Dan Snyder vs. the publisher of the City Paper

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I know this isn’t tax related, but this is a matter of interest that made me want to opine on this. I just finished reading a copy of the complaint filed by Daniel Snyder against the owner of the publisher of the City Paper which ran a negative piece about him. I am not the greatest legal guru that there is, but this case has all the markings of not surviving a motion to dismiss. Why? First, jurisdiction is founded in New York on the fact that the corporation that owns the City Paper is in fact resident in New York. Given that to get to that corporate defendant, he has to first pierce the corporate veil of the City Paper’s own corporation, he has a huge up his climb. To pierce the corporate veil, he has to prove that the city paper is the alter ego of the corporation that owns its publisher. No allegation is made that I saw which did that. Only that each defendant acted as the agent for the other on information and belief. I don’t believe that is a sufficient allegation to create an alto ego claim allowing the corporate veil to be pierced. Given that this defendant is the sole basis for jurisdiction in New York, would be grounds to have the case kicked out of New York.

My other thought is that even if he was libeled, he is going to have a tough time to get damages. He is a public figure and has to also prove malice in addition to an untruth. Even if he succeeds there, he’s going to have to prove that the article damaged his reputation. I am not sure that he will be able to prove that his reputation suffered because of the article. I can imagine if this were to ever get to trial the defendants would produce a parade of witnesses who said that they their opinion of Dan Snyder had not changed due to the publication of the article. I always remind people who want to pursue a libel case that the worst verdict you can get is a dollar. Yes, you were libeled, but your reputation was not damaged. That’s no vindication at all.

Don’t scrap those formula clauses

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As a follow-up to my last posting about combined exclusions of $10 Million, I would not recommend giving up those formula clauses, yet. For one thing, if Spouse A dies in a $5 Million year, the spouse gets the exclusion in that year and it is locked in. The estate can grow for the benefit of the surviving spouse, children and grandchildren for at least two generations (since the GST inclusion ratio is 1.0). If the other spouse dies later having remarried a wealthier new spouse, that would be lost if it were jointly titled. So, its good to keep those formula clauses intact.

Portable Estate Tax Exclusions

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One new concept in the 2010 Tax Act is in Section 303 of the Act which specifies that when a spouse dies the surviving spouse can elect to carry over to his or her estate the unused unified credit. Thus if H dies with a $5 Million estate and leaves it all to the wife, the Executor can elect to have it apply to her estate when she dies. But there is a curve ball in here. The act uses the term, “last such deceased spouse of such surviving spouse”. Let’s say that spouse one died and had $4 Million left over and then surviving spouse remarries. Spouse Two dies leaving a $5 Million estate to Spouse two’s children. Suddenly surviving spouse has no portability of that $5 Million. Thus, her estate loses that. And we don’t know the effect if spouse one dies in 2011 or 2012 and then the surviving spouse dies in 2013 with a $1 Million exclusion.

When Homes are a Home

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Phil Driscoll owns two homes. One in Cleveland Tennessee and a lake home outside of Cleveland Tennessee. Phil Driscoll is an ordained gospel minister. Phil Driscoll Ministries paid for both homes and it was excluded from his income under the Pastor’s Housing allowance under Section 107 of the Internal Revenue Code of 1986. The IRS felt that to be a bit greedy and assessed him with additional income and fraud penalties. Rev. Driscoll took the IRS to tax Court. The IRS argued that the use of the word “home” in Section 107 refers only to one home. Rev. Driscoll countered that in Section 7701(m) the Code provides that singular may include plural. Further, the legislative history did not forbid that interpretation. For those reasons the Tax Court ruled in Driscoll, et ux v. Commissioner, 135 TC 27 (2010) that both houses were homes for the purposes of Section 107 and both could be excluded from income. It was a split and narrow decision, but one that shows two things: (1) The IRS Code does by its own design create issues such as this and (2) That statutory language brings in Legislative History when Courts attempt to resolve these types of issues. This case is a big win for Pastors, but more importantly, it makes very clear another point, that when faced with a case where the IRS is taking a narrow reading of the law, one needs to look at the entirety of the Code to see if there is definitional assistance elsewhere and look to the Legislative History to make sure you have either neutral support or positive support from that history.