This U.S. Tax Court case addressed the computation of a dividends-received deduction (DRD) under IRC §245A and the related disallowance of foreign tax credits under §245A(d)(1) for Varian Medical Systems' 2018 tax year, following a prior ruling that Varian was entitled to the DRD but subject to credit limitations. The parties filed cross-motions for summary judgment disputing whether §246 disallowed part of the DRD, the proper formula for calculating the credit disallowance (specifically involving the net section 965 inclusion amount), and whether certain arguments had been forfeited. The court held that neither party forfeited its arguments, that §246 disallows a portion of the DRD, and that the credit disallowance formula must use the post-§965(c) amount in the denominator. It granted the Commissioner's motion and denied Varian's, resolving the disputes based on the statutory text and purpose of the relevant TCJA provisions.
This U.S. Tax Court case involved a German holding company that issued a $610 million promissory note to its German subsidiary, which then elected to be disregarded as a separate entity and contributed the note to a U.S. partnership subject to TEFRA procedures. The IRS issued a Final Partnership Administrative Adjustment determining that the contributor's basis in the note and partnership interest was zero, and the partnership's basis in the note was also zero. The tax matters partner challenged these determinations, arguing for recognition of basis based on the subsidiary's separate existence before its election. The court granted the Commissioner's motion for partial summary judgment, holding that the check-the-box entity classification regulations required treating the contribution as if made directly by the owner of its own note, resulting in zero basis under section 722 and prior precedent, and that the partnership likewise took a zero basis under section 723.
The case concerned petitioners The Diversified Group Incorporated and James Haber, who marketed tax avoidance strategies from 1999 to 2002 without registering them as required by I.R.C. § 6111, leading the IRS to assess penalties under I.R.C. § 6707. After the Commissioner offered a conference with IRS Appeals to contest the penalties, petitioners declined the meeting to preserve their ability to challenge the liabilities later; they then requested collection due process hearings where they attempted to dispute the underlying penalties. The Tax Court granted the Commissioner's motion for partial summary judgment, holding that the offered conference qualified as an "opportunity to dispute" the liabilities under I.R.C. § 6330(c)(2)(B), which barred petitioners from raising those challenges in the CDP hearings or in court. The court further determined that the settlement officer conducting the hearings was properly appointed under the Appointments Clause and declined to resolve petitioners' Fifth and Eighth Amendment arguments as unnecessary or moot.
This U.S. Tax Court case involved Apache Corporation, which reported net operating losses (NOLs) for 2016 and 2017 that included specified liability losses (SLLs) eligible for a ten-year carryback under IRC section 172(f). Apache elected under section 172(b)(3) and related regulations to waive the standard two-year carryback period for its consolidated NOLs but expressly did not elect to relinquish the longer carryback for its SLLs, leading it to claim tentative refunds for 2006 and 2007; the IRS disallowed the carrybacks and asserted deficiencies. The court addressed cross-motions for partial summary judgment on whether Apache's waiver election applied only to the non-SLL portion of the NOL or to the entire NOL. The court held that the election relinquished the carryback only for the portion of the NOL exceeding the reported SLL, granting Apache's motion and denying the Commissioner's, based on the statutory structure allowing distinct treatment for SLLs and the taxpayer's express intent in the election statements.
The case involved a tax dispute over a charitable contribution deduction claimed by Paul-Adams Quarry Trust, LLC, for a conservation easement granted on a 207-acre Georgia property that had briefly been used for granite quarrying. The LLC deducted over $10 million based on an appraisal assuming the highest and best use was active granite mining, but the IRS disallowed the deduction after determining the easement's value was only $612,000 and imposed a gross valuation misstatement penalty. The Tax Court ruled that the petitioner had the burden of proof, the appraisal met qualified appraisal requirements, but the highest and best use was not granite mining, so the correct easement value was the lower amount proposed by the IRS. The court upheld the accuracy-related penalty under section 6662 and rejected the argument that the penalty provision was unconstitutionally vague.
The case involves electing small business trusts and individuals who own shares in an S corporation (Hobby Lobby) that claimed large noncash charitable contribution deductions in 2011 and 2012 for donating over 1,200 historical artifacts to a museum. The IRS disallowed the deductions and asserted gross or substantial valuation misstatement penalties under section 6662, leading the taxpayers to challenge the penalties via motions for partial summary judgment. The Tax Court granted the Commissioner's motion in part, holding that the IRS satisfied the supervisory approval requirement of section 6751(b) because the examiner's immediate supervisor signed a workpaper approving the proposed penalties before issuing the notice to the corporation. The court denied the motions in part, finding a genuine dispute of material fact on whether the taxpayers had reasonable cause for any valuation misstatements, which could provide a defense under section 6664(c). The taxpayers' motion was denied in full.
