In Uncategorized on 04/24/2015 at 15:49

With a Side Trip to China

There’s being obliging, and Judge David Gustafson is that certainly, but there’s also being sympathetic, and here Judge Joseph Robert Goeke shows at the head of the field.

Two Friday off-the-benchers, a day where nary an opinion can be expected from the Olympian (to say nothing of Sinaiatical) Heights of 400 Second Street, NW, from Judge Goeke, offered in contrast to a throw-down from The Great Dissenter, a/k/a The Judge Who Writes Like A Human Being (especially when peeved), s/a/k/a The Old China Hand (explanation to follow) and The Implacable, Irrefragable, Ineluctable, Incomparable, Indefatigable, Incontrovertible Foe of the Partitive Genitive, His Honor Judge Mark V. Holmes.

First batspersons, Little Heritage Enrichment Center, Inc., Docket No. 18355-14SL, filed 4/24/15. The Little Heritors were a wee bit late with their 990 and 944 for the period at issue. Note to motor racing fans: a 944 is not a vintage Porsche, but rather an Employer’s Annual Federal tax Return.

The Little Heritors claim they’re a 501(c) whatever, and exempt. No, says Judge Goeke, and y’all wisely dropped that claim on brief, because 501(c) whatever exempts you from Subtitle A Income Tax, but not Subtitle B Employment Tax, and never the twain shall cliché. Order, at p. 8.

The Little Heritors didn’t dispute their underlying liabilities or offer any collection alternatives before the SO at the CDP, so they’re nailed. But there was more cliché over the one that was lost and found than over the other ninety-and-nine, as a much more exalted personage remarked.

Judge Goeke: “At the hearing Petitioner’s representative submitted information demonstrating that Petitioner had submitted an offer in compromise to Respondent after the case was docketed, and this offer in compromise was entered into the record at the hearing. We certainly wish Petitioner good fortune with Respondent and we hope the case is resolved via the offer in compromise. However, this offer in compromise is not a defense to the assertions in Respondent’s motion for summary judgment, as it was not submitted for review by Respondent’s settlement officer, and based upon established precedent of this Court, we will not consider information which was not made available to the settlement officer.” Order, at p. 9 (Citation omitted).

Nice touch, Judge.

Next up is Bettye Jean Draper, Docket No. 25951-13, filed 4/24/15, a sad but often-told tale. Bettye Jean, a grandma (and we all love grandmas), gets nailed for claiming a full-time student tax credit for herself and a child dependency on account of grandchild, to neither of which was she entitled, and she admits as much. However, Bettye Jean claims she was deceived by a return preparer who wrote down these fictions and vanished she knoweth not whither.

Alas and alack, says Judge Goeke.

“We’re sympathetic to the Petitioner’s position because we believe that she did not realize that her return preparer had put this information on her return. However, this misinformation on the part of the Petitioner does not relieve her of her obligation to file an accurate federal income tax return, and does not relieve her of her obligation to pay the deficiency, which results from improperly claimed education credits.” Order, at p. 6.

And Judge Goeke’s cup of kindness overfloweth.

“We are not without sympathy to the Petitioner’s plight in relying upon an irresponsible return preparer whom apparently Petitioner is not able to locate at this time. However, the law is clear, the Petitioner is liable for the taxes as determined in the notice of deficiency.” Order, at p. 6.

Now maybe the Registered Tax Return Preparer scheme that Dave Williams and Doug Shulman floated, but DC Circuit wiped out, mightn’t have helped Bettye Jean, because the lowlifes will always dodge, and fly under the radar, but something has to be done.

And only Congress can do it. No further comment.

Finally, the Old China Hand, Judge Holmes. Here he encounters Robert A. Morgan, Docket No. 21778-14, filed 4/24/15. And it’s a designated hitter, because Judge Holmes is obviously peeved.

IRS’s counsel hit Robert A. with a Rule 91(f) “we hold these truths to be self-evident” motion; agree or tell us why you don’t, point by point. Robert A. jumps into the fray, perhaps seeking rounderhood.

