How One Attorney Became Personally Liable for $2M in Entity Taxes : A Cautionary Tale Under 31 U.S.C. § 3713

According to Law360, A Baltimore attorney who manages a client's holding company is personally responsible for paying the entity's unpaid taxes, a Maryland federal judge said, finding that he approved and oversaw loan transactions that prompted the IRS to seek $2 million from the entity.

As director, president and treasurer of Lehcim Holdings Co., Isaac M. Neuberger is accountable because he transferred the company's assets knowing there was still an outstanding tax debt, which the Internal Revenue Service assessed after it disallowed the entity's loan interest deductions, U.S. Magistrate Judge Erin Aslan said in a memorandum decision Thursday.

Neuberger had helped conceptually develop a plan to make those transfers, directed that it include and exclude certain entities, monitored its progress and "overruled outside counsel's decision" to put the plan on hold, which makes him liable under the Federal Priority Statute, 31 U.S. Code Section 3713, Judge Aslan said.

"Other Courts Have Found Corporate Directors And
Officers Who Took Similar Actions With Similar
Fact Patterns Personally Liable," The Judge Said.

The unpaid taxes stemmed from an IRS finding that the unsecured loans the company borrowed from Nightingale Ventures — a British Virgin Islands-based entity with business ties to the Konigs and managed by Neuberger himself — were not bona fide. The agency later disallowed the claimed tax deductions on those loans in the company's returns for 2010 to 2015.

In the memorandum, the judge noted that Neuberger knew about the IRS examinations and 2020 collection notice but that Lehcim did not challenge the agency's final assessment. The IRS also attempted to levy other entities that held Lehcim assets, including Neuberger's law firm, which held money on behalf of the company.

The Neuberger case serves as a cautionary tale for attorneys and fiduciaries managing client funds or corporate entities, reminding them that federal tax claims often have priority over other obligations. 

The decision demonstrates the IRS’s ongoing willingness to enforce Section 3713 in civil actions, thrusting professionals like Neuberger into the spotlight for personal liability where federal interests are jeopardized. 

As enforcement priorities evolve, practitioners are reminded to rigorously assess tax claims against all other debts before approving substantial transactions on behalf of clients or entities.

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Eighth Circuit Overturns IRS in 3M Transfer Pricing Battle: A Post–Loper Bright Landmark Decision

The U.S. Court of Appeals for the Eighth Circuit issued a pivotal decision on October 1, 2025, in 3M Company and Subsidiaries v. Commissioner, 136 AFTR 2d 2025-5252 (CA8), reversing the U.S. Tax Court’s 2023 ruling in favor of the IRS. The court held that the IRS could not impose U.S. tax on “blocked” royalty income that 3M was legally prohibited from receiving under Brazilian law.

Background

The dispute stemmed from 3M’s intercompany licensing arrangement with its Brazilian subsidiary, which paid royalties capped by Brazilian regulations at 1% of sales. The IRS determined that the arm’s-length rate should have been 6%, asserting that the company underreported its income by approximately $23.7 million. Relying on its “blocked income” regulation under Treasury Regulation §1.482-1(h)(2), the IRS reallocated income to 3M’s U.S. parent despite the Brazilian payment restrictions.

In 2023, the Tax Court narrowly (9–8) upheld the IRS’s adjustment, concluding that the regulation properly implemented IRC §482. 3M appealed, arguing that it could not be taxed on income that foreign law prohibited it from receiving and that the regulation conflicted with the statute’s text.

The Eighth Circuit’s Ruling

The Eighth Circuit reversed the Tax Court, rejecting the IRS’s interpretation of §482 and invalidating the blocked income regulation within its jurisdiction. Citing the Supreme Court’s landmark Loper Bright Enterprises v. Raimondo (2024) decision, which ended Chevron deference, the panel held that courts, not agencies, must determine the “best reading” of tax statutes. 

The Judges Concluded That §482 Does Not Authorize The IRS To Impute Income That Taxpayers Cannot Legally Earn Abroad.

The court further dismissed the IRS’s alternative argument that it could recharacterize the blocked royalties as dividends, calling that stance “breathtaking in its potential reach.” It emphasized that taxpayers are not required to violate foreign law to satisfy U.S. transfer pricing principles.

Broader Implications

This ruling is one of the first appellate applications of Loper Bright in the tax context and significantly limits the IRS’s regulatory reach in cross-border transfer pricing. Within the Eighth Circuit, the court’s reasoning effectively invalidates the blocked income regulation, requiring the IRS to respect foreign legal constraints when applying §482 adjustments.

