In the recent Tobias decision, the Tax Court rejected a couple’s argument that they could offset the income they would otherwise have recognized on an annuity distribution by the capital loss they incurred when they sold securities in order to purchase the annuity in the first place.

In order to buy the annuity in 2003, the taxpayers sold securities for which they incurred a taxable loss of $158,000. Then in 2010, after the annuity contract had accrued substantial income, the taxpayers withdrew a portion of the annuity balance to fund the purchase of a residence, and did not report any of the annuity withdrawal as income.

They argued that the otherwise recognizable income was a capital gain and thus should be offset by their capital loss carryforward (remaining from the originally sustained $158,000 loss). The taxpayers thought much of the “income on the contract” likely resulted from capital gains realized by the insurance company that issued the contract and/or that IRS should look at the $158,000 capital loss from 2003 as part of the cost of the annuity purchase.

“No way,” concluded the Court.

Immigrants Whipsawed by Ever-Changing U.S. Laws and Regulations

The series of legal and policy shifts that immigrants in the U.S. face is seemingly unending. Or maybe “seemingly” is too mild a word.

Try Googling the terms “immigrants whipsawed,” and you’ll find headlines both recent and ancient, all saying basically the same thing: Any immigrant trying to plan his or her life in the U.S. had best be prepared for delays, turnabouts, inconsistencies, and all-around frustration.

In the latest example of this phenomenon, F-1 students pursuing degrees in science, technology, engineering, or mathematics (STEM), whom DHS previously found eligible for an extra 17 months of a work status called optional practical training (OPT), may not be able to receive those extra 17 months after all. The U.S. District Court for the District of Columbia decided that the Department of Homeland Security (DHS) hadn’t followed proper procedures when it created the extension. Luckily for students, it gave DHS some extra months to redo the regulation, as described in Nolo’s update, “Extra 17 Months of Optional Practical Training for STEM Students in Jeopardy.”

Non-citizens who had successfully applied for Deferred Action for Childhood Arrivals (DACA) status weren’t so lucky. Many of them had received three-year work permits under President Obama’s latest Executive Order. However, a federal court decision blocking implementation of that order resulted in them having to actually mail their three-year work permits back to USCIS. (These were to be replaced with two-year work permits that USCIS would send out automatically – let’s hope that worked out.) What a bother, not to mention a source of confusion for both immigrants and their employers.

But these DACA recipients are still better off than the immigrants who were hoping to receive Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA). This was (or perhaps is, after it wends its way through the court system) another program created by Executive Order. But it’s still on hold, ever since a federal district court in Texas granted a preliminary injunction against it.

How ironic that one of the 100 questions on the U.S. naturalization exam, which is given to prospective new U.S. citizens, is “What is the ‘rule of law?’” Acceptable answers include, “Everyone must follow the law,” “Leaders must obey the law,” “Government must obey the law,” and “No one is above the law.” Too bad no one seems able to decide what the law says, and stick to it for more than five minutes.


The Ninth Circuit recently reversed the Tax Court, concluding that the Code Section 163(h) limitations ($1 million of acquisition indebtedness and $100,000 of home equity indebtedness) should be applied on a per individual basis, and not on a per residence basis. As such, unmarried co-owners are subject to a maximum of $2.2 million in limitations, rather than $1.1 million. See Voss v. Comm.


Recent legislation will affect the due date for filing FinCEN Form 114. This is the annual form filed by folks with a financial interest in or signature authority over certain foreign financial accounts. Historically, the form has been due by June 30 following the end of the year in question.

Under the new law, for returns for tax years beginning after December 31, 2015, the due date will be the following April 15, with a six month extension available.

Cellphone Location Information: Warrant Required?


Update: On October 28, 2015, the Fourth Circuit granted the government’s petition for rehearing in United States v. Graham, effectively undoing the case discussed below, at least for the time being. The case will eventually be considered “en banc,” meaning that the entire court, rather than a three-judge panel, will decide it. 

On Wednesday a federal appeals court held that the government generally needs a warrant in order to inspect one’s past cellphone location data. The three-judge panel from the U.S. Court of Appeals for the Fourth Circuit found that cellphone users have “an objectively reasonable expectation of privacy” in cell site location information (CSLI). (United States v. Graham, No. 12-4659 (4th Cir. Aug. 5, 2015).)

Where Were We?

In the case that led to the ruling, a federal jury convicted two men of charges related to several armed robberies in the Baltimore area. Officers nabbed the suspects shortly after the last robbery, then seized various items, among them their cellphones.

The government gathered court orders granting access to the phones’ CSLI. Pursuant to those orders, the phone’s service provider (Sprint/Nextel) handed over seven months’ worth of CSLI records. Prosecutors used those records to prove the defendants’ whereabouts at various times surrounding the robberies.

In the course of its opinion, the Fourth Circuit panel explained how CSLI works: A traditional cellphone communicates with cell sites whenever it sends or receives a call or text, while a smartphone might communicate with them more often due to functions like email. The phone typically connects to the nearest cell site because that site offers the strongest signal. Records of the sites to which a phone has connected therefore show the approximate whereabouts of the device—and its user—at precise moments in time. (Listeners to Serial will forgive the recap.)

Searching for a Standard

The government secured the location records through the Stored Communications Act (SCA). The SCA requires that the government get either a warrant or court order for a service provider’s subscriber account records.

Warrants demand probable cause, but SCA court orders can rest on what’s essentially reasonable suspicion, a lower standard. (The SCA allows for orders based on “reasonable grounds to believe” that records are “relevant and material” to an investigation.)

Despite its conclusion that warrants rather than court orders are necessary for CSLI disclosure, the Fourth Circuit panel actually upheld the search. The judges found that the good faith exception to the exclusionary rule applied because the government acted according to what were then established procedures. But at least in the Fourth Circuit, the law is now clear, meaning that officers and prosecutors won’t have this “out” the next time they try to grab CSLI.

Conflict in the Courts

Despite the ruling, the law on cell location data is anything but uniform. Some state courts, including the supreme courts of Massachusetts and New Jersey, have agreed that inspection of cellphone location information requires a warrant. (Com. v. Augustine, 467 Mass. 230 (2014), State v. Earls, 214 N.J. 564 (2013).)

On the other hand, a Fifth Circuit panel ruled in 2013 that the government doesn’t need a warrant to acquire historical CSLI. And the Eleventh Circuit agreed earlier this year. These courts have theorized that people voluntarily convey their location by using their cellphones. (In re U.S. for Historical Cell Site Data, 724 F.3d 600 (5th Cir. 2013), United States v. Davis, 785 F.3d 498 (11th Cir. 2015).)

So, do the police need a warrant to see what your phone says about where you’ve been? That depends in significant part on where you’ve been.