Judge Holmes is not amused, and loses it. “Mr. Morgan instead responded with 61 pages of tax-protester blather about public rights, not being a citizen under the Fourteenth Amendment, and even the old U.S. Court for China.” Order, at p. 1 (Footnote omitted, but I’m coming to that). So the facts are stipulated even without Robert A.’s panegyric to whatever. And, at no extra charge, Judge Holmes, clearly fed up, shows Robert A. the Section 6673 yellow card.

Now for the “Old China Hand” sobriquet I add to Judge Holmes’ long line of attributes. Judge Holmes tells us all about the U. S. China Court.

“This was a district court with extraterritorial jurisdiction over Americans living in China. Created in 1906, see Act of June 30, 1906, ch. 3934, 34 Stat. 814 (Creating a United States court of China and prescribing the jurisdiction thereof), Congress abolished it during World War II, see Treaty for the Relinquishment of Extraterritorial Rights in China and the Regulation of Related Matters, U.S.-China, art. I, Jan. 11, 1943, 57 Stat. 767. It has no discernible relevance to this case.” Order, at p. 1, Footnote 1).

Judge Holmes won’t let Robert A. hock him a China (as my grandma would have said).


In Uncategorized on 04/23/2015 at 16:05

Put away your bagpipes, kilts, claymores and sgian-dhubs, and leave some of that 15-yr old Glenfiddich for me. This is a different forty-five, namely, viz and to wit, the forty-five days within which IRS is deemed to have processed a tax return, so that the address shown thereon is the “last known address” of the taxpayer for Section 6212(b)(1) purposes.

What’s that, you may ask. And well you should, because it would be a great question for the Special Enrollment Examination.

And the answer is a winner for Marina Murashova, Docket No. 6460-14, filed 4/23/15.

Well, Section 6212(b)(1), though it mandates mailing of a SNOD to the “last known address”, doesn’t define the same. But bless their contrarian hearts, the Ninth Circuit in LaLa Land, has exhaustively delved into the topic.

And the magic answer is “when the return in question, which shows the address upon which IRS can rely (as there is neither a subsequent return nor written notice showing any other address) hits IRS’s computer, thereby allowing the IRS employee who mails the SNOD to check the address thereon.”

So Judge Goeke, punctilious as always, canvasses the caselaw and concludes: “We think the law is well-settled that, prior to Respondent’s regulations, Respondent was held responsible for addresses shown on federal income tax returns that were properly processed, and that processing the return meant that the information on the return was available in Respondent’s computer system.” Order, at pp. 8-9.

What’s this, you may ask, Treasury changed the rules after Ninth Circuit told them what the rules are?

Surprise, surprise. Treasury did, and here it backfires.

Reg. 301.6212-2(a) has the famous “last filed return unless clear notice given” language. But wait, there’s more! There are two Rev. Procs., Rev. Proc. 90-18 (1990-1 CB 491) and its successor, Rev. Proc. 2001-18, 2001 1 CB 708.

Note well that these were superseded in turn by Rev. Proc. 2010-16, IRB 2010-26, but this plays no part, as the year involved here predated the last revision.

Not only must the return have been “filed”, that is, in IRS’s hot little paws, it must have been “properly processed”, per the aforesaid Rev. Procs.

Judge Goeke:  “However, the Rev. Procs. both go further and provide in section 5.02(1) that, except as otherwise provided, a return will be considered properly processed after a 45-day processing period, which begins the day after the date of receipt of the return by the Internal Revenue Service Center.” Order, at p. 10.

So the return must have been properly processed, except if it wasn’t, it is deemed properly processed forty-five days after the return is filed.

And that’s Marina’s story.

Her return was in fact processed within the forty-five day time frame, but IRS mailed the SNOD before the forty-five days was up. And IRS mailed it to what was the old address, not Marina’s then-current address.

IRS claims that the forty-five days was a safe harbor for them, and if they mailed a SNOD before the forty-five days were up, their agent need not check to see if a filed return or notice had hit the computer sooner. But IRS’s attorney had no evidence to show what IRS did or didn’t do, or what was SOP.

Judge Goeke isn’t buying.

