TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, December 28, 2012

The Top Ten Tax Cases of 2012

Forbes:  The Top Ten Tax Cases of 2012, by Anthony J. Nitti (WithumSmith & Brown, Aspen, CO):

#10:  Olive v. Commissioner, 139 T.C. 2 (2012):  The IRS Wages War on the Medicinal Marijuana Industry

#9:  Sophy v. Commissioner, 138 T.C. 8 (2012), and Bronstein v. Commissioner, 138 T.C. 21 (2012):  The Mortgage Interest Limitation Is More Complicated Than You Realize

#8:  Storey v. Commissioner, T.C. Memo 2012-115 (2012):  The Tax Court Strikes a Blow For the Documentary Filmmaking Industry

#7:  Rolfs v. Commissioner, 135 T.C. 24 (2012), and Patel v. Commissioner, 138. T.C. 23 (2012):  The IRS Would Like You to Stop Burning Your Houses Down Already

#6:  Mohamed v. Commissioner, 2012-152 (2012):  The Failure to Adequately Substantiate Your Charitable Contribution Deductions Can be Costly. Like $19 Million Costly

#5  Maguire v. Commissioner, T.C. Memo 2012-160: The Tax Court Allows S Corporation Shareholders to Fix Years of Sloppy Tax Planning

#4:  Watson v. Commissioner, 668 F.3d 1008 (8th Cir., 2012):  The Courts Offer a Guide to Determining an S Corporation Shareholder/Employee’s “Reasonable Compensation

#3:  Kawahima v. Holder, 132 S.Ct. 1166 (2012):  Clarence Thomas Sends Two Japanese Citizens Packing for Filing a False Tax Return

#2:  Quality Stores 110 AFTR 2d 2012-5827 (6th Cir., 2012)The Sixth Circuit Holds That Severance Pay Pursuant to an Involuntary Layoff Is Not Subject to FICA Employment Taxes

#1: National Federation of Independent Business v. Sebelius, 132 S.Ct. 2566 (June 28, 2012):  Obamacare Is Constitutional Because the Individual Insurance Mandate Is Both a Penalty and a Tax. Wait...What?

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The Mohamed case is outrageous. Everything in the Tax Court opinion looks to be correct and well-written, but what's outrageous is that the IRS brought the case.

Is there a backstory? It looks like maybe Mr. Mohamed was audited, the auditor found an unsubtantiated $18 million property contribution, and thought he was a crook. Then Mohamed came up with appraisals showing he had *undervalued* the property, and pointed out that he had done his own taxes and the form had misled him (the picky requirements were only mentioned in the instructions, not on the form, which implied appraisals were only needed for art). At that point, the IRS should have shown leniency.
Did they? Maybe what happened is that the IRS offered to settle for $20,000 to cover their audit costs and Mohamed refused on principle. That's pure speculation on my part. Any other guesses?

I also wonder whether Mohamed could get redress using common law avenues--- would estoppel help, or could he bring suit against someone in the IRS for writing misleading forms?

Posted by: Eric Rasmusen | Dec 28, 2012 7:34:38 AM

Not including Union Carbide (research credit issue plus Auer deference issue) seems like a major oversight. Mohamed involved big numbers, but was so elementary that I don't see how it can be on this list.

Posted by: Brian | Dec 28, 2012 9:53:09 AM

How the heck did Home Concrete not make this top 10 list? A huge decision, and the omission is hard to understand insofar as Home Concrete poses a counterpoint to Mayo, decided a couple of years before, for all those interested in the APA and Chevron deference as they relate to tax law.

Posted by: Jake | Dec 28, 2012 4:27:05 PM