Tax preparers must pay an annual fee to obtain a preparer tax identification number (PTIN). Effective November 1, 2015, the annual fee for a 2016 PTIN is $50 for new applications and renewals of existing PTINS. The $50 fee will split between the IRS and a third-party administrator with the third-party receiving $17 for administration of the online system and provision of customer support and the IRS retaining $33. IR-2015-123.
Tax Elections Must Be Filed With a Timely Filed Return.
The petitioner claimed that he was a trader in securities and had, in an earlier year, made a mark-to-market election. To do so, a Form 3115 must be attached to the return. However, IRS didn’t have any evidence from the petitioner that a Form 3115 had been filed and the petitioner could not prove his claim that he had filed one in an earlier year. The court held for the IRS that a valid mark-to-market election had not been made. Poppe v. Comr., T.C. Memo. 2015-205.
IRS Notes Changes On Horizon For Tax Preparers.
The IRS has issued a news release to inform non-credentialed tax return preparers (preparers other than CPAs, attorneys or enrolled agents) of certain continuing education requirements that must be satisfied after 2015. Specifically, the IRS noted that non-credentialed preparers must participate in the IRS' "voluntary" education program, the Annual Filing Season Program (AFSP). Effective for tax returns and claims for refunds prepared and signed after 2015, non-credentialed preparers must complete either 15 or 18 hours of continuing education from IRS-approved continuing education providers which must be completed by December 31, 2015, to be able to receive a 2016 Annual Filing Season Program Record of Completion. IR 2015-123.
No Regulatory Taking For Incorrect Government Advisory Pronouncements That Have Financial Impact.
In 2008, numerous cases of salmonellosis (an infection caused by the salmonella bacteria) were reported. Federal agencies investigated and later the U.S. Food and Drug Administration (FDA) issued a press release that the outbreak "appeared to be linked" to the consumption of "raw red plum, red Roma, or round red tomatoes." Additional press releases were issued with a final release announcing that fresh tomatoes in the domestic market "are not associated with the current outbreak." The plaintiffs, tomato producers whose tomatoes were linked to the outbreak, claimed that their perishable tomatoes were destroyed due to a decrease in market demand for their tomatoes and sued for a regulatory taking. The court denied the claim on the basis that the government action had no legal effect on any property interest of the plaintiffs. The court (opinion by Obama-appointed judge) held that government advisory opinions are insufficient to constitute a Fifth Amendment taking even if there is a significant financial impact on the marketplace. Dimare Fresh, Inc. v. United States, No. 2015-5006, 2015 U.S. App. LEXIS 18741 (Fed. Cir. Oct. 28, 2015).
Treatment of Line Between Properties as Border Establishes Legal Boundary.
Owners of adjacent tracts, for decades, had treated an invisible line between their properties as the boundary. A new owner of one of the adjacent tracts had a survey taken which showed that the line was six-feet onto their tract and that the swimming pool on the adjacent tract was partially on their side of the surveyed line. An existing split-rail fence was on the line between the properties, but had not been there the statutorily required 10-years to establish a boundary by acquiescence (IA Code §650.14). The new owner removed the fence and the plaintiffs (owners of the adjacent tract) sued to quiet title to establish the line as the boundary between the properties via acquiescence. The trial court determined that the elements for boundary by acquiescence had been satisfied. Testimony at trial revealed that the adjacent owners had always mowed up to the line and maintained their respective tracts up to the line. That was sufficient evidence of a physical division between the tracts that had been recognized for at least 10 years. Mapes v. U.S. Bank National Association, N.D., et al., No. 14-1770, 2015 Iowa App. LEXIS 993 (Iowa Ct. App. Oct. 28, 2015).
The petitioner was in the land development business and sold land to builders for home construction. The petitioner accounted for the income from the sales under the completed contract method which applies to home construction contracts and other real estate construction contracts if the taxpayer estimates that the contracts will be completed within two years of the contract commencement date and the taxpayer satisfies a $10 million gross receipts test under the Treasury Regulations. Under the completed contract method, no income is reported until the contract is complete irrespective of when contract payments are actually received. The IRS asserted that the contracts didn't qualify for the completed contract method of accounting because the contracts could not be considered long-term and were not construction contracts because the taxpayer did no construction activities. The court determined that the custom lot and bulk sale contracts were long term contracts and were construction contracts. However, the court determined that none of the contracts were home construction contracts because the taxpayer merely paved the road leading to a home. Thus, gain under the contracts could not be reported under the completed contract method. The court also determined that none of the contracts involved a general contractor or subcontractor relationship. The Howard Hughes Company, LLC v. Comr., No. 14-60915, 2015 U.S. App. LEXIS 18726 (5th Cir. Oct. 27, 2015), aff'g., 142 T.C. No. 20 (2014).
No Breach of Oil and Gas Lease For Failure to Timely Pay Royalties.
The plaintiffs are various landowners that entered into oil and gas leases with the defendant. Two leases at issue contained the same provision that allowed the leases to consolidate the land involved into a single development area with all royalties from wells in the area to be divided between all of the lessors proportionally based on any particular lessor's acreage in the consolidated area. The consolidated area was comprised of 228 acres with five wells being drilled in the area from 1954 through 1980 and two more being drilled between 2007 and 2012. The plaintiffs' acreages were where the 2007-2012 wells were drilled which was within the consolidated area. Some lessors, however, were not included in the well permit application that the defendant submitted to the state (OH) Department of Natural Resources (DNR). The plaintiffs claimed that, as a result, the consolidated area was abrogated and that the plaintiffs were entitled to 100 percent of the royalty amount. The trial court disagreed, granting the defendant's motion for judgment on the pleadings, based on the unambiguous lease language, and because a well permit application cannot abrogate or modify an oil and gas lease. The court also held that any damages resulting from the calculation and distribution of royalties were pure economic losses barred by the economic loss doctrine. K and D Farms, Ltd., et al. v. Enervest Operating, LLC, et al., No. 2015CA00038, 2015 Ohio App. LEXIS 4364 (Ohio Ct. App. Oct. 26, 2015).
Mineral Deed Valid Even Though Not Recorded Within 90 Days.
On July 18, 1929, a mineral deed conveyed a one-half interest to a buyer. The deed was filed in the appropriate county office (county Register of Deeds office) on Nov. 4, 1929. Under Kan. Stat. Ann. Sec. 79-420, a mineral deed is to be filed within 90 days of its execution. The defendant obtained the one-half interest via a mineral deed conveyed on Aug. 31, 1944, which was recorded on Sept. 16, 1944. In 2013, the plaintiff sued to quiet title against the defendant claiming that the plaintiff owned the surface and mineral rights to the property and that the defendant's claimed interest was invalid because the 1929 mineral deed was not recorded within 90 days of its execution. The plaintiff claimed that the defendant's interest clouds the plaintiff's title. The defendant sought summary judgment, on the basis that because the deed was filed by March 1 of the year after its execution it was valid. The plaintiff responded that the failure to record within 90 days was not fatal if the defendant met the "listing for taxation" portion of Kan. Stat. Ann. Sec. 79-420, but that the defendant had not met its burden on that point. The trial court granted the defendant's motion on the basis that because the deed was filed before March 1 of the following year which satisfied the "listing for taxation" requirement. On appeal, the court affirmed, on the basis that, to be held void, the deed must fail to be recorded within 90 days of execution and be failed to be listed for taxation. By filing the deed by March 1 of the year following execution, the minerals in the deed were available to list for taxation. The minerals need not actually be taxed the year after the year of severance, only be listed for taxation which is accomplished by registering the deed with the register of deeds by March 1 of the year following execution. Hess v. Cleroy, Inc., et al., No. 112,579, 2015 Kan. App. Unpub. LEXIS 867 (Kan. Ct. App. Oct. 23, 2015).
Transfer Via Settlement Agreement Not a Gift.
The decedent worked with his father and brother in a family business operated in the corporate form that was created in 1959. When the corporation was formed, the father contributed more capital that the others, but each of them were listed as registered owners of one-third of the corporate stock. A family dispute arose and the decedent sought to cash-out his stock interest. However, his father refused noting the disproportionate contributions and claiming that a portion of the decedent’s stock was being held in an oral trust for the benefit of the decedent’s children. The dispute ended up in litigation ultimately resulting in a family settlement agreement in 1972 under which the decedent transferred one-third of his stock interest to a trust for his children with the balance being redeemed for $5 million. No gift tax return was filed at the time on the belief that the transfer of shares to the trust was not a gift. The IRS claimed otherwise, asserting that the transfer to the trust was a gift that was not entered into in the normal course of business for full and adequate consideration because the decedent’s children paid nothing for it. The Tax Court, in a full T.C. opinion, disagreed with the IRS. The court noted that the transfer did occur in the ordinary course of business for full and adequate consideration in money or money’s worth required by Treas. Reg. §25.2512-8. The consideration, the court determined, was the recognition of the other shareholders that the decedent owned outright the other two-thirds of the stock interest being disputed. Thus, the decedent did not make a taxable gift, and the estate was not liable for a gift tax deficiency of $737,625 plus $368,813 for fraud, $36,881 for negligence and $184,406 for failure to timely file a gift tax return. Redstone v. Comr., 145 T.C. No. 11 (2015).
Res Ipsa Loquitur Not Applicable in Field Fire Case.
