February 2012

Those of you who have a blog are probably aware that many bloggers have a “stats page” where the blogger can view the specific Internet search terms that land visitors on their blog.

Possibly due to the recent news reports about the arrest and conviction of another Texas lawyer named Allyson Rowe, several visitors have landed on the Equine Law Blog after entering search terms such as “allison rowe conviction 2012”.

Out of an abundance of caution, I would like to make clear that I am not the lawyer referenced in these recent news stories. My full name is Alison McCormack Rowe, and my practice is based in Fort Worth, Texas.  I have never been arrested, and I have never been charged with any crime of any nature. 

For more information, see my full biography.

By B. Paul Husband

            One of the significant holdings in Van Dusen was that indirect supervision of the work by the 501(c)(3) charity can suffice to support deductibility of unreimbursed out of pocket expenses from volunteers. The Court stated:   “Nothing in Section 170 or [relevant] regulations suggests that, as a condition to the deductibility of unreimbursed service-related expenses, the services must be performed under the control or supervision of a charitable organization. . . .” 

            One of the keys to winning as much as she did was that some of the receipts were itemized. The itemized receipts were given substantial deference by the Court. 

Saved by The Yankee Doodle Dandy

            The Van Dusen Court utilized the Cohan Rule in a fair manner.   The Cohan Rule is named for the great American composer/lyricist, George M. Cohan, who wrote songs like “Give My Regards to Broadway,” “Over There,” “You’re a Grand Old Flag” and “The Yankee Doodle Boy.”   In addition to his contributions to American musical comedy and patriotism, he made his mark in American tax law in Cohan v. Commissioner, 39 F.2d 540 (2d. Cir. 1930). He challenged the stringent IRS substantiation requirements. Judge Learned Hand wrote the just and enduring opinion. The Cohan Rule provides that, even if the substantiation is incomplete, if some factual basis is provided for the Court to base a finding, a Court may make inferences to support granting of deductions. Ms. Van Dusen may not have kept the records exactly as she should have kept them, and she did not have everything she should have had, but she did prove what a bag of kitty litter cost, and she showed by receipts that she typically bought eight bags at a time. The Tax Court found that was enough to invoke the Cohan rule.

                Van Dusen successfully proved up the cost of kitty litter 

           The Court expressly found Van Dusen to be credible witness. The evidence reflected that Van Dusen had about seven pet cats and about 70 to 80 feral “foster” cats in 2004. She argued that the foster cats consumed a greater percentage of the veterinary care than her pet cats, on a pro rata basis. However, she did not have specific proof and therefore the Court only allowed a pro-rata portion of the veterinary expenses as deductions — 90% with respect to the veterinary, pet food and pet supply expenses. Specific testimony would have helped.

            It is fair to infer that unreimbursed expenses incurred in volunteer work for qualified 501(c)(3) charities which benefit horses, dogs and other animals would be treated the same way by the Tax Court.

            The bottom line is: keep records, keep records, keep records, and for amounts in excess of $250 be sure you get a written acknowledgment from the charity before you file your tax return.

Related Posts:

Guest Post: I Got Dem Ol’ Cathoues Blues Again Mama! (Part 1)

Guest Post: I Got Dem Ol’ Cathouse Blues Again Mama! (Part 2)

©B. Paul Husband 2012

By B. Paul Husband

            In June of 2011, the United States Tax Court decided Van Dusen v. Commissioner, which addresses the rules for deductions of unreimbursed out of pocket expenses incurred in charity work. 

            In Van Dusen, a cat-loving attorney worked on a volunteer basis in association with a Section 501(c)(3) charity called “Fix Our Ferals” with dozens of feral cats, for which Attorney Van Dusen provided food, shelter, veterinary care and pet supplies, including kitty litter.

            Ms. Van Dusen deducted a broad range of expenses which she associated with her volunteer work for Fix Our Ferals. The expenses deducted included cat food, kitty litter, veterinary care for cats, funeral expense for one cat, her bar association dues, Costco membership dues, Department of Motor Vehicle fees, electric bills, water bills, garbage collection charges, vacuum cleaner repair, and the costs of a custom air filtration system for her residence.

