Tax Controversy & Litigation

Strasburger offers its clients extensive experience in tax controversy and litigation including federal and state civil tax litigation; federal criminal tax litigation, including related white collar crime representation; property tax disputes and litigation; representation of attorneys and accountants in malpractice cases and discipline proceedings; representation of taxpayers before IRS Appeals offices; and representation of taxpayers during civil and criminal IRS examinations.

Two attorneys in the San Antonio office, Farley P. Katz and C. J. "Chad" Muller, devote most of their practice to matters of tax controversy and litigation. Mr. Katz spent five years with the Tax Division of the Justice Department, Appellate Section, where he handled numerous appeals to the federal courts of appeals and the U.S. Supreme Court, involving a variety of tax issues. Mr. Muller spent six years with the Criminal Section of the Tax Division, Justice Department, and one year with the U.S. Attorney's Office where he tried many criminal tax cases. Mr. Muller received the Attorney General's John Marshal Award for outstanding achievement in the trial of complex litigation. Both Mr. Katz and Mr. Muller have frequently written and spoken, at the local and national levels, on tax controversies.

Dan Butcher, in the Dallas office, has extensive experience in state taxes, including administrative appeals, refund claims, and litigation. Gary Siller, in the Houston office, was formerly a CPA with an international accounting firm and has handled over 50 accountant malpractice cases. Laura Sanders, a former IRS Special Agent, works as a financial investigator for the firm's tax attorneys.

CURRENT ISSUES IN TAX CONTROVERSIES

Voluntary Disclosure. Under IRS guidelines, a "voluntary disclosure" is where a taxpayer, prior to initiation of an IRS audit or investigation, advises the IRS that he has failed to file a return or has filed false returns. In such situations, the IRS may decide not to make a referral for criminal prosecution. Strasburger attorneys Chad Muller and Farley Katz have regularly advised clients respecting voluntary disclosures and have authored a leading article on the subject. See Muller & Katz, "IRS Makes Important Changes to Its Voluntary Disclosure Policy," Journal of Taxation, February 2003.

Offshore Voluntary Compliance Initiative. Strasburger attorneys Chad Muller and Farley Katz also advise taxpayers concerning their eligibility to take advantage of the IRS Offshore Voluntary Compliance Initiative announced in Revenue Procedure 2003-11. The Revenue Procedure sets forth procedures for taxpayers who have used offshore debit or credit cards or other offshore financial arrangements to hide income. Taxpayers who participate in this initiative will not face civil fraud and information return penalties but will still have to pay back taxes, interest and accuracy or delinquency penalties and will be subject to additional disclosure, cooperation and payment requirements. Participating taxpayers will be treated as having made a voluntary disclosure. To participate in the Initiative, taxpayers were required to send a written request to the IRS by April 15, 2003. See Muller & Katz, "IRS Makes Important Changes to its Voluntary Disclosure Policy," Journal of Taxation, February 2003.

Tax Shelter Audits. Internal Revenue Service announcements, including Notice 99-59 and Notice 2000-44, reflect the IRS intention to aggressively audit taxpayers who have invested in tax shelter strategies (such as COBRA) which generate tax losses through structured basis-boosting transactions. The IRS has coordinated these audits, resulting in limited opportunities for taxpayers to effectively defend their positions within the IRS administrative procedures. Strasburger attorneys Chad Muller and Farley Katz have extensive experience in advising and representing taxpayers and tax professionals in tax shelter related audits and litigation, and have the actual courtroom experience needed to evaluate alternate defense strategies for the administrative or judicial resolution of these audits.