The defendants were harvesting wheat approximately two miles downwind from the plaintiff’s farm when the field caught fire and wind quickly spread the fire such that it burned approximately 1,200 acres including the plaintiffs’ property. The origin of the fire was not established with certainty although its likely source was from a grain cart being pulled by a tractor that was headed to unload a combine. The plaintiff sued on a res ipsa loquitor theory and the defendants motioned for summary judgment. The trial court granted the motion on the basis that field fires that occur during harvesting are not uncommon and cannot be said to occur in every situation due to negligence. On appeal, the court affirmed. The court noted that no Nebraska cases could be found involving field fires and res ipsa loquitur, but that other states had considered the situation and determined that field fires were not that uncommon and could occur without any negligence. Thus, the element of res ipsa loquitur, that the occurrence be one that would not, in the absence of negligence, was not satisfied. The other two elements of res ipsa – that the instrument that caused the event was under the exclusive control and management of the defendant, and that the defendant couldn’t explain how the event occurred, were not at issue. Lamprecht v. Schluntz, 25 Neb. App. 335 (2015).
No Deduction For Investment Loss.
The petitioner invested $285,000 into a scrap metal business (C corporation) operated by his brother. The business filed bankruptcy. The petitioner operated a profitable landscaping business. On this joint return, the petitioner included a Schedule C for the landscaping business and another Schedule C showing a loss from the scrap metal business claiming a $359,000 loss for 2008. The loss was reported as “other expenses” on line 27 of the Schedule C. All other lines of the second Schedule C were blank. The loss more than offset the gain from the Schedule C landscaping business. The IRS disallowed the loss and the court agreed. The loss was not a bad debt, a worthless security or a capital loss. The loss did not become worthless in the year at issue, and his brother kept the scrap metal business operational after the tax year in issue. The petitioner’s short-term capital loss was also disallowed that he was initially allowed upon the IRS initially believing that the petitioner had a bad debt. The negligence penalty was not applied. Espaillat v. Comr., T.C. Memo. 2015-202.
EPA Clean Water Rule Stayed Nationally.
The Environmental Protection Agency (EPA) developed a new "Clean Water Rule" detailing the EPA's jurisdiction under the Clean Water Act (CWA) with an effective date of August 28, 2015. The CWA governs discharges into "navigable waters of the United States" and the rule was EPA's attempt to define it's jurisdiction over such waters. However, the rule became subject to numerous legal challenges and legislative attempts to block or eliminate it based on the rule expanding the EPA's jurisdiction over navigable waters and other waters associated with navigable waters, including "tributaries" and "adjacent waters" which are now jurisdictional if there is a "significant nexus" to a water of the United States. Under the rule, there is no "hydrologic connection" necessary to establish a significant nexus. Any water with a bed and bank and an "ordinary high water mark" that contributes flow directly or indirectly to a navigable water may have the required nexus. Due to confusion surrounding the rule's requirements and various legal challenges to it, the court issued a nationwide injunction staying the rule immediately. The court determined that the 18 states challenging the rule had a substantial likelihood of success on the merits that the rule violated established Supreme Court precedent on the issue of EPA jurisdiction, and that the rule's promulgation likely violated the Administrative Procedure Act. Briefing continues on the issue of whether the court has jurisdiction to consider the merits of the challenge to the rule. State of Ohio, et al. v. United States Army Corps of Engineers, et al., Nos. 15-3799/3822/3853/3887, 2015 U.S. App. LEXIS 17642 (6th Cir. Oct. 9, 2015). In a related action, a federal Joint Panel on Multidistrict Litigation (MDL) established for the purpose of coordinating discovery and pre-trial procedure in the litigation filed in numerous courts, denied the EPA's request to consolidate the nine district court cases in the District of Columbia. The court noted that little discovery was required and that the cases were procedurally postured differently. In re Clean Water Rule: Definition of "Waters of the United States," MDL No. 2663, 2015 U.S. Dist. LEXIS 140117 (Oct. 13, 2015).
No Innocent Spouse Relief Granted.
The petitioners, a married couple, failed to fully report their income on their joint return. The wife worked for an attorney promoter of fraudulent tax schemes, and she put her paychecks into a bank account from which she paid personal living expenses without reporting the wage income. The husband was aware that her income was not being reported and he didn't report his income for one year at issue. The husband sought innocent spouse relief and the court, based on the factors set forth in Rev. Proc. 2013-34, determined that the husband knew of the unpaid tax liability, and denied innocent spouse relief. Williams v. Comr., T.C. Memo. 2015-198.
Minority Shareholders Liable For Unpaid Entity Taxes.
In this case, the president of a corporation impeded an IRS audit of the corporation by creating and backdating promissory notes, issuing false Forms 1099, among other things. From 2004 to 2008 the corporations earned over $100 million but didn't file any tax corporate tax returns. The IRS claimed that the corporation owed $120 million in taxes, interest and penalties. The petitioner was a minority shareholder that had received bonuses and dividends during the years that the corporation was not paying taxes. The IRS sought to recover $5 million from the two minority shareholders. The petitioner received over $3.5 million in dividends during the years at issue while the company was insolvent and another minority shareholder received about $.5 million. Under state (FL) law, the IRS did not have to pursue all reasonable collection efforts against the corporation, but could go directly after the minority shareholders to the extent of dividends received during the years at issue. Kardash v. Comr., T.C. Memo. 2015-51. On reconsideration, the court determined that the corporation was solvent in 2005, but determined that the transfers were constructively fraudulent as a part of a series of transactions that led to the corporation's insolvency. Consequently, the post-2004 transfers were fraudulent because they were for less than fair market value and resulted in the corporation's insolvency. Kardash v. Comr., T.C. Memo. 2015-197.
Non-Judicial Sale Did Not Defeat IRS Lien.
The plaintiff bought a property at a non-judicial sale. The IRS had an I.R.C. Sec. 6321 lien against the property that had been filed more than 30 days before the sale. The IRS was not given notice of the sale at least 25 days before the sale. The IRS lien had been filed with the county. The plaintiff claimed that the lien was not valid, but the court determined otherwise. The IRS, the court held, did not get effective notice of the sale of the property. Thus, the IRS could foreclose the lien and had priority position against other creditors as to the proceeds of sale. Mendoza v. Cisneros, et al., No. 14-cv-3324-WJM-KMT, 2015 U.S. Dist. LEXIS 141416 (D. Colo. Oct. 14, 2015).
Contract Hog Producer Converted Hogs of Supplier.
The defendant raised hogs that he received from the plaintiff via a hog production contract. The plaintiff paid for the feed, transportation and veterinary services for the hogs and the defendant cared for the hogs until they reached market weight. The plaintiff paid the defendant a monthly fee for his services, but retained ownership of the hogs. The defendant accounted for the hogs and unaccounted-for hogs would be charged against the defendant's next monthly payment. The defendant could only keep the plaintiff's hogs at the facility where they were raised. The plaintiff was alerted by a third party that inventory counts did not match and some hogs might be missing. The defendant claimed that some hogs were put in a "slush pen" rather than being marketed because of slow weight gain, and that no inventory was kept of them. The following year, the defendant filed bankruptcy and the plaintiff contacted the hog buyer and over 3,000 hogs could not be accounted for based on what had been supplied and what had been marketed. The defendant claimed the difference was attributable to the defendant also marketing his own hogs at the same time to the buyer. The plaintiff sued for conversion, and the trial court awarded $290,000 to the plaintiff for the hogs plus interest and $50,000 in punitive damages and court costs. On appeal, the court affirmed. The court noted that the defendant's personal income tax returns showed no income from the sale of livestock and no other documentation that would have supported the notion that the defendant was raising his own hogs. On financial statements provided to his bank, the defendant reported that he had no "market livestock or poultry" and no "breeding stock." The court also determined that the trial court properly admitted the weekly calendar and farm book that the plaintiff maintained and the summary exhibits that relied on those exhibits. Pruisner v. Ballhagen, No. 14-1431, 2015 Iowa App. LEXIS 912 (Iowa Ct. App. Oct. 14, 2015).
State Proves Navigability of Portion of River.
The defendant made a declaration of ownership over 89 miles of the Rogue River in accordance with the process established by state law. In making such declaration, the defendant must get a court to find that the watercourse at issue is navigable or the defendant must make such a declaration. Here, the defendant made such a declaration after following the state-prescribed procedures, including public notice of the watercourse at issue. The trial court held that the defendant failed to provide sufficient evidence to establish navigability, and noted that the defendant's procedure would have exchanged dry river channel for flowing river channel with the result that some plaintiff's homes on dry land would be located where the river once flowed and would be within the defendant's ownership determination. On appeal, the court reversed, in part, and remanded the case. The court noted that the defendant's determination of navigability was based on a public notice that didn't provide enough specificity to allow interested persons to discover what land the defendant was actually claiming. However, the court held that evidence of log drives at the time Oregon was admitted to the Union along with post-statehood recreational use that did not differ materially from the type of use at the time of statehood permitted a conclusion that the portion of the river at issue was susceptible to being used as a highway for commerce - the test for navigability. Hardy, et al. v. State Land Board, 274 Ore. App. 262 (2015).
Because $75,000 Equals $580,000, Court Orders In-Kind Partition of Farm Land.
