Post & Schell, P.C.

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On December 4, 2020, the Third Circuit affirmed the district court’s willfulness jury instruction in a criminal payroll tax case under I.R.C. § 7202, which followed the familiar definition of willfulness found in Cheek v. United States, 498 U.S. 192, 201 (1991). In United States v. Gilmore, No. 20-1234 (3d Cir. Dec. 4, 2020), the Third Circuit rejected the defendant’s contention that willfulness requires knowledge that the defendant’s conduct is criminal, affirming that “willfulness…
On October 20, 2020, the Fourth Circuit upheld the imposition of enhanced civil penalties on husband and wife taxpayers for their willful failure to file Reports of Foreign Bank and Financial Accounts (“FBARs”), despite any evidence that they were aware of the FBAR-filing requirement. In United States v. Horowitz, No. 19-1280, 2020 U.S. App. LEXIS 33074 (4th Cir. Oct. 20, 2020), the taxpayers failed to file FBARs for a multi-million dollar Swiss bank account for…
Some audits are about bad math (or bad records): The taxpayer has one set of numbers and the government grades her. Others are more complicated: The taxpayer has carefully structured one or more transactions to reach a particular result; the government decides to recharacterize them according to the economic reality of the situation, which involves a higher tax bill. The government can do that because in tax law, substance controls, not form. What happens if…
When most people think about the Internal Revenue Code, they think about the income tax. More sophisticated individuals may also mention estate and gift taxes. But the Code is also full of excise taxes. They are imposed on diesel fuel, kerosene, gas guzzlers, coal, certain vaccines, fishing rods, tackle boxes, electric outboards, bows and arrows, firearms, communications, transportation by air, and many other goods, services, and transactions. These excise taxes are located in subtitle D,…
Joseph and Amy McKenny sued their accountants for malpractice based upon faulty tax advice, settling for $800,000. The settlement, however, did not end their legal problems, as they wound up litigating with the federal government over the tax treatment of the settlement. The story began when Mr. McKenny hired Grant Thornton to advise him on the best structure for his consulting business. McKenny v. United States, No. 18-10810, 2020 U.S. App. LEXIS 27754, *2…
The Bankruptcy Code sets priorities for certain claims to help assure that they get paid. 11 U.S.C. § 507(a). A tax can qualify as an administrative expense, the second-highest priority,1 if it is (i) incurred by the estate, whether secured or unsecured, including property taxes for which liability is in rem, in personam, or both, except a tax of a kind specified in section 507(a)(8) of this title; or (ii) attributable to an excessive…
When lawyers communicate with clients, two privileges may be implicated: The attorney-client privilege protects confidential communications between a lawyer and a client which are made for the purpose of giving legal advice. The work product privilege protects documents and tangible things that are prepared in anticipation of litigation. 1 Lawyers recognize the two privileges are distinct and serve different purposes. But it can still be a little startling to see a court hold that one…
States and municipalities compete for the attention of businesses that seek to relocate. As a prominent example, Amazon’s decision to establish a second headquarters set off a bidding war in 2018. New York State won with a package that reportedly totaled $3 billion; recent reports suggest that the value of the incentives total $4 billion. What are the tax consequences? Under current law the value of cash incentives or of property provided as an inducement…
The First Rule of Holes: When you’re in a hole, stop digging. Wrentham House is a 14,400 square-foot waterfront mansion in Newport, Rhode Island. David and Candace Keefe purchased the property in 2000 for $1.35 million. Keefe v. Comm’r, Nos. 18-2357 & 18-2594, 2020 U.S. App. LEXIS 22241, *2, *4 (2d Cir. July 17, 2020). At a price of $93.75 per square foot, it would be fair to say it was a project. The house…
On July 7, 2020, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) released its second advisory to financial institutions about detecting and preventing COVID-19 consumer fraud. The guidance provides financial institutions with 18 new red flag indicators to help identify potential imposter and money mule pandemic fraud. FinCEN plans to continue issuing additional advisories about financial crimes related to the pandemic based on evolving trends.  Red Flags of Potential COVID-19 Fraud  FinCEN’s second guidance…