          Happy Mardi Gras:  Laissez les bons temps rouler!

  The significant holdings in Van Dusen are: 

            (1) Out of pocket expenses incurred in connection with providing services to a charity are considered under the set of rules applied to gifts of “money” (Tr. Reg. Section 1.170A-13(a)) rather than the rules applied to gifts of “property” (Tr. Reg. Section 1.170A-13(b). The “money” rules are simpler than the rules applied to gifts of property.

            (2) The Tax Court will allow some flexibility in accepting alternatives to “adequate records” as substitutes for the records required by the Treasury Regulations to substantiate expenses incurred in connection with gifts to charity, of less than $250. However, the flexibility only works for gifts which are less than $250; not the gifts greater than $250.

            (3) For amounts above $250, the Tax Court will enforce the technicalities of Treasury Regulations Section 1.170A-13.

            (4) The test of “relatedness” between the charitable purpose of the donee and the expenses which were sought to be deducted was applied in Van Dusen and as a result of the “relatedness rules” the bar association dues , the Costco membership dues, the Department of Motor Vehicles expenses, and the vacuum cleaner repair expenses were disallowed. Concerning the connection between the expenses deducted to the work done, the Van Dusen Court stated: “To be deductible, unreimbursed expenses must be directly connected with and solely attributable to the rendition of services to a charitable organization.”

            The Costco membership and vacuum cleaner repair deductions were rejected by the Court on the grounds that they were not exclusively for charitable purposes. 

            (5) Percentage deductions were allowed for the electric bill, the water bill, cat food, cat supplies and the air filtration system, based on the ratio of the taxpayers own pet cats (7) to the “foster” cats (70-80). Thus, deduction of 90% of the pet supplies and cat food were allowed, but only 50% of the cleaning supplies and utility expenses were allowed. 

            For the veterinary expenses, the pet supplies, the cleaning supplies, and the utilities, the Court showed some flexibility and allowed a percentage of the expenses, on the grounds that the taxpayer would have had fewer veterinary service expenses, purchased fewer pet supplies and fewer cleaning supplies if she had not been doing volunteer work for the charity. Similarly, her utility bills would have been significantly lower if she had not had to run a special ventilation system, due to the numbers of cats involved.

The Evidence

            At trial the donor, Ms. Van Dusen, introduced evidence:

            (1) Copies of checks;

            (2) Bank account statements;

            (3) Hospital account history;

            (4) Credit card statements;

            (5) Costco purchase history;

            (6) Gas and electric invoices;

            (7) Waste management payment list;

            (8) Water billing history;

            But all of the records were compiled for trial, well after the expenditures were made in 2004. No written statement from Fix Our Ferals, the donee charity, was obtained prior to the filing of Ms. Van Dusen’s tax return. She would have had better success if she had obtained the “contemporaneous” statement from Fix Our Ferals. For contributions of $250 or more, the Court held a taxpayer must satisfy not only the record keeping requirements, but also the requirements of Treasury Regulation § 1.170A-13(f)(1).

Related posts:

Guest Post:  I Got Dem Ol’ Cathouse Blues Again Mama! (Part 1)

Guest Post:  I Got Dem Ol’ Cathouse Blues Again Mama! (Part 3)

©B. Paul Husband 2012

Four years ago this week, the Equine Law Blog was born.  This blog has “grown up” and evolved a lot since February 2008.  But if I did one thing consistently, I hope it was to provide Texas horse owners with useful insights on noteworthy legal issues and developments.

The Equine Law Blog won its first award last year (ABA Top 100 Blawgs). I was very pleased and surprised by this distinction, especially given the high quality of the other blogs on the ABA list.  And (also surprisingly), this little ol’ blog has been viewed somewhere over 171,000 times since its inception.

But to be honest, what I like most about doing this blog is receiving comments from readers who find the blog interesting or helpful. 

