3rd Circuit Tax Law News - U.S. Third Circuit
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Ah, the Real Housewives of New Jersey, the guiltiest of our reality TV pleasures. Some of TV's most memorable moments came from that show. How can you forget Teresa's "prostitution whore" table-flipping incident? Or, her all-cash furniture purchases for her new, gaudy mansion? Or, her sibling jealousy rivalry, with her sister-in-law? Need we say more?

Well, s*#t just got real for Teresa, and her husband, Joe. And since this is a Third Circuit blog, let's sit down at the federal charges table and see what the goverment is dishing up.

Want to Establish Residency? Bring Pets and Personal Property

If you have clients who are lucky enough to have millions in the bank and a home in the Virgin Islands, you might want to brush up on a recent tax ruling from the Third Circuit Court of Appeals about residency requirements.

Residents of the Virgin Islands pay income taxes to the Virgin Islands Bureau of Internal Revenue (VIBIR) rather than the Internal Revenue Service (IRS). Appellants Richard and Lana Vento (the Ventos) filed a joint 2001 income tax return with the VIBIR. Their three daughters also filed their 2001 income tax returns with the VIBIR. The United States claims that the Ventos and their daughters should have filed those returns with the IRS instead.

The proper tax jurisdiction depends on whether they were bona fide residents of the Virgin Islands as of December 31, 2001. Here, there were multiple answers to that question.

Day School Owners Lose Tax Fraud Appeal

The Internal Revenue Service isn’t kidding around when it comes to tax evasion. The Third Circuit Court of Appeals recently ruled in favor of the IRS by upholding the convictions of the owners of the Day School for Children in New Castle, Delaware.

While this sounds like a run-of-the-mill boring tax case, the facts are somewhat egregious. Well, they’re egregious in the sense that this couple actually thought they could get away with going under the table so blatantly.

Tax Debts Dischargeable in Bankrupcy: 3rd Circuit Breaks it Down

In a recent bankruptcy case before the Third Circuit Court of Appeals, the court zeroed in on the issue of tax debts dischargeable in bankruptcy.

As you may already know, there are dischargeable debts in bankruptcy and non-dischargeable debts. When it comes to tax debts, the distinction isn’t always that clear. This case clarifies the distinction between an excise tax and a trust fund tax.

Evidence of Lavish Living Exposes Tax Fraud

Here’s an interesting case about tax fraud and the admissibility of evidence.

The Third Circuit Court of Appeals recently dealt with a case involving over half a million dollars in unpaid taxes. When the taxpayers alleged that they had made a willful attempt at paying the tax and that the non-payment was not, in fact, willful, the government threw in damning evidence that hurt the taxpayers’ case.

Court Gives Exclusive Jurisdiction in Virgin Islands Tax Case

Last week, the U.S. Court of Appeals of the Third Circuit ruled on a tax case that stemmed from the Virgin Islands district court.

While this is a tax case, don't worry -- we won't get into the heavy tax jargon in this post. But the U.S. Virgin Islands are U.S. territories which means that there is a little more U.S. oversight on the taxation of income there.

Interest Paid by State Under Installment Agreement is Tax-Exempt

Tax-Exempt Bonds: The Third Circuit Court of Appeals held, in IRS v. DeNaples, that Internal Revenue Code Section 103 provided an exemption from federal income tax to interest payments paid under an installment agreement by the State to Taxpayers.

Taxpayers Dominick and Louis DeNaples were both partners in several entities that owned an interest in parcels of real property in Pennsylvania. The land was acquired by the State to build the Lackawana Valley Industrial Highway through condemnation and in 2001, the Taxpayers entered into an agreement whereby the state would pay them $40.9 million ($24.6 million in principal and $16.3 million in "settlement" interest) in exchange for the ownership interest in the land.

3rd Circuit Uphold's Merck's $500M Subpart F Tax Bill

The Third Circuit Court of Appeals ruled against Merck & Co earlier this week on a transfer pricing tax case involving a refund of $473 million.

The three-judge panel ruled against the drug giant and upheld the lower court ruling from 2010, where the district court found that the drugmaker was not entitled to the refund.

The case is complex, even for tax lawyers as transfer pricing and Subpart F are some of the most complicated parts of tax law. It involves complicated corporate tax schemes, tax havens and a suit for refund. Let’s try to put this into plain English:

When a Tax Levy is a Procedural Issue; 3rd Circuit Rules

The 3rd Circuit Court of Appeals ruled on an interesting question last month in a tax case. Never fear, all you non-tax lawyers, as this case deals with issues of civil procedure and not archaic tax concepts.

The question: Can a claim for wrongful tax levy be summarily dismissed as time-barred if the whole Notice of Levy is at issue? In other words, if the I.R.S. contents that it never issued a Notice of Levy to the taxpayer prior to taking money from her account, is it even appropriate for the court to dismiss the merits of the case on a statute of limitations ground? After all, when was "notice" received?

Mannella v. Comm'r of Internal Revenue, 10-1308

Claim for equitable innocent spouse relief in an action for unpaid taxes

Mannella v. Comm'r of Internal Revenue, 10-1308, concerned a challenge to the United States Tax Court's decision that petitioner did not owe any income taxes, interest, or penalties for the taxable years 1996 through 2000, in invalidating a Treasury Department regulation, 26 C.F.R. section 1.6015-5(b)(1), that sets two-year deadline to file a claim for equitable "innocent spouse" relief under 26 U.S.C. section 6015(f) from liability resulting from a jointly filed federal income tax return.