Archive for May, 2013|Monthly archive page


In Uncategorized on 05/20/2013 at 17:40

And Gets An Answer

Courtesy of Judge Ruwe, in Julie Beiler Zook, 2013 T.C. Memo. 128, filed 5/20/13, we get a partial answer to the question I posed in my blogpost “Youth Wants To Know”, 4/24/13, wherein I asked Judge Thornton why he dropped the Big Hammer, the $25K Section 6673 frivolity penalty, on hapless Laurel Ann Curtis.

Judge Ruwe only deals a $2K on Julie B., but tells us why.

“Petitioner attended the CDP hearing with her husband and two other family members. Petitioner acknowledged that she received the notice of deficiency. Petitioner did not request a collection alternative. Petitioner’s husband argued that she did not receive proper notice from the Commissioner and that the assessments were not constitutional.” 2013 T. C. Memo. 128, at p. 3. (Footnote omitted, but apparently Julie B.’s husband got shown the yellow card back in 2008, in an order denominated Zook I, when he pulled a similar maneuver. It would seem that one spouse’s delictions may be attributed to the other.).

After the usual recitation of SFR, deficiency, failure to petition, NFTL, CDP and Appeal, NOD and petition, with de novo and abuse-of-discretion review, Judge Ruwe cuts to the chase.

“The notice of determination advised petitioner that this Court may impose the section 6673(a)(1) penalty against her if she raises frivolous or groundless arguments. Petitioner did not heed this advice and made the following arguments in her amended petition and in her opposition to motion for summary judgment: (1) she was not properly served with notice under section 6001; (2) the SFRs constitute evidence of computer fraud and are a fraud on this Court; (3) the notice of deficiency is a nullity and constitutes evidence of mail fraud; (4) the notice of Federal tax lien is a nullity and constitutes evidence of mail fraud; (5) respondent is “exercising such powers through an officer other than the officer specified in law” and “in the absence of proof of jurisdiction”; and (6) “[p]etitioner received no ‘income’”, citing Eisner v. Macomber, 252 U.S. 189 (1920), Doyle v. Mitchell Bros. Co., 247 U.S. 179 (1918), and Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921). The amended petition included many of the same arguments the Court deemed frivolous in Zook I (“The petition set forth various frivolous arguments”.).” 2013 T. C. Memo. 128, at pp. 8-9. (Footnote omitted).

Julie B., that’ll cost you $2K, with more to come if you don’t mend your ways.

Takeaway–Judge Ruwe gave us a pricelist for frivolity. It’s all à la carte.



In Uncategorized on 05/17/2013 at 16:32

An old bugbear of mine is the lack of a single court with nationwide jurisdiction to which appeals from Tax Court may be taken, and whose decisions must be followed by Tax Court. Golsen v. Commissioner, 54 T. C. 745 (1970), aff’d on o/grds 445 F. 2d 985 (10th Cir. 1971) initially confines appellants to the decisional law of the Circuit wherein Tax Court had jurisdiction over the taxpayer when the case was tried (absent contrary agreement, which happens so rarely as to be negligible).

So STJ Daniel A. (“Yuda”) Guy can’t help out poor confused, stressed and traumatized Johnny Steven Vallejo, because Johnny can’t claim fraud and that’s all Ninth Circuit will allow to set aside the stipulated decision Johnny entered into. See my blogpost ‘Confused, Stressed and Traumatized”, 4/9/13.

But had Johnny Steven quitted the Golden State, he might have done better.

Ch STJ Peter Panuthos has a different take in Francisco & Maria Goncalves, Docket No. 9831-10S, a designated hitter filed 5/17/13.

Francisco and Maria lived in the Bay State.

“In addition to fraud on the Court, there are some other narrow exceptions to finality. Thus, this Court and some Courts of Appeals have ruled that this Court may vacate a final decision if that decision is shown to be void, or a legal nullity, for lack of jurisdiction over either the subject matter or the party. See Billingsley v. Commissioner, 868 F.2d 1081, 1084-1085 (9th Cir. 1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988); Brannon’s of Shawnee, Inc. v. Commissioner, 69 T.C. 999 (1978). We also have authority to correct a clerical error discovered after the decision has become final. Michaels v. Commissioner, 144 F.3d 495 (7th Cir. 1998), af[‘g T.C. Memo. 1995-294; see also Fed. R. Civ. P. 60(a). The Court is satisfied that a clerical error was made by the Court, and was discovered after the decision in this case became final. Thus, we will vacate the Order of Dismissal and Decision entered June 30, 2011.” Order, at p. 2.

