Having calmed down from my rant (see my blogpost “A Rant”, 3/7/13) and refreshed by a chat with a special employee of Apple Corporation on a special day, I turn my attention to Tax Court. Today, 3/8/13, in the absence of opinions, I find a designated order by Judge James S. Halpern that follows up nicely on another recent blogpost of mine, “Inside, Outside”, 2/28/13.

This is the short but pithy tale of Mehmood H. Darjee, Docket No. 7311-11 L, filed 3/8/13. And by the “L” hangs the tale.

Meh is fighting a NOD that confirms a Notice of Intent to Levy, but he’s more than ninety days past the magic thirty-day deadline in Section 6330(d)(1).

Giving the usual “we’re a court of limited jurisdiction and the thirty-day statutory time limit is jurisidictional, and we can’t extend it”, Judge Halpern tosses Meh, but not before Meh raises the “inside, outside” defense.

I was out of the country and far away, claims Meh, when the NOD issued and even when I filed my petition, so I should get the 150-day extended care plan for furriners and overseasniks.

Nope, says Big Jim. “Unlike section 6213(a), which provides for an extended 150-day filing period to challenge a notice of deficiency addressed to a taxpayer outside the United States, section 6330(d)(1) contains no extension for taxpayers abroad. See Sarrell v. Commissioner, 117 T.C. 122, 126 (2001). The 30-day filing period applies irrespective of the taxpayer’s location.” Order, p. 2.

So, Meh, it’s neither here nor there whether you were here or there, you’ve only got thirty days. Inside, outside–it’s all the same.

No, not politics; this is a non-partisan blog. But the system is broken.

We have some of the best, most-qualified judges on the United States Tax Court. See my recent blogposts “Acceuillons, Let’s Welcome, Judge Albert B. Lauber”, 2/5/13, and “An Open Buch”, 1/16/13, and look at the resumes of those two judges. Of course, not to slight their colleagues, read all their curricula vitae (or Lives and Miracles). Tons of talent on the Tax Court bench. If I could form a firm with even two such as partners, I’d retire and let someone else write these blogs.

But at the Bar? Tax Court doesn’t appoint counsel, and there is no panel; see my blogpost “With Friends Like Him”, 2/26/13, where a desperately out-of-his-depth “best friend” begs for help but doesn’t get it. And most automatic Tax Court admittees, lawyers who managed to cop a license in any USA jurisdiction, don’t have a clue. See my blogpost “Throwing the Buch”, 3/5/13, where Judge Buch, a Judge with a resume replete with extraordinary accomplishments, must admonish a Harvard-graduate partner in a law firm about ethical responsibilities toward a client.

And the sad stories just keep on coming. No opinions today, post-Snowquester, and no designated hitters, so here’s a simple order that shows what’s wrong, Matthew James Murnane, Docket No. 27548-12S, filed 3/7/13, a small-claimer (like a $15K maiden-claimer ninth race at a nothing track, when all the players have gone home).

Matt is a year and a half late with one petition, and five months late with another, so Chief Judge Thornton has to toss three tax years’ worth of Mike’s gripes. That’s par for the course in a Court of limited statutory jurisdiction.

The sad story comes in when IRS mailed a SNOD to an address not the taxpayer’s last known address. Chief Judge Thornton: “…the record demonstrates that the notice of deficiency, dated August 25, 2008, was sent not to petitioner’s last known and current address in Ballston Spa, New York, but to an address in Saratoga Springs, New York. Respondent represents that the notice was returned unclaimed. Petitioner confirms in his objection that the notice ‘was returned as unclaimed August 25, 2008’ and goes on to state that ‘the notice of deficiency was not sent to the correct address there by [sic] making the notice of deficiency invalid’. However, petitioner nonetheless takes the position in his objection that ‘I need small court to make a dission [sic] on my signature and the amount adjustment on 2006 tax form’.” Order, p.2

Matt doesn’t get his “dission”, because an improperly-mailed SNOD is no SNOD, and no SNOD, no Tax Court case, even though the illustrious, supremely-credential judges hereinabove referred to might object to being called a “small court”.

