When controversies cannot be resolved at the audit or appeals level, or when a taxpayer receives a Notice of Deficiency, Colvin + Hallett represents clients across the country through the various stages of litigation and before courts at all levels, including U.S. District Courts, U.S. Courts of Appeals, the Court of Federal Claims, and in the U.S. Tax Court. In addition to individuals and businesses, our attorneys have also represented the governments of Pacific Territories in tax-related litigation. Colvin + Hallett attorneys evaluate individual cases and court precedents, advise on a litigation strategy, and pursue that strategy from discovery through trial.

U.S. Supreme Court

Gitlitz v. United States, 531 U.S. 206 (2001). Successfully argued that under IRC § 108, shareholders of an S corporation could increase their basis by their share of the corporation’s discharge of indebtedness income even though the income was excludable, thus allowing them to deduct the full amount of the corporation’s losses which would otherwise not have been deductible.

Circuit Courts of Appeals

Linton v. United States, 630 F.3d 1211 (9th Cir. 2011).  Obtained an important reversal of the district court’s decision that gifting LLC interests was an indirect gift of property rather than a gift of LLC interests under the step transaction doctrine. The reversal left intact a longstanding and common estate planning tool used to reduce the value of gifts by applying valuation discounts to gifted LLC interests.

Pacific Fisheries v. United States, 539 F.3d 1143 (9th Cir. 2008).  In case involving the adequacy of the government’s disclosure in response to a Freedom of Information Act request, obtained reversal of the district court’s decision that the IRS was not required to segregate and produce factual portions of documents and that the IRS properly applied the tax convention treaty information exemption in FOIA.  The case has been cited over 160 times. 

Strom v. United States, 641 F.3d 1051 (9th Cir. 2011).  Obtained reversal of the district court decision that pooling of interest accounting rules could not form a basis for deferring income recognition on stock options under § 83. 

St. Charles Inv. Co. v. Comm’r, 232 F.3d 773 (10th Cir. 2000), rev’g 110 T.C. 46 (1998).  In a case of first impression involving whether the suspended passive activity losses of a closely-held C corporation were subject to the prohibition on C corporation carryovers after the corporation made an S election, the Tenth Circuit reversed the Tax Court and ruled that the specific language of section 469(b) (“except as otherwise provided in this section, any loss … which is disallowed under subsection (a) shall be treated as a deduction … allocable to such activity in the next taxable year”) trumped the more general rule against carryovers from C years to S years set out in section 1371(b)(1).

JJR, Inc. v. United States, 156 F.3d 1237 (1998). Obtained favorable district court and Ninth Circuit decision for dance club, in which Ninth Circuit held that nude dancers were not employees and therefore not subject to employment taxes.

1630 Welton, LLC, Buchenberger TMP v. Comm’r, No. 11-9000 (10th Cir. May 10, 2012). Secured victory on statute of limitations issue in Tax Court. After appealing, the government voluntarily dismissed its appeal at the 10th Circuit after the Supreme Court issued its opinion in United States v. Home Concrete & Supply, LLC, 566 U.S. 478 (2012).

District Courts

Bellock v. United States, 2021 U.S. Dist. LEXIS 240869, 2021 WL 5893982 (D. Colo. 2021). In a case of first impression, the court ruled in favor of our property developer clients, holding they were entitled to deduct their purchase of bonds issued by metropolitan districts (which helped put in place infrastructure – water, sewer, arterial roadways – for the development) pursuant to Rev. Proc. 92-29, and could treat the income accruals on the bonds as tax exempt interest. The court rejected the government’s two primary arguments against the developer’s tax position: a substance-over-form argument set out in Chief Counsel Advice 201537022 and an argument that districts were not issuing bonds pursuant to their “borrowing power.”

Wagner v. United States, 353 F.Supp.3d 1062 (E.D. Wash. 2018).  Successfully argued that § 6532(a)—the statute that enables taxpayers to sue the government for tax refunds—is non-jurisdictional and that the two-year limitation to file suit set forth in the statute may be equitably tolled.  This marked the first time any court had extended the equitable tolling doctrine to § 6532(a) since the Supreme Court’s decision in United States v. Brockamp, 519 U.S. 347 (1997).  This success resulted in the defeat of the government’s motion to dismiss and lead to the government ultimately conceding the case in full shortly thereafter.

Proliance Surgeons Inc. v. United States, No. 1:09-cv-00680 (Fed. Cl.).  Represented a large medical practice group with approximately 200 physicians in a case involving the IRS’s challenge to a deduction for medical malpractice insurance premiums paid to a captive insurance company alleging it was impermissible “self-insurance” and not insurance.  Reached a settlement resulting in United States’ concession of more than two thirds and agreement for prospective treatment of the captive insurance arrangement.