The parties, brother and sister, owned two parcels of farmland with each of them owning an undivided one-half interest in each tract. They received complete ownership in the tracts upon the last of their parents to die. Tract A contained 315 acres with 157 of those acres tillable, and had been the parents homestead. The brother had farmed Tract A for over 40 years and a portion of it continued to be leased to the brother. Tract A contained 5 grain bins, three of which the brother put up. The bins were valued at $59,000 and one expert appraiser valued Tract A at $929,000 and the other expert appraiser valued Tract A at $778,000. Tract B contained 163 acres, 110 of which were tillable and had some developmental potential. The expert appraisers valued the tracts at $1,200,000 and $620,000 respectively. The brother sought a partition and sale of the tracts and the sister sought a partition in-kind, seeking to retain ownership of Tract A and having her brother own Tract B with an equalization payment. The trial court determined that the sister had not established that a partition in-kind would be equitable and practical and that such a partition would involve "too much guesswork" and dismissed the sister's proposal that she retain Tract A coupled with an equalization payment to her brother of $75,000. The trial court held that the Tracts should be partitioned by sale via public auction unless the parties agreed otherwise. The sister appealed, and the appellate court reversed. The court noted that any sale of Tract A would trigger approximately $150,000 of capital gain tax if it were to be sold, but Tract B would not trigger capital gain tax due to its high basis. The court determined that it would not be equitable to divide Tract A due to the need to construct fencing and because livestock would not have a water source. Thus, the court held that the sister had met her burden to establish that an in-kind partition would be equitable if she retained Tract A, her brother retained Tract B and she paid him a $75,000 "equalization payment believing that this resulted in each party retaining one-half of the farmland value. A dissenting judge pointed out that the two properties, according to the expert appraisers, had a difference in value of $580,000 and that a $75,000 equalization payment was nowhere close to evening out value. Accordingly, the dissent would have affirmed the trial court that a sale and split of the proceeds was the only equitable result for the parties. Newhall v. Roll, No. 14-1622, 2015 Iowa App. LEXIS 920 (Iowa Ct. App. Oct. 14, 2015).
Payroll Taxes Apply to Phantom Income From Deferred Compensation.
The plaintiff retired in 2004 from being an airline pilot. The airline had filed bankruptcy in 2002. The plaintiff's non-qualified deferred compensation plan benefits vested upon his retirement, and the airline computed the present value of the benefits to be paid in accordance with I.R.C. Sec. 3121(v)(2) and withheld Medicare taxes. The value of the benefits exceeded the FICA limit in 2004, and the computation of the present value of the benefits was computed without regard to the possibility that the benefits might not actually be paid because based on the definition of "amount deferred" in terms of "present value" in Treas. Reg. Sec. 31.3121(v)(2)-(c)(2)(ii). Based on that value, the airline withheld over $4,000 of payroll tax. The deferred compensation liability of the airline, however, was largely discharged in bankruptcy such that the plaintiff received just over $60,000 of the approximately $300,000 of benefits owed to him - even though he paid payroll tax on the full amount. The plaintiff challenged the regulations as invalid, but the IRS maintained that the regulations were appropriate and required payroll tax on the full benefit. The court upheld the regulation as rational and a reasonable interpretation of I.R.C. Sec. 3121 and there was nothing in the statute requiring the IRS to refund the payroll taxes on account of the airline's bankruptcy. The statute provided no exception when there was a risk of nonpayment. Balestra v. United States, No. 2014-5127, 2015 U.S. App. LEXIS 17756 (Fed. Cir. Oct. 13, 2015), aff'g., 119 F. Cl. 109 (2014).
Battle Over Jury Instruction on Defective Product.
The plaintiff was injured while using a hydraulic cattle chute that he bought from the defendant. At the time of the injury the plaintiff was using the chute to pregnancy check cattle. The chute had been purchased just a few weeks before the incident at issue, and the plaintiff had operated it without incident. The operator’s manual for the chute provided a warning that the chute should only be operated with its own power source and that the use of a different power source would void the warranty. The purpose of the restriction was to ensure that there would be a constant flow of hydraulic fluid without any excess or reverse flow. At the time of the plaintiff’s injury, the chute was using the hydraulic system of a tractor rather than the chute’s own power source. Hydraulic fluid shot from a control valve and struck the plaintiff in the cheek, leaving an injection wound. The plaintiff sued for his injuries. A post-event analysis revealed that an o-ring failed and the chute operated properly after the o-ring was replaced. The plaintiff’s suit was based in strict liability for defective design, defective manufacture, failure to warn or inspect or test. The jury was instructed that “a product is in defective condition if [it] has defects in design, manufacturing, instructions, warnings, and such defects existed at the time the product left the manufacturer’s and/or seller’s hands.” At the instructions conference, the plaintiff wanted additional jury instruction language noting that “A product may also be defective without any ascertainable defect in the product and although the product was precisely what it was intended to be, if the manufacturer fails to give adequate and timely warnings as to the dangers or hazards which may result from a foreseeable use or misuse of the product.” The trial court judge rejected the additional language and the jury returned a verdict for the defendant. On appeal, the court upheld the trial court’s jury instruction. The verdict was not contrary to the evidence and the jury instruction that was not used would not have resulted in a different outcome insomuch as the cause of the accident was not known and there was evidence that the plaintiff had not followed the manual in other respects concerning the operation of the chute. Feight v. Moly Manufacturing, Inc., No. 111,899, 2015 Kan. App. LEXIS 839 (Kan. Ct. App. Oct. 9, 2015).
IRS Says When Health Insurance Reimbursement Amounts Are Excluded From Income.
In this advice, the IRS concluded that an employer can exclude from an employee's gross income amounts paid for health insurance coverage that is provided through the group health plan of the spouse of the employee to the extent that the spouse paid for all or part of the coverage on an after-tax basis and not through a salary-reduction under an I.R.C. Sec. 125 cafeteria plan. The payment can also include the after-tax amounts paid for both spouses by the employee's spouse. Thus, an employer would be able to reimburse the payments tax free for the portion that represents the employee's cost and the portion that represents the cost of the employee's spouse. While not addressed, it would appear that because the amounts in issue are tied to the spouse's employer's group health plan, the Obamacare restrictions would not come into play because the reimbursement plan is integrated with the group health plan. However, Obamacare bars an insured plan from discriminating under the same rules as those that apply to reimbursement plans once regulations are promulgated that put the discrimination rules in place (See Notice 2011-1). C.C.A. 201547006 (Oct. 7, 2015).
Nuisance and Negligence Claims Concerning Oil and Gas Operations Fail.
The plaintiffs bought a home on an acre and leased the mineral rights to the defendant's predecessor in exchange for a lease bonus and royalty interest. The lease authorized the defendant to use the surface for oil and gas operations and drill horizontal wells. The lease was pooled with other leases to create a larger drilling unit. A year after the first well was drilled (not on the plaintiffs' property), the plaintiffs sued claiming that the defendant's negligent oilfield operations subjected them to toxic chemicals and noxious odors that made their existing health problems worse and damaged their property by creating sinkholes and damaging the home's pier and beam foundation. The defendant moved for summary judgment and moved to strike most of the plaintiffs' evidence as inadmissible hearsay, unqualified lay opinions, and unreliable, speculative and conclusory expert opinions. The trial court agreed and granted both a no-evidence summary judgment motion (directed verdict before trial) and a summary judgment motion. On appeal, the court affirmed. The court determined that the plaintiffs did not present more than a scintilla of probative expert evidence to create a material fact as to causation because none of their expert witnesses presented any evidence that differentiated between the plaintiffs' preexisting physical conditions and the new problems they claimed resulted from the oilfield operations. The plaintiffs' nuisance claim also failed because lay witness testimony failed to show that the defendant's activities were the proximate cause of the complained-of substantial interference with the plaintiffs' use and enjoyment of their property. Cerny v. Marathon Oil Corporation, No. 04-14-00650-CV, 2015 Tex. App. LEXIS 10364 (Tex. Ct. App. Oct. 7, 2015).
The petitioner was 76 and dying of cancer. For his business, he had taken out a $50,000 line of credit with his bank in 2008. He couldn't pay off the credit line and the bank agreed to accept $15,628 as full payment on the loan in 2009. The petitioner also couldn't pay other debts totaling over $68,000 and that amount was also canceled in 2009. The petitioner received Form 1099-C from the bank with box 5 checked, indicating that that the petitioner was not liable for repaying the debt balance. However, the petitioner did not report his canceled debt in income on the 2009 return. He attached a statement to the return that the local IRS office had told him that "it would likely come under the hardship rules for approval." While the petitioner believed that he was not liable for reporting the cancellation of debt income (CODI), the IRS and the court disagreed. The court noted that there is no exception under I.R.C. Sec. 108 for "hardship." In addition, the court noted that administrative guidance from the IRS is not binding on the court and it cannot change the plain meaning of tax statutes. While the court agreed that the petitioner had suffered from hardships, such hardships did not absolve him from reporting the CODI. The petitioner was neither insolvent or in bankruptcy. Dunnigan v. Comr., T.C. Memo. 2015-190.
No Bad Debt Deduction Allowed.
