“Thou are a rare noodle, Master. Do what was done last time is thy rule, eh?” G.B. Shaw, Saint Joan, Scene VI

I’ve used that quotation before to call into question some hidebound adherence to precedent, but CSTJ Lewis (“A Rare Name”) Carluzzo shows that such adherence can serve the adherent well.

Justin M. Maderia, T. C. Sum. Op. 2024-5, filed 5/8/24, comes up light on the proof side when IRS claims he got a $192K in constructive dividends from the lobster brokerage corporation, 50% of whose stock he owned.

As the case is a small-claimer, one expects something less than top-of-the-line lawyering, but CSTJ Lew is beyond unimpressed with both sides here.

“Few facts have been stipulated. The First Stipulation of Facts and the First Supplemental Stipulation of Facts consist almost entirely of documents. Many of those documents, apparently intended by the parties to ‘speak for themselves,’ have little to say. Other than the Stipulations of Facts no evidence was offered by either party. No witnesses were called at trial, and no other documents were offered into evidence. Nevertheless, in opening statements and closing arguments, counsel for the parties relied upon facts not in evidence to support their respective positions. Those ‘facts’ are ignored in this Opinion.

“At trial respondent objected to the admission of stipulated Exhibits 9-P, 10-P, and 11-P. According to respondent, the information in the documents is not relevant. Ruling on respondent’s objection was reserved at trial. After consideration of what little evidence we have, we find that the information in those Exhibits is probative to the imposition of the section 6662(a) accuracy-related penalty here in dispute. That being so, respondent’s objections are overruled, and the documents will be received into evidence.” T. C. Sum. Op. 2024-5, at p. 2, footnote 2.

Justin’s trusty attorney, whom I’ll call Gene, may have saved himself and his client with those disputed exhibits. As IRS deployed two (count ’em, two) attorneys here, SMH, as they say on their smartphones.

The lobster brokerage’s 1120 doesn’t show how any expense stated therein relates to the alleged deficiency, nor does Justin’s 1040 show any payments from lobster brokerage other than salary and wages. Nor does it (or the attorneys) talk about E&P. The SNOD does, it is presumed correct, and Justin doesn’t contest any expense item, nor deny that lobster brokerage had E&P.

His trusty attorney’s arguments about Exam miscues get run over by Greenberg’s Express. But Justin does claim that he was audited in prior years, and whatever he got in those years from the lobster brokerage settled out at Exam, so all he did in year at issue is what he always did before. I infer that this was the stuff of the disputed exhibits, in which case Gene gets a Taishoff “Good Job, third class.”

“Considering petitioner’s apparent consistent course of conduct with respect to positions taken on his federal income tax returns over a period of years and the results of the examinations of some for prior years, we find that petitioner acted reasonably and in good faith with respect to the underpayment of tax for [year at issue]. That being so, he is not liable for a section 6662(a) penalty for that year.” T. C. Sum. Op. 2024-5, at p. 5.