In Uncategorized on 12/14/2018 at 17:18

Maybe Not, But You Have To Prove It

Judge David Gustafson is down with Scotland’s Greatest. He won’t fault good faith, but he needs to see facts that manifest the good faith of Palmolive Building Investors, LLC, DK Palmolive Building Investors Participants, LLC, Tax Matters Partner, Docket No. 23444-14, filed 12/14/18, a special day at our house.

The Palmolives want partial summary J that they took the $33 million façade deduction that got blown away back in October of 2017 (see my blogpost “No Joy Forever – Because Golsen,” 10/10/17, a/k/a Palmolive I) in good faith and with reasonable cause, per Section 6664, to prevent substantial overvaluation chops. Judge Gustafson, smarting from 1 Cir’s shootdown of Tax Court in Gordo and Lorna Kaufman, refused to apply 1 Cir to the Palmolives, who are 7 Cir domiciliaries. But there was no other appellate learning.

Tax Court generally doesn’t hand out chops on first-impression cases, but good faith and reasonable cause are matters of fact. True, since 1 Cir reversed Tax Court, there is room for good-faith dispute, but what did the Palmolives do besides cite 1 Cir?

“Palmolive contends that it has a reasonable cause and good faith defense for the portion of underpayment attributable to its failure to comply with this regulation. Though this contention is insufficient to entitle Palmolive to partial summary judgment on ‘reasonable cause’, we do accept Palmolive’s argument that our analysis of its non-compliance with section 1.170A-14(g)(2) was an issue of first impression in Palmolive I. However, that alone does not result in our holding that Palmolive had reasonable cause and acted in good faith. See sec. 1.6664-4(b)(1), Income Tax Regs. Deciding whether Palmolive had reasonable cause and good faith for its understatement based, in part, on an alleged honest misunderstanding of law, will require the Court to determine whether that misunderstanding was ‘reasonable in light of all of the facts and circumstances, including the experience, knowledge, and education of the taxpayer.’ Some of those facts and circumstances are disputed by the parties.” Order, at p. 6. (Citations omitted).

Even though Mike Ehrmann’s appraisal was stipulated in as a qualified appraisal for Reg. § 1.170A-13(c)(3) purposes, there remains the fact question whether it was too good to be true, and what the Palmolives did to confirm it. They didn’t claim to have consulted other authorities; did they do anything else?

Lest we think Judge Gustafson is whistling past the Graevyard, he notes that the cross-motions regarding the Section 6751(b) Boss Hoss sign-offs for the chops remain pending.

But Palmolives, don’t get your hopes up. The Boss Hosses won’t be the subject of a trial.




In Uncategorized on 12/14/2018 at 16:35

A much more exalted personage even than Ch J Maurice B (“Mighty Mo”) Foley gives me the title for this blogpost, Michael T. Sestak, Docket No. 17286-18, filed 12/14/18, a special day in our house.

Mike claims IRS failed to send the SNOD to his last-known address.

IRS points to a handwritten letter from Mike that sets forth his address and directs that all correspondence be sent to him at Pine Knot, KY. Mike sent this two (count ‘em, two) years before the SNOD was mailed.

Mike claims he gave the IRS his complete address. IRS says no, Mike didn’t include Mike’s prison registration number.

Despite this season of goodwill, Ch J Mighty Mo isn’t letting IRS get by.

“… I.R.M. (07-09-2013) states, in pertinent part: Incarcerated Taxpayers *******

“2. The address in the Letter 531, Notice of Deficiency, should be where the taxpayer is incarcerated and should reference the prisoner locator number if available.

“3. For federal prison inmates, the prisoner locator number and address can be obtained from the Bureau of Prisons web site.” Order, at p. 2.

DC Cir has held that IRS should make a reasonably diligent effort to find out a party’s address if there’s doubt that the address they have won’t reach that party.

So let IRS explain why they didn’t check out Mike’s prisoner locator number.



In Uncategorized on 12/13/2018 at 15:46

When a newly-minted colleague announces gleefully that s/he has “passed the bar,” my invariable reply is “My condolences.” I’m speaking only partially tongue-in-cheek (although how one can speak at all with tongue in cheek is a good question).

This can be an exhilarating profession, an intriguing life’s work, a ringside seat on the Human Comedy; it can also be stress-inducing, relationship-destroying and dehumanizing.

All that to one side, it can also destroy one’s business tuition deduction. I’ve blogged this before (see my blogpost “Moaning of the Bar,” 11/5/18).

Today’s candidate is another bright, hardworking voyager who comes from away to our shores to learn and earn, Serge Raymond Banini, Docket No. 6699-18S, filed 12/13/18. Serge earns a designated hitter from STJ Diana L Leyden, but IRS gets partial summary J tossing Serge’s deductions.

Serge added to his Cameroon BA in chemistry with a Ph.D. at West Virginia University, and signed up as a Patent Technical Adviser (Life Sciences) with a white-shoe. Serge claims the white-shoe wanted him to get admitted to MA Bar to get his job, but when show-and-tell comes around, his acceptance letter from the white-shoe doesn’t mention lawyering, only helping lawyers understand the life sciences.

The white-shoe did lend him the money for his law school tuition at no interest, but that isn’t enough. Neither is it that having his MA admission helped Serge do his work better.

“…petitioner asserts that the deduction of his legal education expenses should be allowed at least in part because some of the law school courses were only taken to maintain and improve his skills as a patent advisor. However, the regulation provides that expenditures for education which qualify a taxpayer for a new trade or business are not deductible even though the education may maintain or improve skills required for his employment. Sec. 1.162-5(b)(1), Income Tax Regs.; see Bodley v. Commissioner, 56 T.C. 1357, 1361 (1971). The undisputed material facts indicate that attending law school qualified petitioner for the new trade or business of a practicing attorney. Therefore, no partial deduction is allowed even if the education may have maintained or improved petitioner’s skills required for his employment as a patent advisor.” Order, at p. 5.

So summary J for IRS knocking off Serge’s tuition deductions.

Another reason why I express my condolences to those newly-admitted to this crazy profession.