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EO Tax Journal 2011-6

Paul StreckfusComments Off on EO Tax Journal 2011-6

Today, I’m reprinting the Supreme Court’s decision in Mayo Foundation v. U.S. I’ve always seen the never-ending litigation involving medical residents as an attempt by hospitals to deprive their residents of the benefits and protections of Social Security coverage. Congratulations to Cathy Livingston and her folks for pursuing these cases as well as the attorneys at the Department of Justice.

I’m also reprinting from the National Taxpayer Advocate’s 2010 Annual Report to Congress — Most Serious Problem #8 — “The Failure of the Office of Appeals to Adequately Document Prohibited Ex Parte Communications May Violate Taxpayer Rights and Damage the Public’s Perception of its Independence.”

In the discussion of Most Serious Problem #8, there is an interesting dissertation on the appeals process, which should be of interest to EO practitioners considering same. In addition, there is expressed in the report a rather strong disagreement between the Taxpayer Advocate and the Office of Appeals.

Since we’re talking bureaucratic legalese here, the back-and-forth is not on a par with those late seventies exchanges on SNL between Jane Curtin and Dan Aykroyd (“Jane, you ignorant slut” and “Dan, you pompous ass”), but I wouldn’t be surprised if the two sides weren’t thinking along those lines. To quote the new philosopher king, Rex Ryan, “This is personal.” Here are parts of the report I found amusing:

Editor's Notebook Focus on Courts

EO Tax Journal 2010-186

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It’s Friday, it’s snowy, and it’s cold. And the holiday season begins in earnest for many folks this weekend or maybe just shopping for that special gift for that special someone. (Those jewelry store ads are the worst.)

My advice: buy a book or read a court case. I have both for you today.

I didn’t expect to enjoy reading an 800-page book about Warren Buffett, but I did. I saw it in the library and thought, what the heck, if it doesn’t grab me in the first 50 pages, it can go back and I’ll start reading about Mickey Mantle (The Last Boy — and the End of America’s Childhood, by Jane Leavy).

Actually I found I could not put the Buffett book down (The Snowball — Warren Buffett and the Business of Life, by Alice Schroeder). As I think the author says, simple tastes, complex man.

We all know Buffett is giving billions to charity through the Gates Foundation. His views toward charity and charities developed over time. In the early seventies, he was delighted to help bring to light the Boys Town scandal. What was the key document in the investigation?

Here are Buffett’s quoted words: “I was sitting there in the family room doing the Form 990 for the Buffett Foundation, and it just hit me — if I had to file a return, maybe they did too.” Twenty days later they got the Boys Town Form 990 from the IRS. (Try doing that today.)

Later in the seventies, Buffett was getting advice about foundations from Walter Annenberg. His advice to Buffett: be very wary lest your money end up in the hands of a McGeorge Bundy, who Henry Ford II described as “the most arrogant son of a bitch in the country, who developed the lifestyle of an Arabian prince on Ford Foundation money.”

The book has the best definition of leverage I’ve seen. Leverage is like gasoline. In a rising market, a car uses more of it to go faster. In a crash, it is what makes the car blow up. A lesson seemingly always forgotten.

Tax Court Creates Another Tax Shelter? Pun Intended.

I’m reprinting an interesting 7-6 Tax Court decision. I personally agree with the dissenters. While the vast majority of ministers don’t have the problem of multiple homes, if I’m a televangelist with millions of dollars coming in, why not have ten homes and use this case to have the parsonage allowance under section 107 apply to all of them?

Current & Quotable Focus on Courts Focus on IRS and Treasury

EO Tax Journal 2010-126

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1 – More on Milton Hershey School

2 – Times Editorial on Charities and Their Corporate Sponsors

3 – IRS Releases Draft Form EOs Will Use to Calculate New Health Care Tax Credit; Form 990-T To Be Revised to Allow EOs to Claim Credit.

4 – How Many Deja Vus Can There Be? (Bartels Trust v. U.S.)

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Current & Quotable Focus on Courts

EO Tax Journal 2010-122

Paul StreckfusComments Off on EO Tax Journal 2010-122

We won’t know whether a recent Tax Court case (reprinted below) was decided correctly until Jim Hasson has his next panel on UBIT, but I find the rationale used in this case confusing.

If the subject homeowners association is serving Ocean Pines, Maryland, population 10,496, is that a “community” for purposes of section 501(c)(4)? Even the IRS seems to say yes. If that’s a community, should it matter if services (day-time parking) are limited to members of that community? I don’t think so. The issue to me is whether the night-time parking is subject to UBIT, which it clearly is.

Correct me if I’m wrong, but isn’t a church or school analogy appropriate? A church or school restricts its parking to members or students during certain times. No one argues that is not a related use or subject to UBIT. But if the church or school is able to make money off its parking lot when not needed for church or school functions, that is subject to UBIT.

In the case under consideration, the court seems to get confused in its analysis, and focuses on the fact that the two parking lots at issue are eight miles away from the community of Ocean Pines. Why should this matter? The day-time parking clearly benefits the folks from Ocean Pines, but isn’t that part of the community benefit for which Ocean Pines Association received its 501(c)(4) status? The night-time parking is run like your typical commercial parking lot, so UBIT is appropriate on the receipts from this business activity.

