In Uncategorized on 01/17/2020 at 15:36

Judge Mark V Holmes discusses how an OIC transitions from Appeals to COIC and back again in Franklin H. Orienter & Sharon E. Orienter, Docket No. 20004-13L, filed 1/17/20.

Frank & Sharon had health problems, big medical bills, and $300K in unpaid taxes owed for four (count ‘em, four) years, but IRS only gave them a NITL for one of those years. Frank & Sharon wanted to settle all four years, and ghave Appeals an OIC for all of them. That’s when the trouble started.

“When a taxpayer has filed a request for a CDP hearing, the COIC rejection automatically gets sent to the Appeals Office. And that’s just what happened here. The COIC rejection letter sent to the Orienters noted that ‘[a] final determination on the offer will be issued by [the Appeals Office] in conjunction with the CDP case.’” Order, at p. 3.

The RCP was way over the OIC that Frank & Sharon put in.

Tax Court can consider abuse-of-discretion for one year for which there’s proper petition if it’s part of a multi-year OIC for years not petitioned. What Tax Court can’t do is stop collection for the out years.

Section 6330 says Appeals must consider law and administrative procedure. Everyone agrees the IRM is “administrative procedure.” But Appeals says they followed procedure, and Frank & Sharon say they didn’t. So we have what Judge Holmes characteristically describers as “the intersection, or perhaps one might say at the point of collision, of a couple lines of authority.” Order, at p. 3. Vintage Holmes, as another partitive genitive bites the dust.

The “couple” lines? IRM creates no rights for the taxpayer, ands Judge Holmes has a bushelbasketful of cases that say so. But agency rules that constrain others also bind the agency, say another bushelbasketful of cases. Since Frank & Sharon are New Yorkers, 2 Cir wants agencies to follow even those procedures not yet published in Fed Register. I know, Tax Court has to Golsen these cases to DC Cir, since they’re prior to the 2015 effective date of the amendment to Section 7482(b)(1)(G).

But Judge Holmes is a master at ducking.

IRM (Jul. 18, 2013) sets forth the steps to take when Appeals gets back an OIC that COIC bounced. And the AO did that. He reviews the entire file, recalculate the RCP using the assets and values identified by COIC, and determine if the special circumstances described in the file warranted acceptance of the [original] offer.

Frank’s & Sharon’s attorney wants to testify about discussions with the AO, but that’s not a fact question, that’s an abuse of discretion question.

“The Orienters have not raised a factual dispute that the Appeals officer excluded material evidence of his consideration of their request from the administrative record. There is reasonable disagreement about the merits of his decision, but that’s not enough to conclude that he abused his discretion.

“This also means that we need not plumb the difficult questions raised by the Commissioner in opposing the Orienters’ motion for waiver of conflict of interest to allow their attorney to testify — we’ll deny that motion because the testimony wouldn’t make a difference to an issue material to the case.” Order, at p. 10.

I really want to see something more than the blanket assertion that a petitioner’s attorney can’t testify. That isn’t what the ABA Model Rules say, and I’ve blogged that often enough. But Judge Holmes isn’t going there.

Frank & Sharon wanted a face-to-face, but they live in Monroe County, Appeals has no money for roadies, and Frank & Sharon can’t travel to Nassau County where the local Appeals crew hangs out. No right to a face-to-face anyway.





In Uncategorized on 01/17/2020 at 01:12

Years ago a client told me what he’d learned in AA. Show up. Even if you can’t do much, show up. Be where you’re supposed to be. Be there sober, but be there.

Well, that obliging Jurist, Judge David Gustafson puts that lesson in a designated hitter off-the-bencher, Thomas V. Meyers & Joanne T. Meyers, Docket No. 8453-19, filed 1/16/20.

Their trial was the only one on that day in Winston-Salem, NC. The morning was spent with a stip of agreed facts. IRS dropped the chops. Trial started in the afternoon. First up was Thomas, but his testimony was halted for Joanne, who couldn’t be present the next day, to testify about her extensive religious activities. Thomas said he’d show up the next day, but didn’t.

“At about 9:15 a.m…., respondent’s counsel advised the Court that Mr. Meyers had sent an email (Ex. 30-R) stating that he would not appear.

“The email stated that business conflicts had arisen so that he could not come. A second email stated that the judge has ‘already made up his mind – it’s going to be a waste of time. We were were all there today, and he’s got all the information he needs. He’ll have to make a decision with what he’s got, and we’ll accept his decision.’ We placed a telephone call to Mr. Meyers with respondent’s counsel standing by, in the hope that we
could have a conference call, but the call went straight to voicemail. We stated in voicemail that his failure to appear is improper, that he should come to trial, and that we would start at 9:30 as scheduled. He did not appear, and proceedings resumed at 9:30 a.m., consisting of argument by respondent’s attorney from the evidence on the record. The Commissioner moved orally for dismissal of the case for failure to prosecute and for the imposition of a penalty under section 6673(a).” Transcript, at p. 10.

Thomas’ no-show really steamed Judge Gustafson.

“A party’s failure to appear at trial – and especially his failure to appear for cross-examination after he has been permitted to put on his own testimony in ‘direct examination’ –is a most serious offense against the process. Ours is an adversary system, and it presumes that the truth can best be discerned by allowing competing parties to challenge and probe each other’s claims. Where a party evades cross-examination, he frustrates this process fundamentally. He unfairly disables the opposing party from being able to probe his evidence, and he invites the inference that his claims could not bear up under examination.

