Attorney-at-Law

Archive for December, 2012|Monthly archive page

GOT YOUR TICKET?

In Uncategorized on 12/13/2012 at 17:45

Or, Scar Tissue

That’s the question for Karl E. Cross, in 2012 T.C. Memo. 344, filed 12/13/12, and Judge Jacobs gives him and his seasoned attorney Mitch an answer they don’t like.

We all know that a Notice of Deficiency is the ticket to Tax Court. Karl E. got Letter 531-T, at the top of which and in capital letters is written “NOTICE OF DEFICIENCY”, for the year in question. The items disallowed giving rise to the deficiency are erroneous, as the computation apparently came from IRS’ RTVUE synopsis of the return as filed, rather than the document itself.

The IRS’ RTVUEr apparently transcribed items incorrectly, ascribed a tax shelter to Karl E. that he wasn’t part of for the year at issue, and thereby caused Mitch to stipulate to bind Karl E. to the outcome of cases having nothing to do with Karl E.’s tax situation for the year at issue, and Mitch alleges IRS knew this all along.

Mitch claims no jurisdiction, as the Notice of Deficiency was so deficient as to be no notice at all. In other words, no ticket.

No, says Judge Jacobs. “It is well settled that no particular form is required for the notice of deficiency to be valid. The Court of Appeals for the Eleventh Circuit, the court to which this case is appealable barring  a stipulation to the contrary, has held that the notice will be treated as valid if the Commissioner demonstrates that ‘the IRS has determined that a deficiency exists for a particular year and specif[ies] the amount of the deficiency’.” 2012 T. C. Memo. 344, at pp. 11-12 (Citations omitted).

Besides, Mitch’s arguments go to the accuracy of the determination, not the fact that there is a determination. The one case to the contrary, Scar v. Com’r., 814 F.2d 1363 (9th Cir. 1987), rev’g 81 T.C. 855 (1983), involves a statement in that notice that the tax return itself was not examined, ascribed to the Scar taxpayer a tax shelter with which Scar had never had a relationship (unlike Karl E., who had been in the tax shelter referred to in the Notice of Deficiency in the past), and assessed tax at the top marginal rate without consulting the Code. Ninth Circuit held that was not a notice.

Here, however, though there may be factual inaccuracies, “(W)e disagree with the position taken by petitioner’s counsel. His arguments in both the motion to dismiss and the supplemental motion are arguments as to the correctness of respondent’s determinations in the notice of deficiency, not the validity of the notice of deficiency. Consequently, these arguments do not support the position he takes because our jurisdiction in this matter does not hinge on the correctness (or incorrectness) of respondent’s determinations in the notice of deficiency.” 2012 T. C. Memo. 344, at p. 15.

Judge Jacobs: “The facts in this matter are readily distinguishable from those in Scar. In this matter, the notice of deficiency specifically addresses petitioner’s income tax return. Unlike the notice in Scar, here the notice of deficiency does not state that the income tax is being determined at the maximum rate simply to protect the Government’s interest. It does not refer to a tax shelter with which petitioner had no relationship. Nor does the notice of deficiency indicate that petitioner’s tax return (or the transcript thereof) was never examined. In sum, we cannot say that the notice of deficiency reveals on its face that respondent failed to determine a deficiency.” 2012 T. C. Memo. 344, at p. 17.

Mitch tries to argue that the Notice of Deficiency should follow the pleading requirements of the Federal Rules of Civil Procedure. No authority for that, says Judge Jacobs; at most, the Notice of Deficiency, like a complaint, sets out the basis of a claim and confers jurisdiction on the Court, but that’s all.

Finally, Mitch’s claim he was hoodwinked into signing onto a determination in cases having nothing to do with the year at issue gets short shrift from Judge Jacobs. Mitch “is a longtime member of the Tax Court bar, is an experienced attorney, and was formerly an attorney in the Commissioner’s Office of Chief Counsel. We are skeptical that he could be induced to consent to such an important agreement by respondent’s counsel without any supporting materials to justify its signing. But we need not make a  determination with respect to [Mitch’s] allegations. Even if true, they would not affect our analysis regarding the validity of the notice of deficiency.” 2012 T. C. Memo. 344, at p. 19, footnote 7, second paragraph).

