Daily Tax Update - December 29, 2006

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL THE 110TH CONGRESS CONVENES ON JANUARY 4TH.

D.C. CIRCUIT COURT VACATES COTROVERSIAL MURPHY DECISION: This week, a D.C. Circuit panel vacated a controversial decision (Marrita Murphy v. IRS, No. 05-5139, 460 F.3d 79 (D.C. Cir., Aug. 22, 2006) relating to the taxation of damages for emotional distress. The appeals court had ruled that it was unconstitutional for the IRS to tax the money plaintiffs receive as compensation for emotional distress and other intangible injuries because such compensation was not "income." The D.C. Circuit panel ordered a rehearing. A second order dismissed as moot the government's petition for rehearing en banc. A new period for petitioning for en banc review will begin to run after entry of a new panel judgment.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.