C.I.R. v. Danielson

4 Analyses of this case by attorneys

  1. The US tax rescission doctrine: when the parties want an agreement to disappear

    DLA Piper LLPJanuary 23, 2014

    80-58 and the Penn case discussed above remain the leading authorities, and accordingly, the US tax-based version of a golf “mulligan” of the rescission doctrine remains very much in play for taxpayers seeking to avoid the tax consequences of transactions that may have landed in the rough.[1]See, e.g., Commissioner v. Danielson, 378 F2d 771 (3d Cir. 1967) (holding that a taxpayer can challenge IRS’ construction of an agreement’s unambiguous form only by proving that the agreement was unenforceable), cert. denied, 389 US 858 (1967); Elrod v. Commissioner, 87 TC 1046, 1066 (1986) (adopting the “strong proof” standard).

  2. Contract Allocations and Judicial Doctrines

    Holland & Knight LLPWilliam SharpApril 13, 2021

    9 See, e.g., Better Beverages, Inc. v. United States, 619 F.2d 424, 430 (5th Cir. 1980).10 See Commissioner v. Danielson, 378 F.2d 771, 775 (3d Cir. 1967).11 See, e.g., Molasky v. Comm'r, 897 F.2d 334 (8th Cir. 1990).

  3. Step Transaction Or Substance Over Form? Loss Disallowance In Any Case

    Rivkin Radler LLPLouis VlahosAugust 2, 2021

    Rather than Federal District Court. IRC Sec. 7422 and Sec. 6532.SeeComm’r v. Danielson, 378 F.2d 771(3d Cir. 1967). A taxpayer is generally bound to the characterization of a transaction originally chosen by the taxpayer.

  4. Intercompany Loan Treated As Constructive Distribution and Contribution

    Rivkin Radler LLPFebruary 2, 2024

    onclude there was some tax gamesmanship here notwithstanding the Court’s determination to the contrary. After all, what taxpayer describes a transaction one way on their books and tax returns but then takes a contradictory position during the audit of such returns when such a change in posture will benefit the taxpayer?In any case, the behavior of Taxpayer and their corporations does not provide a roadmap to be followed by other closely held businesses and their owners.Instead, such taxpayers should be careful to ensure their dealings with related persons are conducted on as close to an arm’s length basis as possible. In addition, prior to engaging in a transaction with a related person, they should decide upon the character of such transaction and its expected tax consequences, and they should document and report the transaction accordingly.The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.Commissioner v. Danielson, 378 F.2d 771 (3d Cir. 1967). According to the Third Circuit:“[A] party can challenge the tax consequences of his agreement as construed by the Commissioner only by adducing proof which in an action between the parties to the agreement would be admissible to alter that construction or to show its unenforceability because of mistake, undue influence, fraud, duress, etc.” T.C. Memo. 2024-8 Estate of Thomas H. Fry v. Commissioner. You can’t make this up. At trial, the Vice President for the two corporations testified that Taxpayer treated them like his “baby” and wanted to ensure that both continued operating. IRS Form 1040, Schedule E, Part II. IRC Sec. 1366(d). Subchapter S corporations are flowthrough entities. A shareholder in an S corporation is entitled to deduct his share of entity level losses in accordance with the flowthrough rules of subchapter S. IRC Sec. 1366(a). Section 1366(d)(1) limits the amount of losses and deductions the shareholder may deduct as not exceeding the sum of the shareholder’s adjuste