Archive for August, 2013|Monthly archive page


In Uncategorized on 08/13/2013 at 18:36

No, not the way the universe will end when, according to some theorists, the universe will have expanded such that all heat will be so evenly distributed that none is left to do any work and everything stops.

No, this is the story of Dr. Woody and Dr. Kumar, two battling oncologist radiologists, and how Judge Vasquez decides Dr. Kumar’s tax fate, in Ramesh T. Kumar and Pushparani V. Kumar , 2013 T. C. Memo. 184, filed 8/13/13.

Woody and Ram were shareholders, 60-40, in a sub S. As is not unusual among partners, a dispute arose and Woody froze Ram out, told him nothing, and gave him nothing except a K-1 for $215K in ordinary business income and $2k in interest.

Of course Woody gave Ram no cash. So Ram sued, got an accounting, and settled by selling his stock to the sub S in complete redemption of his interest.

Ram never reports the business or interest income from the K-1, and IRS issues a deficiency, but following my blogpost “Don’t Get Yourself Into A State”, 5/11/11, IRS concedes the penalty.

But Ram owes the tax.

Judge Vasquez: “Petitioners argue that they are not liable for tax on [the S Corp’s] income because Dr. Kumar was not the beneficial owner of his [S Corp] shares in 2005. When the record owner of S corporation stock holds that stock for the benefit of another, such as a nominee, an agent, or a passthrough entity, then income, losses, deductions, and credits of the corporation are passed through not to the record owner but to the beneficial owner of the stock. A taxpayer is the beneficial owner of property if the taxpayer controls the property or has the economic benefit of ownership of the property. We have previously noted that cases applying the beneficial ownership test involve an arrangement between parties who had some agreement or understanding regarding their relationship with each other.” “ 2013 T. C. Memo. 184, at p. 6. (Citations and name omitted).

Ram argues that because Woody froze him out, Woody grabbed his beneficial ownership.

No go, says Judge Vasquez: “However, petitioners have not cited any cases, nor are we aware of any, where one shareholder was able to take beneficial ownership of stock away from another shareholder absent an agreement between the two shareholders or a provision in the corporation’s governing articles to that effect. On the contrary, we have held that when one shareholder merely interferes with another shareholder’s participation in the corporation as a result of a poor relationship between the shareholders, such interference does not amount to a deprivation of the economic benefit of the shares.” 2013 T. C.Memo. 184, at p. 7. (Citation omitted).

Ram and Woody never agreed. So Ram is on the hook for the tax and interest. And since he stipulated when he settled with Woody that each would bear his own tax consequences, he’s out there by himself.


In Uncategorized on 08/12/2013 at 16:26

If IRS gives you a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a Hearing, you have thirty (count ‘em, 30) days to file your petition with Tax Court. If you miss the cut-off, even if IRS later on gives you a second Letter 1058 covering the same tax(es) and same year(s), you don’t get a second chance.

But if the second Letter 1058 has new tax(es) or new year(s), your petition may be timely for those if you hit the thirty-day cut-off.

That’s the lesson Judge Vasquez teaches B. Gordon LaForge, in 2013 T. C. Memo. 183, filed 8/12/13.

And he does it in a footnote. “…a taxpayer must request a CDP hearing within 30 days of receiving the notice of intent to levy. Sec. 6330(a) and (b). Once the Secretary issues a notice of intent to levy and notice of right to a sec. 6330 hearing, a subsequent notice, more than 30 days later, that the IRS intends to levy on property of the taxpayer for the same tax and tax period as in the initial notice does not entitle the taxpayer to a sec. 6330 hearing. Sec. 301.6330-1(b)(2), Q&A-B2, Proced. & Admin. Regs.” 2013 T. C. Memo. 183, at pp. 6-7, footnote 3.

So a bunch of years are off the table. And anyway, B. Gordo doesn’t contest the tax liability, so abuse of discretion is the only test for the couple of years for which his petition was timely. Since B. Gordo’s 433-A wasn’t complete, the SO was not arbitrary in rejecting B. Gordo’s OIC or installment agreement. IRS need not keep the administrative record open indefinitely, or go hunting for what the petitioner should provide.

Takeaway–The first Letter 1058 is the hardest, but also the one you need to address–fully.


In Uncategorized on 08/09/2013 at 17:21

No, not William Empson’s 1930 classic of literary criticism; literary excellence is rarely found in the Internal Revenue Code or the regulations thereunder. Today we consider two varieties of dismissal, one from a SNOD redetermination and the other from a CDP.

First up, Jazmine M. Valte, Docket No. 8662-13S, filed 8/9/13, Ch J Thornton on deck. Jaz sends the Ch J a billet doux, stating “she wishes ‘to drop the case’ and requesting the Court to ‘discontinue everything.’” Order, at p. 1. Ch J Thornton, a stickler for proper form: “The Court will retitle petitioner’s Letter as a Motion To Dismiss.” Order, at p. 1.

Now our old friend Settles comes into the picture. See my blogpost “Dismissed!”, 5/8/12. Now Settles involved a CDP, not a SNOD, so the holding in Settles will apply to the CDP case I’ll discuss next.

But Ch J Thornton likes Judge Wells’ dicta in Settles enough to quote it: “In the deficiency context, once a taxpayer has filed a petition with the Tax Court, the taxpayer cannot withdraw that petition. See Estate of Ming v. Commissioner, 62 T.C. 519 (1974). When the Tax Court dismisses a deficiency case for a reason other than lack of jurisdiction, we generally are required by section 7459(d) to enter a decision for the Commissioner for the amount of tax determined against the taxpayer in the notice of deficiency. Id. at 522. Rule 123(d) requires that a decision entered pursuant to a dismissal on a ground other than lack of jurisdiction operate as an adjudication on the merits of the taxpayer’s case. [Fn. ref. omitted.]” Order, at p. 1.