So Tax Court has jurisdiction, and Mitch can try to get out of the stipulation, and get Karl E. out of the deficiency.

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PARAPHRASING MARK TWAIN

In Uncategorized on 12/12/2012 at 17:22

The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, Judge Mark V. Holmes, has a Designated Order, Docket No. 11884-11, Estate of Bernard Dorman, Deceased, Dennis Dorman, Executor, filed 12/12/12. Incidentally, this is the last time an identical numerical designation of month, day and year will occur for the next 89 years.

Back to Judge Holmes, who in effect paraphrases Mark Twain’s famous statement “Tell me where a man gets his cornpone, and I’ll tell you where he gets his opinions.” Judge Holmes would have it “Tell me where I get my interpretations of the Federal Rules of Evidence, and I’ll tell you where I get my opinions.”

Judge Holmes does the telling: “We are bound by the rules of evidence applicable in a trial without a jury in the United States District Court for the District of Columbia. Rule 143(a); sec. 7453. In light of that mandate, we have applied the law of the D.C. Circuit when it comes to issues concerning application of privilege.” Order, p. 1.

The particular points involve Bernie’s Estate’s appraiser/valuer, the terms of his retention and that of his firm, what the appraiser/valuer was told, and on what assumptions he relied. This IRS wants, but Denny claims work product and material prepared for litigation, so privileged.

Judge Holmes needs a look-see, but gives the IRS some of what they ask for, the rest to follow if the DC Circuit permits. Documents can be multi-purpose. “…the D.C. Circuit opted to follow the Second Circuit…. The test we have to use in judging the extent of work-product protection for a dual-purpose document is whether a document was created ‘because of anticipated litigation, and would not have been prepared in substantially similar form but for the prospect of that litigation.’ The D.C. Circuit held quite plainly that ‘a document can contain protected work-product material even though it serves multiple purposes, so long as the protected material was prepared because of the prospect of litigation.’” Order, p. 2. (Citations omitted).

Judge Holmes gently reproves counsel for both sides (and I’m surprised at IRS’ counsel, though; they should know this). “…since they both seemed unaware of the Code’s somewhat obscure requirement that this Court follow D.C. Circuit evidence law, Petitioner may supplement his response with evidence and argument relating to Respondent’s motion to compel production of document requests 1 and 2; and Respondent may supplement his response with evidence and argument relating to Petitioner’s motion for a protective order relating to document requests 1 and 2.” Order, p. 5.

Mark Twain is vindicated.

WELL, SIR – YOUR CREDENTIALS?

In Uncategorized on 12/11/2012 at 18:32

This remark, attributed to Voltaire on his deathbed when an abbé approached him and said he came from God, should be remembered by Tax Court litigants seeking to have Tax Court cut them some slack from penalties via Section 6664(c), the “reasonable cause and good faith” out, principally evidenced by reliance on advisors.

So many times taxpayers, usually but not exclusively pro se, claim they relied on a preparer, but introduce no evidence as to the show-and-tell they had with the preparer, or what, if any, credentials the preparer possessed.

Today’s reiteration of this lesson, which I previously expounded in my blogpost “Another Argument”, 6/7/12, among other places, is Carnell Specks and Cheryl Specks, 2012 T. C. Memo. 343, filed 12/11/12.

Nothing novel here in point of law. On the facts, Carnell, a police officer in the fair metropolis of Houston, TX, the residence of the most wonderful child in the world, my granddaughter, moonlights as a security provider, marching about in uniform with personal six-shooter at his side. On the facts, he’s an IC, not an EE, so owes SE, but didn’t pay.

IRS attacks his deduction for rental real estate losses in their answer, so IRS has burden of proof. Carnell establishes material participation, IRS concedes all his rental activity as a single activity, but Carnell can’t show 750 hours, as he’s too busy policing and securitizing. So he’s got the $25K limit under Section 469(i), rather than the $51K he claimed.