“We would have to presume that it was reasonable for them [IRS] not to look at the most recent information before sending out the notice, because it was simply something that had been done previously, when the notice was actually drafted. As I said, however, there is no specific evidence in the record about those circumstances or the normal procedures Respondent would have from the time a notice is reviewed and prepared until it is sent out. We will not presume that it was reasonable for the employees who sent the notice to Petitioner not to have accessed the computer records on… the day before the notice was issued, to determine the address that was available to them, which was not the address shown on the notice of deficiency.

“This creates the unusual circumstance where Respondent’s efficiency in processing the return served to Respondent’s detriment. However, we think the best course, based upon the limited record we have about the processing of Petitioner’s notice of deficiency, is to follow the case law that existed.” Order, at p. 12.

So, IRS, too soon may arrive as tardy as too late.

“The fact that the Revenue Procedure goes on to set a black line 45-day rule for that date does not, in our opinion, create a safe haven for Respondent when Respondent actually has the information available before 45 days.” Order, at p. 13.

Thus, no SNOD (because not mailed to last known address), so no jurisdiction. And Marina’s late petition doesn’t hurt her.

Takeaway–This case relies on pre-2010 law, regs and rev. procs. Beware! Current rev. procs., as well as your mileage, may (and will) vary.


In Uncategorized on 04/22/2015 at 16:09

Now who could that be? Why, that Obliging Jurist, Judge David Gustafson, friend of hapless Technophobe Al (hereinafter sometimes designated or described as “TA”), an attorney who shall remain nameless.

Last month neither TA nor client showed for calendar call. Judge Gustafson ordered client to file a response to IRS’s motion to dismiss for lack of prosecution. Neither TA nor client did.

Judge Gustafson thereupon issued an OSC for TA to show cause why he shouldn’t be sanctioned for failing to follow the Court’s rules and orders.

That woke up TA. So he responds on paper.

“Pursuant to Rule 26, Tax Court Rules of Practice and Procedure, electronic filing is generally required for all papers filed by counsel in open cases. In his response, [TA] claims that he did not ‘see or receive’ the Court’s order requiring petitioner to file…a response to respondent’s motion to dismiss for lack of prosecution. [TA] further contends that he did not appear at the Court’s Trial Session… because he had been informed that respondent intended to file a motion to dismiss for lack of prosecution and he did not have anything to produce.” Order, at p. 1.

Comment is superfluous, at least from me, so I’ll let Judge Gustafson tell the story.

“A practitioner before this Court is required to carry out his or her practice in accordance with the letter and spirit of the Model Rules of Professional Conduct of the American Bar Association. Rule 201(a), Tax Court Rules of Practice and Procedure. Tax Court Rule 202(a)(3) specifically identifies as a ground for discipline any conduct that violates the letter and spirit of the Model Rules. For example, Model Rule 1.1 requires a lawyer to provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. Model Rule 1.3 requires a lawyer to act with reasonable diligence and promptness in representing a client. Model Rule 3.4(c) prohibits a lawyer from knowingly disobeying court rules and orders. [TA]’s failure to appear and failure to comply with Court orders is inconsistent with the obligations imposed upon him pursuant to the Court’s Rules of Practice and Procedure and the Model Rules of Professional Conduct of the American Bar Association.

“[TA] is hereby advised that he should take whatever steps are necessary to avoid such deficiencies in the future, including appropriate continuing legal education courses.” Order, at p. 1.

Nevertheless and notwithstanding the foregoing, Judge Gustafson once again exhibits the quality of which the Sweet Swan of Avon rhapsodized thus: “It droppeth as the gentle rain from heaven/ Upon the place beneath. It is twice blest:/ It blesseth him that gives and him that takes.” (Citation omitted).

Well, Judge Gustafson orders the long-suffering Clerk of the Court to file TA’s screed as of date of delivery, even though it’s written on paper and not on electrons, and discharges the OSC, letting TA off the hook for the Rule 202(a)(3) chop. Indeed, it blesseth him that gives and him that takes.

PS- Per separate order under same date, TA’s client gets nailed for $161,596.00 in tax plus a Section 6662(a) five-and-ten chop of $32,319.20.

The orders, under the same Docket No. 30464-13, were filed 4/22/15. I omit names and links. TA and client have suffered enough.


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