In Uncategorized on 10/21/2021 at 12:56

Rule in CDPs

Richard Hudec, Docket No. 1953-20L, filed 10/21/21*, is the usual you-didn’t raise it-at-Appeals-so-fuggedaboutit. Richard had an EA as agent (not Power of Attorney, Judge Christian N. (“Speedy”) Weiler; a power of attorney is a piece of paper or a concatenation of electrons wherewith the taxpayer-principal appoints a Representative or Agent). The EA may not have been in the picture at Appeals; I can’t discern the whole story from the order.

I only blog this order because Judge Speedy Weiler provides a footnote with the latest learning on which CCAs are record-rule-only, and which are free of the Administrative Procedures Act and the record rule in CDP abuse of discretion cases.

I include Judge Speedy Weiler’s “copious citation of precedent” to make my readers’ lives easier if they need to drag-and-drop for a brief or memo of law.

” The facts in this Order are principally derived from the administrative record developed before Appeals; however, our review of Appeals’ determination is not limited to the administrative record. In Robinette v. Commissioner, 123 T.C. 85, 95 (2004), rev’d, 439 F.3d 455 (8th Cir. 2006), we held that ‘when reviewing for abuse of discretion under section 6330(d), we are not limited by the Administrative Procedure Act * * * and our review is not limited to the administrative record.’ The Courts of Appeals for the First, Eighth and Ninth Circuits have concluded otherwise, holding that the so-called ‘record rule’ applies to Collection Due Process (CDP) cases before this Court. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff’g in part T.C. Memo. 2006-166, and aff’g in part, rev’g in part decisions in related cases; Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006); Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006), rev’g 123 T.C. 85 (2004). Under sec. 7482(b)(1)(G), appeal in this case would lie in the Court of Appeals for the Eleventh Circuit, absent a stipulation by the parties to the contrary. Since the Eleventh Circuit has not addressed the issue, our review of Appeals’ determination in this case is not limited by the record rule. See Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971).” Order, Footnote 1, at pp. 1-2.

And this gives me a springboard once again to suggest that essential elements of due process should not be constrained by State lines; Federal tax law is uniform for the entire country, so the scope of review should follow the flag, not cartography.

*Richard Hudec 1953-20L 10 21 21


In Uncategorized on 10/21/2021 at 11:27

Many non-practitioners think tax practice is arcane, casuist, hypertechnical, and dull. But I find the human interest side irresistible, so I’m reaching back to the first American playwright to be taken seriously in Europe, for today’s title of my sermonette. Clyde Fitch’s 1905 Broadway hit captions the latest installment in the Podlucky Saga; taking center stage is Karla S. Podlucky, co-starring in Gregory J. Podlucky & Karla S. Podlucky, Docket No. 453-17, filed 10/21/21*.

I’ll defer to Judge Albert G. (“Scholar Al”) Lauber, as he lectures us on the trial testimony hearsay exception in FRE 804(b)(1). Note this might be a dandy question for the upcoming Slaughter of the Innocents, a/k/a the US Tax Court admissions exam.

Karla wants innocent spousery, and as Greg is looking at $4 million in tax plus chops, she does well to bail. Except.

“In 2011 Mrs. Podlucky was indicted on counts of money laundering and conspiracy to commit money laundering. The Government alleged that petitioners used funds extracted from Le-Nature’s, Inc., a corporation of which petitioner husband had majority control, to purchase (and later sell) jewelry from various jewelers, including Van Cleef & Arpels (VCA).” Order, at p. 1.

Longtime Antiques Roadshow addicts (of whom I’m one) have often seen Arlie Sulka and colleagues lose it over even tiny  VCA pretties, to the tune of five figures plus.

Turns out on the money laundering trial one Brent Nestor, then VCA Senior VP for Sales, testified that Karla got custom-made baubles, and that he personally had to measure her wrists and fingers to make sure they fitted exactly. Brent got a thorough cross from Karla’s defense counsel on that trial. Now IRS wants to use Brent’s prior testimony to defeat innocent spousery via Karla’s guilty knowledge about the various rocks and minerals she got.

