Fullerton Gift Basket Business Defeats IRS Lawsuit in Tax Deduction Dispute

Categories: Court

winecountrygiftbasketsocw.jpg
OC-based Wine Country Gift Baskets business wins federal case
A federal judge may have undermined the old adage that you can't outrun death and taxes.

This month inside the Ronald Reagan Federal Courthouse in Santa Ana, U.S. District Court Judge James V. Selna officially dismissed an Internal Revenue Service (IRS) complaint that demanded a successful Orange County small business return nearly $280,000 in tax refunds.

Four days before Christmas in 2011, the IRS and U.S. Department of Justice sued Timothy J. Dean and his 1984-created Houdini, Inc.--a gift basket business with operations in Fullerton and Buena Park--for improperly receiving refund checks for business deductions from 2005 and 2006 filings.

Get a load of the crux of the dispute: In making its claim, government tax collectors asserted that Houdini "packages" and "repackages" gift baskets and gift towers--and, thus, wasn't entitled to a manufacturing deduction. The business--which has about 300 regular employees and 4,000 seasonal ones--argued that it "manufactures" and "produces" the products.

After noting how Houdini adds items such as chocolates, cheese, cookies, candies, alcohol and packing materials to the baskets, Selna rejected the IRS interpretation of federal tax law and sided with the stance of Nixon Peabody, the law firm that represented the OC business.

"Houdini changes the form and function of the individual items by creating distinct gifts," the judge, a 2003 President George W. Bush appointee, declared in a 20-page ruling. "Houdini creates a new product with a different demand."

The business, which operates the nationally-acclaimed Wine Country Gift Baskets, will keep its earned money.

Follow OC Weekly on Twitter @ocweekly or on Facebook!

Email: rscottmoxley@ocweekly.com. Twitter: @RScottMoxley.

My Voice Nation Help
6 comments
mccabet116
mccabet116

Gift baskets are designed to fit the needs of the customers, thats why there are tons of people getting involved in the gift basket industry. Just check out our site and you will see that its not all what some people claim it to be.

P.S. We also giveaway a free basket every month and there tightly packed so their not destroyed any way shape or form. 

ShirleyGeorgeFrazier
ShirleyGeorgeFrazier

In the gift basket industry, we are not only manufacturers, we are also architects, building gorgeous designs that people and businesses worldwide present to others to express joy or comfort.


Congratulations to Houdini for this win which positively impacts every industry participant.

Jason Guthrie
Jason Guthrie

not as entertaining as the negative stories.

basketcase
basketcase

@ShirleyGeorgeFrazier YOU ARE CERTAINLY MANUFACTURERS, BUT YOU ARE ABSOLUTELY NOT "ARCHITECTS," NEITHER ARE THOSE I.T. PROFESSIONALS. 

THE BURDEN OF PROOF IN THESE CASES SHOULD ALWAYS BE PUT ON THE IRS, ITS WRONG THAT IT APPEARS TO BE THE OPPOSITE IN THESE TAX 

Now Trending

From the Vault

 

Fashion

Loading...