For multinational taxpayers, the case signals a new landscape: judicial interpretation will likely override agency-driven transfer pricing positions when statutory authority is ambiguous. Companies with subsidiaries in jurisdictions imposing currency controls or profit remittance restrictions may find stronger grounds to challenge IRS allocations that disregard foreign law.

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Sources: 

1.       https://www.jdsupra.com/legalnews/3m-co-v-commissioner-irs-shipwrecks-7138399/  

2.      https://www.currentfederaltaxdevelopments.com/blog/2025/10/1/eighth-circuit-reverses-tax-court-in-3m-restricting-482-allocations-of-blocked-foreign-income 

3.      https://www.pwc.com/gx/en/tax/newsletters/pricing-knowledge-network/assets/pwc-eighth-circuit-reverses-us-tax-court’s-ruling-in-3M-appeal.pdf     

4.      https://exactera.com/resources/when_economic_reality_meets_legal_reality_new_lessons_from_3m/    

5.       https://academyoftaxlaw.com/document/3m-company-v-commissioner-of-internal-revenue-case-summary/ 

6.      https://www.millerchevalier.com/publication/3m-wins-blocked-income-transfer-pricing-dispute-eighth-circuit

7.       https://www.gibsondunn.com/eighth-circuit-holds-that-irs-may-not-tax-domestic-parent-company-on-royalties-it-could-not-legally-receive-from-a-foreign-subsidiary/

8.      https://www.forbes.com/sites/nathangoldman/2025/10/02/3-key-ways-3ms-federal-appeals-court-win-impacts-multinational-taxes/

9.      https://en.tpcgroup-int.com/news/impact-of-the-3m-company-case-on-transfer-pricing-regulation/ 

10.   https://www.crowell.com/en/insights/client-alerts/blocking-the-blocked-income-rules-loper-bright-influence-over-the-eighth-circuits-3m-decision

11.    https://molawyersmedia.com/2025/10/20/irs-royalty-reallocation-3m-8th-circuit-ruling/

12.   https://law.justia.com/cases/federal/appellate-courts/ca8/23-3772/23-3772-2025-10-01.html

13.   https://global-tp.com/a-shift-in-the-irss-powers-to-make-transfer-pricing-adjustments/

14.   https://www.taxcontroversy360.com/2025/10/3m-co-v-commissioner-irs-shipwrecks-hard-on-the-shoals-of-loper-bright/

15.    https://ecf.ca8.uscourts.gov/opndir/25/10/233772P.pdf

16.   https://www.pyapc.com/insights/a-grammar-lesson-in-tax-law-the-8th-circuits-reversal-of-the-tax-court-in-3m/

17.    https://www.indeed.com/q-transfer-pricing-jobs.html

18.   https://www.ziprecruiter.com/t/Most-Popular-Types-Of-Transfer-Pricing-Jobs

19.   https://snaphunt.com/resources/job-descriptions/transfer-pricing-specialist-job-description

20.  https://wowremoteteams.com/blog/job-titles-in-marketing/

21.   https://www.kpmguscareers.com/jobdetail/?jobId=121147

22.   https://www.etaxjobs.com/browse-jobs/transfer-pricing-jobs/

23.   https://www.linkedin.com/jobs/transfer-pricing-manager-jobs

24.  https://yardstick.team/job-description/transfer-pricing-specialist

https://online-distance.ncsu.edu/career/pricing-manager/

Tax Court Rules Civil Fraud Penalties Continue Within Its Jurisdiction Even After Supreme Court’s Jarkesy Decision

The U.S. Tax Court recently declined to dismiss civil fraud penalties assessed against a partnership accused of vastly overvaluing a conservation easement deduction, ruling that the penalties can be adjudicated without a jury trial. The case, Silver Moss Properties, LLC v. Commissioner, 165 T.C. No. 3 (2025), reaffirmed that the Internal Revenue Service has authority to pursue penalties under IRC §6663(a) within the Tax Court system despite arguments based on the U.S. Supreme Court’s SEC v. Jarkesy, 144 S. Ct. 2117 (2024).

Court’s Reasoning

The partnership, Silver Moss Properties, LLC, argued that Jarkesy established that agencies cannot adjudicate fraud penalties without offering a right to a jury trial, as such penalties resemble common law fraud claims. The Tax Court disagreed, emphasizing two key legal principles:

·         Sovereign immunity: The United States cannot be sued without its consent, and Congress’s limited waiver of immunity allowing TEFRA partnership-level litigation does not include jury trials. As the court noted, neither the Tax Court nor the Court of Federal Claims has statutory authority to empanel juries.

