In Uncategorized on 04/25/2019 at 16:20

STJ Lewis (“A World-Class Name”) Carluzzo is a man of many talents, a true latter-day Solomon. Today he shows us his skill at rarefied mathematics in Bara v. Commissioner, Docket No. 17107-17SL, filed 4/25/19, a designated hitter that is truly worthy of designation.

It’s the 15% qualified dividends calculation.

If STJ Lew worked all this out with a stub of a pencil on the back of today’s take-out menu in the Judges’ cafeteria at The Glasshouse on Second Street, NW, I wouldn’t be a bit surprised. I gave up after Section 1(h)(1)(F).

I leave to my readers the head-swimming task of reading through the two-and-one-half (count ‘em, two-and-one-half) pages of STJ Lew’s mathematical masterpiece.

STJ Lew well-deserves Sir A. C. Doyle’s encomium: It “ascends to such rarefied heights of pure mathematics that it is said that there was no man in the scientific press capable of criticizing it.”



In Uncategorized on 04/25/2019 at 13:42

All y’all will recall Judge Mark V (“The Great Dissenter”) Holmes’ warning of Graev consequences, more particularly bounded and described in my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

It’s the gift that just keeps on giving.

Now we have the Indians and the White Sox.  Maybe it’s a game, but it’s not a baseball game. See Tribune Media Company f.k.a. Tribune Company & Affiliates, et al., Docket No. 20940-16, filed 4/25/19. The Tribunes are now, or formerly were, owners of the Chicago White Sox, and are facing some chops, so Section 6751(b) Boss Hossery is on the menu.

Now where better to stir silt? Especially if the issue is when the  “determination” to go for the chops was first made.

Now enter the Indians, specifically not the Clevelanders but rather the Miccosukee Tribe of Florida. The Miccosukees lost the unreported income but won the chops. See my blogpost “Indians Not Taxed – NOT!” 4/24/19.

And bright and early today Tax Court judges were jumping all over the Revenue Agent’s Report and the 30-day letter resulting therefrom as the fount of all chopping.

Judge Buch wants IRS and the Tribunes to address “…the effect of Clay on the section 6751(b) issues presented in their respective motions for summary judgment. The parties’ responses shall identify whether any notice conferring the opportunity for administrative appeal was issued to either petitioner and direct the Court’s attention to any such notice.” Order, at p. 1.

They probably met in the Judges’ cafeteria at the Glasshouse this morning, and over a piece pie and a cup coffee (hi, Judge Holmes) decided to stir up a whirlpool.

Judge James S (“Big Jim”) Halpern must have been in on the breakfast discussion, because he’s tipping off Hisham N. Ashkouri & Ann C. Draper, Docket No. 17514-15, filed 4/25/19. Hish & Ann petitioned from NY, wherefore I doubt they’re members of the Miccosukee tribe, and maybe their trusty attorney doesn’t read this my blog, so Judge Big Jim needs to put them wise.

IRS wants a reopener, obviously to wild-card in the Section 6751(b) Boss Hoss sign-off. Hish & Ann sent in an affidavit as a reply to the motion, which doesn’t cut it. Judge Big Jim told them so in a phoneathon. So here’s the gen, Hish & Ann and trusty attorney.

“We wish petitioners to file a supplemental response to the motion. In doing so, petitioners should consult our recent report, Clay & Osceola v. Commissioner, 152 T.C. No. 13 (April 24, 2019) with respect to its discussion of when respondent must obtain written supervisory approval in order to meet his burden of production for penalties under I.R.C. section 7491(c).” Order, at p. 1.

Here comes the silt.


In Uncategorized on 04/24/2019 at 16:25

But Not Chopped

All of my readers (few in number but strong in willpower) will recall Judge Pugh sending off IRS and the Miccosukee Tribe of Indians of Florida to try their case, concerning what part, if any of the distributions from said tribe were taxable to James Clay and Audrey Osceola, 152 T. C. 13, filed 4/24/19.

If my readers may have been distracted, they can see my blogpost “Indians Not Taxed – Redivivus,” 11/28/16.

Well, they had their trial. But the money that the tribe handed out is taxable, because not derived from their land. The next-door casino bought land adjacent to the tribe’s, and placed it in trust for the tribe. The distributions came from casino income, denominated as a tax. The tax wasn’t rent for tribal land, and gambling isn’t a land-based activity, like farming or wood-cutting.

If taxation of Indians is what you do, this is required reading, especially as Judge Pugh relies heavily on an 11 Cir. case (United States v. Jim, 891 F.3d 1242 (11th Cir. 2018)) that deals with all these issues.

I’ll spare those of my readers who don’t practice in this specialized field a trudge through details.

But the takeaway is the 30-day letter, the statement of proposed changes to the returns for the years at issue. I talked about the 30-day letter in my blogpost of even date herewith (as my high-priced colleagues say), “Exhaustion.”

Now it’s not about exhaustion, but rather it’s about Section 6751(b) Boss Hossery.

Reliance on the tribe’s Chairman, who was also the Bureau of Indian Affairs’ superintendent, is not justifiable for chops purposes. No evidence was offered as to any delegation from the Bureau as to tax, and even if there was, the Chairman’s conclusion that the distributions were tax-free is manifestly contrary to law.

IRS tries to wild-card in Civil Penalty Approval forms for the years at issue. But those were preceded by 30-day letters based on the Revenue Agent Reports (RAR) proposing the changes set forth in the 30-day letter.

“The determinations made in a notice of deficiency typically are based on the adjustments proposed in an RAR.  (‘[R]espondent sent to petitioner by registered mail a notice of deficiency determining deficiencies in income tax for the taxable years….  * * * Said determination by respondent was based on the adjustments contained in the revenue agent’s report[.]’); (‘[I]t is obvious that petitioner * * * is relying upon the revenue agent’s report of examination upon which respondent based his determination of deficiency.”). And when those proposed adjustments are communicated to the taxpayer formally as part of a communication that advises the taxpayer that penalties will be proposed and giving the taxpayer the right to appeal them with Appeals (via a 30 day letter), the issue of penalties is officially on the table.  Therefore, we conclude that the initial determination for purposes of section 6751(b) was made no later than…when respondent issued the RAR to petitioners proposing adjustments including penalties and gave them the right to protest those proposed adjustments.” 152 T. C. 13, at p. 44. (Citations omitted, but get them for your trial briefs).

The Civil Penalty Approval forms were issued two months after the 30-day letters. Too late. No chops.