In Uncategorized on 12/22/2014 at 18:47

 But Not Disabled Enough

This is a case of the misalignment between the armed services and the Veterans’ Administration, brought to you by the United States Congress. As this is, and I hope always shall be, a non-political blog, I will say no more.

But here is a small-claimer in point, Kevin M. Campbell and Pamela J. Campbell, 2014 T. C. Sum. Op. 109, filed 12/22/14.

It’s really Kev’s story. Kev entered the United States Coast Guard, but three years out, he was diagnosed with diabetes mellitus, and discharged on medical grounds.

The USCG’s medics gave Kev a 60% disability rating, but a later trip to the VA resulted in a lower number. Kev doesn’t remember what the number was, and has no proof,

I note Kev was represented by counsel. What does it take to subpoena VA records for trial?

I ask, because the VA number is the key.

Here’s STJ Daniel A. (“Yuda”) Guy: “Section 104(a)(4) provides the general rule that amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country are not included in gross income. Section 104(b)(1) and (2), however, limits the exclusion prescribed in subsection (a)(4), as relevant here, to an individual who ‘on application therefor* * * would be entitled to receive disability compensation from the Veterans Administration.’ Section 104(b)(4) further provides that if an individual is described in subsection (b)(2), the amount excludable from gross income under subsection (a)(4) for any period ‘shall not be less than the maximum amount which such individual, on application therefor, would be entitled to receive as disability compensation from the Veterans’ Administration.’” (2014 T. C. Sum. Op. 109, at pp. 9-10. (Footnotes omitted).

Congress put in this limitation because the armed services were giving about-to-retire servicepeople big disability ratings to shield retirement pay from taxes. Those servicepeople then went on to earn decent money in “retirement”, notwithstanding their “disabilities”.

And we all know how the VA treats veterans. But I must remember that this is a non-political blog.

I’m not saying Kev didn’t have diabetes, but he did work as a deputy in the Cuyahoga County Sheriff’s Office with no apparent ill effects.

Anyway, Kev and his trusty CPA jousted with the USCG, who kept sending Kev 1099-Rs, while Kev and CPA claimed the payments should be excluded. And IRS issued Kev a bunch of “no change” letters.

Finally, IRS hits Kev with a SNOD. Kev’s Section 104 argument fails.

STJ Yuda: “We are unable to determine, on this record, that Mr. Campbell would be entitled to receive disability compensation from the VA. Although the Coast Guard and the VA apply the same rating standards–the VASRD– the Coast Guard and the VA approach the question of disability ratings from different perspectives. Whereas the Coast Guard focuses on whether a service member is able to perform his or her miliary [sic] duties at a given time, the VA rates disabilities by weighing the impact of an injury or illness on a veteran’s earning capacity in a civil occupation over his or her lifetime.” 2014 T. C. Sum. Op. 109, at p. 16.

As for past “no change” letters, each year stands on its own; with Federal taxation, the past is not even prologue, The Bard of Avon (Tempest, Act II, Scene 1) to the contrary notwithstanding.

Without the VA number, Kev is hard aground. But it might be well for him to get the VA number, even if it’s lower than the USCG’s. There may be other years where it would help.

Takeaway–Practitioners dealing with taxpayer-veterans, watch it. Here be dragons.


In Uncategorized on 12/22/2014 at 17:43

No, not the 1984 Boston boy band, and these certainly aren’t kids, but the latest additions to the Tax Court bench.

Please join with me to welcome Cary Douglas Pugh and Tamara W. Ashford, both bringing impressive resumes, to 400 Second Street, NW. Judge Ashford’s doesn’t show up on the Tax Court site yet, although Judge Pugh’s is there. I wonder why; but then again, President Obama’s announcement of Judge Ashford’s appointment, replete with Judge Ashford’s cursus honorum, is fully webified.

Now they can start wading through protester jive, Section 152 relativity, professional and amateur dodgers, nonfilers, late filers and rounders that we lonely bloggers confront every day, although our credentials are much less impressive.

Here’s a sample, courtesy of Judge Cohen, Hamlet C. Bennett, 2014 T. C. Memo. 256, filed 12/22/14.

And it’s just a sample, but it will give Cary and Tam a taste of their future.

“We reject any inference that petitioner’s persistence in his frivolous theories demonstrates sincerity or good faith or is otherwise a defense to the charge of fraud. Petitioner filed tax returns for decades before 1995, stopping only after he faced large tax liabilities for 1993 and 1994. He ‘discovered’ his various frivolous arguments in alleged reliance on a carpet cleaner turned tax adviser, while disregarding the cautionary advice of his certified public accountant. He adopted various means of concealing income by diverting income to nominees or to entity accounts. He rejects the judgments of the courts, including a jury verdict, a District Court judgment, and an appellate court opinion that he was criminally responsible for his conduct. A person with his education and skills could be expected to abandon unsuccessful arguments if acting in good faith. We conclude that petitioner’s failure to file for each year in issue was due to fraud.” 2014 T. C. Memo. 256, at p. 12.





In Uncategorized on 12/20/2014 at 12:20

Friday, December 19, 2014 was a slow day in Tax Court. No opinions, of course, and the only designated hitter involved a summary J defeated by a question of fact (did taxpayer have opportunity to dispute underlying liability?); these clearly are not the droids I’m looking for.

But there was a trio of orders in US Loan Auditors, Inc., Docket No. 27157-13, filed 12/19/14, that really bemused and befuddled me to such an extent that I had to sleep on them before I could blog.

Judge Haines says he ducks the question whether a retroactive 11USC§362 lift-stay makes an invalid petition valid. You remember 11USC§362(a)(8) puts any Tax Court proceeding in the deepfreeze.

But take a look at my blogpost “Back to the Future – Part Deux,” 7/8/14. On identical facts in the identical case with the identical docket number, Judge Haines apparently did decide that the retro lift-stay works.

Now for the strange part–I did a docket inquiry for Docket No. 27157-13 today, 12/20/14. The website docket search shows no sign of the 7/8/14 order. Neither does the online orders search for 7/8/14. And the link in my above-referred-to blogpost doesn’t open the 7/8/14 order either.

Nor does the 12/19/14 order make any reference to the disappeared order.

George Orwell, thou should’st be living at this hour.

Sounds like the “forced disappearance” outlawed by the International Convention for the Protection of All Persons from Enforced Disappearance of 2006.

But US Loan Auditors, Inc., has not been disappeared. They can continue their case under a different docket number, and their opposition to IRS’s motion to dismiss is treated as an imperfect but timely petition, which they can amend.

Judge Haines keeps US Loan Auditors, Inc.’s, case alive, by some adroit juggling of dates and a disappearing act.


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