Here the Court had the wrong address for the petitioners, so all the notices went astray.

Time for one size fits all.


In Uncategorized on 05/17/2013 at 15:46

Not, not another single parent of a disabled child taking on the IRS, whose counsel seemed not to be current on the law (see my blogpost “Read the Law”, 9/12/11), but the case of a Tax Court admittee  who needs that admonition.

 It’s Herb Vest, Docket No. 30510-12, filed 5/17/13, Ch. J. Colvin at the controls.

Herb timely filed his petition, but before he did that he filed a petition in bankruptcy and the automatic stay was still in effect.

So IRS moved to dismiss pursuant to 11 USC §362(8). “Petitioner opposes the granting of respondent’s motion to dismiss on two grounds: (1) the Fifth Circuit has held that a stay pursuant to 11 U.S.C. 362(a)(1) does not necessarily bar all proceedings; and (2) petitioner fears that he would be ‘statutorily barred from bringing a Petition for Redetermination in Tax Court’ if the case is dismissed rather than stayed.” Order, p. 1.

Ch Judge Colvin: “As an initial matter, petitioner–represented here by counsel admitted to practice before the Court–is reminded of the applicability of I.R.C. section 6213(f)(1), which provides that the running of time for filing a Tax Court petition is suspended during the time the automatic stay prohibits the filing of a Tax Court petition, and for 60 days thereafter. The automatic stay is lifted upon the earliest of (1) the date the bankruptcy case is closed, (2) the date the bankruptcy case is dismissed, or (3) the date a bankruptcy discharge is granted or denied. 11 U.S.C. sec. 362(c)(2).” Order, at p. 1.

Ch Judge Colvin continues the lesson: “Second, and perhaps more directly to the point of petitioner’s opposition, is that respondent’s motion is being made pursuant to 11 U.S.C. section 362(a)(8), not 11 U.S.C. 362(a)(1). In fact, 11 U.S.C. section 362(a)(8) specifically prohibits ‘the commencement or continuation of a proceeding before the United States Tax Court’. Order, at pp. 1-2.

Petition dismissed.

Automatic admittee, ya think?




In Uncategorized on 05/17/2013 at 15:02

From IRS website 5/16/13, at

“Fee amounts collected for scheduled registered tax return preparer test appointments canceled due to the court ordered injunction are being refunded. Additionally, fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined, are also being refunded. No additional refund or reimbursement requests related to registered tax return preparer regulation are being provided or considered at this time. E-mail notifications will be provided to those receiving refunds to explain the process. No action is necessary to receive the refund. A credit for the test fee will automatically be made to the account used to pay the fee. It is anticipated that all refunds will be processed by July 19, 2013.”



In Uncategorized on 05/16/2013 at 15:55

As the late great Yul Brynner so eloquently put Oscar Hammerstein II’s words in the 1951 smash-hit “The King and I”, STJ Lewis (Love That Name) Carluzzo confronts a similar predicament. No great legal principles here, but a good example of what a 19-year veteran STJ must deal with.

IRS’ NOD to Phil Filet Davis-Windsor, in Docket No. 15962-12L, filed 5/16/13, doesn’t sustain the proposed levy based on a Section 6702 frivolity penalty. So Phil Filet won, right?

It would seem so, but Phil Filet petitions nevertheless, although STJ Lew is at a loss to figure out why, because Phil Filet’s petition doesn’t enlighten him.

And IRS moves for summary judgment sustaining its determination that Phil Filet is off the levy hook. Of course, Phil Filet objects.

See my blogpost “You Won, Go Home”, 9/13/12. But there the taxpayer had an argument, although a losing one. Here, Phil Filet has nada.

“Taking into account the determination made in the notice and statements contained in the pleadings, the issue presented in this case can be stated as follows: whether respondent’s determination not to sustain the proposed levy in order to collect the underlying liability is an abuse of discretion. Adjudication of this issue in respondent’s favor, of course and in effect, is adjudication in petitioner’s favor as well. This point appears to have been lost on petitioner because, as noted, he objects to respondent’s motion. Petitioner’s objection, however, is no more informative than his petition.

“Be that as it may, and making what sense that we can from what has been submitted, we are satisfied that respondent has proceeded as required by section 6330(d) and nothing submitted by petitioner suggests otherwise.” Order, p. 2.

So summary judgment, and Phil Filet, you won, go home.




