Rubin v. United States, No. 16-56633 (9th Cir. 2018)
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Plaintiff appealed the district court's judgment in favor of the Government in his tax refund action. Plaintiff argued that the net income for the subchapter S corporation, of which he was the sole shareholder, was substantially overstated on the corporation's tax return by the bankruptcy trustee who filed the return, resulting in personal income tax payments by plaintiff that were substantially more than he actually owed.
The Ninth Circuit reversed the district court's judgment and held that the filings by plaintiff satisfied the requirement for a "statement identifying the inconsistency" pursuant to 26 U.S.C. 6037(c)(2)(A)(ii). In this case, the filings sufficiently identified the inconsistencies between plaintiff's tax returns and those of the S corporation. The panel affirmed as to plaintiff's abandoned appeal of his refund claim for tax year 2001 and remanded for further proceedings.
Court Description: Tax The panel affirmed in part and reversed in part the district court’s judgment in favor of the Government, and remanded for further proceedings, in an action seeking a refund of overpayments of personal income tax, based on a claimed substantial overstatement of net income on taxpayer’s corporation’s tax return by the bankruptcy trustee who filed it. Taxpayer was the sole shareholder of a subchapter S corporation, whose losses were not taxed at the corporate level but instead flowed through to taxpayer as its sole shareholder. The corporation was put into involuntary bankruptcy. Taxpayer argued that the bankruptcy trustee incorrectly accounted for cancellation of indebtedness income and bad debts expenses that the corporation was entitled to write off, resulting in a tax overpayment. At issue was whether taxpayer provided a “statement identifying the inconsistency” between the corporate and shareholder returns, as required by 26 U.S.C. § 6037(c)(2)(A)(ii). When he filed his personal tax return, taxpayer included a statement that described how his income flowed from the corporation and stated his disagreement with the corporation’s tax return filed by the bankruptcy trustee. He attached forms explaining why he disagreed with the income and expenses reflected on the corporate tax
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