IMPORTANT SUCCESSES of our attorneys include the following:

Federal Civil Tax Litigation

• Salzillo v. United States, ___ Fed. Cl. ___ (Apr. 4, 2005) (CFO who signed most of company's checks was not responsible person because company's president completely controlled corporate finances and payments).
• Estate of Russell v. Commissioner, 76 T.C.M. (CCH) 978 (awarding client attorney's fees to be paid by IRS) (December 1998).
• Streber v. Commissioner, 138 F.3d 216 (5th Cir. 1998) (amicus brief) (overturning imposition of negligence and substantial understatement penalties).
• Bolding v. Commissioner, 117 F.3d 270 (5th Cir. 1997) (shareholder, not S corporation, was borrower of bank loan, with result that shareholder had sufficient basis to deduct S corporation's losses).
• American National Bank v. United States (In Re: Hawn), United States District Court, Southern District of Texas, Corpus Christi Division, No. C-93-102 (January 1996), aff'g, 149 B.R. 450 (Bankr. S.D. Tex. 1993) (federal tax lien was inferior to bank's lien on oil and gas production) (January 1993).
• De Cou v. Commissioner, 103 T.C. 80 (1994) (taxpayer held entitled to ordinary loss on discovery that building had hidden structural defects because that loss was not "on account of" the building's subsequent demolition) (July 1994).
• Lee v. United States, 870 F. Supp. 137 (W.D. Tex. 1994) (summary judgment granted taxpayer on federal employment tax issues) (June 1994).

• Murphy v. Campbell, 964 S.W.2d 265 (Tex. 1997) (affirming summary judgment in favor of Deloitte & Touche on all claims in tax malpractice case arising from alleged erroneous tax advice on sale of corporation's assets and alleged errors in preparation of corporate tax returns).
• Ponder v. Brice & Mankoff, 889 S.W.2d 637 (Tex. App. – Houston [14th Dist.] 1994, writ denied) (affirming summary judgment in favor of attorneys in tax malpractice case arising from attorneys' legal opinion on a tax shelter); see also Sutton v. Mankoff, 915 S.W.2d 152 (Tex. App. – Fort Worth 1996, writ denied) (same); Sargent v. Brice & Mankoff, 1996 WL 10277 (Tex. App. – Dallas 1996, writ denied) (same).
• Willie Nelson v. Price Waterhouse, United States District Court, Northern District of Texas, Dallas Division, No. CA-3-90-1894-P (achieving confidential settlement for recording artist in his malpractice suit against national accounting firm) (August 1994).
• In Re: Fairchild Aircraft Corp., U.S. Bankruptcy Court, Western District of Texas, San Antonio Division, Case No. 90-50257-C/Adversary No. 90-5269-C (summary judgment granted in favor of Deloitte & Touche, rejecting claims of tax malpractice arising out of preparation of corporate consolidated income tax returns) (April 1992).

• Home Interiors & Gifts, Inc. v. Strayhorn, ___ S.W.3d ___ (Tex. App. – Austin, July 28, 2005) (Texas franchise tax provisions governing "throwback" of out-of-state sales discriminated against interstate commerce and therefore violated the Commerce Clause).
• Deer Park I.S.D. v. Harris County Appraisal Dist., 132 F.3d 1095 (5th Cir. 1998) (federal statute exempting property in Foreign Trade Zones from local property tax is constitutional).
• Texas Workforce Commission, Hearing No. TD-96-026-1195 (taxpayer not liable for unemployment taxes since workers are exempt as "direct sellers" under Labor Code section 201.070(2)) (June 1996).
• H.E. Butt Grocery Co. v. Jefferson County Appraisal Dist., 922 S.W.2d 941 (Tex. 1996) (September 1 alternative valuation date for inventory for property tax purposes is constitutional and appropriate under the circumstances).
• Texas Comptroller of Public Accounts, Hearing No. 29,740, CCH Texas Tax Reporter ¶ 401-854 (inventory taking business not subject to sales tax as "data processing service"; hand-held calculator not a "computer.") (February 1995).
• Barton Creek Club, Inc. v. Travis Central Appraisal Dist., 147th Judicial District Court, Travis County, Texas, Cause No. 471,398 (jury verdict reducing appraised value of country club by more than $31 million over three-year period) (January 1993).

TAX CONTROVERSY & LITIGATION TEAM

James R. Browne		Daniel L. Butcher		Farley P. Katz Team Leader
Crawford Moorefield		Charles J. Muller		John K. Round		Gary J. Siller

  
     
TAXES, ESTATE PLANNING & EMPLOYEE BENEFITS
OVERVIEW OF PRACTICE AREAS

DISCLAIMER © STRASBURGER & PRICE, LLP
All Rights Reserved