In Uncategorized on 05/15/2013 at 16:15

Tax Court will not assist a taxpayer in preparing his return. One might have mistakenly come to that conclusion by reading STJ Lew (Spell It Right) Carluzzo’s opinion in Loretta Lea Wanat, T. C. Sum. Op. 2012-92, filed 9/17/12, or my blogpost “Tax Court As Preparer?”, 9/17/12.

But Judge Morrison isn’t having any in Diep N. Hoang, 2013 T. C. Memo. 127, filed 5/15/13.

Diep claims he thought he was an accrual-basis taxpayer when he filed his first petition for tax year 2001, and Judge Vasquez disabused him of that notion.

So when he filed his next petition (late) for the “deficiency of $5,188,587 in federal income tax for 2006, a section 6651(a)(1) addition to tax of $1,297,533.50, and a penalty under section 6662(a) of $1,037,717.40.” 2013 T. C. Memo. 127, at pp. 1-2, he thought that Tax Court would tell him how to do it right.

Not quite, Diep. Diep tried to get into evidence some obviously altered brokerage statements and an explanation why he filed late, but Judge Morrison barred that.

And when Diep tried to avoid the Section 6662(a) penalties, Judge Morrison relegated Diep’s argument to a footnote: “According to the explanation (and to another document fragment and court papers), the Tax Court failed to assist Hoang in preparing his tax returns after the 2001 deficiency case was decided and, as a result, Hoang no longer had to file federal income tax returns. The Tax Court is not required to assist taxpayers in preparing their tax returns; taxpayers who do not receive such assistance are not absolved of their obligation to file federal tax returns. It would have been unreasonable for Hoang to believe that he had been absolved of his filing obligations. Such a belief would not constitute reasonable cause for failing to timely file his tax return.” 2013 T. C. Memo. 127, at p. 32, footnote 45.

Diep, next time you need to file a tax return, try a good tax professional; just not one in a black robe.


In Uncategorized on 05/15/2013 at 13:22

Harkening back to my youthful days On The Hill Far Above, I remember the late Professor I. R. MacNeil (the 46th MacNeil of Barra, “The Professor”) drumming into our heads the necessity of doing cite and substance checking in briefs and memoranda. I gratefully acknowledge all that he taught me, both about being a lawyer and being a man.

Incidentally, the clan history states: “ He was said to have been a well respected person by the residents of Barra, and that he took genuine interest in the life of the island and its inhabitants.” I certainly respected him, and honor his memory.

Old habits never die. I did some cite and substance checking on a Tax Court Order today, and Judge Wells’ chambers told me they will be correcting and reissuing the Order in Lorraine C. & Marvin T. Boyd, Docket No. 1780-12L, filed 5/15/13.

In the Boyd Order, Judge Wells cited to 2013 T. C. Memo. 57, filed 2/21/13. But that opinion had to do with Alfred Q. Campbell, III. I didn’t do a blogpost on that opinion, because it was the usual fact-driven opportunity-to-contest meets arbitrary-and-capricious CDP, with little to add to the accumulated learning thereon.

What Judge Wells meant to cite was his opinion in 2013 T. C. Memo. 100, filed 4/11/13, concerning Boyd, likewise a CDP with like issues.

I took the liberty of calling Chambers and letting the Judge’s people know. They promptly returned my call and told me they were putting things right.

Thanks again, Professor MacNeil.


In Uncategorized on 05/14/2013 at 16:00

No opinions or designated orders out of Tax Court today, 5/14, so I was going to take the day off. But I thought I’d give my loyal readers something, and there was that opinion filed 5/13/13 by The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, His Honor Mark V. Holmes, Edmond Audrey Heinbockel and Lydia Rose Heinbockel, 2013 T. C. Memo. 125, filed 5/13/13.

Now I skipped those 76 pages of Judge Holmes’ colloquial prose yesterday in favor of Alexander (the Friend) Salvagno (see my blogpost “Quo Usque Tandem Abutare, Alexander, Patientia Nostra?”, 5/13/13) and Judge Kerrigan’s three-page exegesis of the life and miracles of Raul and his next friend son Alexander.

And the tale of E. Audrey and Lydia is the usual story of want-of-documentation, hobby-disguised-as-business (Section 162 meets Section 183) with Section 274 thrown in, and self-serving trial testimony, so that there’s really little to “long detain the tourist”, as Michelin (or was it Baedecker?) used to say.

But for want of better subject for a rant, I again deplore Judge Holmes’ war on the partitive genitive: c’mon Judge, a Harvard Law graduate perpetrating solecisms like “making a couple loans to one’s brother” (2013 T. C. Memo. 125, at p. 32), and “no more than a couple hundred dollars“ (2013 T. C. Memo. 125, at p. 57) crosses the line from colloquial to illiterate.