Yet Tax Court is the “small court”. It’s a $60 ticket to justice for people who can’t afford a trip to USDC or USCFC in the company of lawyers who just might make the cut for the Tax Court bench. You can best believe such lawyers bill at an hourly rate much above the purse or wallet of such taxpayers as Matt.

Tax Court is the only nationwide tax tribunal even though, like USDC, it must follow its superior CCA. Tax Court has the expertise USDC and CCA judges can’t have, by virtue of the variety and multifarious nature of the cases with which the Big Benches must deal.

But the practice of Tax Court is hypertechnical. Even where Tax Court Judges wish they could help, they can’t.

Matt gets tossed from the “small court” with no “dission” in his case, which is as important to him, I’ll wager, as to a Fortune 50 multinational whose case is one where the amounts are rounded to the nearest million.

This isn’t right.

I note the retirement of Stuart D. Gibson, Esq., Senior Litigation Counsel, Tax Division, DOJ, the man who dammed Stobie Creek (see my blogpost “Woodshedding Your Experts–Stobie Creek Part Deux”, 1/10/11), and provided the raw materials for my blogpost “The Non-Virgin Islanders”, 3/13/11.

I wish Mr. Gibson every success in all his future endeavors, and hope his retirement party is a real winner, snow or no snow.

But unlike the sad tale told by Albert Hammond in 1972, in the turntable hit he and Mike Hazlewood crafted, it does snow in Washington, D.C., so it’s outie for the United States Tax Court today, March 6.

Fortunately the T. C. Memo on Jim and Gae Urtis from March 5 (see my blogpost “We Wuz Robbed–Part Deux”, 3/5/13), and the two designated hitters from the same date (“Throwing the Buch”, 3/5/13, and “Not Even a ‘Good Try’”, 3/5/13), gave me (and hopefully all y’all, as my Texan daughters say) plenty of material.

And today’s the day IRS will accept any and every form of 2012 tax return–if they’re not closed, that is.

Another old blogpost returns to haunt us in Peter Kuretski and Kathleen Kuretski, Docket No. 18545-10L, a designated hitter on 3/5/13.

Pete and Kath want a Rule 161 and Rule 162 rematch, a reconsideration and a vacatur of Judge Wherry’s previous decision. See my blogpost “Make Your Case”, 9/11/12, but it’s not on the underestimated payments issue, it’s the failure of Appeals to grant an alternative to collection.

You gotta admit Pete and Kath are inventive. Judge Wherry: “ In their motion to vacate, petitioners contend that I.R.C. section 7443(f), which provides for Presidential removal of Tax Court judges under certain circumstances, is unconstitutional under Article III of the Constitution. However, petitioners do not question our jurisdiction on that ground, which they could do at any time, Henderson ex. rel. Henderson v. Shinseki, __U.S. __, 131 S.Ct. 1197, 1202 (2011). Instead petitioners ask that if we agree with their contention, we first determine that section 7443(f) is unconstitutional and then, free of ‘the improper threat of interbranch removal’ from office, decide this case again on the record and previous briefing. They also ask that we consider all of the arguments in their motion for reconsideration as if made in their opening brief, rather than the record as it was submitted under the standard applicable to motions for reconsideration. It remains unclear how this remedy would address or solve the Constitutional question raised by petitioners.” Order, pp. 1-2 (Footnote omitted.)

Here’s the omitted footnote: “The Court has an independent obligation to determine whether it has jurisdiction over a case, and the parties cannot stipulate jurisdiction nor can they waive jurisdictional defects. Arbaugh v. Y& H Corp., 546 U.S. 500, 514 (2006) Charlotte’s Office Boutique, Inc. v. Commissioner, 121 T.C. 89, 102 (2003), aff’d, 42 F.3d 1203 (9th Cir. 2005). A determination by this Court that section 7443(f) is unconstitutional would not be conclusive of that issue. If there is a constitutional problem, such a ruling would not make a second determination of the case on its merits any freer from potential prejudice or duress than our first determination.” Order, p. 2, footnote 1.

In short, the constitutional argument is a loser because Judge Wherry is still on the case, and since Pete and Kath raise no new evidence, no substantive error, and no jurisdictional objection, they’re out.