If you have not posted a comment in the past, I’d be very pleased it if you would send me an email to let me know one thing you like or dislike about this blog. Or let me know a topic you’d like for me to cover in the future. (But please don’t post a comment or send a message seeking legal advice or asking specific questions. I cannot answer due to ethics rules). 

You can also join my Facebook group and provide some feedback there.

In case you were curious, the following were the top 5 posts of the past year, based on number of page visits (in no particular order):

1) Obama Lifts Horse Slaughter Ban–PETA Says It’s A Good Idea

2) Can Jaci Rae Jackson Be Hanged for Horse Theft?

3) New Requirement for Texas Sales Tax Exemption Number May Affect Horse Businesses

4) DOT Says it Will Not Adopt Regulation Requiring CDL for Farmers & Ranchers

5) Time to Get New Warning Signs: Equine Activity Act Amended in 2011

Thank you for your loyal readership of this blog! I’m looking forward to an exciting fifth year.

The Fort Worth Court of Appeals has affirmed the 348th District Court of Tarrant County’s dismissal of horse trainer Rebecca “Becky” George’s lawsuit against Adam Deardorff and Lana Wirsig, holding that the trial court lacked personal jurisdiction over Wirsig and Deardorff.

Becky George of Tomball, Texas alleged that statements by Deardorff and Wirsig were submitted to the American Paint Horse Association (APHA), which caused the APHA to revoke George’s status as an official APHA judge and suspend her from APHA competitions for six months. George alleged that the suspension caused her to lose more than half of her clients.

All parties agreed that Deardorff was a resident of Pennsylvania, and Wirsig was a resident of Missouri. The trial court dismissed George’s claims against Deardorff and Wirsig on jurisdictional grounds. According to the Court of Appeals, George did not meet her burden to allege facts sufficient to give the trial court personal jurisdiction over Deardorff and Wirsig, because:

1) George asserted in her pleadings that another defendant named Harlan Hall (and not Deardorff or Wirsig) submitted Deardorff and Wirsig’s statement to the APHA (which is based in Fort Worth). 

2) George alleged that Deardorff had engaged in negotiations with Hall regarding the possibility of Hall hiring Deardorff to become the Hall family’s horse trainer in Texas. But George did not allege where these negotiations occurred or allege any other facts about these negotiations.

3) Even if Deardorff and/or Wirsig had submitted their statements to the APHA, this allegation is not sufficient to establish personal jurisdiction because it “was too is too random or isolated to constitute purposeful availment and does not show that Deardorff or Wirsig sought some benefit, advantage, or profit by availing themselves of Texas.”

 4) George’s claim asserting a civil conspiracy among Deardorff, Wirsig, and Hall (a Texas resident) did not impute Hall’s acts to Deardorff and Wirsig. The court held that George had to establish jurisdiction over Deardorff and Wirsig individually and not based on the acts of another person as part of a conspiracy.

5) George argued that Deardorff and Wirsig attended APHA events and that Wirsig competed in APHA-sponsored events, and because the APHA is headquartered in Texas, these acts constitute doing business in Texas. The Court of Appeals overruled this argument because George did not allege that Deardorff and Wirsig attended any of these events in Texas, much less that their contacts with Texas in connection with these events constituted purposeful availment of the laws of Texas.

6) George claimed that Wirsig was a customer of George, and George’s business is located in Texas. But George never alleged that Wirsig ever did business with George in Texas or other facts showing that Wirsig purposefully invoked the benefits of Texas laws by using George’s services.

As you can see, a defendant’s isolated or indirect contacts with Texas do not always give rise to jurisdition in Texas.  The defendant must usually be shown to have committed a tort in Texas, to have done busniess in Texas, or to have otherwise purposefully availed himself of the protections of Texas law to in order to submit to the jurisdiction of Texas courts.  Plaintiffs should always plead jurisdictional facts against out-of-state defendants in a detailed manner to demonstrate the defendant’s specific acts undertaken in Texas.

