Today’s news media is full of stories about supposed malicious allegations, unfounded criminal investigations and indictments based on perjury.
Regardless of our political leanings, all of us should hope that such things are actually exceedingly rare. However, a case decided recently by the Sixth Circuit Court of Appeals shows that such things really do happen. Mynatt v. United States, — F.4th —-, 2022 WL 3335690 (August 12, 2022).
In Shakespeare, an English King blames the loss of an important battle on his lack of a horse: “A horse, a horse, my kingdom for a horse!”[1]
In real life (and especially, it seems, in tax law) it is more like to be the lack of a timely piece of paper that causes the taxpayer to lose.
In the course of administering a trust, it sometimes happens that mistakes are made that require correction. For example, distributions may be made that are not in accordance with the provisions of a trust: payments to the wrong beneficiaries, or in the wrong amounts or for the wrong purposes. A similar situation may arise when a trust instrument requires the trustee not to make any disposition of certain “legacy” assets, and the trustee erroneously sells them anyhow.
In such situations, the way to “undo” the transactions is for the parties to reverse the erroneous transaction by returning the distributions made in error. When the year of distribution is a closed tax year and the act of correction is made in a later year, it is important to make sure that the distribution that is returned is treated as a tax-deductible expense, thus offsetting the taxable receipt of the erroneous distribution in the prior tax year.
The Supreme Court’s recent decision in CIC Services, LLC v. Internal Revenue Service may have significantly expanded taxpayers’ ability to obtain immediate injunctive relief against onerous tax reporting requirement.
The Anti-Injunction Act bars any “suit for the purpose of restraining the assessment or collection of any tax.” Civil penalties are usually considered to be “taxes” for purposes of the Anti-Injunction Act. But in CIC Services, the Supreme Court sustained a suit to enjoin the enforcement of IRS Notice 2016–66 which provides that micro-captive insurance arrangements are “listed transactions” which must be disclosed (regardless of the ultimate validity of the transaction) upon pain of a civil monetary penalty under IRC § 6707A – as well as potential criminal sanctions under § 7203 for the willful failure to make a return or supply information required by law or regulation. The IRS’ problem in CIC Services was that in issuing Notice 2016-66, it had failed to comply with the Administrative Procedures Act (APA) which requires that a rule with the force and effect of law may be issued only after an opportunity for public notice and comment. No public notice, no enforceable rule, the Court held. The Anti-Injunction Act did not deprive the courts of jurisdiction.
Texas is a “community property” state; but all property in Texas is not “community property”.
In Texas, each spouse can have his or her own “separate” property, which generally consists of property that was acquired by gift or inheritance, and that which was owned by the spouse prior to marriage. All other property is generally presumed to be community property.
A good friend called me recently with a question for one of his clients. The client, an elderly client with health problems, wanted to know if the payments she has been making to her caregivers could be treated as non-taxable gifts, or if she has to report the payments to the IRS as wages?