Looks like substantial understatement after the Rule 155.

But Carnell says he relied on his preparer, a many-times-told tale. Again, no credentials in evidence, or what Carnell (Cheryl did nothing) told the preparer. So no dice.

One would hope the message finally gets through. IRS has a link on its website which purports to instruct taxpayers how to find a preparer. Maybe the “how to” should include what to tell the preparer, and warn the taxpayer to get the preparer’s resume.

THE NIGHT OF THE LIVING DEAD

In Uncategorized on 12/11/2012 at 17:59

The Kersting tax shelter cases, now approaching their thirtieth birthday, are still winding their way through Tax Court. Henry Kersting, supposedly a U-boat commander for Nazi Germany in World War II, created a package of tax shelters and thereby left a legacy which torpedoed some 1300 airline pilots and their families, and set them adrift in a modern Jarndyce v. Jarndyce, with appellate findings of official misconduct, tampering and general governmental skullduggery.

I’ll skip the details, although a simple Google search will turn these up instantly.

The reason why I turn to this antique is that it continues to befuddle Tax Court to this day. Case in point: Richard J. Buckley and Estate of Jean Buckley, Deceased, Diane Tsubota, Personal Representative, Docket No. 17756-82, filed 12/10/12.

It’s a simple order. IRS has a computation of who owes whom what, and either Richard and Diane sign aboard, or they can submit their own; but if Richard and Diane don’t sign aboard or object, then Chief Judge Thornton will enter IRS’ computation as the decision.

Simple, no?

But that’s not all. Here’s the relevant paragraph, in full: “(2) file the computation and a motion for entry of decision with a proposed decision document; respondent must serve a copy of the motion on petitioners, and petitioners must file their objection, accompanied by an alternative computation, on or before 45 days after the date of service; if petitioners fail to file an objection, then the Court may grant respondent’s motion and enter the decision in accordance with respondent’s proposed computation. It is further”. Order, P. 1.

It is further what?

I told you the Kersting cases continue to befuddle the Tax Court.

HARD CASES MAKE

In Uncategorized on 12/10/2012 at 16:19

Bad law, as the old law school mantra goes, and John Bruce Corcoran and Frances H. Corcoran, 2012 T. C. Sum. Op. 119, filed 12/10/12, proves it true yet again. Judge Gerber feels constrained to follow Ninth Circuit and earlier Tax Court decisions, to render a decision that he admits “is inequitable and does nothing to further the congressional purpose underlying the enactment of section 219.” 2012 T. C. Memo. 119, at pp. 6-7.

Section 219 is the deduction (generally reported on one’s Form 1040 as an adjustment to gross income) for contributions to IRAs, where the taxpayer meets certain age and income limits, and is not “actively enrolled” in any employer sponsored retirement plans. And “actively enrolled” means your name is on the books, whether or not you contribute to, or have the right to get one penny from, the employer retirement plan.

Mr. Cork was a salesman for New York Life, “The Company You Keep”, according to their advertising slogan. But though Mr. Cork wanted to keep New York Life, New York Life did not keep Mr Cork. They canned him for low sales in the year in question.

But before kicking him to the proverbial, New York Life did enroll Mr Cork, concededly without his knowledge, in their defined benefit plan. The hitch, of course, is that Mr. Cork would have to stay with New York Life for five years, and meet certain sales hurdles he knew he’d never surmount, before his rights would vest. Mr. Cork never contributed to the defined benefit plan, and never joined New York Life’s defined contribution plan, because he knew he’d never see back centavo uno from anything he kicked in to any New York Life plan.

So he made a $6K IRA catch-up. But New York Life sent him a W-2 stating he was enrolled in a company plan. So IRS disallows Mr. Cork’s deduction.

Mr. Cork argues he didn’t know he was enrolled, got nothing, and New York Life never contributed a dime anyway, because, in the immortal words of the Kerry Dancers, he was “gone, alas, like our youth, too soon.”

