Government Opposes Cert. in Murphy

[Dr. Caligari]

From Howard Bashman, a link to the Government's brief to the U.S. Supreme Court opposing the cert. petition in the Murphy case, which was discussed here extensively when it was before the D.C. Circuit:

http://howappealing.law.com/031908.html#032879

[Famspear]

Commentary on the government's brief opposing the petition for writ of cert., from Professor Gregory Germain at Syracuse University law school, as reprinted in TaxProf Blog (19 March 2008):

What is the goal of a brief opposing a petition for certiorari? Presumably, the goal is to convince the Court to deny the certiorari petition. Supreme Court Rule 10 requires compelling reasons for a grant of certiorari, such as a conflict among the circuits over an important legal issue, a conflict between a circuit court and the highest state court over an important federal question, or a serious procedural irregularity below that requires the Court to exercise its supervisory power. The rule concludes with the following admonition: “A petition for a writ of certiorari is rarely granted when the asserted error consists of erroneous factual findings or the misapplication of a properly stated rule of law.” Given this standard, which is well known to and routinely followed by the clerks reviewing certiorari petitions, why would the parties spend so much time in their briefs discussing the merits of the underlying case rather than emphasizing the relevant legal standard?

The government, in its 17 page opposition, devotes one sentence at the end of its long introduction, and one paragraph at the end of its brief, to the only issue likely to be of concern to the Supreme Court – whether the Court of Appeals’s decision creates a conflict between the circuits. The key sentence at the end of the government’s long introduction says it all: “[The Court of Appeals’s] decision does not conflict with any decision of this Court or of any other court of appeals.”

In my opinion, this sentence should have been put at the top of the brief, and the entire argument should have been structured to show that there is no conflict and thus no basis for certiorari. The Court does not care about the long procedural history and lengthy explanation of the lower courts’ rulings. The clerks can read the decisions for themselves; they don’t need the government to restate the decisions in laborious detail.

So my criticism of the government’s brief concerns its focus, not its content. The taxpayers have to make the case that the Court of Appeals’s decision in Murphy creates a circuit conflict. The government’s brief should focus solely on the taxpayer’s failure to do so.

Murphy argued that the Court of Appeals’s decision conflicts with some 1920s administrative rulings suggesting (after the Supreme Court’s narrow definition of “income” in Eisner v. Macomber) that emotional injury recoveries might not be “income” under the 16th Amendment or the then-existing taxing statutes, and with some later rulings and court decisions that held emotional injury damages to be exempt under the pre-1997 broad exclusion in IRC section 104. The government should have pointed out first and foremost that these are not circuit conflicts. Nevertheless, the government did a fine job of pointing out that the judicial definition of income and the language of IRC section 104 have changed, rendering these rulings irrelevant.

Murphy also argued that the Court of Appeals’s decision conflicts with the Supreme Court’s prior decisions in O’Gilvie, Glenshaw Glass, and with another circuit court’s decision in Dotson. The government properly explains, although with too much detail, that O’Gilvie and Dotson concerned the statutory language in IRC section 104 before the 1996 amendment which limited the exclusion to cases of “personal physical injury or physical sickness.” Similarly, Glenshaw Glass merely recognized that Congress had previously chosen to exempt personal injury awards when it decided that the fraud and anti-trust punitive damages award in issue was taxable. The problem for Murphy is that no court has held that emotional damages awards are non-taxable following Congress’s 1996 amendment to IRC Section 104. There are simply no relevant conflicting authorities from any court, let alone a circuit court of appeals.

Murphy has only one real chance at obtaining certiorari. The government recognizes in its final paragraph that “the court of appeals’ initial opinion received significant attention in the tax bar because of its erroneous holding that taxation of compensatory damages for nonphysical personal injuries is unconstitutional.” Indeed it did. Murphy’s only real chance is for the Supreme Court to ignore its usual rules and grant certiorari because it thinks Murphy’s case would be sexy. Supreme Court – Tax – Sexy? I don’t think so. Motion for certiorari denied.

[bolding added]

from:
http://taxprof.typepad.com/taxprof_blog ... itiqu.html

I don't understand. Tax law isn't sexy?

Who knew?

