In Uncategorized on 05/18/2022 at 17:27

Once again, the Sage of Concord, Ralph Waldo Emerson: “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.” And Judge Morrison has a helping of Emerson’s wisdom for Kirk Stevens & Shannon Stevens, Docket No. 2824-20, filed 5/18/22.

Kirk & Shannon’s Sub S signed up with two unrelated entities, MVP and Hedge Red. MVP owned Hedge Red. Kirk & Shannon’s Sub S  signed aboard an “Amended and Restated Bermuda Call Option Agreement” with the aforesaid MVP and Hedge Red.

If this sounds to you like another of those offshore indifferent dodges, it did to IRS, who claimed no economic substance. But Kirk & Shannon claim IRS said it did have economic substance for MVP, and wants documents from IRS’ audit of MVP to show it. IRS says “Section 6013 taxpayer info, therefore cannot be disclosed.”

Kirk & Shannon riposte that Sections 6103(h)(4)(B) and (h)(4)(C) provide exceptions. Judge Morrison isn’t buying.

“The party asserting that an exception allows disclosure of third-party tax returns and tax return information under section 6103 bears the burden to show the information can be disclosed. Mescalero Apache Tribe v. Commissioner, 148 T.C. 291, 299-300 (2017). But respondent’s tax treatment of one taxpayer (here, MVP) is not relevant to the appropriate tax treatment of other taxpayers (here, the petitioners). And respondent is entitled to take inconsistent positions to ensure that it is not “whipsawed” by taxpayers who themselves take inconsistent positions. We therefore conclude that the petitioners have not shown that tax treatment of the option agreement reflected on MVP’s returns directly relates to whether the option agreement has economic substance (see §6103(h)(4)(B)) or that MVP’s return and return information directly relates to whether the agreement has economic substance (see §6103(h)(4)(C).” Order, at p. 2 (Citation omitted, but you’ll find the Mescaleros’ story in my blogpost ‘Indians Not Taxed, Maybe,’ 4/5/17).

Once again, Emerson prevails.


In Uncategorized on 05/17/2022 at 15:21

Judge David Gustafson confronts the old “seal one document, seal ’em all” problem which bedevilled the original new, improved, jim-handy (yeah, most affirmative, roger that) DAWSON electronic docket system. Now it seems that the Genius Baristas have so far pulled their thumbs out, that only individual documents can now be sealed, while the rest of the electronic docket may be available to the public, as intended by Section 7461.

Of course, that which was previously enveloped in the all-encompassing sealing must be individually released, rather like prisoners at the end of Act I of Fidelio.

Lawrence W. Doyle & John F. Moynihan, Docket No. 4865-19W, filed 5/17/22, are engaged with IRS in an unseal-athon. This started with one document, but 25 (count ’em, 25) others got involved.

Of course, the sealing started a year ago. See my blogpost “Stealth and Unstealth,” 4/28/21.

But IRS suggests this may all be for naught, as DC Cir put paid to Cooper and Lacey back in January, in Li v Com’r, 20-1245, filed 1/11/21. Mandy Mobley Li, pro se (natch), exhausted DC Cir’s patience, and they held that no award equals no jurisdiction, per Section 7623(b)(4). So whatever the Ogden Sunseteers did or didn’t do, neither Tax Court nor anyone else can say Word One.

For Mandy Mobley’s story, see my blogpost “Ran the Checklist,” 4/6/20.

Taishoff says DC Cir has made mincemeat of the whole tax whistleblower system. All the Ogden Sunseteers have to do is do nothing; no award, no Tax Court jurisdiction (and Tax Court’s jurisdiction is expressly “exclusive,” so no one else can look either).

So thanks to DC Cir, the brand-new Chief Whistler Mr. John W. (“Hoppin’ John”) Hinman has the easiest job in the world; he can run the 100% sequester.

Judge Gustafson does order the uncontested documents unsealed, although to what purpose remains doubtful. It’s doubtful if he has jurisdiction to do even that much.


In Uncategorized on 05/16/2022 at 16:33

So many expert witness jousts involve mixed questions of fact and law. And expert knowledge is essential in sorting out facts so as to make them intelligible to the trier of fact. But the judge decides when the expert has stepped out of bounds, to expound the law, or worse, to advocate. Here Judge Mark V. Holmes, summarizing in CFM Insurance Inc., et al, Docket No 10703-19, filed 5/16/22.

Judge Holmes has some thoughts that bring a grin to my battered visage.

“We began by agreeing with petitioner that it is correct that there is a fairly hard rule that expert testimony about domestic law is generally not admissible. This rule is usually accompanied by the line that ‘testimony about the law does not assist the court.’ Judges may pretend this is so, but in their hearts they know that many of the lawyers and sometimes even the witnesses who appear before them know much more about the law than they do.

“The rule would be a weak one if it was helpfulness in reaching the correct result that we focused on. But the rule would be a strong one if we focused on the difference between findings of fact and conclusions of law. Courts mostly serve as human lie detectors in evaluating testimony — they ask if the witness broke down on cross, engaged in self-contradiction, or told an incoherent story. Judges are not supposed to conduct private investigations outside the record into the facts of a case. But in reaching a legal conclusion, a judge is less constrained. He is able to consult his own resources and expertise, and looks to the advocates who appear before him for help in where to look. We expect lawyers to zealously advocate for their clients; we’re suspicious of witnesses who do so.” Order, at p. 1-2.

IRS was looking to eviscerate the petitioner’s expert’s report. Judge Holmes only cuts off a couple sentences. And this is as good a statement of the principles as I’ve seen.