And they don’t even get a Taishoff “good try”.

I recently welcomed Judge Buch to the Tax Court bench (see my blogpost “An Open Buch”, 1/16/13), and His Honor comes out swinging with this designated hitter, a tale of attorney negligence in Adelfa E. Govea, Docket No. 806-12S, a designated hitter on 3/5/13.

Poor Adelfa is nowhere to be found, but her attorney, Kim T. Phipps, a graduate of Harvard University and the University of Virginia Law School, is a moving target. Kim changes addresses and firm affiliations three times, but never files the Form 10 to let Tax Court know her whereabouts. Maybe her old firm (which still lists her as a partner on their website) now represents Adelfa, but they never file a substitution of attorney (Form 8). Kim did update her address on eAccess, but that’s not sufficient (lawyers, please copy).

Now Kim moves to be relieved with trial scheduled for April 29, 2013, but of course Kim mailed her motion to Adelfa the same day she mailed it to the Court, and gave no evidence of any prior communication with Adelfa to warn her that she was bailing.

“Through this tale of changing addresses and law firms, the one person that seems to be lost is the petitioner, who has a trial set for just over one month from now. It is the attorney, not the law firm, who enters an appearance in a case. It is the obligation of the attorney to keep her contact information with the Court current. And through all of this, it is the client whose interests the attorney should be protecting.” Order, p. 2 (emphasis mine, although it should be unnecessary.)

Judge Buch cites the ABA Model Rules of Professional Conduct, Rules 1.3 and 1.4. It is the Model Rules that govern in Tax Court, not one’s local rules; see Tax Court Rule 201(a).

Adelfa could have her case tossed for want of prosecution if Kim didn’t let the Court know where she was, or arrange for an appropriate substitution of counsel.

Judge Buch: “It should further be noted that, had Ms. Phipps and her former firm timely sought a substitution of counsel, it would have been granted as a matter of right. However, now that the case is calendared for trial, it may only be granted by motion.

“To be clear, it is possible to withdraw as counsel in a case even after calendared for trial. Clients may become incommunicative, uncooperative, or insist upon following a course of action that the attorney cannot countenance. But, there are no such allegations here.

“Allowing Ms. Phipps to withdraw without a substitution of counsel could have a material adverse effect on petitioner and leave her without an advocate less than two months before trial. Ms. Phipps remains counsel of record for petitioner until such time as leave is granted to substitute counsel.” Order, p. 4 (Footnote omitted, but read it.)

So Judge Buch orders copies of his decision to be mailed to all and sundry.

Now, read and heed, all you automatic admittees to Tax Court, lest you get the Buch tossed at you.

Another sequel to an old blogpost, in this case “We Wuz Robbed”, 8/7/12, and again the plot is theft by deceit. Replacing as villain the improbably-named but larcenously-inclined Yuri Debevc Derivium, we have the equally larcenous Dariusz Potok. Starring as victims-taxpayers in 2013 T. C. Memo. 66,  filed 3/5/13, let me present James M. Urtis and Gaetana R. Urtis. And our host for this tale of woe is Judge Goeke.

Jim and Gae need more space for their six-child family, and hire Onyks Construction, an Illinois corporation, to demolish a large part of their old house and build a massive extension. The aforesaid Dariusz is the boss of Onyks, and absconds with about $400K of Jim and Gae’s cash, fobbing them off with excuses, a cancelled insurance policy (which Jim and Gae have to sue to get) and finally by dying with his toxicologic status unresolved.

Jim and Gae sue, as aforesaid, but all they get is $10K nuisance value from the insurance carrier. Jim and Gae take a $188K theft loss in the year they discover that Dariusz’s corporations have been dissolved and no probate or administrative proceedings have been begun for the estate of the late Dariusz.

IRS claims (a) no theft and (b) if there was one, it was in the year before Jim and Gae took the loss on their 1040.

State law governs what is theft, and Judge Goeke finds the Illinois statutory offense of home repair fraud defines what Dariusz did as theft. Judge Goeke: “Respondent [IRS] argues that petitioners failed to prove that Mr. Potok’s improper taking of their money was anything more than ‘a failure to comply with the terms of the construction agreement.’ We disagree.