But Judge Gerber is constrained to follow precedent (which I suggest can be distinguished, and unhappily, since this is a 7463 throwaway, will not be examined by an appellate court). So agreeing that the result is entirely inequitable, and does nothing to further Congress’ intendment that individuals who choose to postpone present laughter for retirement jollity should catch a wee break, Judge Gerber finds for IRS.

Takeaway- Employees, don’t let your employer do you any favors. If the proffered retirement plan is more like steel chains than golden handcuffs, just say no. And make sure HR gets the word you don’t want it.

MAN, DIG THAT ISLAND

In Uncategorized on 12/08/2012 at 21:12

I mean the Isle of Man, the UK’s original tax haven, the right-little, tight-little British Crown dependency in the Irish Sea. It seems the IOM and the UK Revenue have made a deal à la FATCA. In announcing the Manx-UK deal under date of 12/7/12, Chief Minister Alan Bell was quoted thus:  “The Island already shares tax information automatically under the EU Savings Directive and has recently announced that it will do so on a wider basis with the USA.”

Have the dodgers been voted off the island? Stay tuned.

OLD TAX CREDITS NEVER DIE – PART DEUX

In Uncategorized on 12/06/2012 at 16:06

But they do give rise to some interesting, if unanswered, questions. Here’s a reprise of the second iteration of the First Time Home Buyer Tax Credit, known to the initiate as FTHBTC2, the $8000 actual credit, as distinct from FTHBTC1, which was a fifteen-year interest-free loan disguised as a credit.

Case in point is Robert Perez Morales, 2012 T. C. Memo. 341, filed 12/6/12, with its companion case Ronda Kay Morales. Apparently the Moraleses filed separate returns for separate principal residences on the same tax lot (nice move, guys; see my blogpost “Old Tax Credits Never Die”, 11/6/12, showing similar fancy, but more successful, footwork by Bob Packard and wife Marianna). Each claims the $8K credit, of course.

Unfortunately, neither Morales checks the calendar. They sold their last principal residence 4/27/06, according to the 1099-S they got from the settlement company. They bought the new principal residences 3/17/09.

What’s wrong with this picture?

No prize for the correct answer, so I’ll let Judge Kroupa provide it: “A first-time homebuyer is any individual who has had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence in question. Sec. 36(c)(1); Foster v. Commissioner, 138 T.C. 51, 53 (2012). Petitioners purchased the new principal residences on March 17, 2009. Accordingly, petitioners are eligible as first-time homebuyers only if they had no present ownership interest in a principal residence between March 16, 2006, and March 17, 2009. Petitioners sold their prior principal residence on April 27, 2006 and therefore had a present ownership interest in a principal residence during the relevant period. Petitioners are therefore not entitled to the claimed first-time homebuyer credit.” 2012 T. C. Memo. 341, at pp.3-4.

And see my blogpost “This Old House”, 1/30/12, for the story of Francis T. and Maureen P. Foster, the parties alluded to in the case cited in Judge Kroupa’s decision.

So the Moraleses should have looked at the calendar and adjourned the closings. Nothing novel here; the statute is plain, three years means three years, and the Moraleses’ defenses are futile. So what’s interesting?

The question Judge Kroupa decides not to answer. The Moraleses claim the shrink-wrapped guru, in this case TurboTax, led them astray. But they don’t say how. See my blogpost “The Shrink-Wrapped Guru”, 9/14/12.

Judge Kroupa:  “The TurboTax instructions and the specific information petitioners entered into TurboTax is not in the record. Moreover, petitioners failed to introduce other evidence that demonstrates their improperly claiming the first-time homebuyer credit was the result of a TurboTax programming flaw or instructional error. We note we find it unlikely that TurboTax would allow a result inconsistent with the Code if its instructions were properly followed. Petitioners may have acted in good faith but likely made a mistake. We find that petitioners’ use of TurboTax is not a defense to the accuracy-related penalty.” 2012 T. C. Memo. 341, at pp. 6-7. (Citations and footnote omitted.)