Do you ask for  “a cup coffee” or “a piece cake”, at the Tax Court cafeteria?

And y’all are capable of better, as witness your dissents in  Randall J. and Karen G. Thompson, 137 T. C. 17, filed 12/27/11(see my blogpost “The Great Dissenter”, 12/28/11), and Tigers Eye Trading, LLC, Sentinel Advisors, LLC, Tax Matters Partner, 138 T. C. 6, filed 2/13/12 (see my blogpost “The Great Dissenter – Part Deux”, 2/15/12).

Now to the opinion. One point worth noting is the burden of proof shift where new matter is introduced, an anti-ambush provision.

Judge Holmes: “After a case has begun, Rule 142(a) places the burden on the Commissioner ‘in respect of any new matter, increases in deficiency, and affirmative defenses, pleaded in the answer.’ However, we distinguish between new matters and new theories. See Hurst v. Commissioner, 124 T.C. 16, 30 (2005). ‘[W]e have held that for respondent to change the section of the Code on which he relies does not cause the assertion of the new theory to be a new matter if the section relied on is consistent with the determination made in the deficiency notice relying on another section of the Code.’ Id. (citation and internal quotation omitted). A ‘new matter’ is one that reasonably would alter the evidence presented. A ‘new theory,’ in contrast, is just a new argument about the existing evidence. Id. Although the notice of deficiency challenged virtually all of Collective Flight’s 2007 expenses, proof that a business is engaged in for profit is reasonably likely to require the presentation of evidence different from that required to prove that expenses should be allowable because they’re ordinary and necessary. We give the benefit of the doubt to the Heinbockels here, and construe the Commissioner’s new argument for 2007 as a new matter (not just a new theory), and therefore shift the burden to him for that year.” 2013 T. C. Memo. 125, at pp. 19-20.

Doesn’t much matter, though; E. Audrey and Lydia get some deductions, but most of what they claimed gets shot down. I won’t tease it all out, but read the extracts of their testimony Judge Holmes quotes, especially Lydia’s.

As the great trial lawyer Henry Miller has said, “when the witness’ testimony sends your client’s case down the drain, smile your most winning smile, as if this is just what you wanted to hear.” It beats putting your head down on the counsel table and sobbing loudly.


In Uncategorized on 05/13/2013 at 13:49

I Need Not, Of Course, Translate

This is the sequel to my blogpost “With Friends Like Him”, 2/26/13. Judge Kerrigan, the embodiment of long-suffering forbearance, finally loses it after six years of masterful inaction by Raul Salvagno and his next friend, Alexander Salvagno, in Raul Salvagno, Incompetent, Alexander Salvagno, Next Friend, Docket No. 16800-07, filed 5/13/13.

I offer this gem as an example of how far procrastination and dodging can carry a taxpayer, and in rebuttal of the oft-times stated jibe that Tax Court is hostile to taxpayers.

Raul is an incompetent because “Petitioner is a 74 year old incarcerated person serving a 20 year sentence at FCI Otisville.” Order, at p. 1. For those of you on the right side of the law, FCI (Federal Correctional Institution) Otisville is a medium-security (with a satellite low-security) facility 70 miles northwest of the Big Apple. Raul’s delictions aren’t stated, but we can assume they have a certain substance if he’s doing 20.

Enter Alexander, the frequenter of law libraries. In Sir William Schwenk Gilbert’s immortal words, like the House of Peers, Alexander “Did nothing in particular, And did it very well”.

Judge Kerrigan: “The Court notes that in the almost 6 years this case has been pending, the Court has repeatedly denied respondent’s motions to dismiss for failure to properly prosecute to provide petitioner with an opportunity to prosecute his case, as a pro se petitioner, through his next friend, or through counsel. Petitioner has not availed himself of those opportunities. Petitioner, whether individually or through his next friend, has been repeatedly non-responsive to the Court’s Orders, and non-compliant with the Tax Court Rules of Practice and Procedure, despite multiple warnings that failure to comply with either the Rules or the Court’s Orders could result in the dismissal of this case. See, e.g., Rules 123(a) and (b). During the time this case has been pending: (1) the matters contained in respondent’s Requests for Admissions were deemed admitted because of petitioner’s failure to respond; (2) the facts as set forth in respondent’s Motion to Show Cause Why Proposed Facts and Evidence Should Not Be Accepted as Established were deemed established for the purposes of this case due to petitioner’s failure to either respond to the Court’s Order to Show Cause dated September 12, 2012, or to participate in the stipulation process (frequently referred to as ‘the bedrock of Tax Court practice’; and (3) petitioner has not presented any documentation or other evidence to support any claim that respondent’s determinations are incorrect, see Rules 142(a), 149(b); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 (1933).” Order, at p. 2. (Citations Omitted).

