919 F. Supp. 2d 1140
D.N.M.2012Background
- Plaintiffs seek refunds for 2003, 2004, and 2006 totaling about $112,440 plus related interest and penalties.
- The core dispute concerns noncash charitable donations in 2001, 2003, and 2004 and whether deductions were proper.
- IRS audit disallowed charitable deductions for 2003, 2004, and 2006 on the theory the donations were not to §170(c) charities.
- Plaintiffs also seek a theft-loss deduction tied to Whitecross representations, and challenges to self-employment tax, retirement tax adjustments, and a substantial understatement penalty.
- The court grants the Government’s motion for partial summary judgment and sets a scheduling conference for unresolved issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the 2001/2003 Whitecross donations substantiated under §170(f)(8)? | Riether | Government | No; lack of contemporaneous acknowledgments and qualified appraisals defeats deduction. |
| Is Whitecross a §170(c) charitable organization for deductibility? | Riether | Government | Government entitled to summary judgment; Whitecross not proven a §170(c) organization. |
| Does the theft-loss theory have a basis given basis evidence? | Riether | Government | Summary judgment for Government on theft-loss claim due to no basis shown. |
| Are LLC distributive shares subject to self-employment tax? | Riether | Government | Distributive LLC income is self-employment income; summary judgment for Government. |
| Was the substantial underpayment penalty proper or should it be recalculated? | Riether | Government | Penalty sustainment; partly remitted pending recalculation for conceded errors. |
Key Cases Cited
- Lewis v. Reynolds, 284 U.S. 281 (U.S. 1932) (refunds de novo; overpayment determination governs)
- Dye v. United States, 121 F.3d 1399 (10th Cir. 1997) (government may change theory in a refund action)
- Jones v. Comm’r, 560 F.3d 1196 (10th Cir. 2009) (basis in property; adjustment under 170(e)(1)(A))
- Neonatology Assocs., P.A. v. Comm’r, 299 F.3d 221 (3d Cir. 2002) (reliance on professional advice requires a communications-based endorsement)