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

This case involved the allocation of tax refunds pursuant to a Tax Sharing Agreement (TSA) between two members of a Consolidated Group, the parent corporation (the Holding Company), and one of its subsidiaries (the Bank), the principal operating entity for the Consolidated Group. At issue on appeal was whether the Bankruptcy Court erred in declaring the tax refunds an asset of the bankruptcy estate. The court concluded that the relationship between the Holding Company and the Bank is not a debtor-creditor relationship; when the Holding Company received the tax refunds it held the funds intact - as if in escrow - for the benefit of the Bank and thus the remaining members of the Consolidated Group; the parties intended that the Holding Company would promptly forward the refunds to the Bank so that the Bank could, in turn, forward them on to the Group's members; and in the Bank's hands, the tax refunds occupied the same status as they did in the Holding Company's hands - they were tax refunds for distribution in accordance with the TSA. Accordingly, the court reversed the Bankruptcy Court's judgment and directed that court to vacate it decision declaring the tax refunds the property of the bankruptcy estate and to instruct the Holding Company to forward the funds held in escrow to the FDIC, as receiver, for distribution to the members of the Group in accordance with the TSA. View "Zucker, et al. v. FDIC" on Justia Law

CSX, an interstate rail carrier, filed suit challenging Alabama's sales and use taxes. At issue was whether exempting CSX's main competitors from Alabama's sales tax was discriminatory as to rail carriers in violation of the Railroad Revitalization and Regulation Reform Act of 1976 (4-R Act), 49 U.S.C. 11501(b)(4). After establishing a comparison class of competitors and showing that its competitors did not pay the sales tax on diesel fuel purchases, CSX made a prima facie showing of discrimination under section 11501(b)(4). Alabama then failed to meet its burden by showing a "sufficient justification" for the exemptions. Accordingly, the court reversed the judgment of the district court, holding that Alabama's sales tax violated the 4-R Act, and remanded to the district court with instructions to enter declaratory and injunctive relief in favor of CSX. View "CSX Transp., Inc. v. AL Dept. of Revenue, et al." on Justia Law

Allen Davis exercised an option to purchase additional shares in CNG, a closely-held corporation but did not report the option as income on his federal income tax return. On appeal, Davis and CNG taxpayers challenged their respective deficiency notices in the Tax Court. The Tax Court determined that Davis should have included the value of the shares he received from the option's exercise in his 2004 gross income and sustained the Commissioner's deficiency notice. The Tax Court upheld the CNG taxpayers' deductions. Because the court held that CNG granted Davis the option in connection with the performance of services and that he should have included the value of the shares he received as ordinary income under 26 U.S.C. 83(a), the court also upheld CNG taxpayers' deductions, which were proper under section 83(h). Accordingly, the court affirmed the judgment of the Tax Court. View "Davis v. Commissioner of IRS" on Justia Law

This appeal concerned a grand jury investigation and the issuance of subpoenas duces tecum to a target and his wife, which required the production of records concerning their foreign financial accounts. The government conducted an investigation of, among other things, the Target and his wife's failure to disclose tax returns on foreign accounts and failure to file certain government forms for these alleged accounts. The Target and his wife refused to comply with the subpoenas by producing their records, asserting their Fifth Amendment privilege against self-incrimination. The court joined its sister circuits and concluded that the subpoenaed records fell within the Required Records Exception and affirmed the district court's grant of the government's motion to compel. View "In re: Grand Jury Proceedings, No. 4-10" on Justia Law

In 2010, the Commissioner issued four summonses to third-party financial institutions to determine whether the Miccosukee Tribe had complied with its federal withholding requirements during the period from 2006-2009. The Tribe petitioned to quash the summonses on the grounds of sovereign immunity, improper purpose, relevance, bad faith, and overbreadth. The district court denied those petitions. Because the court concluded that tribal sovereign immunity did not bar the issuance of these third-party summonses, the district court did not clearly err when it found that the summonses were issued for a proper purpose, and the Tribe lacked standing to challenge the summonses for overbreadth, the court affirmed the judgment. View "Miccosukee Tribe of Indians v. United States" on Justia Law

