In Uncategorized on 07/15/2013 at 23:09

As we reach the midsummer All-Star break, I am reminded of an axiom every batter learns in his or her earliest hour: make the pitcher throw pitches. If she or he throws enough of them, one of them will be the pitch you want.

The corollary extends to Tax Court, as Judge Chiechi teaches in John D. Nye and Rose M. Nye, 2013 T. C. Memo. 166, filed 7/15/13.

Raise every issue you possibly can in your petition, and argue it in your brief, even if your case is as thin as a spider’s web (just don’t be frivolous). Make IRS, and Tax Court, deal with every issue. Make ‘em throw pitches.

The case itself is another of the alimony night-of-the-living-dead cases. John settles with ex-spouse Alice for a $350K lump-sum payout, but the question is what would happen if Alice dies after the revised judgment of divorce is entered in FL county court, but before the payout actually happens?

It’s the old Section 71(b)(1)(D) problem, and Judge Chiechi grants IRS summary judgment.

I’m finding fault with the Court’s rationale, as it’s based upon an intermediate FL appellate court case. Judge Chiechi relied on dictum, as the court in that case didn’t need to reach the conclusion that the obligation to pay survived, in denying the deceased spouse’s executor’s petition to modify that divorce decree. In fact Judge Chiechi admits that the intermediate appellate court said several times it wasn’t going there. See 2013 T. C. Memo. 166, at p. 17, footnote 15.

So Judge Chiechi falls back on general contract law statements. But as we learned in James F. Moore, 2011 T. C. Memo. 200, filed 8/16/11, “(I)f State law is ambiguous in this regard, however, a ‘federal court will not engage in complex, subjective inquiries under state law; rather, the court will read the divorce instrument and make its own determination based on the language of the document.’ Hoover v. Commissioner, 102 F.3d 842, 846 (6th Cir. 1996), affg. T.C. Memo. 1995-183.” 2011 T. C. Memo. 200, at p. 6. And see my blogpost “Essmiss Essmoore, Essmiss Essmoore,” 8/16/11.

I submit State law was ambiguous on the specific point, the State’s highest court not having ruled on the point.

Howbeit, that’s for John and his lawyer to sort out, if they appeal.

What I want to stress, though, is that John’s lawyer never contested the Section 6662 accuracy penalty, even though Judge Chiechi asked for supplements to the parties’ papers. “In fact, petitioners alleged in the petition that ‘[t]he only issue is the deductibility of the $350,000 as alimony.’” 2013 T. C. Memo. 266, at p. 8, footnote 6.

So when she ruled against John on the deduction, the penalty was automatically included. See my blogpost “An Interest(ing) Question – or Two”, 6/11/13, wherein I said “And their lawyers should write on the blackboard 100 times: I will raise every error I can possibly conceive of in every petition I file.”

In fact, in James F. Moore, which I cited supra, as the high priced lawyers say, IRS conceded the penalty. But James’ lawyer obviously contested the penalty. Here, John’s lawyer (who also represented him in the divorce) didn’t.

As I’ve suggested in the analogical child-support Section 152 situation, some lawyer will get in trouble if his/her client doesn’t get what they expected. See my blogpost “Moody Blues”, 9/19/12.


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