TAX CASES
U.S. 5th Circuit, May 12, 2008
Kornman & Assocs. Inc. v. US, No. 06-11422
In a proceeding under the Tax Equity and Fiscal Responsibility Act (TEFRA) in which plaintiffs were alleged to have attempted to create an artificial tax loss through the short sale of Treasury Notes and the transfer of partnership interests, summary judgment for the government and dismissal with prejudice of a petition for readjustment of partnership items is affirmed where the obligation to close a short sale is a liability for purposes of I.R.C. section 752.
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U.S. 6th Circuit, May 13, 2008
S&M Brands, Inc. v. Cooper, No. 06-5828, 06-5829
In an action involving the Tennessee's Attorney General's enforcement of an amended escrow provision in the Master Settlement Agreement between various states and tobacco manufacturers alleging an impermissible retroactive effect in violation of due process, a summary judgment ruling is reversed and remanded with instructions to dismiss the case without prejudice on grounds of sovereign immunity where: 1) continuous application of the retroactive statute is unlikely; 2) states enjoy immunity in federal court for tax-related claims; 3) the inherent dignity of the sovereign state favors immunity; and 4) the semi-tax nature of the escrow system would better lend itself to a suit in state court.
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U.S. 9th Circuit, May 15, 2008
US v. Wealth & Tax Advisory Servs., Inc., No. 06-55915
In a tax case, an order denying the government's petition to enforce a summons issued by the IRS is reversed where: 1) a 29-page "draft opinion letter" sent by taxpayers' accountants to the taxpayers' tax lawyers, containing extensive legal authority and analysis of a complicated tax transaction, constituted a "memorandum"; and 2) thus, even though the letter was characterized as a "draft," it was nevertheless subject to disclosure pursuant to taxpayers' agreement to provide to the IRS "[a]ll opinions and memoranda that provide a legal analysis" of the transaction in question.
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