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Duly Noted

A Minnesota Lawyer Is Off To The Races. Minneapolis attorney Stefan Tolin purchased his first mare in 1990. The mare’s foal had an injury-shortened career at the track before Tolin put him out to stud. Tolin was a hands-on, if absentee, owner, calling the Louisiana farm that housed the horse daily and visiting 14 times between 2002 and 2004. Tolin claimed tax losses in his breeding business for each of those years. The Internal Revenue Service disallowed his losses because it said Tolin failed to prove that he materially participated as required by the passive loss rules. But the Tax Court found in Tolin’s favor, ruling that Tolin’s testimony, backed by multiple witnesses and documents, showed that he devoted at least 500 hours each year to the business, satisfying the requirement for nonpassive treatment. Stefan A. Tolin v. Commissioner, T.C. Memo 2014-65.

IRA Rollover Proves Costly For Retired New York State Worker. Peter Kane retired in 1995 after working for the State University of New York for 30 years. He promptly rolled over a lump-sum pension distribution of $528,808 into an IRA at Fidelity. By 2006, Kane’s distributions from that IRA had exhausted the original $528,808, but thanks to investment growth, he was able to withdraw another $128,000 in 2007. Kane contended that the 2007 distribution was free from New York income tax under a provision of the state constitution that exempts “pensions to officers and employees of this state.” But the state Taxation Department concluded that only the amount Kane rolled over from his SUNY pension, not the subsequent growth, qualified for the exemption. Kane challenged the ruling, but an administrative law judge upheld the state’s position. Matter of Kane, DTA 824767.

Tennessee Repeals Its ‘Jock Tax.’ NHL players who face off against the Nashville Predators, and members of the Predators themselves, no longer must pay a state occupational tax of up to $7,500 per year. Basketball players who compete for or against the Memphis Grizzlies will get the same relief, but not until 2016, under legislation enacted this year. Players union officials pushed for the change, noting that the tax money was turned over to the operators of the arenas that house the Grizzlies and Predators — and that the arenas are controlled by the teams’ owners. They also noted that NFL players were not subject to the tax. The trade publication Tax Analysts quoted Tennessee House Majority Leader Gerald McCormick’s explanation that the repeal means “taking a little bit of money away from billionaires who don’t need it and giving it back to the millionaire players who earn it.”

If you enjoyed this article, be sure to check out Palisades Hudson’s books, The High Achiever’s Guide To Wealth and Looking Ahead: Life, Family, Wealth and Business After 55. Both are available in paperback and as e-books.