The petitioner occasionally made loans to friends, acquaintances and business associates, doing so 12 times over a six-year period without the normal formalities associated with a lending business. He did not hold himself out as in the business of lending money and did not keep business records that were close to adequate, and did not perform "due diligence" with respect to any loans that he made. He made a loan to a construction company which failed to pay its $925,000 loan upon it becoming due in 2007. The company filed for reorganization bankruptcy in 2008 showing assets of over $62 million and liabilities of over $34 million. The petitioner did not file a claim in the bankruptcy. Ultimately, the case was converted to Chapter 7 from Chapter 11. The petitioner filed an amended return claiming a business bad debt deduction (ordinary loss deductible on debt that becomes partially worthless) on the 2008 return. The petitioner argued that if the loss wasn't deductible in 2008, it was in 2009. The court held that the loan would not qualify as a business bad debt, but that any bad debt would be a non-business bad debt (deductible as a short-term capital loss in the year in which the debt becomes wholly worthless). The court determined that the plaintiff had failed to show that the debt was completely worthless in either 2008 or 2009. Instead, the court pointed out that the petitioner first acted as if the debt was worthless in 2010 when he filed his amended 2008 return. The company's filing of bankruptcy that year was insufficient to show that the debt was worthless in 2008 because it was not clear at that time that the company was insolvent. Cooper v. Comr., T.C. Memo. 2015-191.
IRS Announces 2015 Marginal Percentage Depletion Rate.
The regular percentage depletion rate for independent producers and royalty owners remains at 15 percent for calendar year 2015. The regular percentage depletion rate for independent producers and royalty owners is 15 percent. For qualifying marginal production (less than 15 daily barrels of oil equivalent per day) the 15 percent rate is increased by one percentage point for each dollar the price of crude oil is less than $20 per barrel. With the barrel price exceeding $20 per barrel, there is no increase to the 15 percent rate. Percentage depletion for oil and gas production is 15 percent of gross revenue limited to 100 percent of a property’s net income. IRS Notice 2015-65, 2015-40 IRB 466.
IRA Early Withdrawal Penalty Upheld Because Son Not A Dependent.
The petitioner, 47 years old, withdrew funds from her IRA to pay her son’s medical expenses. Her son was not claimed as a dependent on her return. She did not pay the additional 10 percent penalty on the withdrawal required under I.R.C. Sec. 72(t). The IRS assessed the additional penalty and the court upheld the IRS position. The court noted that the petitioner did not claim her son as a dependent on her return for the tax year in issue and that he did not otherwise qualify as a dependent under I.R.C. Sec. 152, which would have avoided the penalty on the withdrawn amount to the extent of what the taxpayer could have claimed as a deduction for qualified medical expenses under I.R.C. Sec. 213. Unlike a health savings account, where the withdrawn amounts used to pay for the son’s medical expenses would have also been tax-free if the son had been a dependent, the withdrawn amounts from the IRA are taxable. Ireland v. Comr., T.C. Sum. Op. 2015-60.
Growing and Raising of Worms Is Agriculture for FLSA Purposes.
The defendant imports baby worms from Europe and feeds and grows them in “worm houses” on its property, a 750-acre tract on which corn is grown to ensure a quality feed supply for the worms. The corn is made into silage and combined with a mixture of peat moss, lime and water, and then is fed to the worms until they are “harvested.” The defendant did not pay its employees overtime based on the exemption from the overtime pay requirement for agricultural employees contained in 29 U.S.C. Sec. 213(b)(12) of the Fair Labor Standards Act (FLSA). The trial court ruled for the defendant on the basis that the growing and raising of worms constituted “agriculture” and the plaintiffs, employees, appealed. On appeal, the court affirmed. The court determined that 29 U.S.C. Sec. 203(f) was broad in that it covered “the production, cultivation, growing, and harvesting of any agricultural or horticultural commodity.” “Agriculture” was defined as “farming”, which included agricultural commodities and the court determined that worms are like “cultivated commodities.” Simply because the worms were raised for bait did not deprive them of their agricultural character. The worms are raised and harvested like an ag commodity. Thus, the defendant was not required to pay overtime wages to its employees as they were agricultural employees. Barks, et al. v. Silver Bait, LLC, No. 15-1575, 2015 U.S. App. LEXIS 17310 (6th Cir. Oct. 2, 2015).
Expenses Denied For Lack of Substantiation.
The petitioners, a married couple, bought a 10-acre tract in 2006 on which they built their residence and also barns and a horse riding arena used in their LLC's horse boarding and sales business. The business sustained a loss of almost $100,000 in 2009 showing up as negative gross income on their joint return. The riding arena suffered from construction defects, requiring additional sums to be spent to resolve the problem. During 2009, the husband conducted his (very limited) law practice from an office in the residence. The petitioner shared the office with his (much younger) wife who is an equestrian a realtor and experienced horse jumper. The couple's joint return included over $12,000 of "other expenses" consisting, in part, of telephone expenses and $25 of "miscellaneous" expenses. The petitioners claimed expenses for five telephone lines and internet service. The IRS disallowed half of the deductions for telephone expenses and all of the miscellaneous expenses, and a claimed casualty loss deduction. The IRS also imposed an accuracy-related penalty. the court sustained the IRS determinations. On the telephone expenses, the court noted that the petitioners did not tie any expenses to any particular telephone line or business activity. The miscellaneous deductions were also disallowed for lack of explanation. The riding arena did not sustain a casualty loss because the construction defects giving rise to the extra expenses were not "sudden, unusual or unexpected in nature." Costs associated with faulty construction are not deductible. In addition, the loss was not sustained in the conduct of a trade or business and the petitioners continued to use the asset. The riding arena was not sold, abandoned or permanently withdrawn from use during 2009. The court upheld the accuracy-related penalty with respect to the adjustments conceded to and the disallowance of the deduction for miscellaneous expenses. Wideman v. Comr., T.C. Summary Op. 2015-61.
Disclaimer Of Trust Interest Not Treated As Taxable Gift.
A trust had been created for the benefit of the taxpayer's husband and his children from a prior marriage before the taxpayer was born. The trust specified that the taxpayer would receive half of the current income during her husband's life and all of the income if he pre-deceased her until the death of the husband and his two siblings. A second trust established before the taxpayer's marriage to the husband paid the taxpayer a fixed annuity with staged principal distributions upon the taxpayer reaching various ages so long as the taxpayer and the husband were co-habituating. Upon marriage the taxpayer's trust interest would end unless she disclaimed her interest in the first trust with the remainder being split among the husband's grandchildren or descendants. The taxpayer knew nothing about the second trust until after it was established and proposed to disclaim her interest in the first trust within nine months of the marriage to her husband. The IRS allowed the disclaimer because it was within reasonable time after she obtained knowledge of her interest according to Treas. Reg. Sec. 25. 2511-1(c), and the disclaimer would not be treated as a taxable gift. The IRS noted that the trust involved was created before 1977 under a different set of rules than now apply. Priv. Ltr. Rul. 201540006 (Jun. 11, 2015).
Disorganized Records Fail To Substantiate Deductions.
The petitioner claimed that he lost his business records in a flood, but he was still able to produce large amounts or records that were disorganized. The court held that the records failed to show the business purposes of particular expenses and were not helpful in distinguishing the type of expenses incurred - reimbursed or non-reimbursed. While the petitioner had information for the years in issue, he made no attempt to reconstruct his claimed business expenses. Consequently, some of his claimed business expenses were denied. Young v. Comr., T.C. Memo. 2015-189.
Tax Court Petition Not Timely Filed.
The petitioner's S corporation claimed a net operating loss (NOL) as a result of writing down real estate holdings due to the collapse of the real estate market. The petitioner claimed that the properties had been abandoned in that same year or had become worthless. The IRS disallowed the NOL and the court agreed. The petitioner never abandoned the properties and a loss on account of worthlessness of property that is mortgaged, the court noted, means worthless of the petitioner's equity in accordance with I.R.C. Sec. 165. The court noted that, with respect to recourse debt, the petitioner could not claim any loss deduction until the year in which a foreclosure sale occurs. Thus, the petitioner was not entitled to any deduction until some point in the future. Tucker v. Comr., T.C. Memo. 2015-185.
Net Operating Loss Must Be Proven Before It Can Be Utilized.
The petitioner's S corporation sustained losses which the petitioner carried forward to offset income in the carry forward years. The IRS denied the carry forward of the NOLs because the petitioner did not establish that he had waived the carryback period, failed to show that the losses had not been absorbed in an earlier year, and even failed to show that the S corporation incurred the losses. The court agreed with the IRS and also noted that the petitioner failed to show that the petitioner had sufficient basis in the S corporation shares. Jasperson v. Comr., T.C. Memo. 2015-186.


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Subject: YARN, Fabrics & Made-ups Export ENTITLEMENT (Quota) POLICY FOR 2000-2004 - in respect of countries where such exports are covered by restraints under the provisions of the Agreement on Textiles and Clothing.
Pursuant to the provisions contained in Item No. 8 of Appendix I, schedule 2 of ITC(HS) Classification of Export and Import published under the Export and Import Policy (1997-2002) in respect of exports of Yarn, Fabric and Made-up items to the USA, Canada and the European Union, the Policy for allotment of entitlements, (hereinafter referred to as the Allotment Policy) for the years 2000 to 2004 shall be as hereinafter detailed.
Ministry of Textiles - Notifications - Garment and Knit wear Export entitlement (Quota) Policy 2000-2004.
