R. & G. Slogoff v. Com. of PA ( 2021 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Reed and Gail Slogoff, :
:
Petitioners :
:
v. : No. 742 F.R. 2017
: Argued: June 9, 2021
Commonwealth of Pennsylvania, :
:
Respondent :
BEFORE: HONORABLE P. KEVIN BROBSON, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE J. ANDREW CROMPTON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WOJCIK FILED: December 2, 2021
Reed and Gail Slogoff (Taxpayers) petition for review of the order of
the Board of Finance and Revenue (Board), which sustained in part and denied in
part the Department of Revenue’s (Department) assessment of Personal Income Tax
(PIT) against Taxpayers, plus interest and penalties, for the years 2013 and 2014.
The issue is the Board’s assessment of PIT for Taxpayers’ net gains or income from
disposition of property, specifically PIT owed on like-kind exchanges of real
property during the 2013 and 2014 tax years. Taxpayers, who are partners in a
number of real estate development and management partnerships, and who use the
Federal Income Tax (FIT) method of accounting, argue that net gains on like-kind
exchanges should be taxed when the property is sold, because such deferrals are
permitted under Section 1031 of the Internal Revenue Code of 1986, as amended,
26 U.S.C. §1031 (IRC §1031). The Board determined that net gains on like-kind
exchanges should be taxed in the years the exchanges occurred, because unlike IRC
§1031, the Tax Reform Code of 1971 (TRC)1 does not permit tax deferral on net
gains from like-kind exchanges of real property. For that reason, the Board found
that the FIT method of accounting does not clearly reflect income. Accordingly, the
Board concluded that Taxpayers should be assessed PIT and interest, but not
penalties. We affirm the Board’s order based on the reasoning expressed in our
opinion in James and Karen Pearlstein v. Commonwealth of Pennsylvania, ___ A.3d
___ (Pa. Cmwlth., No. 741 F.R. 2017, filed December 2, 2021).
MICHAEL H. WOJCIK, Judge
1
Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§7101-10004.
2
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Reed and Gail Slogoff, :
:
Petitioners :
:
v. : No. 742 F.R. 2017
:
Commonwealth of Pennsylvania, :
:
Respondent :
ORDER
AND NOW, this 2nd day of December, 2021, the order of the Board of
Finance and Revenue dated August 23, 2017, is AFFIRMED. Unless exceptions are
filed within 30 days pursuant to Pa. R.A.P. 1571(i), this order shall become final.
__________________________________
MICHAEL H. WOJCIK, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Reed and Gail Slogoff, :
Petitioners :
:
v. : No. 742 F.R. 2017
: Argued: June 9, 2021
Commonwealth of Pennsylvania, :
Respondent :
BEFORE: HONORABLE P. KEVIN BROBSON, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE J. ANDREW CROMPTON, Judge
OPINION NOT REPORTED
DISSENTING OPINION
BY JUDGE CROMPTON FILED: December 2, 2021
Reed and Gail Slogoff (Taxpayers) petition for review of the order of
the Board of Finance and Revenue (Board), which sustained in part and denied in
part the Department of Revenue’s (Department) assessment of Personal Income Tax
(PIT) against Taxpayers, plus interest, for the years 2013 and 2014. The issue is the
Board’s assessment of PIT for Taxpayers’ net gains or income from the disposition
of property, i.e., PIT owed on like-kind exchanges of real property during the 2013
and 2014 tax years. Specifically, the dispute involves when that PIT is owed.
Taxpayers, who are partners in a number of real estate development and
management partnerships, and who use the Federal Income Tax method, contend
that the Department abused its discretion and was inconsistent with its own
regulatory interpretation when it imposed tax liability on the like-kind exchanges
before income from the exchanges was realized. For the reasons set forth in my
dissenting opinion in James and Karen Pearlstein v. Commonwealth of
Pennsylvania, ___ A.3d ___ (Pa. Cmwlth., No. 741 F.R. 2017, filed December 2,
2021), I respectfully dissent.
_________________________________
J. ANDREW CROMPTON, Judge
JAC - 2