“It is clear that by virtue of his criminal fraud Mr. Potok induced petitioners to enter into a contract which allowed him to obtain significant funds from them. Nearly half of those funds ($188,070) were then improperly used for purposes other than construction on petitioners’ home. We will not attempt to distinguish Mr. Potok’s criminal intent in causing petitioners to enter the contract from his intent in taking the improperly used $188,070 from them; we believe these intertwined actions were part of a scheme by Mr. Potok to wrongfully obtain funds belonging to petitioners. We therefore find that petitioners were the victims of a “theft” as that term is defined for purposes of section 165 and may claim a theft loss deduction under that section.” 2013 T. C. Memo. 66, at p. 14.

Next, IRS relies on a pre-trial letter Jim wrote that seems to say he knew the year before he’d get nothing back from the late Dariusz, his estate or anyone else. Now Jim is a lawyer, and that should tell against him, but Judge Goeke brushes the letter aside.

“We do not assign a great deal of weight to Mr. Urtis’ letter. The letter was written to explain the ways in which petitioners sought to recover from Mr. Potok, Onyks Construction, and Essex Insurance. In doing so, the letter focuses on the ways in which recovery was attempted and is vague or simply incorrect about the dates involved and the order of events.” 2013 T. C. Memo. 66, at pp. 19-20.

Apparently Jim was a plausible witness on the trial. Still, be careful what you write to IRS; everything you say can and will be used against you.

So Jim and Gae win. They wuz robbed.

My long-suffering readers will remember Lucy Gabey, Navajo tribal elder and sole support of her clan-nephew, who starred in my blogpost “Losing My Religion”, 1/17/13; Lucy has a disciple, George Thompson, who features in 140 T. C. 4, a full-dress opinion filed 3/4/13.

Geo files a Section 6330 petition after Appeals bounces his proposed partial pay installment agreement because he included his tithe to his Church (with a capital “C”) in his necessary living expenses. Geo claims this violates the First Amendment to the Constitution and the Religious Freedom Restoration Act of 1993 (RFRA”), Pub. L. No. 103-141, sec. 3, 107 Stat. 1488 (current version at 42 U.S.C. sec. 2000bb-1(a) and (b) (2006)), just like Lucy G.

Geo is a pious fellow. Judge Ruwe explains: “Petitioner has been a member of the Church of Jesus Christ of Latter-Day Saints (Church) his entire life and has regularly contributed 10% of his monthly income to the Church. Petitioner is actively involved in the Church and holds a position as a shift coordinator in the Church’s Manhattan Temple. Additionally, petitioner is a stake scouting coordinator for the Church and is responsible for overseeing six scout troops in different congregations in New Jersey. Petitioner was not compensated by the Church for his shift coordinator or stake scouting coordinator responsibilities.” 140 T. C. 4, at p. 3.

Geo’s present problems are his TFRPs for the business entity he controls through a trust with his wife. He’s got $150K in current TFRPs, plus a previously defaulted installment agreement for personal taxes for a bunch of years and previous TFRPs, amounting to $731K, for a total of about $888K. Apparently rendering unto Caesar isn’t part of Geo’s religion.

Based on what Geo offered in his partial pay installment plan ($3K per month), it would take 24 years for Geo to pay off what he owes. Appeals offered Geo $8K per month, which Geo rejected, even though it would take nine years for Geo to pay off at that rate.

Tax Court doesn’t rewrite installment plans. If underlying liability is not at issue (and it isn’t), “arbitrary, capricious or contrary to law” is the rule.

Judge Ruwe: “The Commissioner has created guidelines for settlement officers to follow in determining the terms of a partial payment installment agreement for a taxpayer who cannot fully pay his liability but can pay some of it.

“In evaluating a taxpayer’s ability to pay, the Commissioner classifies a taxpayer’s expenses into two categories: (1) necessary expenses and (2) conditional expenses.” 140 T. C. 4, at p. 12.

If a taxpayer requests a partial payment installment agreement, which is what Geo wants, taxpayer is only allowed what expenses s/he needs to live, per the IRS regional guidelines.