Plaintiffs to litigation against defendants who reside in other states should carefully consider jurisdictional factors before deciding where to bring suit. Filing suit in the correct forum to begin with can expedite the litigation process and save attorneys’ fees and court costs. Typically, jurisdiction is proper in the state and county were the defendant resides. If a defendant has a possible “quick way out” of a lawsuit by challenging personal jurisdiction, a defendant will usually take advantage of this.  If a defendant’s suit is dismissed on jurisdictional grounds, the plaintiff must then sue them again in a proper forum.  But the plaintiff must act expediently in doing so to ensure that the statute of limitations does not expire before the new suit is filed.

Case informationGeorge v. Deardorff, No. 02-11-00173-CV, 2012 WL 335854, (Tex. App.—Fort Worth, Feb. 2, 2012).

            Paul Husband, an equine tax attorney based in California, will be contributing a series of guest posts over the next few weeks on the 2011 tax opinion, Van Dusen v. Commissioner. There are many valuable lessons contained in this opinion from which equine charities might benefit. Enjoy!

            In the context of deductions claimed by a woman who kept 70 to 80 “foster” cats, in addition to her own seven pet cats, the U.S. Tax Court addressed the deductibility of out of pocket expenses incurred as a volunteer for a properly qualified IRC Section 501(c)(3) charity in Van Dusen v. Commissioner, (2011) 136 T.C. 515.

            There is no deduction whatsoever available for the value of labor or services provided when an individual volunteers to do work for a charity, even though a gift of money to the same organization would be deductible. Nonetheless, out of pocket expenses incurred during the course of performing services for a qualified charity may be deductible if the expenses are sufficiently related to the charitable purpose of the organization, and substantiation and record keeping requirements are met.

          Happy Valentine’s Day!

            There are lengthy and complex Treasury Regulations concerning the deductibility of gifts to charity, with separate rules for gifts of property versus gifts of money. 

            Before getting deeper into Van Dusen, lets take a quick look at the requirements and limitations provided by the Treasury Regulations concerning the deductibility of out of pocket expenses incurred in the course of volunteer work for a § 501(c)(3) charity.

Less Than $250

            Generally, for expenses of less than $250, to justify a tax deduction for out of pocket expenses for a charitable work, the donor must maintain, as a record of the contribution, either:

            (a) a bank record; or

            (b) a written communication from the donee (the charity) showing:

                        (1) The name of the donee organization;

                        (2) The date of the contribution; and

                        (3) The amount of the contribution.

More Than $250

            For expenses which are incurred in the course of doing volunteer work for a charity which are more than $250, in addition to meeting the requirements for expenses less than $250, the donor must have a contemporaneous written acknowledgment from the donee, which must include:

            (a) The amount of cash and a description (but not the value) of any property other than cash which was contributed;

            (b) Whether the donee provided any goods or services in consideration for any part of the contribution; and

            (c) A description and a good faith estimate (by the donee) of the value of those goods or services.

Contemporaneous

            The term “contemporaneous” as used in the Treasury Regulations concerning a written acknowledgment of contributions of out of pocket expenses related to charitable work means a written acknowledgment prepared on or before the earlier of:

            (a) The due date of the donor’s tax return, including extensions; or

            (b) The date that the donor files his/her/its tax return.

Acknowledgment

            The acknowledgment requirement for unreimbursed out of pocket expenses can be met if:

            (a) The taxpayer has “adequate records” to substantiate the amount of the expenditures; and

            (b) The taxpayer obtains a statement prepared by the donee that, in addition to the required information listed above for contributions of less than $250, the statement must describe the services and expenses performed, incurred and/or received. See Treasury Regulation § 1.170A-13(f)(10). 

            The $250 level is an important line of demarcation. Above it, the contemporaneous written acknowledge from the donee must be obtained.

Multiple Gifts Under $250 Do Not Trigger Higher Standard

            On the bright side, if a particular donor makes several gifts of unreimbursed expenses incurred doing volunteer work for a charity in amounts less than $250 each, even if they add up to more than $250, they need not be aggregated for the purpose of triggering the contemporaneous written requirements set forth in Treasury Regulation 1.170A-13(f) for contributions of more than $250.