Subject:- Garments and Knitwears export entitlement (quota) policy (2000-2004) - in respect of countries where such exports are covered by restraints under the provisions of the Agreement on Textiles and Clothing.
Pursuant to provisions contained in Item No.8 of Appendix I, schedule 2 of ITC (HS) classifications of Export and Import published under the Export and Import Policy (1997-2002) in respect of export of readymade garments and knitwear to the USA, Canada and the European Union, the Policy for Allotment of Entitlements (hereinafter referred to as the Allotment Policy) for the years 2000 to 2004 shall be as hereinafter detailed.
i. Unless otherwise directed, the Director General, Apparel Export Promotion Council, New Delhi (DG, AEPC) shall allocate export entitlements. The DG, AEPC shall also do the necessary certification for exports of all readymade garments and knitwear covered in this Notification. DG, AEPC shall also function as ‘Quota Administering Authority’ as mentioned elsewhere in this Notification.
expressly or otherwise delegates a part or whole of the necessary functions and responsibilities.
iii. The DG, AEPC, notwithstanding any delegations effected by him, shall be accountable to the Ministry of Textiles for implementation of the Allotment Policy.
iv. The Ministry of Textiles shall be the final authority regarding interpretation of any of the provisions of this notification. The Ministry of Textiles may also issue such guidelines as it deems fit from time to time regarding agencies of administration, their functions and responsibilities and may reallocate a part or whole of the functions and responsibilities to such authorities as it deems fit.
v. Export entitlements will be allotted only to exporters registered with the competent registering authorities as per the Export-Import Policy prevailing from time to time.
The phrase "Base Year" for an allotment year, wherever appearing in this Notification, shall mean the calendar year preceding the year immediately before that allotment year. For example, for the allotment year 2000, the base year shall be 1998.
ii. Quantities that become available from time to time on account of surrenders, flexibilities or otherwise shall also be allocated under the First Come First Served (FCFS) System.
children’s wear or any other Country/Category. Such reserved quantities will operate in the FCFS system for the products for which they have been reserved, upto 30 September and unallocated balance from the reserved quantities as on 1 October will be made available for applications in the FCFS system, without any reservations for such Countries/Categories.
i. The quantities earmarked for allotment in this system shall be made available on 1st January and for this purpose, applications shall be invited by the Quota Administering Authority during the previous year.
ii. The DG, AEPC will compute PPE.
iii. Available levels will be allotted pro-rata on the value of exports during the base year by the applicants in each country-category. Allotments, however, will be restricted to the average annual export performance of India in the country-category during the base year.
(iv) The average unit value realised by all exporters who have applied for PP Entitlement in a particular country-category during the base year would be worked out and exporters who have realised a higher unit value than the average unit value will be allotted additional quantities from the 5% reserved pool (HVE) on the basis of the difference between the unit value realised by an exporter and the average unit value realised in a country-category multiplied by the quantity exported by individual exporters in that country-category. The HVE of the individual exporters will be added to their PPE and will be subject to all the conditions applicable to PPE.
(v) The allotment will be in two parts, each consisting of 50% of the allotment. The first part will be valid from the date of allotment till the 31st of May and second part will be valid till the 30th of September.
upto the 20th of June of the quota year. Unutilised quotas (non-certified or non-shipped) shall lapse.
ii. In case of allotment valid till the 30th of September, transfers may be allowed till 20th September. The original quota holder or transferee may get an extension thereof till the 31st of December on payment of BG/EMD at the rates given below, subject to the condition that the extension sought is for a specific buyer. One time change of buyer can be allowed by DG, AEPC without changing other conditions applicable.
Group-A in Canada Rs.12/- per Sq. Mtr.
iii. The applications for such extension should be submitted, complete in all respects, before the expiry of the initial validity of the entitlement or within a grace period of three working days.
iv. The transferred PPE will be known as PPT.
v. Shipments against PPT shall be counted as exports by the transferee.
vi. Transfer of PPT is not allowed.
vii. PPE transfers will be regulated by the Director General, Apparel Export Promotion Council through an Electronic Transfer Scheme with the help of an on-line computer network in which the Offers of intending transferers will be displayed in the Regional Offices of AEPC, including the quantity and Offer prices and the intending transferees will request for transfers on the basis of displayed offers. The offers and requests would be received during the working hours to be prescribed by DG, AEPC and all such offers and requests so received will be processed together. The requests will be made only against the available Offers. However, in case there is no offer on display for a particular country / category, there will be no restrictions on the quantities to be requested and the request price to be indicated.
viii. DG, AEPC may take such steps as deemed necessary for facilitating the smooth and effective implementation of ETS after giving due notice to trade and after informing the Ministry of Textiles.
i. Allotments under the NIE system would be made only to exporters registered, as manufacturer-exporters and who have invested a minimum amount of Rs.50 lakhs in new machinery either in an existing unit or in a new unit. Such machinery shall meet the eligibility criterion of the Technological Upgradation Fund Scheme currently in force.
ii. Allotments under this system shall be only for the export of goods manufactured in the modernised and upgraded production unit.
iii. The allottees shall also submit an affidavit at the time of certification of shipments that the goods being exported have been manufactured in their production units so modernised/upgraded.
iv. The base period for NIE will be any consecutive period of 12 months starting from the 1st January of the base year and ending with 30th June of the previous year. Thus, for the quota year 2001, any 12 constitute months from out of the 18 months period from 1.1.1999 to 30.6.2000 will constitute the base period.
v. Applications for NIE will be received upto 30th September of the previous year by the Quota Administering Authority. An application under this system shall be accompanied by a demand draft of Rs. 500/- drawn in favour of the Quota Administering Authority and payable at New Delhi. The other terms and conditions of the application will be determined by the Textile Commissioner in consultation with the Quota Administering Authority and after seeking the prior approval of the Ministry of Textiles.
vi. Available quantities under the NIE will be distributed by the Quota Administering Authority on the basis of the production capacity of eligible applicants.
vii. Allocation to individual applicants will be distributed pro-rata among all eligible applicants on the basis of eligible investment.
viii. During the year 2000, NIE allocation would meet the committed liabilities under NIE pertaining to the previous years and if the liabilities are more, these would be met on a pro-rata basis but would not be carried over. The eligible persons would be required to rank their options from the available categories.
ix. NIE shall be allocated in two parts, each consisting of 50% of the allotment. The first part will be valid from the date of allotment till the 31st of May and second part will be valid till the 30th of September.
x. In case of NIE valid till 31st May, the quota holders will get the certification of shipment in respect of the entitlement by 31st May. The certification will be valid for shipment upto 20th June of the quota year. Unutilised quotas (non-certified or non-shipped) shall lapse.
xi. In case of NIE valid till 30th September, the quota holders can get the extension till 31st December on payment of BG/EMD at the rates mentioned in 5(vii), subject to the condition that the extension sought is for a specific buyer.
xii. The applications for such extension should be submitted, complete in all respects, before the expiry of the initial validity of the entitlement or within a grace period of three working days.
xiii. NIE shall NOT be transferable.
i. Exporters of garments to non-quota countries and non-quota garments to quota countries shall be eligible for allotment under this system provided the payment is received in free currency, and the exporter has a minimum export performance of Rs. 20 lacs during the base year. Exports of garments to Russia will, however, not be taken into account for NQE allotments.
ii. The quantities earmarked for allotment in this system shall be made available on 1st January and for this purpose, applications shall be invited by the Quota Administering Authority during the previous year.
iii. The ‘Quota Administering Authority’ will compute NQE.
iv. Entitlements under this system will be calculated and allotted by the Quota Administering Authority on the basis of value of admissible exports during the base year. The exports of quota garments, which are covered under this Allotment Policy, to non-quota countries will, however, be given double weightage for the purpose of determining entitlements. The levels available will be distributed pro-rata on the basis of the value of exports of individual applicants.
v. An exporter shall be permitted a choice of ten country-category combinations for allotment.
vi. All conditions applicable to PPE shall also be applicable to NQE, mutatis-mutandis.
vii. NQE is transferable (such transferred entitlements hereinafter referred to as NQT) and the conditions of transfer will be the same as in the case of PPE.
viii. All conditions applicable to PPT shall also be applicable to NQT, mutatis-mutandis.
i. Entitlement under the FCFS System shall be opened twice in the year. 50% of the entitlement under FCFS will be released on the 10th of January and the other 50% on the 10th of April.
ii. In addition to the quantities under this system, those that become available by way of surrenders, flexibilities or otherwise, if any, will be released on 10th April, 10th July and 10th November. While considering any such releases, inter-alia, availability of quantities in different categories will also be taken into account. The quantities to be released on these dates along with the country categories and segments where the releases are made, will be announced by the Quota Administering Authority sufficiently in advance before the schedules release.
iii. The Ministry of Textiles may decide to release quantities in FCFS system in any dates other than the dates stipulated in (ii) above, as may be found necessary. On receipt of such a decision, the Quota Administering Authority will release such quantities in FCFS system after giving adequate notice to the trade.
iv. Quantities shall be allocated against applications and on a day when available quantities are oversubscribed, eligibility shall be decided on the basis of unit value realisation among the applications received on that day.
v. Allotments will be valid for 75 days from the date of such allotment and no extension will be granted.
vi. Allotments under the FCFS system would be subject to EMD/BG @ 5% of FOB value of the quantity involved.
vii. The Textile Commissioner may fix the maximum quantity that can be applied for by an applicant for each country-category under this system per day in consultation with the Quota Administering Authority.
viii. FCFS allotments shall NOT be transferable.
