Evidence 801(d)(2)(E), and the district court did not clearly err by including in the loss amount the tax she owed on the interest, dividends, and capital gains in those accounts. However, the district court should have made a foundational finding as to whether the two entities defendant owned are properly treated as partnerships for the purpose of federal tax purposes. Accordingly, the court affirmed the convictions, vacated the sentence, and remanded for further proceedings. View "United States v. Hough" on Justia Law

In this appeal, the court considered whether Florida’s Rental Tax and Florida’s Utility Tax, as applied to matters occurring on Seminole Tribe lands, violate the tenets of federal Indian law. The court held that Florida’s Rental Tax is expressly precluded by 25 U.S.C. 465, and, in the alternative, is preempted by the comprehensive federal regulation of Indian land leasing. Therefore, the court affirmed the district court's order as to this issue. The court concluded, however, that the district court erred in placing the legal incidence of the Utility Tax on the Tribe and find that, on this record, the Tribe has not demonstrated that the Utility Tax is generally preempted by federal law. Therefore, the court reversed as to this issue and remanded for further proceedings. View "Seminole Tribe v. Stranburg" on Justia Law

This court previously determined that the State of Alabama failed to sufficiently justify its decision to impose certain taxes on rail carriers, including CSX Transportation, when motor carriers and water carriers (both railroad competitors) are not subject to the same. Then the Supreme Court reversed and remanded, concluding that the court should reconsider whether the State has offered sufficient justification for exempting railroad competitors from the sales and use taxes the State imposes on railroads when they purchase or consume diesel fuel. The court vacated its prior opinion, vacated the judgment of the district court, and remanded for further proceedings consistent with the Supreme Court's opinion. View "CSX Transportation, Inc. v. AL Dep't of Revenue" on Justia Law

This is an appeal of a federal income tax refund suit filed by the Estate of George Batchelor (“Estate”). Counts I and II of the Estate’s three-count complaint involve Batchelor’s personal income taxes for 1999 and 2000. Count III concerns the Estate’s attempt to claim a credit for its 2005 income taxes for payments it made in settlement of various lawsuits against Batchelor. The court concluded that the district court erred in applying res judicata to bar the government’s claims in Counts I and II and reversed the district court's decision. Since the Estate has failed to identify an applicable deduction identified in 26 U.S.C. 691(b), the court found no error in the district court’s determination that the Estate cannot avoid section 642(g)’s bar on double deductions, and therefore affirmed on Count III. View "Batchelor-Robjohns v. United States" on Justia Law

Plaintiffs-appellants Donald Kipnis, Lawrence Kibler, Barry Mukamal and Kenneth Welt,appealedthe district court’s Federal Rule of Civil Procedure 12(b)(6) dismissal of their complaint against defendants-appellees Bayerische Hypo-Und Vereinsbank, AG and HVB U.S. Finance, Inc. (collectively, “HVB”) as barred by the applicable statutes of limitations. This appeal arose out of the parties’ participation in an income tax shelter scheme known as a Custom Adjustable Rate Debt Structure (“CARDS”) transaction. In short, Plaintiffs alleged that HVB and its co-conspirators defrauded Plaintiffs by promoting and selling CARDS for their own financial gain. Plaintiffs “paid a heavy price in damages” as a result of HVB’s wrongdoing, including “substantial fees (and interest payments)” they paid HVB and other CARDS Dealers to participate in the CARDS strategy and “hundreds of thousands of dollars in ‘clean-up’ costs” they incurred after HVB failed to advise them to amend their tax returns. Consequently, Plaintiffs sought to recover the “damages that reasonably flow” from HVB’s misconduct. These damages included fees they paid to HVB and other CARDS Dealers, attorney’s fees and accountant’s fees incurred in litigating against the IRS, back taxes and interest paid by Plaintiffs, punitive damages, treble damages, and attorney’s fees and costs incurred in the instant action. The district court rejected Plaintiffs’ argument that their claims did not accrue until November 1, 2012, because they did not sustain any damages until the tax court issued its final decision. By December 5, 2001 (plaintiffs’ mandatory repayment date) Plaintiffs had sustained part of the damages they sought to recover, including the fees they paid to HVB.The district court found Plaintiffs’ reliance on the Florida Supreme Court’s decision in "Peat, Marwick, Mitchell & Co. v. Lane," (565 So. 2d 1323 (Fla. 1990)), to be misplaced, and dismissed Plaintiffs’ complaint as time-barred. The parties agreed that Florida law controlled the sole issue in this appeal: when did Plaintiffs’ claims against HVB accrue for purposes of the statutes of limitations. It was not clear under Florida law when Plaintiffs first suffered injury, and thus when their claims against HVB accrued for purposes of the applicable statutes of limitations. Because the relevant facts were undisputed, and this appeal depended wholly on interpretations of Florida law regarding the statute of limitations, the Eleventh Circuit certified a question of Florida law to the Florida Supreme Court. View "Kipnis v. Bayerische Hypo-UND Vereinsbank, AG" on Justia Law