Any other opinions?

I don’t know whether us beleaguered males should be outraged or not at an article in today’s New York Times discussing Under Armour sports apparel. According to an analyst for a market research group, “guys buy clothes to look cool or feel cool,” whereas “women buy for fit and color.” Okay, I don’t like the bozo implications, but women do have to admit we are cool.

Another Times’ article is a follow-up to an earlier Times’ story, and sort of a follow-up to my report yesterday on a Baltimore Sun article on compensation of hospital executives.

Practices of Dodgers’ Charity Are Said to Be Under Scrutiny

by Katie Thomas and Michael S. Schmidt, New York Times, August 31, 2010

Editor's Notebook Focus on Courts

EO Tax Journal 2010-115

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1 – More on Friends of Fiji

Following up on yesterday’s post regarding attorney Richard Fox’s recent letter to the IRS about Friends of Fiji, it has been reported in the tax press that an attorney for the House Committee on Oversight and Government Reform — who was involved in the committee’s ACORN investigation last year — has contacted Fox about Friends of Fiji’s tax-exempt status and the alleged self-dealing by its two directors. Hopefully, the IRS is already on the scene. If not, why not?

2 – Why Appeal a Slam Dunk?

When the Foundation of Human Understanding case came down last year, it was a brilliant recitation of facts and law by the chief judge of the U.S. Court of Federal Claims, resulting in the proper finding that the foundation did not qualify as a church. (Okay, I admit, one of my favorite EO attorneys, Milt Cerny, said the associational aspects of a church may need to be redefined in the internet age.)

If you’re still with me, then why appeal? To me, just a waste of time and money, but I suppose the foundation was determined — just like VSP is one determined litigant — and just like VSP, seeking cert is probably the next step for the foundation. In any event, I’m reprinting the court of appeals’ opinion, which makes relatively short shrift of the foundation’s arguments for church status.  

Editor's Notebook Focus on Courts

EO Tax Journal 2010-110

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1 – Our Tongue-Tied IRS

Rather than just have one report on my IRS questionnaire, I will address concerns somewhat seriatim. One major concern appears to be the inability of practitioners to get through to someone at the National Office or, if a phone or email is returned, to get a substantive answer out of anyone in the EO Division.

Focus on Courts

EO Tax Journal 2010-99

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I have been joking about the frequent bar quips to end EO Committee meetings, and have even suggested members bring their own doctored water bottles — and now I find this time-honored practice is even favored by royalty:

“The royal family is not without its quirks. When Prince Charles and Camilla, Duchess of Cornwall, came to visit us, they requested glasses of ice before we began a long receiving line. The staff dutifully produced them, and the prince removed a flask from his pocket and added to each a small splash of what I presume was straight gin, so that they might be fortified before the hour or more of shaking hands.”

Excerpt from Spoken from the Heart, by Laura Bush

Good news of two sorts today. One, if you don’t care about section 501(c)(6), you can skip today’s email. Two, if you do care about section 501(c)(6), you should find today’sBluetooth case of interest.

I’ve never considered myself a (c)(6) expert, but I have to wonder why Bluetooth appealed. It seemed to me that the district court had pretty much knocked down all of Bluetooth’s arguments. Of course I’m still wondering why VSP is still litigating. And I guess we shouldn’t be surprised if Free Fertility Foundation also decides to appeal. Maybe a recent comment by a baseball player explains the motivation: “I may strike out a lot but if I connect, it’s a home run.” I suppose hope springs eternal.

Focus on Courts

EO Tax Journal 2010-91

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Will the VSP litigation ever end? Probably not. As noted in the most recent installment of this long-running soap opera (see below), “this litigation has the look and feel of VSP trying to get a second chance at tax-exempt status.” Does anyone doubt that VSP will appeal its latest setback?

Focus on Courts

EO Tax Journal 2010-50

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The IRS continues its quixotic quest against credit unions. The latest chapter in the Bellco litigation appears below. For earlier developments, see Order Regarding Motions for Summary Judgment, EOTJ,vol. 14, no. 6, p. 112, and Order, EOTJ, vol. 14, no. 1, p. 152. For a similar case, see Community First Credit Union v. U.S., EOTJ, vol. 14, no. 4, p. 156, and vol. 14, no. 3, p. 161.

Editor's Notebook Focus on Courts

EO Tax Journal 2010-25

Paul StreckfusComments Off on EO Tax Journal 2010-25

1 – Old Business

Eve Borenstein weighs in on retroactive revocations.

2 – On the Road to Certiorari?

For most of us, we just want to know when it’s over. The latest step in the long-running medical residents saga is now a petition for certiorari, reprinted below. Normally I’d call this a slam dunk, as Ted Olson’s pals on the Supreme Court would say come on in, but now that Ted is advocating for same-sex marriages, is he persona non grata? Unfortunately, on such considerations is the law of the land decided.
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