Special quantities reserved for handloom garments for certain countries would be allotted under the FCFS system.
i. Validity of certification on shipping bills in respect of FCFS allotments would be 75 days from the date of allotment unless otherwise specified.
ii. Validity of PPE/NIE/PPT/NQT will be 75 days from the date of endorsement of the shipping bill or till the expiry of the entitlement certificate, whichever is earlier.
iii. Notwithstanding anything contained in para 8(v) above, the Textile Commissioner may grant extension of validity period upto three working days in individual cases if he is satisfied that the exporter concerned could not export within the period due to circumstances beyond his control.
i) An item shall be notified as slow-moving, if, during the base year the utilisation has been less than 75% of the annual level for that year. The Quota Administering Authority shall notify the items that are slow moving, latest by 1st December of the previous year.
i. Notwithstanding anything else contained in any of the provisions of this Notification, for slow-moving items, EMD/BG would be charged @ 1% of FOB value for shipment under the FCFS system.
ii. The quantitative ceiling stipulated for the FCFS system vide para 8(vii) above shall not be enforced.
iii. This relaxation may, however, be withdrawn at any time without any notice.
a. If the DG, AEPC raises a claim, in terms of the Export Entitlement Distribution Policy, for any forfeiture amounts in respect of entitlements covered by a Legal Undertaking, the exporter concerned who had submitted the Legal Undertaking, would have to remit the amounts so claimed by the DG, AEPC within a period of 90 days from the date of such claim without demur or protest, failing which the exporter shall not be eligible to apply for or obtain any certification of shipping bills, transfer of Entitlements or return of EMD/BGs in any system until the amounts are remitted and the DG, AEPC decides to re0instate these facilities for the exporter.
b. The DG, AEPC may withdraw the facility of submitting LUT in place of EMD/BG for any exporter who is otherwise eligible for the facility, but has failed to remit any forfeiture amount within the stipulated period of 90 days.
c. The stipulations relating to release / forfeiture of the LUT would be the same as applicable to the other forms of EMD/BG.
(iii) Post Dated Cheques will be accepted as EMD, in systems other than FCFS, for extension of entitlements subject to the condition that if the cheque is dishonoured on deposit for any reason, the quantities extended against such cheques would be debited to any future entitlements of the concerned exporter and he will not be allotted any further entitlements until the amount covered by the forfeiture is remitted by way of Demand Draft.
i. The Post Dated Cheques should be dated 1st June of the year following the year of allotment and shall be valid for presentation during a period of 6 months from that date.
ii. The stipulations relating to release / forfeiture of the Post Dated Cheques would be the same as applicable to the other forms of EMD/BG.
iii. The EMD/BG/LUT/Post Dated Cheque of an exporter who exports 90% or more of the entitlement would be released in full. However, in the case of slow moving items, this percentage will be 75% or more.
iv. The ‘Quota Administering Authority’ shall forfeit the EMD/BG, in case utilisation is 75% or more but less than 90% in case of fast moving items, and 50% or more but less than 75% in case of slow-moving items, proportionate to the shortfall in utilisation.
v. If utilisation is less than the above, i.e. 75% in case of fast moving items and 50% in case of slow moving items, the EMD/BG/LUT/Post Dated Cheque shall be forfeited in full.
vi. For the above purpose, utilisation shall be compiled on the basis of individual entitlements or on the basis of each System separately or on the request of the exporter for his performance in all systems (except FCFS System) clubbed together.
vii. A show cause notice shall be issued before forfeiture.
viii. The quota administering authority should despatch the order of forfeiture of BG/EMD/LUT/PDC etc., by registered post with acknowledgement due card or preferably through speed post. Evidence of despatch of an order through the means specified above as also of acknowledgement/receipt thereof or otherwise should be kept on the file concerned.
ix. The Quota Administering Authority, for ensuring the recovery of the amount of forfeiture may temporarily debar the exporter from obtaining entitlements and participating in the Export Entitlement Distribution Scheme for a specified period.
x. All forfeited EMD/BG/Post Dated Cheques shall be deposited into a Public Deposit Account of the Government in such manner as Government directs from time to time.
a. When a shipment effected in an unrestrained category is reclassified by the importing country into a restrained category or when a shipment effected in a restrained category is reclassified by the importing country into another restrained category, Export Certificates / Visas will be issued in the reclassified category after the exporter surrenders the quantity involved in the reclassified category. For this purpose, the exporter can surrender the quantity from own entitlements in systems other than FCFS or by obtaining the quantity by transfer. If the case is to be cleared after 20th September, when transfers are not permissible, and an exporter does not have own entitlements to surrender, an undertaking to surrender the requisite quantity by the 31st January from the succeeding year’s entitlement (own or transferred) shall be taken from such an exporter. Such an undertaking should be backed by BG/EMD to the extent of 50% of the FOB value of the quantity. Once the quantity is surrendered, the BG/EMD may be released. If the quantity is not surrendered as per the undertaking, the BG/EMD may be forfeited. In such cases, PPE allotments in any country-category to the exporter for the succeeding year may be allotted, only after the requisite quantity is so surrendered.
b. If unallocated balance is available in the reclassified categories from the quantities released by the Quota Administering Authority in FCFS system, the Export Certificate / visas for the held up consignment will be issued after debiting such balance and the exporter will not be required to surrender any quantity.
c. The stipulations of (a) and (b) above will also apply to cases where a change of buyer is required for a shipment that had been effected under the FCFS system or under the PPE system after obtaining extension beyond 30th September and to cases where a change of importing country is required.
i. The exporter returns the Original Export Certificate / Visa to the Quota Administering Authority.
ii. The Entitlement Certificate which had been debited at the time of export, remains valid for the concerned quantity when the add-back is requested.
a. In the case of items exported as handloom garments exempted from restraints or as "India Items", which are reclassified by the importing countries as restrained items, Visas/Export Certificates will be issued by the Quota Administering Authority after obtaining the approval of the Ministry of Textiles.
Shipments will be allowed by the Customs Authorities at the port of shipments after verifying the certification of export entitlement in the original and duplicate of shipping bills for individual consignments, issued by the DG, AEPC.
For export of all handloom garments, corresponding to restrained items in Canada and special quantities reserved for handloom garments in some of the restrained categories relating to the USA, Shipments will be permitted by the Customs on the basis of an Inspection Endorsement by the Textiles Committee in part 2 of the combination form.
In respect of ‘India item’ which are traditional folklore handicraft textile products of India, shipments will be permitted by the Customs for exports to the EU, the USA and Canada on the basis of an appropriate certificate issued by the office of the Development Commissioner (Handicrafts).
(i) EU (a) Export Certificates and Certificates of Origin for all garment/knitwear items under restraint.
a. Certificates of Origin for all non-restrained garments/knitwear items.
(ii) Canada Export Certificates for garments that are subject to restraint except for properly marked samples valued at Canadian $ 500 or less.
(iii) U.S.A. Visa for all garment/knitwear consignments except properly marked samples valued at US $ 800 or less.
In the case of export of all Handloom Garments, corresponding to restrained items to Canada and all Handloom Garments corresponding to the restrained categories to the EU, the Textiles Committee will issue the certificate as prescribed in the Bilateral Agreements for such products.
i. Any exporter aggrieved by the order of forfeiture of EMD/BG by the quota administering authority may file an appeal to the 1st appellate authority, i.e., the Textile Commissioner within 45 days of the despatch of the order of the quota administering authority. This appeal shall be made in triplicate, accompanied by a demand draft for Rs. 500/-, drawn in favour of the Textile Commissioner and payable at Mumbai.
ii. The appellant may make a separate application for stay of the order of the quota administering authority.
iii. The Textile Commissioner shall decide the issue of stay, as early as possible.
preferably through speed post and the evidence of despatch thereof by the said means, as also of acknowledgement/receipt thereof or otherwise will be placed on the file concerned.
v. In the case of appeals which have been filed after the due date, the Textile Commissioner shall first decide as to whether such delay is to be condoned or not. The Textile Commissioner shall pass a speaking order in such cases expeditiously.
vi. For the above purposes, the Textile Commissioner shall mean and include such other officer (not below the rank of Director) to whom the Textile Commissioner, expressly or otherwise delegates the necessary responsibilities.
vii. An exporter who is not satisfied with the decision of the Textile Commissioner in the matter of a stay application or an appeal, may prefer an appeal against such decision within 45 days of the despatch of the order of the 1st appellate authority to the 2nd appellate authority for a decision thereon.
The quorum of the this committee will consist of its Chairman and 2 members.
ix. Any appeal before the 2nd appellate authority shall be addressed to its Member-Secretary in a set of five copies and shall be accompanied by a demand draft for Rs. 500/-, drawn in favour of the Ministry of Textiles, GOI and payable at Delhi.
x. If matter of the appeal also pertains to a stay and is of an urgent nature, the Chairman of the committee may grant the stay by recording reason(s) in writing expeditiously.
xi. The 2nd appellate authority shall also decide the case at the earliest, preferably within three months.
i. The Chairman and two members will constitute the quorum.
d) Submission of post-dated cheques for extension of entitlements which are dishonoured on presentation to his bank.