Petitioner claimed substantial tax benefits from a tax shelter on four consecutive tax returns. The IRS later disallowed petitioner's claim and determined deficiencies in tax and accuracy-related penalties, including gross valuation misstatement penalties and a negligence penalty. Petitioner conceded the deficiencies in tax, but contested the penalties. The Tax Court affirmed the IRS's imposition of the penalties. The court held that the Tax Court correctly concluded that petitioner was liable for the 40% gross valuation misstatement penalties from 2000 through 2002. In addition, the court found no error in the Tax Court's determination that petitioner failed to establish that he acted with reasonable cause and in good faith with respect to his underpayment of tax. View "Gustashaw, Jr., et al v. Commissioner of IRS" on Justia Law

The Property Appraiser and the Tax Collector appealed from an order of the district court affirming the final order of the bankruptcy court. The bankruptcy court held that debtor's request for the bankruptcy court to redetermine her ad valorem tax liability for the year 2009 was timely filed under 11 U.S.C. 108(a) and 505. The court concluded that the bankruptcy court erred in ruling that debtor's request was timely under section 108(a). The bankruptcy court's interpretation of the language in section 505(a)(2)(C) failed to give full effect to Congress's intent. Accordingly, the court reversed the judgment of the district court affirming the bankruptcy court's holding. View "Dubov, et al. v. Read" on Justia Law

Petitioners, husband and wife, sought review of a judgment of the Tax Court sustaining the Commissioner's determination of a deficiency, an accuracy-related penalty, and a penalty for filing a delinquent tax return. Husband worked for IBM and acquired IBM stock by exercising his employee stock options. Husband subsequently participated in a program operated by Derivium, whereby it would "lend" a client ninety percent of the value of securities that the client pledged to it as collateral. The court concluded that a combination of factors pointed decidedly to the conclusion that husband disposed of his stock by signing a Master Agreement and addenda and retained no real interest in his collateral or the "loan" after Derivium had transferred the proceeds to him. The court also concluded that plaintiffs have not shown that they acted with reasonable cause and in good faith when they declared their income from the sale of IBM shares to Derivium. Consequently, the court affirmed the Tax Court's imposition of an accuracy-related penalty. Further, plaintiffs have not carried their burden of establishing reasonable cause for failing to timely file their return and therefore, the Commissioner's assessment of a late-filing penalty was appropriate. View "Calloway v. Commissioner of IRS" on Justia Law

The narrow question presented to the Eleventh Circuit concerned whether a Tax Court petition that challenged a notice of deficiency as invalid, "was a proceeding in respect of the deficiency" so as to suspend the limitations period. The IRS selected Petitioner-Appellant Shockley Communications Corporation's (SCC) return for audit. SCC was closely held, and Petitioners-Appellants Terry Shockley, Sandra Shockley and Shockley Holdings, LP were shareholders in SCC. The IRS began the statutory procedures required prior to formal "assessment" of SCC's tax. If a proceeding regarding the taxpayer's deficiency is placed on the Tax Court docket, the IRS must wait to assess until the Tax Court decision becomes final, plus 60 days thereafter. Receipt of the notices was the issue before the Tax Court. After review and oral argument, the Eleventh Circuit held that the petition at issue here suspended the running of the statute of limitations, and reversed. View "Shockley v. Commissioner of IRS" on Justia Law

Plaintiffs appealed the dismissal of their complaint contending that the Department of Treasury lacked statutory authority to promulgate regulations imposing a user fee. Specifically, plaintiffs challenged the Department's regulation's requirement that compensated tax return preparers obtain a Preparer Tax Identification Number (PTIN) and its imposition of an annual fee for that number. Because in exchange for the user fee the Department assigned a PTIN and conferred a special benefit upon tax return preparers, the court held that the Department's user fee complied with 31 U.S.C. 9701. Accordingly, the court affirmed the decision of the district court. View "Brannen, III, et al. v. United States" on Justia Law