And the IRS has been uncommonly kind to Raul and Alexander: “As respondent explained during the trial session of the Court held October 22, 2012: in the last five years, Respondent has made every attempt to communicate with Petitioner or Petitioner’s next friend in preparation for seven different trial calendars. These communication attempts include numerous telephone calls, eight letters informally requesting information, two sets of requests for admissions, one set of interrogatories, a request for documents and a proposed stipulation of facts. None of which — of these have been — has been substantially responded to by Petitioner or Petitioner’s next friend.” Order, at pp. 2-3.

And IRS even concedes the Section 6654(a) underpayment penalty.

But now Judge Kerrigan tosses the Salvagnos, and dismisses the petition for failure to prosecute.



In Uncategorized on 05/10/2013 at 16:01

Judge Foley (“MightyMo” to his many friends) excoriates IRS in a designated hitter, 5/10/13, Anonymous 1 and Anonymous 2, Docket No. 12472-11W.

Remember the Anonymous Duo? No? Well, check out my blogpost “Your Name Is Not Your Fame”, 11/2/12, where Mighty Mo blew off the Anonymous Duo because IRS said they didn’t use the info the Anonymous Duo put on their Forms 211, saying “didn’t use the info and didn’t get any cash.” So MightyMo gave IRS summary judgment tossing the Anonymous Duo.

May I claim prophetic vision, as I wrote at the end of the aforementioned blogpost: “I know it’s a waste of time asking Congress to do anything; they can’t stop the country from falling off the fiscal cliff they created, much less clean up the whistleblower provisions of the Internal Revenue Code. But this charade really has to stop.”

Well, Congress didn’t, but IRS reopened the matter on its own hook, apparently, and sent the Anonymous Duo a letter so stating. So the Anonymous Duo move to vacate the summary judgment they lost, and IRS opposes.

“Respondent reopened petitioners’ original award claims, yet requests that the Court deny petitioners’ motion. Furthermore, respondent states that ‘The Court’s Order and Decision specifically made reference to the petitioners’ information and respondent’s subsequent investigation; the Court granted respondent’s Motion for Summary Judgment, aware of that possibility.’ Respondent’s statement is misleading. The Court was aware that respondent opened a subsequent investigation, however, respondent assured the Court that the SB/SE investigation was independent and that the information petitioners provided in their original Forms 211 was not being used. Moreover, respondent did not inform the Court that he was considering subsequent action relating to petitioners’ original award claims.” Order, at p. 2.

Now for the good part: “It appears, despite respondent’s assertions to the contrary, that the information provided by petitioners in their original Forms 211 has been used by respondent in the SB/SE investigation. Furthermore, respondent has repeatedly failed to provide the Court with relevant information: respondent failed to timely inform the Court about the SB/SE investigation, failed to inform the Court that respondent was considering reopening petitioners’ original award claims, and, most egregiously, failed to inform the Court that respondent did, in fact, reopen petitioners’ original award claims. We do not know whether these failures were the result of bureaucratic confusion or ineptitude. We do know, however, that the obfuscation surrounding this matter has either been caused or exacerbated by respondent.” Order, at pp. 2-3,

Now the Anonymous Duo’s Rule 162 vacate-or-reverse motion is filed way later than the thirty-day requirement. “Motions to vacate are generally not granted absent a showing of unusual circumstances or substantial error (e.g., mistake, inadvertence, surprise, newly discovered evidence, fraud, or other reason justifying relief).” Order, at p. 3. (Citations omitted).

But this case is pretty unusual, ya think?

Anyway, Mighty Mo thinks so, and his thought is what counts: “The Whistleblower Office’s reopening of petitioners’ original award claim is an unusual circumstance. Furthermore, respondent provided the Court with incomplete, misleading, and possibly inaccurate information. Accordingly, we vacate our Order and Decision dated November 2, 2012, and conclude that respondent’s April 26, 2011, determinations were not valid. “ Order, at p. 3.

So the Anonymous Duo can wait until IRS completes its new inquiry, and if they’re unhappy with the result, they can petition afresh.

Now IRS, in the immortal words of the late great Desi Arnaz: “Lucy, you got some ‘splainin’ to do!”