(iv) The Enforcement Committee will also deal with cases relating to exporters who are found to have exported or who have completed the formalities to export any item, which contains any dyes, chemicals, pigments or other material whose handling is specifically banned by the competent authority of the Government.
the above provisions, after examining his explanation and giving a personal hearing, the exporter may be debarred from obtaining entitlements and participating in the Export Entitlement Distribution Scheme for a specified period.
i. In serious cases, the exporter may be temporarily debarred by the Quota Administering Authority before personal hearing, pending the completion of the procedures and finalisation of a decision by the Committee.
iv) Dy. Secretary/Director (Exports), MOT, GOI Member-Secretary.
i. The quorum of the Enforcement Appellate Committee will consist of the Chairman and 2 members. The Chairman of the Enforcement Appellate Committee will, however, have the power to grant stay on the orders passed by the Enforcement Committee, after giving reasons recorded in writing.
ii. Any appeal filed before the Enforcement Appellate Committee shall be presented in five sets of papers accompanied by a demand draft for Rs. 500/-, drawn in the favour of the Ministry of Textiles, GOI.
iii. The Enforcement Appellate Committee may review and amend, modify or quash the orders of the Enforcement Committees on appeal from an aggrieved exporter or by initiating the action suo-moto.
The Textile Commissioner shall exercise general supervision over the matters relating to implementation of this Policy. In case, any deviation is noticed by the Textile Commissioner, it shall be promptly reported to the Ministry of Textiles seeking directions thereon.
A Coordination Committee consisting of Textile Commissioner, the representatives of EPCs (AEPC, TEXPROCIL SRTEPC and WWEPC) including the Quota Administering Authorities, ED, HEPC, DC(HC) and Dy. Secretary/Director (Exports) will meet under the chairmanship of the Joint Secretary (Exports) once in three months to review the operation of the policy. The Committee will send a report to the Ministry for taking appropriate actions on any changes desired in the Policy.
Government reserves the right to make amendments to and of the foregoing provisions in the public interest, without giving prior notice.
Last edited by ca_news; 20-06-2011 at 03:03 PM.
Ministry of Textiles - Notifications - Notification regarding reconstitution of Cotton Advisory Board.
Science & Technology Connected with National Remote Sensing Agency.
All India Federation of Co-operative Spinning Mills Ltd., Mumbai.
Cotton Corporation of India Ltd., Mumbai.
Growers’ Marketing Fedn. Ltd., Mumbai.
East India Cotton Association, Mumbai.
Chairman- Cotaap Research Foundation of EICA Mumbai.
Handloom Export Promotion Council Chennai.
Last edited by ca_news; 20-06-2011 at 03:02 PM.
Ministry of Textiles - Notifications - Repeal of Cotton Ginning and Pressing Factories Act,1925.
The Cotton Ginning and Pressing factories Act, 1925 enacted on the 8th day of August, 1925 provided for periodical filing of returns, maintenance of registers, marking of bales and other rule making powers for the Central and State Governments for the purpose of regulating the ginning and pressing factories.
2. There have been changes in the pattern of processing, marketing and consumption of cotton since the enactment of the act. In the market driven economy needing quality products modernisation of ginning and pressing factories is essential. Further, in the present liberalized industrial scenario the restrictions laid down in the Cotton Ginning and Pressing Factories Act, 1925 are not required any longer and the Cotton control Order, 1986 issued under the Essential Commodities Act, 1955 would cover provisions considered essential to regulate working of ginning and pressing factories in future so long as cotton remains as an essential commodity. Hence it was considered that the said Act be repealed.
3. The repeal will also provide a thrust and incentive to the modernisation efforts in the cotton ginning and pressing sector to ensure quality processing of cotton and charging remunerative price for the service provided for.
Last edited by ca_news; 20-06-2011 at 03:01 PM.
Ministry of Textiles - Notifications - Notification of Dept. of Revenue.
TO : ALL COMMISSIONES OF CUSTOMS (as per list attached)./COMM.2 CEK.
(i) Total number of independent processors.
(ii) Total number of independent processors falling under the new scheme ( section 3a ).
(iii) Total no. of hot air stenters in respect of (ii) above.
(iv) Total number of chambers in respect of (iii) above.
(v) Total number of chambers required to pay duty at the rate of Rs. 1.5 lakhs per month as determined under the provisions of the new scheme.
(vi) Total number of chambers required to pay duty at the rate of Rs. 2 lakhs per month as determined under the provisions of the new scheme.
(vii) Total number of duty paid at the rate of rs.1.5 lakhs per month and rs.2 lakhs per month, separately.
Till the fixation of the all industry rate of drawback on the above mentioned fabrics the exporters of such fabrics (processed by independent processors and paying duty as per notification no. 36/98-central excise dated 10.12.98 ) may be advised to file special brand rate fixation as per drawback rules, 1995.
For the export made out of stock lying before 16.12.98 the practice prevalent in regard to drawback and rebate of the duties may be continued.
The report as required must reach in this office by 31.1.99 positively.
TO BE PUBLISHED IN PART – II, SECTION 3, SUB-SECTION (1) OF THE GAZETTE OF INDIA (EXTRAORDINARY) DATED THE 1ST JANUARY, 1999.
"Provided that where the resultant products are textile and clothing goods falling under chapters 50 to 63 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), the value addition under this condition shall be of any positive value".
(b) in Explanations, in clause (ii), for the words "components, intermediates, consumables, parts", the words "components, intermediates, semi-finished goods, consumables, parts" shall be substituted.
Note: The notification No.32/97-Customs, dated the 1st April, 1997 was published in the Gazette of India, Extraordinary vide notification number 32/97-Customs, dated the 1st April, 1997 (G.S.R. 188(E), dated the 1st April, 1997).
Last edited by ca_news; 20-06-2011 at 02:59 PM.
Ministry of Textiles - Notifications - Press Note #17 of Ministry of Industry.
SUBJECT: Export of cotton yarn by EOU/EPZ units.
The Export Oriented Units/EPZ units in the cotton yarn sector are currently allowed to manufacture and export cotton yarn with domestic cotton use restrictions as stipulated in Press Notes No. 19 (1997 series) dated 26.12.97.
2. There have been representations from the 100% EOUs producing cotton yarn seeking greater operational flexibility so that they are better equipped to deal with the adverse market conditions prevailing in the international market. At the same time, there is an urgent need for promoting downstream investments by cotton yarn EOUs in the interest of higher value added export of fabrics.
(i) Those 100% EOUs that are manufacturing cotton yarn and are subject to count restrictions may be permitted to export cotton yarn without any count/domestic cotton use restriction upto 31st December, 1998 subject to the condition that such exports are within the overall quantitative ceiling on cotton yarn exports of counts 1-40 (which is 175 million Kgs for the calendar year 1998 as of date). For such exports, the EOUs will have to apply to the Cotton Textile Export Promotion Council (TEXPROCIL) for allocation of ceiling.
(a) Special eligibility would accrue only after the weaving capacity has been fully installed, certified as balanced unit of spinning and weaving capacity by Textile Commissioner, and its commercial production has started.
4. All investors and entrepreneurs may please take note of the aforesaid revision in the Policy.
Forwarded to the Press Information Bureau for giving wide publicity to the contents of the above Press Note.
Last edited by ca_news; 20-06-2011 at 02:58 PM.
Ministry of Textiles - Notifications - Public Notice #51 of Ministry of Commerce.
NEW DELHI, DATED THE 26 OCTOBER, 1998.
S.O.(E) Attention is invited to Schedule 2 App. 1 of the book Titled "ITC(HS) Classifications of Export and Import items 1997-2002" specifying the terms and conditions for export of items indicated therein.
3. The condition No. (iii) against entry at S. No. 6 relating to Cotton Yarn shall be deleted.
4. This issues in the Public interest.
Copy to all concerned By order etc.
Ministry of Textiles - Notifications - Gazette Notification under JPM Act.1987 dated 31st March, 2000.
And , whereas, the Central Government, after considering the recommendations made to it by the Standing Advisor Committee, is satisfied that it is necessary so to do in the interest of engaged in the production thereof, directed to and the percentage of total production of commodity or class of commodities required to be packed in jute packaging material specified in the order No.S.O.No526(E) dated 1st July, 1999.
(iii) Against Sl.No.3 relating to the commodity "Fertilizer (Urea only)", for the words "Twenty percent", the words "Fifteen percent" shall be substituted.
Foot Note: The Principal order as published vide S.O.526(E) dated 1st July, 1999.
Ministry of Textiles - Notifications - Gazette Notification under JPM Act dated 25th Oct.,2000.
Now, therefore, in exercise of the powers conferred by sub-section (1) of section 3 of the Jute Packaging Materials (Compulsory Use in Packing Commodities) Act, 1987,(10 of 1987), and in supersession of the Order of the Government of India in the Ministry of Textiles bearing S.O.No.526 (E) dated 1st July, 1999 published in the Gazette of India, Extra-ordinary Part II, Section 3, Sub-section (ii) dated 1st July, 1999, except as respects things done or omitted to be done before such supersession, the Central Government hereby directs that, w.e.f. the25thOctober, 2000 the commodities specified in column (2) of the Schedule below, shall be packed in jute packaging material, for supply or distribution, in such minimum percentage as specified in corresponding entries in column(3) of the said Schedule for the period from25th October, 2000 to 30th June, 2001.