But the interesting part is the omitted footnote: “We leave for another day whether reliance on tax preparation software such as TurboTax is sufficient to avoid the accuracy-related penalty where the taxpayer has provided evidence demonstrating a programming flaw or an instructional error.” 2012 T. C. Memo. 341, at p. 7,  footnote 2.

Of course, as I said in my cited blogpost “The Shrink-Wrapped Guru”, “I’m sure the software developers’ counsel have festooned box and contents with disclaimers and exculpatory exhortations worthy of the medieval indulgence mongers.” So perhaps the hypothetical software glitch will not spare the taxpayer.

However,  Special Trial Judge Armen, the Judge with a Heart, who spared poor Kurt E. Olsen in 2011 T. C. Sum. Op. 131, filed 11/23/11, might be willing to do so. See my blogpost “Basis for Dummies”, 11/24/11, a Judge Mark V. Holmes and STJ Armen doubleheader.

HAIL, ALL HAIL CORNELL!

In Uncategorized on 12/05/2012 at 17:04

Jerry Rawls should join in the last line of the Alma Mater with a loud voice and true thankfulness, after he reads Rawls Trading, L.P., Rawls Management Corporation, Tax Matters Partner, 2012 T. C. Memo. 340, filed 12/5/12, as his trusty accountant, a graduate of the Cornell Law School (just like me), saves him from the Section 6662(a) accuracy penalties in the cited case, a follow-up to Judge Vasquez’s earlier decision; on background, see my blogpost “Finishing the Play”, 3/26/12.

This is a son-of-BOSS, Section 752 unrecognized cover of a short sale, to build phony outside basis to bury a big-time capital gain. Needless to say, it gets shot down on a TEFRA FPAA, notwithstanding a tax opinion from Lewis, Rice & Fingersh, L.C., a St. Louis white-shoe, which says the deal works.

Jerry was a Texas Tech engineering graduate, who quit his job and hocked his house to start a fiber optic company with the unprepossessing name of Finisar before anyone had ever heard of fiber optics. It wound up being worth hundreds of millions, and when it went public, Jerry had a ginormous capital gain.

Solicited by a sheltermonger called Heritage who introduced him to Lewis Rice, Jerry signed with Heritage (who got 2% of the tax savings) after he consulted his brother Walter the CPA, who said it looked okay. “Mr. Rawls believed the Heritage strategies were ‘investments where you had to put up real money but you had the real opportunity to profit.’ Furthermore, Mr. Rawls entered into the Heritage agreement to increase the diversification of his holdings and reduce the economic risk related to the volatility of the market price of his Finisar common stock.” 2012 T. C. Memo. 340, at p. 7.

Lewis Rice prepared all the transactional documents and oversaw the implementation. Jerry claims he relied on Lewis Rice, but Judge Vasquez isn’t buying: “…the Lewis Rice lawyers were not being paid to evaluate a deal or to tweak it; they were being paid to make the transactions happen. They did more than simply evaluate Heritage’s strategies; they implemented them. They created the entities involved and prepared all the paperwork involved. Therefore, Mr. Rawls cannot rely on the advice of Lewis Rice because it was a promoter of the transactions involved.” 2012 T. C. memo. 340, at p. 33. Oh yes, and Lewis Rice got a six-figure flat fee for their trouble.

Promoters, upon whose advice taxpayers cannot rely, are those who “make it happen”. And this is additional support to my argument that the authors of marketed opinions should make it clear that their opinions cannot be relied upon for Section 6664 purposes, so IRS, keep at least part of Circular 230 §10.35.

So does Jerry have to take the Section 6662(a) hit? No, because Larry Poster was his accountant. Jerry’s former accountant had only done his routine tax returns for years, did not understand the heavy complexities of Jerry’s newly-gained wealth, and anyway was getting ready to retire. So Heritage gave Jerry a list of accountants, and Jerry chose Larry.

Larry never paid Heritage for referrals and never charged above his normal low hourly rates for the work he did, which was to look over the paperwork and prepare the returns. So he wasn’t a promoter.