Related posts:  

Guest Post:  I Got Dem Ol’ Cathouse Blues Again Mama! (Part 2)

Guest Post:  I Got Dem Ol’ Cathouse Blues Again Mama! (Part 3)

©B. Paul Husband 2012

Kelly Hart & Hallman LLP’s Agricultural Law and Equine Law practices were featured in Fort Worth Stock Show Syndicate’s 2012 Sale of Champions Guide.

Several Kelly Hart attorneys attended the Sale of Champions on February 4, 2012, where the Grand Champion Steer sold to Dick Wallwrath for a record $230,000.

Ross Perot, Jr. bought the Reserve Grand Champion steer for $155,000.

For the photo shoot, Stephanie Kaiser and I were standing in the Coliseum arena at Will Rogers Memorial Center near the bucking chutes.  This photo was taken before the rodeo started, and you can see that new footing was about to be put into the arena.

Happy Friday to all!

On Friday, February 3, 2012, CBS aired the trial of horse owner Deborah Dobbs vs. horse trainer Sharon Jeffco on Judge Judy–a case involving alleged injury to a horse at the hands of a trainer. This case has caused quite a stir in the horse community, possibly because of the unique nature of the alleged injuries to the horse.On Friday, February 3, 2012, CBS aired the trial of horse owner Deborah Dobbs vs. horse trainer Sharon Jeffco on the show Judge Judy, in a case involving alleged injury to a horse at the hands of a trainer.  This case has caused quite a stir in the horse community, possibly because of the unique nature of the alleged injuries to the horse.

Dobbs sued Jeffco for $5,000 (the jurisdictional limit on Judge Judy), alleging that her 5-year-old mare, “Misty”, sustained severe tongue lacerations due to Jeffco’s training methods. Dobbs specifically complained that Jeffco used an “ill-fitting bit”. Dobbs posted this photo of the alleged injuries on Facebook  [CAUTION: photo is graphic].  Dobbs admitted that she was present during the entire training session in question. 

During the trial on Judge Judy, Jeffco alleged that Misty had the cuts on her tongue before Jeffco started training her, but Jeffco was unaware of the wounds until they were reopened and started bleeding during the course of Jeffco’s final training session. Jeffco brought a counterclaim against Dobbs for defamation and business disparagement. Jeffco did not get to put on her full case during the trial on Judge Judy, but she posted this statement with supporting documents on her website. 

The bit was not shown during the trial.  As far as I know, Jeffco has not posted a photo anywhere of the bit she used on Misty during the incident in question. But a vet report included in Jeffco’s statement about what happened indicated that it was a “solid shank bit.”

This case left me wondering, “can any bit really cause this much damage during a short period of time?” I asked professional horseman Liz Payne of Unity Equestrian Arts, LLC what she thought about the evidence revealed in the trial itself. According to Payne,

There is no excuse for a tongue to be cut, ever.  The amount of damage to this tongue is hard to believe.  In over 40 years of training horses I have never seen anything like this, in fact I have never seen a cut tongue.  I have unanswered questions.  Someone is responsible for the damage to the horse.  The sorting out who caused this horrific damage seems to be the difficult challenge.  There is never an excuse for damaging a horse, physically or mentally.”

Without opining on who was liable for the horse’s injuries, the judge awarded zero damages to both parties on their claims. Below are some of the reasons (potential litigants, take note!):

1) Neither party brought a veterinarian with them to the trial. Only Dobbs had a report from a veterinarian who actually treated the horse. The judge seemed to lend little credence to the reports from Jeffco’s vets who had not seen or treated the injuries.  Parties to horse injury suits should always bring a vet with them to testify, and preferably one who saw the horse as opposed to someone who drew conclusions from documents, photographs, radiographs, etc.