In case of any disruption in supply of jute packaging material, Ministry of Textiles may, in consultation with the user Ministry concerned, relax these provisions upto a maximum of 20% for foodgrains and sugar and 5% for urea respectively.
Further, in exercise of powers conferred by sub-section (1) of section 16 of the Jute Packaging Materials (Compulsory Use in Packing Commodities) Act, 1987, (10 of 1987),the Central Government hereby direct that export packaging and small consumer packs of 5 kg and below in respect offoodgrains and sugar shall be exempted from the operation of this order.
Ministry of Textiles - Notifications - Pursuant to clause 4 of the Jute and Jute Textiles Control Order, 2000.
S.O. 1096(E).—Pursuant to clause 4 of the Jute and Jute Textiles Control Order, 2000, the Jute Commissioner hereby directs all the manufacturers of jute textiles to mark/brand the items of jute textiles mentioned in Column (2) of Table below with the corresponding words specified in the Column (3).
(1) (2) Name of the manufacturer.
The aforesaid direction will come into force from the date of its publication in the Official Gazette and will be valid upto 30.9.2001.

matches: v. v. v. v. v. v. v.


Section 101.2. Information panel of package form food.
21 CFR § 101.2 - Information panel of package form food.
(1) If the part of the label immediately contiguous and to the right of the principal display panel is too small to accommodate the necessary information or is otherwise unusable label space, e.g., folded flaps or can ends, the panel immediately contiguous and to the right of this part of the label may be used.
(2) If the package has one or more alternate principal display panels, the information panel is immediately contiguous and to the right of any principal display panel.
(3) If the top of the container is the principal display panel and the package has no alternate principal display panel, the information panel is any panel adjacent to the principal display panel.
(b) All information required to appear on the label of any package of food under §§ 101.4, 101.5, 101.8, 101.9, 101.13, 101.17, 101.36, subpart D of part 101, and part 105 of this chapter shall appear either on the principal display panel or on the information panel, unless otherwise specified by regulations in this chapter.
(c) All information appearing on the principal display panel or the information panel pursuant to this section shall appear prominently and conspicuously, but in no case may the letters and/or numbers be less than one-sixteenth inch in height unless an exemption pursuant to paragraph (f) of this section is established. The requirements for conspicuousness and legibility shall include the specifications of §§ 101.7(h)(1) and (2) and 101.15.
(i) Soft drinks packaged in bottles manufactured before October 31, 1975 shall be exempt from the requirements prescribed by this section to the extent that information which is blown, lithographed, or formed onto the surface of the bottle is exempt from the size and placement requirements of this section.
(A) If the soft drink is packaged in a bottle bearing a paper, plastic foam jacket, or foil label, or is packaged in a nonreusable bottle bearing a label lithographed onto the surface of the bottle or is packaged in metal cans, the product shall not be exempt from any requirement of this section other than the exemptions created by § 1.24(a)(5) (ii) and (v) of this chapter and the label shall bear all required information in the specified minimum type size, except the label will not be required to bear the information required by § 101.5 if this information appears on the bottle closure or on the lid of the can in a type size not less than one-sixteenth inch in height, or if embossed on the lid of the can in a type size not less than one-eighth inch in height.
(1) Neither the bottle nor the closure is required to bear nutrition labeling in compliance with § 101.9, except that any multiunit retail package in which it is contained shall bear nutrition labeling if required by § 101.9; and any vending machine in which it is contained shall bear nutrition labeling if nutrition labeling is not present on the bottle or closure, if required by § 101.9.
(2) All other information pursuant to this section shall appear on the top of the bottle closure prominently and conspicuously in letters and/or numbers no less than one thirty-second inch in height, except that if the information required by § 101.5 is placed on the side of the closure in accordance with § 1.24(a)(5)(ii) of this chapter, such information shall appear in letters and/or numbers no less than one-sixteenth inch in height.
(i) The statement of ingredients.
(ii) The name and address of the manufacturer, packer, or distributor.
(iii) The statement of identity.
(iii) The information required by paragraph (b) of this section appears on the label in accordance with the provisions of this paragraph, except that the type size is not less than 1/32 inch in height.
(1) Except as provided by §§ 101.9(j)(13) and (j)(17) and 101.36(i)(2) and (i)(5), all information required to appear on the principal display panel or on the information panel under this section shall appear on the same panel unless there is insufficient space. In determining the sufficiency of the available space, except as provided by §§ 101.9(j)(17) and 101.36(i)(5), any vignettes, designs, and other nonmandatory label information shall not be considered. If there is insufficient space for all of this information to appear on a single panel, it may be divided between these two panels, except that the information required under any given section or part shall all appear on the same panel. A food whose label is required to bear the ingredient statement on the principal display panel may bear all other information specified in paragraph (b) of this section on the information panel.
(i) The name and place of business information required by § 101.5 shall not be required on the body of the container if this information appears on the lid in accordance with this section.
(ii) The nutrition information required by § 101.9 shall not be required on the lid if this information appears on the container body in accordance with this section.
(iii) The statement of ingredients required by § 101.4 shall not be required on the lid if this information appears on the container body in accordance with this section. Further, the statement of ingredients is not required on the container body if this information appears on the lid in accordance with this section.
(e) All information appearing on the information panel pursuant to this section shall appear in one place without other intervening material.
(f) If the label of any package of food is too small to accommodate all of the information required by §§ 101.4, 101.5, 101.8, 101.9, 101.13, 101.17, 101.36, subpart D of part 101, and part 105 of this chapter, the Commissioner may establish by regulation an acceptable alternative method of disseminating such information to the public, e.g., a type size smaller than one-sixteenth inch in height, or labeling attached to or inserted in the package or available at the point of purchase. A petition requesting such a regulation, as an amendment to this paragraph, shall be submitted under part 10 of this chapter.


Defendant Hyung Joon Kim immigrated to the United States from South Korea at age six. He became a lawful permanent resident in 1986, but not a citizen.
Main Point: Expungement of petty theft conviction a mistake, although defendant consequently faces deportation.
While a juvenile, he was arrested multiple times and was placed on probation before he was eighteen. Within months after turning eighteen, he was convicted of first-degree burglary and placed on probation. Within the next two years, he was convicted two more times for theft-related crimes. One was first degree burglary again and he was again placed on probation.
The second of the two offenses, in 1997, was petty theft with a prior. Kim was then sentenced to three years in state prison. It merits mention that with the passage of Proposition 47 in 2014, he would have only faced county jail because the petty theft with a prior charge would have been filed as a misdemeanor.
Kim then served approximately two years of the three-year sentence and was released. He was then placed on three years of parole. The Department of Homeland Security (then named the INS), initiated deportation proceedings in 2002 due his string of convictions for theft, each of which was a crime of moral turpitude making his subject to removal.
Kim filed numerous challenges to his multiple convictions. Each challenge failed to eliminate a basis for deportation.
In 2011, he again attacked his 1997 petty theft conviction, by way of an “invitation” that the court dismiss the judgment of conviction under Penal Code § 1385. It merits mention parenthetically that only prosecutor can move to dismiss a case under section 1385. Thus, a defendant must instead “invite” the judge to exercise his discretion under 1385 to dismiss the case.
Kim’s “invitation” to the court was based on an argument of ineffective assistance of counsel (IAC). Kim argued that his attorney failed to advise him of the immigration consequences of his plea. The trial court granted the motion, most likely under Padilla v. Kentucky (2010) 559 U.S. 356.
The prosecution appealed to the Sixth District Court of Appeal. The prosecution argued that 1385 could not be used to attack a conviction. Penal Code § 1385 can only be used to dismiss a pending case. Kim’s case had proceeded to judgment twelve years earlier. Moreover, once a defendant begins serving a sentence, the court loses jurisdiction over the matter.
Second, the prosecution argued that Mr. Kim signed an agreement pursuant to the plea that acknowledged, “I understand that if I am not a citizen of the United States, a plea of guilty or no contest could result in deportation, exclusion from admission to this country and / or denial of naturalization.” Consequently, Kim’s argument of ineffective assistance of counsel was waived when he signed the form acknowledging such an immigration consequence.
The prosecution also argued that Mr. Kim had failed to exercise reasonable diligence in challenging the conviction due to the immigration consequences, because deportation proceedings began in 2002, nine years earlier. Moreover, the challenge was barred because its sole purpose was to avoid deportation. People v. Mendoza (2009) 171 Cal. App. 4th 1142, 1159.
Lastly, even if Penal Code § 1385 were to apply, the dismissal would not serve “the interests of justice “ given Mr. Kim’s lengthy criminal history. Rather, the interests of justice would be to leave the conviction on the record with its attendant consequences.
The Sixth Appellate District, in People v. Hyung Joan Kim (2012 DJDAR 16957), agreed with the prosecution on the prosecutor’s first argument only, reversing the trial court. The appellate court noted that Penal Code § 1385 “has never been held to authorize dismissal of an action after the imposition of a sentence and rendition of judgment.“ People v. Barraza (1994) 30 Cal.App. 4th 114, 121, fn. 8. Therefore, the trial court had no authority to dismiss the action under Penal Code § 1385.