In Uncategorized on 06/20/2018 at 16:12

That’s Judge Cohen; she doesn’t like cognomens, and doesn’t like petitioners who fiddle with OIC forms and expect the SO assigned to their CDP to edit their Forms 656 (with no financial information attached).

And this is the third time around for Craig K. Potts & Kristen H. Potts, Docket No. 9307-17L, filed 6/20/18.

The backstory is found in 2017 T. C. Memo. 228, filed 11/20/17, which I didn’t blog at the time. It was a Form 870-AD waiver for one year, and a chance to contest deficiency for the others that ended with another T. C. Memo. That Craig & Kristen has six (count ‘em, six) OICs hanging about in 2017 didn’t impress the SO, or Judge Albert G (“Scholar Al”) Lauber either.

OK, so tax due is off the table.

Craig & Kristen has an OIC pending when they had their latest CDP. The SO said he couldn’t deal with the OIC, but checked out everything else, and affirmed.

“Essentially petitioners argue that it was an abuse of discretion for the SO not to delay action while petitioners’ missteps–whether intentional and strategic or inadvertent–were straightened out. Those missteps were altering the prescribed form for submitting an offer-in-compromise, submitting various altered forms to different offices of the IRS, attempting to recharacterize the form from ETA to one based on DATC, and continuously raising new arguments not properly raised with the Appeals office during the years that administrative proceedings were pending. Petitioners’ inconsistencies and strategies of altering forms and resubmitting them to different IRS offices apparently were intended to avoid submitting financial information and to support their claim that the payment made with the offer was refundable.” Order, at p. 3.

Any confusion was engendered by Craig & Kristen. NOD affirmed.



In Uncategorized on 06/19/2018 at 23:03

All y’all (I’m in Texas with my nearest and dearest, sweeter than Blue Bell Homemade Vanilla) will recall The (now-retired) 7 Cir Divebomber, Judge Richard Allen Posner, who blew off Reg. Section 1.183-2(b) as a ”goofy” regulation.

If not, see my blogpost “Amen, Judge Posner,” 12/22/16.

Well, today Judge Cohen, who eschews cognomens, trudges the weary nine (count ‘em, nine) factors in the hobby-vs.-profit checklist, and finds that Shane V. Robison and Robin S. Robison, 2018 T. C. Memo. 88, filed 6/19/18, were actually all-cattle, whatever the state of their hats.

And were out for a profit, notwithstanding five years of seven-figure Silicon Valley income and thirteen (count ‘em, thirteen) years of continuous six-figure cattle losses.

They bought the ranch, tried and bailed out of paint horsing and quarter horsing, got into a high-altitude cattle raising operation, and retained “…a local expert regarding brisket disease. At high elevations cattle are at risk of brisket disease, which causes fluid accumulation in a cow’s lung that can then cause it to suffocate. A cow with a low pulmonary artery pressure score (PAP score) indicates an animal with a greatly reduced risk of brisket disease.” 2018 T. C. Memo. 88, at p. 8. As a moist brisket barbecue lover, I entirely appreciate this…with a rich sauce and a cold Shiner.

And they had bushelbaskets full of records, some contemporaneous, some ex post facto. And the essential separate bank account and CPA.

They also hired a ranch manager, even though he hadn’t managed a registered ranch before.

“A profit motive may also be indicated if a taxpayer ‘employs competent and qualified persons to carry on such activity.’ Petitioners hired professionals to manage Robison Ranch, employing a full-time ranch manager and a ranch hand during the years in issue, both of whom lived on site.” 2018 T. C. Memo. 88, at p. 19.

Judge Cohen finds Shane and Robin are in it for the money.

But did they materially participate?

All their well-kept records don’t show hours. And their testimony shows they spent time, but most of it was investor-type oversight, looking at books and chatting up experts. Shane and Robin didn’t spend too much time “ridin’, rockin’, ropin’, poundin’ leather all day long,” as Fred Howard and Nat Vincent put it.

And finally, that “competent and qualified” ranch manager hands Shane and Robin the Section 469 passive loss rules kibosh.

“Petitioners’ activities in operating through the ranch manager suggest characterization of the activity as passive—that of an investor. That was the observation of the Court at the conclusion of the trial, and our impression has not been altered.” 2018 T. C. Memo. 88, at p. 24.

Well, Shane and Robin can always take those suspended multi-million-dollar losses against the profit (if any) when they sell.

Takeaway- That “goofy” regulation can be a trap.


In Uncategorized on 06/19/2018 at 22:07

Another Jimmy Webb classic sung by Glen Campbell gives me the headline for today’s blogfodder, Hampton Software Development, LLC, 2018 T. C. Memo. 87, filed 6/19/18, with Judge Chiechi decomposing almost as many electrons as did Judge Goeke did three years ago.

See my blogpost “Nothing Succeeds,” 2/26/15, the story of TFT Galveston Portfolio, Ltd, 144 T. C. 7, which Judge Chiechi quotes in extenso.

IRS won a Phyrric victory back in ’15 in Galveston, getting one quarter of FICA/FUTA plus chops, when they were trying for numerous years’ worth.

But yesterday’s scratch win is today’s complete win, as the property manager gets nailed as an EE, not IC, for all periods at issue.

The interesting thing about this fact-bound reprise is that petitioner gets whanged for not seeking discovery concerning the Section 6751 Boss Hoss, just protesting that it’s too burdensome to get IRS’ documents.

“The parties agree in their respective filings that sec. 7491(c) applies only ‘with respect to the liability of any individual’ for, inter alia, any penalty and that therefore respondent does not have the burden of production under sec. 7491(c) for the penalties under sec. 6656(a) that respondent determined. The parties also agree in their respective filings that petitioner has the burden of proof and the burden of production with respect to the penalties under sec. 6656(a). Petitioner nonetheless argues that ‘[r]espondent would be the only party with access to these records [any records regarding the approval that sec. 6751(b)(1) requires] and, therefore, it would place an undue burden on * * * Petitioner to be required to produce internal documents of the Internal Revenue Service to prove a penalty assessed against them [sic] was proper.’ We agree with petitioner that ‘[r]espondent would be the only party with access to these records [any records regarding the approval that sec. 6751(b)(1) requires]’. We disagree with petitioner that ‘it would place an undue burden on * * * Petitioner to be required to produce internal documents of the Internal Revenue Service to prove a penalty assessed against them [sic] was proper.’ That is because petitioner did not ask us to allow it (1) to conduct discovery in order to ascertain whether respondent has any records regarding the approval that sec. 6751(b)(1) requires with respect to the penalties under sec. 6656(a) and/or (2) to reopen the record in order to dispute that that approval occurred.” 2018 T. C. Memo. 87, at pp. 42-43, footnote 22.

Takeaway- Demand discovery unless the signed Boss Hoss document is on the table. The burden is not only on the taxpayer-petitioner, but also on the taxpayer-petitioner’s lawyer.