Who says tax law is boring? Here are three court decisions from 2013 that will have a significant impact tax cases and tax law in the future.
Defense of Marriage Act (DOMA)
- Summary: On June 26, 2013, the United States Supreme Court ruled in Windsor v. United States that Section 3 of the Defense of Marriage Act is unconstitutional.
- Significance: The Internal Revenue Service (IRS) and Treasury Department have ruled that legally married same-sex couples will be treated as married for federal tax purposes, including income and gift and estate taxes. Starting with their 2013 tax returns, same-sex married couples generally must use “married filing jointly” or “married filing separately” filing status.
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Owen G. Fioire v. Commissioner of the Internal Revenue Service – Willful Blindness
- Summary: In Fioire, the U.S. Tax Court used Willful Blindness to find fraud in favor of the IRS’s charges of civil tax fraud penalties.
- Significance: The Tax Court held that the IRS may use the willful blindness standard; a standard not typically used in civil fraud cases, to establish a taxpayer’s fraudulent intent. This decision opens the door for the IRS to use willful blindness, a much lower standard than the willfulness standard adopted by the Supreme Court in Cheek, to establish fraud in future cases.
Blum -Tax Court determination of no reasonable reliance functions as collateral estoppel in malpractice case
- Summary: The Tenth Circuit affirmed a Tax Court’s decision in Blum which found that a taxpayer did not reasonably rely on KPMG when he entered into an Offshore Portfolio Investment Strategy. What was remarkable about this case was that the Tax Court’s finding, as affirmed by the Tenth Circuit, estopped the taxpayer from asserting negligence and fraud claims against KPMG in state court.
- Significance: A taxpayer may be estopped from pursuing civil claims against his or her accountant if the IRS proves that the taxpayer did not reasonably relied on the accountant’s advice.