Judge Ruwe again: “This issue involves whether petitioner’s asserted religious obligation to tithe can trump his obligation to pay substantial amounts of delinquent penalties and taxes. Petitioner does not meet the requirements of sec. 6159(c), which if met would require respondent to enter into a full payment installment agreement in a reasonably prompt manner. Petitioner introduced evidence, including a biblical passage from the Old Testament, to support his position. See Malachi 3:8-10. This brings to mind another biblical passage suggesting an answer to this type of dilemma: “Render therefore to Caesar the things that are Caesar’s, and to God the things that are God’s.” Matthew 22:21. However, even this formulation presents the dilemma of determining which things fall into the two respective categories. While we may be incapable of determining what belongs to God, we believe that we can, and must, decide what is Caesar’s. Therefore, we will consider this issue using the latter approach based on existing procedures and precedents.” 140 T. C. 4, at pp. 12-13.

Geo fails the test. His tithing may be necessary for his employment, but as he isn’t being paid that doesn’t count, notwithstanding a letter from his Bishop (with a capital “B”), which though admitted into evidence without objection is not deemed to be an official Church (with a capital “C”) position.

And as for his spiritual well-being, Tax Court doesn’t go there, and there’s copious Supreme Court learning on that score.

Finally, our friend “least intrusive” under RFRA. Geo is a long-time nonpayer, everyone agrees that collection of taxes is necessary, and Tax Court decides that Geo and his Church (with a capital “C”) cannot trump governmental functions.

So Geo, say hello to Lucy.

Tax Court gives second chances today, a no-opinion day. If you don’t want to play, however, you’re out. See my blogpost “We’ll Come to You–Yet Again”, 1/3/13, for an example of a second chance.

Here’s an example of a second chance not taken. See Judge Gale’s latest, Gordon F. McCaleb, Deceased, Docket No. 656-12S, filed 3/1/13.

You’ll remember that the late Gordo was fighting over a $4K deficiency plus an accuracy penalty when the clock ran out on him personally, but not on his case. Judge Gale sent an offer to join the dance to the late Gordo’s heirs-at-law, complete with copies of the relevant State law.

In the meantime, IRS concedes the penalty, but the heirs-at-law jointly and severally pass on the invitation, and Judge Gale determines the petition didn’t raise any substantive issues anyway, so he dismisses for want of prosecution.

Today’s a big day for second chances in Tax Court, though,  so The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, Mark V. Holmes, does a designated hitter in Alison T. O’Neil, Petitioner, and Michael J. O’Neil, Intervenor, Docket No. 28711-09. This is a Rule 161 motion, which “are good tools for ‘correcting substantial errors of fact or law and allow[ing] the introduction of newly discovered evidence that the moving party could not have introduced, by the exercise of due diligence, in the prior proceeding.’ Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998).” Order, p. 1.

Of course, Judge Holmes finds Alison has nothing new, but must cruise through his de novo findings on Alison’s innocent spouse claim, because Alison lived in California when this case started.

Judge Holmes: “And, because of the Ninth Circuit’s recent decision in Wilson v. Commissioner, ___F.3d___, 2013 WL 174395 (9th Cir. Jan. 15, 2013), aff’g T.C. Memo. 2010-134, it is the ‘de novo’ portions of our opinion–and not the portions where we reviewed the Commissioner’s exercise of his discretion–that we discuss.)” Order, p. 1.

For those who tuned in late, Ninth Circuit decided in Wilson that Tax Court had jurisdiction to consider matters outside the administrative record in reviewing an innocent spouse denial, following Eleventh Circuit. Judge Bybee dissented, saying the Administrative Procedures Act prevents this; Tax Court is limited to reviewing what IRS did with the evidence it had for abuse of discretion.

So Judge Holmes looks at Alison’s story, finds nothing new, and “( S)ome of the remaining discussion in Ms. O’Neil’s motion (her health as a factor that the Commissioner improperly considered in issuing the notice of determination, and her suggestion of remand to the IRS) are no longer tenable after Wilson. See Wilson, ____ F.3d______ at_______,  2013 WL 174395, at *8, *11.” Order, p. 3.

No second chance for Alison, either.