Federal Taxation

The Fifth Circuit issued twenty-two decisions involving federal taxation issues during the survey period. The court dealt with an expansive realm of issues but issued few unprecedented rulings. Still, the court did render some noteworthy opinions that have provided definitive answers to certain critical issues. For example, the court ruled that section 83 of the Internal Revenue Code (the "Code") applies to a corporate taxpayer. It set out rules for determining which corporation is entitled to a tax refund when a corporate group files a consolidated return. Also, it held that a taxpayer may claim a tax loss for a worthless asset even though the taxpayer has not abandoned the asset. It decided that a taxpayer is precluded from claiming any interest deduction on investment property if the underlying asset is worth less than nonrecourse debt on the property. Finally, it prevented the Internal Revenue Service ("IRS") from avoiding the two year statute of limitations on bringing a suit to recover an erroneous refund by filing the petition as a suit to reduce an assessment to judgment.