In Uncategorized on 07/03/2013 at 15:30

Specifically to Mr. J. P. Finet, now or formerly legal editor of BNA Daily Tax Report (n/k/a Bloomberg BNA, as our Mayor’s corporate octopus has entangled BNA), who brought the Coffey case to my attention back in December, 2011. See my blogpost “Somebody Does Read This Blog”, 12/4/11.

Well, my comment on Coffey may have been short-lived, but not the case, as witness Melissa Coffey Hulett a.k.a. Melissa Coffey, Et Al., Docket No. 30676-09, filed 7/3/13, a designated hitter. And who is more fit to wade through the silt stirred up by this latest tale from our insolvent Islands in the Sun but The Great Dissenter, a.k.a The Judge Who Writes Like a Human Being, His Honor Mark V. Holmes?

Yes, it’s back to the Virgin Islands and Section 932. You’ll remember my exegesis anent Arthur I. Appleton, Jr., Petitioner, and The Government of The United States Virgin Islands, Intervenor, 140 T. C. 14, filed 5/22/13, when IRS lost on SOL grounds.

Mr Finet thought back in December, 2011, that Coffey’s case differed from Appleton’s in point of the Virgin Islands government’s right to intervention. It didn’t, but Judge Holmes says it differs based on whether la famille Coffey were bona fide residents of the VI.

See my blogpost “The Non-Virgin Islanders”, 3/13/11, the tale of la famille Vento, whose plight was confirmed by Third Circuit earlier this year.

Judge Holmes, once again disdaining the partitive genitive: “A very considerable chunk of the stack of motion papers from the Coffeys, the Commissioner, the Government of the Virgin Islands, and a couple amici curiae is made up of arguments about whether the Coffeys fit within the exception of section 932(c) that would let them file with the Virgin Islands alone. That argument focuses on section 932(c)(4)–the Commissioner contends that 932(c) makes a taxpayer who fails to perfectly report her income tax liability or fully pay her income-tax bill or correctly conclude that she’s a bona fide Virgin Islands resident have to file with both the IRS and the Virgin Islands, just as she would if she wasn’t a Virgin Islander at all. Everybody else who filed papers disagrees with the Commissioner, and just over a month ago, so did we. In Appleton v. Commissioner, 140 T.C.__,__(slip op. at 31-32)(May 22, 2013), we held that although the Commissioner was correct in arguing that a taxpayer who doesn’t meet all the requirements of section 932(c)(4) ‘falls back into the Federal reporting and payment regime,’ that regime directs him to file his return with the Virgin Islands Bureau of Internal Revenue, not the IRS.

“There’s one big difference between Appleton and the Coffeys’ cases: Everyone agreed that Appleton was a bona fide Virgin Islands resident. That is not true here: The Commissioner specifically determined in the notice of deficiency that Judith Coffey was not a bona fide resident for the 2003 and 2004 tax year.” Order, at p. 2 (Footnote omitted, but it says that since Judy has the higher AGI, her residence is the one that counts for tax residence on a joint return).

Since the Form 1040 instructions for the years at issue told the Coffeys to file both with IRS and BIV if not bona fide VI residents, SOL hasn’t run against IRS if Judy wasn’t bona fide.

But bona fide depends, as Vento teaches us, upon an eleven-factor test, divided into four groups, which said groups are “taxpayer’s intent; taxpayer’s physical presence; taxpayer’s social, family, and professional relationships; and taxpayer’s own representations; see also Appleton, slip op. at 11 n.9 (citing Vento); cf Huff v. Commissioner, 135 T.C. 222, 227 n.1.” Order, at p. 3.

But neither the Coffeys nor IRS put anything about Judy’s bona fides in their moving papers. Now that’s not their fault, as they were fighting the Appleton battle before Appleton was decided, so they couldn’t know.

But since summary judgment, which is what the parties are asking for, is issue-finding and not issue-determination, there is a big materially-factual issue. Was Judy a bona fide VI resident during the years at issue? So it’s time for the drivers’ licenses, the library cards, the club memberships and all that jazz.

Mr Finet, please copy.


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