“So serious is this violation that it justifies wholesale dismissal of the case for ‘failure to prosecute”, with the consequence that the deficiency determination of the Commissioner is upheld.” Transcript, at p. 12.

But the quality of Judge Gustafson’s obliging character is unstrained.

“However, it is the frequent practice of this Court-often at the instance of the Commissioner – to dismiss a case for failure to prosecute but to enter decision in a deficiency amount smaller than what appears in the SNOD. Typically this occurs when respondent’s counsel has determined to concede an issue and affirmatively proposes the smaller deficiency amount. In the same way, we prefer if possible, even in such a circumstance, to enter a decision based on the facts demonstrated by the evidence rather than as a punishment. But to do so without rewarding the petitioner for his non-appearance, we must scrutinize his evidence closely and resolve all doubts against him. We will attempt to do so in this instance, but this requires us, in effect, to impose a heightened burden of proof on the non-complying petitioners.” Transcript, at pp. 12-13.

Well, Thomas seems to have “deliberately concocted a non-authentic receipt and tried to make the Commissioner and the Court assume that it was authentic.” Transcript, at p. 14.

IRS counsel then elaborated on what her cross would have been. Thomas would have had a most unhappy morning. As it was, Judge Gustafson has no confidence in Thomas’ veracity, and was inclined to bounce all his claims absent independent corroboration, which Thomas had not.

Judge Gustafson mercifully allowed Thomas and Joanne all of their home mortgage interest on Schedule A, even though they claimed 94% of their home was used for business on their Schedule Cs, because the lender confirmed the amount.

I’ll spare you Judge Gustafson’s deconstruction of the rest of the Meyers’ deductions. Joanne had a lot of mileage for religious purposes but no substantiation. Section 274 blew away most of their other deductions, and want of receipts put paid to all but $187 of the rest.

IRS wants a Section 6673 frivolity chop, but Judge Gustafson says it might require Section 6751(b) Boss Hossery, and IRS’ version is an e-mail that is hardly unequivocal. Nevertheless, Judge Gustafson isn’t deciding that in an off-the-bencher, although as a dyed-in-the-wool Boss Hoss fan, he comes mighty close. And while he can sua sponte do one for Thomas and Joanne, Thomas and Joanne never had a yellow card in either of their two previous trips to USTC.

So a Rule 155 beancount. But I somehow doubt Thomas and Joanne will be putting in a lot of numbers.




In Uncategorized on 01/16/2020 at 20:14

Swifter even than jeopardy comes Section 6851 termination. If it looks like the non-taxpayer is about to scarper with the readies, IRS can immediately assess and grab. Ugorji Timothy Wilson Onyeani, 2020 T. C. Memo. 15, filed 1/16/2020, is a perfect candidate.

UTWO was born in Nigeria, naturalized n the UK where he practiced medicine (but lost his license for falsifying records and misconduct), got a US green card and, claiming to be a broker for the Nigerian National Petroleum Corp., got an $800K advance from a couple customers (hi, Judge Holmes), who should have known better, for Bonny Crude, of which he had none but he did have a phony corporate shell. When he tried to wire $300K to a UK corporation from his BoA account, BoA shut him down.

UTWO then went to Harris Bank, who tipped off the Secret Service. Then IRS got word, did a flash bank deposits reconstruction and a quick-and-dirty SFR, and did the Section 6851 grab. Harris escrowed $289K to cover the potential lien, which UTWO fought unsuccessfully in USDCNDIL, whereupon Harris paid IRS the $289K, and UTWO took the rest. Some he’d already spent on trips to Disneyland and at Victoria’s Secret (don’t ask). The onshore customer sued him, and he settled for $400K. And he and Mrs. UTWO filed a return for the year at issue showing only Mrs. UTWO’s income, and paid $2K in tax.

Maybe I got one of UTWO’s e-mails in my spam box; I don’t remember.

Judge Albert G (“Scholar Al”) Lauber spends some time on the Section 6751(b) Boss Hoss, but that was OK.

UTWO does get credit for the $400K he paid back to one of his customers. If you steal and repay in  the same year, you deduct what you repaid.

But whomever he defrauded, it wasn’t IRS.

Remember, Section 6664(a) defines “underpayment of tax,” a necessary component of a deficiency, as “the amount by which the tax imposed for the year (i.e., the correct amount of tax) exceeds the sum of ‘(A) the amount shown as the tax by the taxpayer on his return, plus (B) amounts not so shown previously assessed (or collected without assessment).’” 2020 T. C. Memo. 15, at p. 30. And Reg. Section 1.6664-2(a) includes termination assessments per Section 6851 in “amounts not shown previously assessed.”

IRS knew about the termination assessment, and the money was paid to IRS. UTWO gets a deduction for what he paid back to the onshore customer. And the amount of tax that IRS assessed on the termination, plus Mrs. UTWO’s tax exceeds the amount of tax they owed. And UTWO couldn’t evade payment of tax that was already in IRS’ hands.

No deficiency, no fraud chop, not even an accuracy penalty. There’s a Rule 155, so it just might be possible that UTWO gets a refund.

UTWO was pro se. I’ll give him a Taishoff “Good Job, Second Class.”