Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

Articles Posted in Tax Law

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The issue presented for the Tenth Circuit’s review centered on whether a taxpayer may challenge a tax penalty in a Collection Due Process hearing (“CDP hearing”) after already having challenged the penalty in the Appeals Office of the Internal Revenue Service (“IRS”). Keller Tank Services II, Inc. participated in an employee benefit plan and took deductions for its contributions to the plan. The IRS notified Keller of: (1) a tax penalty for failure to report its participation in the plan as a “listed transaction” on its 2007 tax return; and (2) an income tax deficiency and related penalties for improper deductions of payments to the plan. Keller protested the tax penalty at the IRS Appeals Office. It then attempted to do so in a CDP hearing but was rebuffed because it already had challenged the penalty at the Appeals Office. Keller appealed the CDP decision to the Tax Court, which granted summary judgment to the Commissioner of Internal Revenue (“Commissioner”). Finding no reversible error in the Tax Court’s judgment, the Tenth Circuit affirmed. View "Keller Tank Services v. Commissioner, Internal Rev. Svc." on Justia Law

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After a bench trial, defendant-appellant Eldon Boisseau was convicted of tax evasion The district court determined that Boisseau, a practicing attorney, willfully evaded paying his taxes by: (1) placing his law practice in the hands of a nominee owner to prevent the Internal Revenue Service (IRS) from seizing his assets; (2) causing his law firm to pay his personal expenses directly given an impending IRS levy, rather than receiving wages; and (3) telling a government revenue officer that he was receiving no compensation from his firm when in fact the firm was paying his personal expenses. On appeal, he challenged the sufficiency of the evidence and argued that the district court wrongly convicted him: (1) without evidence of an affirmative act designed to conceal or mislead; and (2) by concluding that proof satisfying the affirmative act element of tax evasion was sufficient to prove willfulness. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Boisseau" on Justia Law

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Prior to petitioner-appellant Corbin McNeill retiring as an executive to a utility company, "he came across a complicated little scheme suggested by some well-heeled tax advisors." At its core, the scheme was to transfer to McNeill losses that foreign debt holders had already suffered: McNeill would claim the losses as deductions against his income; the foreign debt holders would transfer their assets for a slight premium over their current (and much reduced) market value because McNeill could use them to secure a tax advantage they didn’t need. To accomplish this, McNeill's tax advisors established a series of partnerships to which the foreign debt holders contributed their underwater debt instruments and their basis in them. McNeill contributed a relatively small sum of money, but owned over 90% of the partnership. When the partnership sold the debt to third parties, it could claim to realize the whole of the losses, and McNeill could claim his income was offset by the losses. In aid of the scheme, various accounting and law firms supplied opinion letters affirming that the scheme would withstand IRS scrutiny. The IRS indeed questioned McNeill's partnerships, and determined McNeill owed back taxes. McNeill paid the tax then filed suit seeking a partial refund. McNeill didn’t suggest that the partnership scheme was lawful or that he should have been excused the taxes the IRS assessed. Instead, he argued only that he should have been excused from the penalties and associated interest the IRS had imposed. The district court declined to decide the merits of McNeill’s partner level defense, holding it was precluded from doing so by Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The Tenth Circuit concluded this judgment was made in error, reversed and remanded for further proceedings. View "Mc Neill v. United States" on Justia Law

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The Internal Revenue Service notified petitioner-appellant James Cropper of its intent to collect unpaid taxes by levying his property. Cropper requested a collection due process (CDP) hearing with the IRS Office of Appeals. The Office of Appeals determined that the IRS could proceed with the proposed levy. Cropper sought judicial review, and the United States Tax Court sustained the Office of Appeals’ determination. Because the Tenth Circuit agreed with the Tax Court that the Office of Appeals didn’t abuse its discretion in determining that the IRS could proceed with the levy, it affirmed. View "Cropper v. CIR" on Justia Law
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Defendant Mary Vernon was a physician licensed to practice in the State of Kansas. She co-authored a book with the late Dr. Robert Atkins, famous for a low-carbohydrate diet. Vernon also worked as the medical director for several nursing home facilities in the northeast Kansas area, and also provided consulting services to various entities, including the University of Kansas. In April 1999, the Internal Revenue Service (IRS) assigned Revenue Officer Joni Broadbent to collect from Vernon unpaid taxes for the 1997 tax year. Broadbent was subsequently assigned by the IRS to collect from Vernon unpaid taxes for the tax years 1991 through 1996. Although Vernon filed a tax return for 1997, she did not file a tax return for the years 1991 through 1996. Together, the unpaid taxes, penalties and interest for the tax years 1991 through 1997 totaled $1,432,299.38. After processing late returns, the IRS adjusted the amount owed by Vernon downwards to approximately $1.1 million. Vernon did not comply with deadlines set by the IRS for payment. As a result, Broadbent levied various investment and retirement accounts that Vernon held, and eventually seized Vernon's personal residence. At the time the IRS moved to seize Vernon's personal residence, the amount of unpaid taxes was approximately $543,015.11. The federal tax lien was eventually released so that Vernon could sell the residence without encumbrance. Vernon, unbeknownst to Broadbent and the IRS, arranged for her domestic partner, Sara Wentz, to purchase the residence for a price of $250,000. The proceeds from the sale went to the IRS, but still did not satisfy Vernon’s tax liability in full. Vernon set up a new company, through which she could continue her work as a consultant, Rockledge Medical Services. Wentz was Rockledge's sole shareholder, and Vernon worked as a volunteer, thus receiving no income for her work. Vernon and Wentz disregarded corporate formalities in dealing with Rockledge’s contracts and finances. At some point, the IRS began investigating Vernon from a criminal standpoint. And that investigation ultimately led to the indictment for tax evasion that was issued in this case. Vernon was sentenced to a total term of imprisonment of 41 months, to be followed by a three-year term of supervised release, and ordered to pay $311,157 in restitution to the Internal Revenue Service. Vernon appealed her convictions and sentences. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Vernon" on Justia Law
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Petitioners Neil and Andrea Feinberg and Kelly McDonald run Total Health Concepts (THC), a Colorado marijuana dispensary. Colorado has legalized the sale of marijuana, but this permissible use runs in defiance of federal criminal law. Officials at the IRS have refused to recognize business expense deductions claimed by companies like THC on the ground that their conduct violates federal criminal drug laws. Petitioners have challenged the IRS’s policy after the agency disallowed their business expense deductions. Among other things, petitioners argued that the agency lacked authority to determine whether THC trafficked in an unlawful substance and, as a result, they suggested that their deductions should have been allowed like those of any other business. As the litigation progressed, the IRS issued discovery requests asking the petitioners about the nature of their business. Petitioners resisted these requests, asserting that their Fifth Amendment privilege against self-incrimination relieved them of the duty to respond. The IRS responded to petitioners’ invocation of the Fifth Amendment by moving to compel production of the discovery it sought. Ultimately, the tax court sided with the IRS and ordered petitioners to produce the discovery the agency demanded. Because the tax court proceedings were still ongoing and no final order existed that would give the Tenth Circuit jurisdiction over this appeal, petitioners sought a writ of mandamus. The Tenth Circuit concluded after review that petitioners did not carry their burden for mandamus relief, and denied their petition. View "In re: Feinberg" on Justia Law