But can Jerry rely on Larry’s advice? Yes, if he’s competent. Judge Vasquez:  “We find that Mr. Poster was a competent professional. Mr. Poster graduated from Cornell Law School, was a certified public accountant, and had almost 30 years of experience in tax when Mr. Rawls hired him, including 13 years as a tax partner at a major accounting firm. Not only was Mr. Poster a competent tax return preparer; he also had knowledge of the relevant aspects of Federal tax law. He had experience evaluating short sales involving section 752 issues.” 2012 T. C. Memo. 340, at p. 35 (emphasis added.)

IRS argued that Larry was incompetent because he gave Jerry the wrong advice. To require the taxpayer to cross examine one with much more expertise than he, and evaluate complicated tax plans, negates the whole purpose of hiring an adviser.

Moreover, Jerry told Larry the whole story. IRS says Larry should have sweated Jerry more, but it’s not the taxpayer’s fault if the expert, who should know what questions to ask, doesn’t ask them. How can the taxpayer know what the expert should ask?

Finally, Jerry was acting in good faith, even though IRS claims he should have known the Heritage deal was too good to be true. “Mr. Rawls is not a sophisticated investor and is not familiar with tax law. Before the success of Finisar, Mr. Rawls’ wealth consisted of the equity in his home, which was subject to two mortgages in order to finance Finisar. Mr. Rawls was not familiar with managing a large fortune and, as of early 2000, he did not have an estate plan or even a will. We find that Mr. Rawls did not have the background or experience necessary to have known that the Heritage plan was too good to be true.” 2012 T. C. Memo. 340, at p. 39.

Larry the Cornell Law alum (from a later class than mine) saves the day for Jerry. Hail, all hail, Cornell!

SOMEDAY YOU WILL FIND ME

In Uncategorized on 12/04/2012 at 17:07

In the words of Oasis guitarist and songwriter Noel Gallagher’s 1996 hit “Champagne Supernova”, but not as far as Judge Wells is concerned; the Judge wants the taxpayer to tell IRS by internet, telephone, or at least use a USPS Form 3575 “Official Mail Forwarding Change of Address Form” when taxpayer changes his or her address.

The story is found in Robert P. Duplicki, 2012 T. C. Sum. Op. 117, filed 12/4/12. You can’t quote it, but you should know it.

Judge Wells isn’t buying it when Rob claims he didn’t get the mandated Section 6303(a) demand for balance due for the tax IRS assessed. Of course, Rob hadn’t filed returns for at least four years at that point. Rob moved from one house to another, but rented a P. O. Box in between, and that’s where the notice of assessment was sent, and from where the obliging USPS forwarded same to Rob’s new house.

When IRS drops a NFTL on him, Rob demands a CDP, whereat he claims he never got the aforesaid demand for balance due (demand), but that of course is irrelevant; actual receipt is not required, just mailing to last known address. Rob claims that the P.O. Box wasn’t his last known address.

Judge Wells: “The term ‘last known address’ is well defined in the tax law. A taxpayer’s last known address is the address that appears on the taxpayer’s most recently filed and properly processed Federal tax return, unless the IRS is given clear and concise notification of a different address. It is the address to which, in the light of all the surrounding facts and circumstances, the Commissioner reasonably believes the taxpayer wished notice to be sent.

“If the Government has become aware of a change of address, the Commissioner may not rely on the address listed on the last-filed tax return but must exercise reasonable care to discern the taxpayer’s correct address. Although the Commissioner must exercise reasonable diligence in ascertaining the taxpayer’s correct address, the burden is upon the taxpayer to keep the Commissioner informed of the taxpayer’s correct address.” 2012 T. C. Memo. 117, at pp. 7-8 (Citations omitted.)

But Rob had the burden of proof that IRS knew his whereabouts (he didn’t ask for a Section 7491 burden shift). He claims he never told IRS to use the P. O. Box. However, Reg. 301.6212-2(b)(2)(i) lets IRS mine data from the National Change of Address (NCOA) data base maintained by USPS, and if they find someone whose name and old address match someone whose name and new address show up there, that’s okay.

If Rob wanted IRS to use another address, he should have filed USPS Form 3575, or sent a “clear and concise notice” to IRS, or maybe best of all,  filed the returns he hadn’t filed for four years, using the address he wanted.

