DC Metropolitan Business Law Alert - Updates on Important Legal Developments that Impact the Business Community in DC, Md and Va.

In a lengthy decision (Amerisouth XXXII, Ltd., et al. v. Commissioner, Tax Court Memo 2012- 67), the United States Tax Court decided yesterday that a taxpayer’s cost segregation analysis was, for the most part, ineffective to establish differing components for depreciation purposes. The taxpayer purchased a large apartment complex in 2003. Soon thereafter, the taxpayer engaged an independent firm to prepare a cost segregation analysis of the complex. As a result the taxpayer allocated its total cost of the complex to a number of differing components with different depreciable lives ranging from 5 years to 27.5 years. On examination, the IRS asserted that the complex qualified only for 27.5 year depreciation. The court describes the matter this way:

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'That was the clear message from the U.S. Court of Appeals for the District of Columbia Circuit’s in Zuckerman Spaeder, LLP v. James A. Aufenberg, Jr., No. 10-7041, July 29, 2011 (slip op.) when it “alert[ed] the bar in this Circuit that failure to invoke arbitration at the first available opportunity will presumptively extinguish a client’s ability later to opt for arbitration.” Typically the time to seek arbitration after being sued is in an answer to a complaint or in a motion to dismiss. However, if a defendant fails to assert his right to arbitration then but only later seeks a stay of the litigation in favor of arbitration, the D.C. Circuit explained that the presumption of forfeiture can be rebutted only if requester’s delay in seeking the stay has not prejudiced the plaintiff.

In the case at hand, the Court found that by failing to seek an early stay and allowing the case to move forward, the defendant had “imposed substantial costs upon [the plaintiff] and the district court.” Specifically, in the several months before the defendant sought a stay, the defendant had already engaged in discovery, filed several amended counterclaims, and participated in a court-ordered mediation. Accordingly, the Court held that plaintiff had been prejudiced and that the defendant had indeed forfeited any right to arbitration.

The lesson to be learned? If you are sued and your agreement contains an arbitration clause, seek an early stay of the litigation. If you don’t timely use your right to arbitrate, you’ll likely lose it.

On March 2, 2011, Rep. Duncan Hunter (R-CA-52) introduced The ADA Notification Act of 2011 (112 H.R. 881).  The bill would require every plaintiff planning to file a lawsuit under Title III of the Americans with Disabilities Act (covering discrimination in places of public accommodation), 42 U.S.C. § 12188(a), to first notify the potential defendant business owner in writing by registered mail of the alleged violation(s), including the date and location of the violation.

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The Supreme Court ruled unanimously this morning that medical students training to be residents are employees, and not students, and therefore are subject to Federal Insurance Contributions Act taxes (Mayo Foundation for Medical Education and Research v. United States, U.S., No. 09-837, 1/11/11).  Local medical schools and hospitals should take notice and consider whether amended payroll tax returns are required and what effect this decision will have on their resident programs.

Click here (and then click on Mayo) to read a full copy of the opinion.