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Jerold Fisher entered a plea agreement and pled guilty to submitting fraudulent tax returns to the Internal Revenue Service. In return, the Government promised, among other things, not to charge Fisher with any further crimes arising out of the same underlying conduct. Following the plea agreement and before sentencing, the district court found Fisher had breached the plea agreement and released the Government from its no-new-charges obligation. The Government then indicted Fisher on related structuring charges. The court subsequently reversed itself and reinstated the plea agreement, but the Government did not dismiss the new indictment. At sentencing on the tax fraud charge, Fisher asked the district court to find that the Government: (1) had breached the plea agreement by failing to dismiss the structuring charges; and (2) had engaged in vindictive prosecution. The court sentenced Fisher to 41 months in prison without ruling on either of those requests. Fisher appealed, arguing the district court erred by declining to decide his governmental breach claim. Because that claim was moot, the Tenth Circuit concluded it lacked jurisdiction over it. To the extent Fisher tried to raise a similar argument regarding his vindictive prosecution claim, the Tenth Circuit concluded he forfeited that claim and waived it through inadequate briefing. View "United States v. Fisher" on Justia Law
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From 2002 to 2007, Defendant-appellant Jerold Sorensen, an oral surgeon in California, concealed his income from the Internal Revenue Service (“IRS”) and underpaid his income taxes by more than $1.5 million. He used a “pure trust” scheme, peddled by Financial Fortress Associates (“FFA”), in which he deposited his dental income into these trusts without reporting all of it to the IRS as income. Over the years, he also retitled valuable assets in the trusts’ names. In 2013, after a series of proffers, the government charged him with violating 26 U.S.C. 7212(a) for corruptly endeavoring to obstruct and impede the due administration of the internal-revenue laws. A jury convicted him of the charged offense. On appeal, Sorensen argued his conduct amounted to evading taxes so it was exclusively punishable under a different statute; that the prosecution misstated evidence in its closing rebuttal argument; and (7) cumulative error. Furthermore, he argued the district court erred: (2) by refusing his offered jury instruction requiring knowledge of illegality; (3) by giving the government’s deliberate-ignorance instruction; (4) by instructing the jury that it could convict on any one means alleged in the indictment; and (5) by refusing to allow him to provide certain testimony from a witness in surrebuttal. Finding no merit to any of these contentions, the Tenth Circuit affirmed Sorensen's conviction. View "United States v. Sorensen" on Justia Law

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Defendant-appellant Elizabeth Kupfer and her husband jointly filed federal income taxes for 2004-2006, but failed to report over $790,000 in gross income. The government charged defendant with three counts of tax evasion, one for each tax year. She admitted that she had failed to report a substantial amount of gross income, but denied that her under-reporting was willful. A jury disagreed and found defendant guilty on each of the three counts. Defendant appealed, arguing: (1) the trial court erred in instructing the jury; (2) the trial court erred in denying her request for a mistrial after she alleged a juror commented on other charges against defendant during jury deliberations; and (3) the trial court erred in calculating defendant's sentence. Upon review, the Tenth Circuit concluded that the trial court did miscalculate defendant's sentence. The sentence was vacated and the case remanded for resentencing. The Court affirmed the trial court in all other respects. View "United States v. Kupfer" on Justia Law

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Petitioner Ramona Mitchell appealed a Tax Court decision to deny a charitable contribution deduction for a donation of a conservation easement on real property that was, at the time of the donation, subject to an unsubordinated mortgage. Specifically, she challenged the Tax Court’s conclusion that the donation failed to comply with the Internal Revenue Code (and its implementing regulations). Finding no reversible error, the Tenth Circuit affirmed the Tax Court. View "Mitchell v. Comm'r of Internal Rev." on Justia Law