[Famspear]

And here is a link to Professor Germain's analysis of Ms. Murphy's petition (also reprinted in the TaxProf Blog -- back on 17 December 2007):

http://taxprof.typepad.com/taxprof_blog ... -murp.html

[LPC]

From the TaxProf blog previously cited:

While Ms. Murphy tries to place her argument within the language of Glenshaw Glass, she fails to recognize that the Glenshaw Glass concept of an accession to wealth operates in a realization system designed to avoid taxing the same income to the same taxpayer twice. Income has never been measured by the increase in the value of the property received in an exchange over the value of the property transferred. If that was the test, exchanges would almost always be non-taxable. Our system taxes the value of the property received in excess of the taxpayer’s previous after-tax investment in the property transferred (an investment of income that had been previously taxed or was permanently exempted). The basis system avoids double-taxation (or the taxation of permanently exempted income); it does not preclude the taxation of previous years’ untaxed gains. Ms. Murphy’s brief says over and over that make whole damages should not be considered “income.” But because her “human capital” was never previously taxed, she is not suffering a double tax.

The part in red is the part that tax deniers always get wrong, which leads them to the (wrong) conclusion that wages are not "income."

[Cpt Banjo]

I don't understand. Tax law isn't sexy?

Who knew?

The Code is the Kama Sutra of tax lawyers and CPA's, don'tcha know.

[Imalawman]

I don't understand. Tax law isn't sexy?

Who knew?

The Code is the Kama Sutra of tax lawyers and CPA's, don'tcha know.

I pulled my back doing the "704(c)(2)(B)(ii)" last night. Man, am I sore this morning.

[Cpt Banjo]

For guaranteed stimulation of your lover, just whisper this bit of aphrodisiacal poetry from Section 509:

"For purposes of paragraph (3), an organization described in paragraph (2) shall be deemed to include an organization described in section 501(c)(4), (5), or (6) which would be described in paragraph (2) if it were an organization described in section 501(c)(3)."

[Imalawman]

For guaranteed stimulation of your lover, just whisper this bit of aphrodisiacal poetry from Section 509:

"For purposes of paragraph (3), an organization described in paragraph (2) shall be deemed to include an organization described in section 501(c)(4), (5), or (6) which would be described in paragraph (2) if it were an organization described in section 501(c)(3)."

You could have at least put NSFW before that so I wouldn't get in trouble for looking at that at work.

[Famspear]

Ah, when it comes to uh, stimulation, I find that nubile young women always respond favorably to this long-ago repealed provision -- section 341(e)(1) -- which grammatically consists of only one sentence of over 400 words:

For purposes of subsection (a)(1), a corporation shall not be considered to be a collapsible corporation with respect to any sale or exchange of stock of the corporation by a shareholder, if, at the time of such sale or exchange, the sum of --

(A) the net unrealized appreciation in subsection (e) assets of the corporation (as defined in paragraph (5)(A)), plus

(B) if the shareholder owns more than 5 percent in value of the outstanding stock of the corporation, the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the shareholder owned more than 20 percent in value of such stock, plus

(C) if the shareholder owns more than 20 percent in value of the outstanding stock of the corporation and owns, or at any time during the preceding 3-year period owned, more than 20 percent in value of the outstanding stock of any other corporation more than 70 percent in value of the assets of which are, or were at any time during which such shareholder owned during such 3-year period more than 20 percent in value of the outstanding stock, assets similar or related in service or use to assets comprising more than 70 percent in value of the assets of the corporation, the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the determination whether the property, in the hands of such shareholder, would be property gain from the sale or exchange of which would under any provision of this chapter be considered in whole or in part as ordinary income, were made --

(i) by treating any sale or exchange by such shareholder of stock in such other corporation within the preceding 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation) as a sale or exchange by such shareholder of his proportionate share of the assets of such other corporation, and

(ii) by treating any liquidating sale or exchange of property by such other corporation within such 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation), as a sale or exchange by such shareholder of his proportionate share of the property sold or exchanged,

does not exceed an amount equal to 15 percent of the net worth of the corporation.

--From former Internal Revenue Code section 341, which was repealed by the Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27, 117 Stat. 752 (May 28, 2003).

That's a long sentence, and of course size does matter. Drives women wild.