·         Public rights doctrine: The court found that §6663(a) civil fraud penalties fall within the public rights exception because they address fraud against the federal government, not private individuals. In contrast to Jarkesy, where the SEC sought civil penalties akin to private fraud, tax fraud penalties are tools of revenue enforcement, properly handled within administrative and Article I courts.

Implications

This decision confirms that civil fraud penalties for conservation easement overvaluation can proceed entirely within the Tax Court, even after Jarkesy. It suggests that the Supreme Court’s limits on administrative enforcement in securities law do not extend to IRS-imposed civil tax penalties. The ruling preserves the longstanding understanding that no jury trial right exists in Tax Court proceedings, a principle grounded both in sovereign immunity and congressional intent.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Sources:

1.       https://www.millerchevalier.com/publication/no-jury-trial-civil-tax-penalties-tax-court-declines-extend-jarkesy 

2.      https://www.currentfederaltaxdevelopments.com/blog/2025/8/21/tax-court-upholds-administrative-adjudication-of-civil-tax-fraud-penalties   

3.      https://www.meadowscollier.com/irs-faces-jarkesy-fallout-tax-penalties-under-constitutional-scrutiny 

4.      https://taxaid.com/criminal-tax-law/tax-court-rejects-jury-trial-for-conservation-easement-fraud-penalties/

5.       https://www.law360.com/articles/2400013/tax-court-says-easement-fraud-penalties-don-t-require-jury

6.      https://www.law360.com/tax/news?about=tax&amp%3Bpage=2&page=1

7.       https://www.law360.com/about/tax

8.      https://www.law360.com/insurance

9.      https://news.bloombergtax.com/daily-tax-report-international/tax-court-again-holds-irs-penalties-dont-require-jury-trials

10.   https://www.currentfederaltaxdevelopments.com/blog/2025/9/23/tax-court-again-not-impressed-with-a-syndicated-conservation-easement-transaction

11.    https://www.currentfederaltaxdevelopments.com/blog/2025/8/21/tax-court-upholds-administrative-adjudication-of-civil-tax-fraud-penalties

12.   https://taxaid.com/criminal-tax-law/tax-court-rejects-jury-trial-for-conservation-easement-fraud-penalties/

13.   https://www.law360.com/articles/2379857/tax-court-says-civil-fraud-penalty-cases-don-t-require-juries

14.   https://www.vitallaw.com/news/llc-not-entitled-to-jury-trial-in-civil-fraud-proceeding-court-retains-jurisdiction-to-adjudicate-penalty-silver-moss-properties-llc-tc/ftd01acf3ebbc49cb41be8aac79d524b0eeb0

15.    https://www.millerchevalier.com/publication/no-jury-trial-civil-tax-penalties-tax-court-declines-extend-jarkesy

https://www.casemine.com/judgement/us/65b5d84d3cd82457c68a7aeb

Dual Citizen Ordered to Pay $5.3M FBAR Penalty

According to Law360, a dual citizen Individual was ordered to pay $5.3 million in penalties and interest for willful failure to report a Swiss bank account, according to a judgment a New York federal judge issued on January 31, 2024.

U.S. District Judge granted the government's motion for default judgment against Vladimir Mrvic, which the U.S. government said it filed after Mrvic failed to respond to repeated attempts to contact him. 

The Internal Revenue Service In 2019 Assessed A Penalty Of
$4.1 Million, Half The Amount In The Account In 2012, A Year For Which He Failed To Report, According To Court Documents.

As of late September, Mrvic owed $5.3 million, including $161,500 in interest and $969,000 in nonpayment penalties, the government said.

Mrvic opened an account with Swiss bank Julius Baer & Co. Ltd. in 2005 on behalf of Beaucastel Management Corp., of which he was the beneficial owner, according to court documents.

Two years after the Julius Baer account's value peaked at $11.77 million in September 2007, the Swiss bank informed Beaucastel that it needed an IRS W-9 form on file, the government said.

Rather than provide that information, the government said, Mrvic closed Beaucastel's account at Julius Baer and then transferred $5.47 million to another Swiss bank, Banque Privee Edmond de Rothschild SA. He used the funds for an "extravagant lifestyle," including purchases of condos and villas in St. Marten and Hong Kong, according to the government.

Mrvic indicated on his 2011 tax year forms that he had a foreign account, but he said he didn't need to file a form reporting it because it totaled less than $10,000, according to court documents. Mrvic deliberately misled authorities on this point, the government said.

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