Problem is that Brent now resides in the Helvetian Confederacy, and the Swiss gov’t doesn’t allow foreigners to take testimony of its residents on its soil. And Brent says he ain’t goin’ nowhere, so The Long Arm of Judge Scholar Al can’t help here; for the backstory on said long arm, see my blogpost thus entitled.

Karla’s lawyer says the former trial testimony is hearsay. So it is (declarant not in the courtroom), but FRE 804(b)(1) comes to the rescue.

IRS claims “…Mr. Nestor’s testimony is admissible under FRE 804(b)(1), which provides an exception when (1) the declarant is unavailable,  (2) the testimony was given ‘at a trial * * * whether given during the current proceeding or a different one,’ and (3) the testimony is ‘now offered against a party who had * * * an opportunity and similar motive to develop it by direct, cross-, or redirect examination.’ FRE 804(b)(1).” Order, at p. 2.

No doubt Brent is unavailable, even to the long arm of Judge Scholar Al. And yes, there was Karla’s money laundering trial. But what about motive and opportunity?

“By cross-examining Mr. Nestor during the criminal trial, Mrs. Podlucky’s counsel had a ‘similar motive’ to develop Mr. Nestor’s testimony in an effort to show that Mrs. Podlucky had no knowledge of (and derived no benefit from) the jewelry arrangements. We accordingly conclude that Mr. Nestor’s prior testimony is admissible under FRE 804(b)(1).” Order, at p. 3 (“Somber reasoning and copious citation of precedents” omitted, but read it, Innocents, it might could be that it gets on the November Death March).

When the client is facing the slammer, there’s very serious motive to show they didn’t know nuthin’.

Now IRS is moving here for an order in limine to let in Brent’s launderette trial testimony.

“In their responses to the Motion in Limine petitioners do not address the hearsay rule or the requirements of FRE 804(b)(1). Nor do they dispute that Mr. Nestor is currently an ‘unavailable’ witness. Rather, petitioners contest granular details of his prior testimony and assert that his testimony is not relevant. Mr. Nestor’s testimony is clearly relevant because Mrs. Podlucky, by requesting innocent spouse relief, has placed her knowledge of the jewelry purchases at issue in this case. And to the extent petitioners believe Mr. Nestor’s testimony to be incorrect, they were free to testify to that effect at trial.”  Order, at pp. 3-4.

When the law is against you, pound the facts. When the facts are against you, pound the law. When both law and facts are against you, pound the table. Doesn’t work with Judge Scholar Al. I make IRS 1 to 8 in the Karla Bling stakes.

*Greg Podlucky & Karla Podlucky, 453-17 10 21 21


In Uncategorized on 10/20/2021 at 20:46

In an off-the-bencher, Judge Kerrigan notes that even though Douglas Leon Schnitzspahn, Docket No.: 8477-20S, filed 10/20/21*, “…is making progress on filing his tax returns, petitioner did not establish that his failure to file was due to reasonable cause. Accordingly the section 6651(a)(1) addition to tax is sustained….” Transcript, at p. 5.

Doug “…has a history of filing his tax returns late.” Transcript, at p. 2.

In this case Doug finally filed four (count ’em, four) years late, even taking his extension into account. IRS, not playing the waiting game, hits Doug with a SFR, with a SNOD at no extra charge. The only issue today is the add-ons, Transcript, at p. 4.

Doug can’t come up with a reasonable excuse for his late filing and late paying. And Judge Kerrigan notes that in most cases there is no reasonable cause excuse for nonpayment of estimated tax. “Generally, no reasonable cause exception exists for section 7765(a) addition to tax. [Sic; I think you meant 6654(a), Judge, as there is no Section 7765.]  Sec. 1.6654-1(a)(1), Income Tax Regs. There are exceptions to section 6654(a) addition to tax and petitioner does not meet the requirements of these exceptions. See sec. 6454(a) [sic; I think you meant Section 6654(e), Judge]. Accordingly petitioner is liable for the addition to tax pursuant to section 6654(a).” Transcript, at p. 6.

Not to discourage trying, but avoiding add-ons needs more than trying.

*Douglas Leon Schnitzspahn 8477-20S 10 20 21