Sala v. United States, 552F. Supp. 2d 1157 (D. Colo. 2008).  Obtained summary judgement holding that the government had not established fraud by clear and convincing evidence.

Strom v. United States, 583 F. Supp. 2d 1264 (W.D. Wash. 2008).  Successfully argued that stock options were subject to a substantial risk of forfeiture by reason of § 16(b) of the Securities Exchange Act and therefore the stock was valued at a later date when the value was lower. 

Gary J. Racca & Sound Built Homes, Inc. v. United States, 2:06-cv-01822, 2007 WL 1108872 (W.D. Wash. April 11, 2007). Successfully quashed two IRS summonses issued to the clients’ former accountant in connection with the IRS’s audit of the client.

United States v. Cassini, No. 2:05-cr-00166 (W.D. Wash.).  Successfully argued that our client’s security interest in criminal defendant’s (Cassini) luxury sports cars, even though not recorded, was superior to the government’s interest in its forfeiture action.  The government returned the seized cars to our client.

Pacific Fisheries, Inc. v. Internal Revenue Service, 2:04-cv-2436, 2006 WL 1635706 (W.D. Wash. June 1, 2006).  Obtained over $17,000 in attorney’s fees from the IRS as a result of its conduct in responding to Freedom of Information Act requests.

Crabapple, LLC v. United States, 2:07-cv-00263 (W.D. Wash.).  Represented a national title insurance company that issued a clear title insurance policy to Crabapple, LLC on its purchase of real property that was subsequently seized by the IRS pursuant to federal tax liens not discovered in the title search.  The dispute centered over whether the federal tax liens were valid and properly filed.

Tax Court

Estate of Bartell v. Comm’r, 147 T.C. 140 (2016). Prevailed in a case involving a reverse 1031 exchange for a build-to-suit property for an S corporation drug store chain.

Strom v. Comm’r, No. 16258-08.  Represented client seeking innocent spouse relief from an $80 million tax liability attributable to his wife’s receipt of stock options because he relied on a tax opinion and therefore had no knowledge of any understatement of tax on the joint tax return.   The decision is pending.

Pister v. Comm’r, No. 020851-13.  Represented taxpayers following the IRS’s assertion that substantial income reported by a life insurance company on Form 1099-R was properly included in income.  Reached settlement before trial, resulting in a 75% concession by the government. 

Marshall v. Comm’r, No. 003351-12.  Represented a real estate developer in a case arising from his participation in a tax shelter shielding $2.8 million in income.  Because the taxpayer had not received notices sent to the TEFRA partnership that had been involved in the shelter, an assessment was made against the taxpayer in a subsequent collection due process case. The IRS conceded that the proposed assessment was outside the statute of limitations because the extended six year statute did not apply to overstatements of basis.

Colacurcio v. Comm’r, No. 022123-14.  Represented taxpayer in connection with the IRS’s attempt to levy a partial interest in real property.

LaDow v. Comm’r, No. 10132-08. Represented wife of tax shelter promoter in Tax Court case resulting in full government concession that wife was entitled to innocent spouse relief.

Browning v. Comm’r, T.C. Memo. 2011-261 (2011). Successfully tried case in Tax Court involving offshore employee lending arrangement whereby the government asserted it had an unlimited statute of limitations due to fraud; Tax Court found no fraud in 3 of the 6 years; the 3 years of no fraud were the years when substantial taxes had been assessed so it was a significant victory for the client.

Arnes v. Comm’r, 102 T.C. 522 (1994). Prevailed in case involving transfer and redemption of stock shares in McDonald’s franchises after a divorce; Court held that client had not received a constructive dividend and received no income incident to the transfer, even though Ninth Circuit had indicated in ex-spouse’s case that client likely had constructive dividend. 

Oak Harbor Freight Lines, Inc. v. Comm’r, T.C. Memo. 1999-291 (1999). Tax Court held in favor of client motor carrier that was engaged in the intrastate transportation of goods when, in 1994, Congress prohibited states from regulating intrastate trucking routes, thereby resulting in a loss to the client based on the worthlessness of its intrastate operating routes; client claimed the loss in 1994 but the Commissioner asserted it was only properly taken in 1995; Tax Court agreed with our position that the loss was properly sustained in the earlier year.

Cascade Designs, Inc. v. Comm’r, Lea v. Comm’r, T.C. Memo. 2000-58.  Represented majority shareholder/inventor (Lea) who had sold a patent to the corporation in exchange for royalties.  The court ruled that revisions to the terms of the royalty obligation made by the parties in light of financial pressures on the corporation did not transform the royalty payments into constructive dividends, and that the payment stream was properly reported by the majority shareholder/inventor as long term capital gains.

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