[Demosthenes]

Ah, when it comes to uh, stimulation, I find that nubile young women always respond favorably to this long-ago repealed provision -- section 341(e)(1) -- which grammatically consists of only one sentence of over 400 words:

For purposes of subsection (a)(1), a corporation shall not be considered to be a collapsible corporation with respect to any sale or exchange of stock of the corporation by a shareholder, if, at the time of such sale or exchange, the sum of --

(A) the net unrealized appreciation in subsection (e) assets of the corporation (as defined in paragraph (5)(A)), plus

(B) if the shareholder owns more than 5 percent in value of the outstanding stock of the corporation, the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the shareholder owned more than 20 percent in value of such stock, plus

(C) if the shareholder owns more than 20 percent in value of the outstanding stock of the corporation and owns, or at any time during the preceding 3-year period owned, more than 20 percent in value of the outstanding stock of any other corporation more than 70 percent in value of the assets of which are, or were at any time during which such shareholder owned during such 3-year period more than 20 percent in value of the outstanding stock, assets similar or related in service or use to assets comprising more than 70 percent in value of the assets of the corporation, the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the determination whether the property, in the hands of such shareholder, would be property gain from the sale or exchange of which would under any provision of this chapter be considered in whole or in part as ordinary income, were made --

(i) by treating any sale or exchange by such shareholder of stock in such other corporation within the preceding 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation) as a sale or exchange by such shareholder of his proportionate share of the assets of such other corporation, and

(ii) by treating any liquidating sale or exchange of property by such other corporation within such 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation), as a sale or exchange by such shareholder of his proportionate share of the property sold or exchanged,

does not exceed an amount equal to 15 percent of the net worth of the corporation.

--From former Internal Revenue Code section 341, which was repealed by the Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27, 117 Stat. 752 (May 28, 2003).

That's a long sentence, and of course size does matter. Drives women wild.

That's just ugly.

[Famspear]

Multiple choice. Famspear is:

(a) The world's foremost authority on what turns women on.

(b) Totally clueless about women, and as delusional as a tax protester if he thinks he's some sort of authority on women.

(c) A tax geek who thinks the Murphy case is sexy.

(d) B and C.

[Demosthenes]

Multiple choice. Famspear is:

(a) The world's foremost authority on what turns women on.

(b) Totally clueless about women, and as delusional as a tax protester if he thinks he's some sort of authority on women.

(c) A tax geek who thinks the Murphy case is sexy.

(d) B and C.

(a), of course. Duh.

[Famspear]

Demo, I am definitely buying the book when it comes out!

[ASITStands]

I pulled my back doing the "704(c)(2)(B)(ii)" last night. Man, am I sore this morning.

Chuckle. The old "reportable distributive share" question.

I liked "Cpt Banjo's" quote too.

And, the exchange between "Famspear" and "Demo" got me laughing.

[Famspear]

And speaking of guys being clueless about women, I saw this just yesterday....

http://www.msnbc.msn.com/id/23726891

[Cpt Banjo]

Let's not forget the plan to tax "thingy", courtesy of Monty Python:

http://www.youtube.com/watch?v=D6OJLytnfNk

[LPC]

And speaking of guys being clueless about women, I saw this just yesterday....

http://www.msnbc.msn.com/id/23726891

This study is also consistent with the idea that women are the only ones who know The Rules.

[Famspear]

Man, I wish I had had that list of The Rules about 40 years ago.

Although, realistically, I suspect that being aware of The Rules all these years probably wouldn't have helped me much, anyway.

[Dr. Caligari]

An interesting discussion of the Murphy case here:

http://taxprof.typepad.com/taxprof_blog ... sents.html

The money quote:

Although the D.C. Circuit panel ultimately granted rehearing and reversed its earlier decision in Murphy v. IRS, 493 F.3d 170 (D.C. Cir. 2007), the panel could not unring the bell and undo the lasting damage to the tax system caused by its original opinion.

[Quixote]

the panel could not unring the bell and undo the lasting damage to the tax system caused by its original opinion.

They could have if they had explained why Murphy I was wrongly decided. Instead they left the questionable reasoning in Murphy I alone and attacked the conclusion with reasoning at least as questionable. That they arrived at the correct conclusion is fortunate. A valid argument supporting that conclusion would have made the outcome look less ad hoc.