DEMAND FOR REMAND?

In Uncategorized on 12/03/2012 at 17:32

No, says Judge Swift. Whether Tax Court has jurisdiction to remand a case to Appeals due to change in circumstances between the CDP hearing and the Tax Court trial, even if Appeals made no error,  is a question whose answer must await another day. But there’s no remand coming for W. Russell Van Camp and Teresa Van Camp, in 2012 T. C. Memo. 336, filed 12/3/12.

Russ has enough problems, aside from not having filed returns for three years, and not contesting the liabilities IRS imposed or the NFTL or Notice of Levy, because Russ’ attorney dropped the installment agreement he was negotiating with the SO. Judge Swift: “…before final approval and implementation of the installment agreement, petitioners’ attorney informed the settlement officer that petitioners’ financial affairs were ‘going from bad to worse’ and that petitioners ‘would not be able to pay anything under an installment agreement.’

“Petitioners’ attorney did not explain to respondent’s settlement officer the specific reason petitioners would not be able to pay anything under an installment agreement (namely, the imminent disbarment of Mr. Van Camp).” 2012 T. C. Memo. 336, at p. 4.

So the SO tells Russ’ attorney the immortal words of Toni Stern’s and Carole King’s 1972 Grammy winner:  “It’s too late baby now it’s too late.”

Russ’ derelictions are too numerous to recount here, but those interested in such things can check them out at 257 P.3d 599 (Wash., 2011). Russ is disbarred after the CDP hearing.

Russ’ attorney claims changed circumstances, but doesn’t claim the SO abused her discretion or didn’t follow the law. IRS says no, and Judge Swift agrees. “Remand of a CDP case to the Appeals Office may be appropriate in limited circumstances where there occurred some omission or error in the original hearing or in the record of the hearing. These cases present no such circumstance, and respondent argues that as a matter of law we have no authority to remand a CDP case to the Appeals Office on the basis of a change in a taxpayer’s financial circumstances that occurred after the CDP hearing was completed, where the Appeals Office did not abuse its discretion and where there is no ambiguity or omission in the administrative record before the Court.” 2012 T. C. Memo. 336, at p. 6. (Citations omitted.)

When Russ’ attorney dropped the proposed installment agreement and said Russ could pay nothing, he informed the SO of Russ’ dire financial straits and abandoned any collection alternative. So even though Russ’ attorney didn’t go into details, he did disclose that Russ was bust, and the SO had no choice but to go ahead with lien and levy.

All is not lost for Russ and poor Terry, or their hapless attorney. They can go back to Appeals under Section 6330(d)(2), pursuant to which Appeals has continuing jurisdiction over collections, but which is not a continuation of the present proceeding (which is closed). And in a Section 6330(d)(2), there is no appeal to Tax Court.

IRS wants more, as always. “Respondent disagrees with petitioners and with a suggestion made in a number of our opinions that we have the authority to remand CDP cases to the Appeals Office merely where a remand may be regarded as ‘helpful’, ‘necessary’, ‘productive’, and/or due to ‘changed circumstances.’ See e.g., Kelby v. Commissioner, 130 T.C. 79, 86 n.4 (2008); Lunsford v. Commissioner, 117 T.C. 183; Kuretski v. Commissioner, T.C. Memo. 2012-262, at *11; Churchill v. Commissioner, T.C. Memo. 2011-182. Respondent contends that, absent the exercise of an abuse of discretion by the settlement officer or a defective or incomplete administrative record, this Court lacks any remand authority in CDP cases.” 2012 T. C. Memo. 336, at p. 8.

See my blogpost “Back to the Future”, 8/1/11, where the irrepressible Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, Mark V. Holmes, says Tax Court can do just that. Cf. Churchill, supra, at pp. 13-14.

Judge Swift ducks. Since on these facts Tax Court doesn’t find changed circumstances between CDP hearing and trial (Russ was broke throughout, so nothing changed), there’s no need to consider Tax Court’s jurisdiction to remand.