2)  Dobbs witnessed the incident in question, but she did not leave the premises with her horse as soon as she allegedly believed that Jeffco was using abusive methods. This admission detracted from Ms. Dobbs’s credibility with the judge, especially with respect to Dobbs’s allegations that Jeffco tied the mare’s head down and used a longe whip on the horse.

3)  Jeffco paid Dobbs $953.50 in restitution in a related criminal animal cruelty proceeding. Judge Judy ruled that Jeffco waived her defamation claim when she paid the restitution to the plaintiff.  The judge further ruled that Dobbs had been fully compensated by the restitution check in the criminal case, and therefore awarded her $0 damages.  The effects on a civil case of actions taken in a related criminal case is something clients should discuss with their counsel before taking action.

4)  Jeffco and Dobbs repeatedly make comments to one-another during the trial.  This agitated the judge (as it is considered unacceptable behavior in any courtroom).  As such, the parties’ conduct at trial may have made the judge more inclined to give both parties nothing.  

I in no way condone the use of training methods that might cause these types of injuries to a horse.  But it should be noted that trainers might protect themselves from unfounded claims of horse injury or abuse by having all training clients sign a written training agreement, whereby the client releases the trainer of liability should the horse be injured in training and/or if the training does not achieve the desired results.

Follow me on Twitter @alisonmrowe

On January 23, 2012, the U.S. Supreme Court ruled that while states may be able to enact laws banning the slaughter of horses, states cannot impose their own laws governing how animals are handled and processed at federally-regulated slaughterhouses.   A link to the U.S. Supreme Court’s opinion can be found here.

This opinion was handed down in National Meat Association v. Harris, the “pig case” I discussed back in November 2011 when the case was in the oral arguments phase. This prior post discussed that case’s possible indirect effects on the horse slaughter debate:

Could the U.S. Supreme Court Unwittingly Decide the Fate of Horse Slaughter?

Photo:  Punxsutawney Phil declared today that winter is far from over.

 

In a nutshell, the Court held in Harris that a state law in California requiring all slaughterhouses to “immediately euthanize” any nonambulatory animal on its premises is preempted by the Federal Meat Inspection Act (FMIA) because the FMIA regulates slaughterhouses’ handling and treatment of animals upon their arrival at a slaughterhouse. 

The Court was not persuaded by the argument that the treatment of nonambulatory pigs could be regulated by states because the Fifth and Ninth Circuits have upheld state laws banning the slaughter of horses. The court made clear that the FMIA applies to a broad range of activities at slaughterhouses, but it does not address the specific species of animals that are allowed to be processed in the first place. With respect to the federal circuit cases upholding state bans on horse slaughter, Justice Kagan, speaking for the Court, stated:

We express no view on those decisions, except to say that the laws sustained there differ from [the California law requiring the immediate euthanization of nonambulatory animals] in a significant respect…Unlike a horse slaughtering ban, the statute thus reaches into the slaughterhouse’s facilities and affects its daily activities. And in so doing, the California law runs smack into the FMIA’s regulations. So whatever might be said of other bans on slaughter, [the challenged California law] imposes requirements within—and indeed at the very heart of—the FMIA’s scope.”

The question I posed in my prior post about Harris was:

“What if one or more states were to enact laws that made illegal the so-called ‘evils’ of slaughter that opponents of horse processing find so unsavory? Would the opponents of horse slaughter be opposed to the humane processing of horses in those states?"

The answer to this question, per the Court’s ultimate opinion in Harris, is “it doesn’t matter now, because it is now clear that states cannot make their own laws governing how animals are handled at slaughterhouses that are governed by the FMIA.”

Also, we can now assume that if the processing of horse meat for human consumption is to be resumed in any state where it is still legal under state law, FMIA regulations (and not any regulations that the states may attempt to promulgate) will govern how horses are handled and processed in those states.

For another take on the Harris case and its possible effects on horse slaughter, see the following post by Milt Toby on Horses and the Law:

Horses and Cattle and Pigs, Oh My

Follow me on Twitter @alisonmrowe