Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

ES NPA HOLDING LLC v. Commissioner
T.C. Memo. 2021-68

On June 3, 2021, the Tax Court issued a Memorandum Opinion in the case of ES NPA HOLDING LLC v. Commissioner (T.C. Memo. 2021-68). The primary issue presented in ES NPA HOLDING LLC v. Commissioner was whether the adjustment to ES NPA's 2011 ordinary income originates at the level of another limited liability company, IDS, in which the petitioner held an interest, which is to say that the adjustment is a partnership item of IDS and not a partnership item of the petitioner. Background to ES NPA HOLDING LLC v. Commissioner In 2011 Joshua Landy owned all the shares in NPA, Inc., an S corporation. On September 12, 2011, NPA Holding was formed, and on September 27, 2011, NPA, Inc., formed two LLCs: IDS and NPA, LLC. On October 14, 2011, NPA Holding exercised a call option granted by NPA, Inc., and pursuant thereto acquired all of the IDS class C units. …

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June 21, 2021
Business Related Issues
Business Related Issues / Memorandum Opinions / Tax Opinions

New Capital Fire Inc. v. Commissioner
T.C. Memo. 2021-67

On June 2, 2021, the Tax Court issued a Memorandum Opinion in the case of New Capital Fire Inc. v. Commissioner (T.C. Memo. 2021-67). The primary issue presented in New Capital Fire Inc. v. Commissioner was whether the petitioner is barred under the doctrine of equitable estoppel from changing its reporting of its bases in certain assets that the petitioner acquired in the merger because the statute of limitations bars assessment. Dancing the Merger Two Step in New Capital Fire Inc. v. Commissioner The petitioner, New Capital Fire was formed in November 2002 as a wholly owned subsidiary of (Old) Capital Fire.  A month after New Capital was formed, it merged with Old Capital, with New Capital surviving. This was the first step of a two-part merger. To accomplish the two-step merger, two other corporations were organized, CF Merger, in early October 2002, and CF Acquisition, in late October 2002, which…

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June 21, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Torres v. Commissioner
T.C. Memo. 2021-66

On June 2, 2021, the Tax Court issued a Memorandum Opinion in the case of Torres v. Commissioner (T.C. Memo. 2021-66). The issues presented in Torres v. Commissioner were whether the petitioner was entitled to reduce his flowthrough income from his wholly owned S corporation for a theft loss deduction pursuant to IRC § 165. Background to Torres v. Commissioner As of 2016, the petitioner was illiterate—whether because of an illness or because he didn’t ascribe much to them book learnings, is unclear.  In 2018, the petitioner learned to read. Prior to his literacy, he relied on others to handle the taxes of his S corporation. In 2016, the petitioner filed suit against a former co-owner, alleging that she had embezzled money from the company.  The petitioner filed his 2016 return in July 2018.  The company filed its 2016 return a couple of weeks later. The returns were audited in April…

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June 21, 2021
Income Tax Issues
Income Tax Issues / Memorandum Opinions / Tax Opinions

Grossman v. Commissioner
T.C. Memo. 2021-65

On May 27, 2021, the Tax Court issued a Memorandum Opinion in the case of Grossman v. Commissioner (T.C. Memo. 2021-65). The primary issue presented in Grossman v. Commissioner was whether state law determines a taxpayer’s marital status at death for purposes of the marital deduction under IRC § 2056(a). The Saga of Semone in Grossman v. Commissioner All Semone Grossman wanted was to find a nice Jewish girl to settle down with. He had survived internment in a series of concentration camps during World War II and immigrated to New York in 1949, where he got into the business of owning and operating parking garages. Semone married Hilda in 1955, and they had two children together.  They separated in 1965, never to reconcile or cohabitate again. Semone and Hilda entered into a separation agreement, though they never officially divorced New York. In 1967, Simone began cavorting with a shiksa named…

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June 21, 2021
Procedural Issues
Full Tax Court Opinions / Procedural Issues / Tax Opinions

Stein v. Commissioner
156 T.C. No. 11

On June 17, 2021, the Tax Court issued its opinion in Stein v. Commissioner (156 T.C. No. 11). The primary issue presented in Stein v. Commissioner was whether the Tax Court has discretion to grant the petitioners’ motion to dismiss a stand-alone petition for recovery of administrative costs when the petition did not invoke the Tax Court's jurisdiction to redetermine a deficiency under IRC § 6213(a). Factual Background in Stein v. Commissioner The petitioners filed an application for the award of reasonable administrative costs under IRC § 7430(a)(1).  After the IRS filed its answer to the petition, the petitioners filed a motion to voluntarily dismiss this case (motion), to which the IRS did not object. The Tax Court was faced with the question of whether it has the authority to grant the petitioners’ motion to dismiss the petitioner without entering a decision. Legal Background IRC § 7430(a)(1) provides that a taxpayer…

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June 20, 2021
Business Related Issues
Business Related Issues / Full Tax Court Opinions / Tax Opinions

Mylan Inc. v. Commissioner (156 T.C. No. 10)

On April 27, 2021, the Tax Court issued its opinion in Mylan Inc. v. Commissioner (156 T.C. No. 10). The underlying issues presented in Mylan Inc. v. Commissioner were (1) whether the legal expenses incurred in preparing notice letters to brand name drug companies of petitioner’s intent to make generic versions of its drugs as part of the FDA approval process to do the same were capital or ordinary expenses; and (2) whether the legal expenses incurred in defending against subsequent patent infringement suits were ordinary or capital in nature. Background to Mylan Inc. v. Commissioner The petitioner is a manufacturer of brand name and generic pharmaceutical drugs. From 2012 through 2014 it incurred significant amounts (tens of millions of dollars) of legal expenses in preparing notice letters and defending patent infringement lawsuits related to its generic versions of certain brand name drugs. On its 2012 through 2014 Federal income tax…

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June 20, 2021
Taxing, Briefly
Taxing, Briefly
Taxing, Briefly

Taxing, Briefly – Can the IRS Take My Passport?

When my son was two, his grandmother gave him a stuffed owl. Not a particularly creative toddler, he named the little owl Stuffy, and the name has stuck to this day.  What does this have to do with the question "Can the IRS Take My Passport?"  Patience...all will be revealed. He took the owl everywhere, which naturally led to many a calamity when Stuffy was inevitably misplaced. For my wife and I, Stuffy also had an unintended consequence—leverage. The boy-child needed Stuffy to go to sleep. So, when he was being unabashedly insolent, the threat of taking the owl usually remedied the situation. When the threats failed, and the tantrum moved the needle from angry little person to questionably-possessed imp, the actually seizure the owl was our only means of recourse. So, what the hell does this have to do with tax? Taxpayers are Basically Toddlers I have been a tax…

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June 7, 2021