In Uncategorized on 08/29/2014 at 20:32

 So No Penalty

That’s Judge Goeke’s lesson for IRS in Frank Sawyer Trust of May 1992, Transferee, Carol S. Parks, Trustee, Docket No. 5526-07, filed 8/29/14.

And it’s a good thing I’m not out on my yacht or in my house in the Hamptons at the start of the Labor Day weekend, like my $1200-per-hour colleagues, because I don’t have either a yacht or a house in the Hamptons, so that I can dig through seven (count ‘em, seven) pages of Tax Court orders to bring my now-118 followers the latest Tax Court skinny.

Remember Frank and Carol? No? Then refresh your recollection with my blogpost “Little Deuce Coup”, 6/25/14. Frank and Carol dodged the penalty there, but IRS is back with a Rule 161 try-again.

And it doesn’t work.

Judge Goeke: “The transfer to petitioner was not actually fraudulent as we found in the Court’s Memorandum Findings of Fact and Opinion (T.C. Memo. 2011-298) and was accepted as such by the United States Court of Appeals for the First Circuit. For a transfer to be constructively fraudulent, the transferor must receive less than reasonably equivalent value for it. The trust gave value for the transfer, but it was not reasonably equivalent value, so the transfer was constructively fraudulent. However, only the portion of the transfer that exceeds the value of the assets transferred was constructively fraudulent. Therefore, only that portion is subject to the Mass. UFTA and transferee liability….. In other words, a transferee’s liability is capped at the amount of the constructively fraudulent transfer it received.” Order, at p. 1 (Citations omitted).

State law (here Massachusetts) only lets the defrauded creditor get what they should have gotten, not a windfall.

“Allowing respondent to collect penalties would subject petitioner to transferee liability in excess of the amount of the fraudulent transfer it received, and consequently in excess of the maximum recovery provided by the UFTA.” Order, at p. 2.

IRS, you were wrong before and you’re wrong now.

And another tip of the Taishoff baseball cap to David R. Andelman, Esq., and the team at Lourie & Cutler, counsel for taxpayer.


In Uncategorized on 08/29/2014 at 20:10

No, not the 1982 Star Trek baddie (different spelling, he) nor yet the late actress and comedienne Madeline (and her performance in the 1974 Mel Brooks cult classic Blazing Saddles is a fond memory). No, this is Kathleen Kahn, Docket No. 1517-13L, filed 8/29/14, a designated hitter off the bat of STJ Lewis (“Our Name Is Our Fame”) Carluzzo, a walk-off hit before the last weekend of summer.

Kathleen is wroth because Appeals done her wrong, she says, and wants summary judgment in Tax Court. And she won’t go back to Appeals, even though IRS wants a remand.

Appeals has taken its lumps lately, mostly at the hands of that hard-charging but low-billing attorney-at-law Honest Eric William (EW) Johnson. In witness whereof, see my blogposts “Abate, Don’t Debate”, 8/25/14, and “Honest tax representation at reasonable rates”, 8/28/14). But Kathleen is on her own here.

And her objections to IRS’ remand request and her written statement in lieu of appearance at the argument of her summary judgment motion didn’t hit STJ Lew’s radar until after the hearing.

“During the hearing, however, it was clear that the Court intended to deny petitioner’s motion and, subject to conditions discussed at the hearing, grant respondent’s [IRS’] motion. Concerned that the remand would unnecessarily delay the matter further, the Court was persuaded by respondent’s argument that a remand would be beneficial because it would allow for respondent to review the administrative process giving rise to the underlying liabilities in dispute in this matter. Although it would seem that a remand could only work to petitioner’s favor, in her objection petitioner opposes the remand because: (1) it would cause further delay; and (2) she did not expect that the matter would be given fair consideration by respondent’s settlement officer.” Order, at pp. 2-3.

That’s something of a riposte to Judge David Gustafson’s sermonette to Barb and Wel Delon in my blogpost “I’m From the Government and I’m Here to Help”, 8/20/14.

So STJ Lew finds questions of fact and jurisdiction in Tax Court to review Kathleen’s liabilities de novo.

“It is clear from petitioner’s submissions that she does not want to participate in further administrative proceedings. Mindful that we have jurisdiction in this matter to review, de novo, the underlying liabilities here in dispute, we weigh the likely benefits of a remand against petitioner’s (and the Court’s) concerns about any additional delay that a remand might cause. In so doing, we find that the scale tips ever so slightly in petitioner’s favor.” Order, at p. 2.

So no summary judgment, no remand, let IRS answer or amend its answer, and Kathleen need not reply, as any allegations in an amended IRS answer will be deemed denied.

Takeaway 1- Note Rule 50(c). You can make a written statement in lieu of showing up for a hearing on a motion. This saves shlep time (and money).

Takeaway 2- Note that skipping a remand may be good tactics. Don’t always take the bait without thinking. IRS may be using the remand to clean up its act, as seen in my blogposts aforesaid.




“Honest tax representation at reasonable rates.”

In Uncategorized on 08/28/2014 at 17:25

No, this is not an advertising pitch from me. This is a direct quotation from the webpage of that hard-charging hero of my blogpost “Abate, Don’t Debate”, 8/25/14, Eric William (EW) Johnson, now or formerly of St. Paul, MN.

And EW again shows his stuff in Eladio Duarte and Azucena Bailon-Rivas, 2014 T. C. Memo. 176, filed 8/28/14.

It’s really Eladi’s story. He’s a roofer with a somewhat peripatetic career and sporadic income, who got behind on his filings. He tries to buy a house, discovers he hasn’t filed some years, and sends in his returns. But he still owes money, and IRS hits him with a NITL.

Enter EW, sending in a timely Form 12153. As seems to befall EW’s clients, Appeals makes a hash of the CDP, twice. Of course IRS levies while the CDP is pending, and doesn’t release all levied funds despite EW’s protestations.

Then EW asks for an OIC, sends in the money per Form 656, which get applied to another open year, and the AO says she can process the OIC, as Eladi appears compliant.

Nothing happens, an SO gets assigned and schedules a face-to-face a year later. EW asks for more time and a face-to-face because his client has language problems and has some ‘splainin’ to do.

You’re gonna love this: “Mr. Diamantopoulos stated that no extension or face-to-face hearing would be provided because Mr. Duarte had previously had a face-to-face hearing and because Mr. Diamantopoulos did not speak Spanish. Mr. Diamantopoulos summarily stated that the offer-in-compromise would be rejected based on his calculation that Mr. Duarte could fully pay the liabilities. Further, and despite having apparently reached the conclusion that he did not have up-to- date financial information, Mr. Diamantopoulos offered Mr. Duarte an installment agreement for $3,000 per month.

“On the day after the phone call, Mr. Diamantopoulos sent a letter to Mr. Duarte stating that, according to his calculation of the financial information Mr. Duarte had provided at the previous face-to-face hearing more than a year before, he could fully pay the liabilities and that Mr. Diamantopoulos was recommending that the offer-in-compromise be rejected. He included his worksheets with that letter and stated that a notice of determination would be issued.” 2014 T. C. Memo. 176, at pp. 7-8 (Footnote omitted).

Contrary to my usual policy of not naming names, I do so here. Judge Buch names names in this case.

And on this record Judge Buch sends Eladi back to Appeals, because he can’t conclude whether IRS abused its discretion.

Read the whole opinion. Then I leave it up to you whether IRS abused its discretion.

I hope EW gets paid his fee at his usual reasonable rates. He earned them.


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