So rather than treat Jaz’s note as consent to entry of decision, Ch J Thornton titles it as her motion to dismiss, and denies it. Now Jaz and IRS can do the entry of decision dance.

Next up, Geoffrey Weglarz, Docket No.11416-12SL, filed 8/9/13. Geoff petitioned from a NOD and IRS moved for summary judgment. Geoff moved for a continuance (that’s an adjournment), and IRS said “Okay”.

CSTJ Panuthos: “Petitioner did not file a separate objection to respondent’s [IRS’] motion for summary judgment, but it appears to the Court that petitioner’s motion for continuance contains his objections to respondent’s motion for summary judgment. The Court has not yet ruled on respondent’s motion for summary judgment.” Order, at p. 1.

Then Geoff files a motion to dismiss, stating he is unable to pay his taxes. Confused? So is CSTJ Panuthos.

“Granting petitioner’s motion to dismiss would have the effect of treating petitioner’s case as if it had never been filed. See Wagner v. Commissioner, 118 T.C. 330 (2002). Additionally, the statutory period under section 6330(d)(1) has expired in which petitioner may file (or refile) a Tax Court petition based on the Notice of Determination…. Consequently, should we grant petitioner’s motion, respondent will be able to take all appropriate collection action as provided by law.

“It is not clear to the Court that petitioner is aware of the consequences of filing a motion to dismiss, or that petitioner even intended the document he filed… to dismiss the case and allow respondent to take all appropriate collection action as provided by law. If petitioner indicates to the Court that he intended to proceed to trial rather than dismiss the case, the Court will rule on respondent’s motion for summary judgment. If the Court denies respondent’s motion for summary judgment, this case will be set for trial at a future trial session of the Court….” Order, at p. 2.

So CSTJ Panuthos tells Geoff to let him know soon whether he really intended to have his case dismissed as if it had never been filed, and let IRS levy, and if he says he doesn’t so intend, then it’s summary judgment time. But if Geoff says nothing or says he really wants the case dismissed, then IRS must tell CSTJ Panuthos if they object.

Clear? Thought not.


In Uncategorized on 08/08/2013 at 17:18

No, not the 1943 hit by the King Cole Trio, as written by the late great Nat King Cole and Irving Mills, but rather Judge Chiechi’s admonition to an attorney (who shall here be nameless) who appears to be following in the footsteps of Freddie; see my blogposts “How Not To Do It”, 11/21/12, and “Utterly Helpful”, 1/18/13.

Here’s the story, ripped from the text of the order in Farrokh E. & Minoo S. Pourmirzaie, Docket No. 12894-12, filed 8/8/13.

IRS moved to toss Farrokh & Minoo and enter decision. Judge Chiechi did, so Farrokh & Minoo move to vacate.

Judge Chiechi: “The thrust of petitioners’ motion and petitioners’ reply is that petitioners were not aware of the (1) negligence of their counsel of record (counsel), including counsel’s negligence in not appearing at the call of this case from the calendar at the Court’s May 14, 2013 trial session in San Francisco, California, and not informing petitioners until after that session concluded that this case was calendared for trial at that trial session, and (2) counsel’s lack of cooperation with respondent. Petitioners are now aware of counsel’s negligence and lack of cooperation. They should also be aware, as the Court is aware, that their counsel continues to be negligent in other ways in representing them in this case. For example, petitioners’ counsel attempted twice to file electronically petitioners’ reply. In the first such attempt, their counsel did not comply in all respects with the Court’s Order dated July 9, 2013. In the second such attempt, the document that counsel attempted to file electronically contained careless mistakes. The Court rejected each of those attempted electronic filings and required counsel to comply with the Court’s Order dated July 9, 2013, and to correct the careless mistakes contained in the second attempted electronic filing. The Court admonishes petitioners that they as well as their counsel will bear the consequences of any future negligent, uncooperative, or otherwise irresponsible and unprofessional conduct by their counsel.” Order, at p. 1.

So dismissal and decision are vacated, and get ready for trial, guys; but first, straighten up and fly right.

Yes, there were T. C. Memos today, but one of them was a disability income case with nothing new in it, and the other was a discussion of material participation in bull breeding. I’m not going there.


In Uncategorized on 08/07/2013 at 16:06

That’s the lesson from STJ Armen, the Judge With A Heart (see my blogpost “A Judge With A Heart”, 6/6/13), in James Cecil & Anne-Marie Swank, Docket No. 20448-12S, filed 8/7/13, today’s designated hitter.

IRS says the issues in this case are “whether petitioners are entitled to claim tax credits under I.R.C. § 901(a) for two specific taxes paid to the French government, the contribution sociale généralisée (“CSG” ) and the contribution pour le remboursement de la dette sociale (“CRDS”).” Order, at p. 1.

Now I have no idea what these “contributions” might be, much less whether either or both are foreign taxes creditable under Section 901.

But IRS doesn’t want those questions decided in a small-claimer, which is non-appealable and non-citable as precedent. So IRS asks to remove the small case designation and to continue the trial, because a full-dress Tax Court case is pending where the same French “contributions” are at issue, and that case has been fully briefed and submitted for summary judgment (decision as a matter of law, as no facts are disputed).

Jimmy and Anne-Marie object to IRS’ motions, but STJ Armen finds merit as to continuing (adjourning) their trial until the full-dress is decided.

“It would appear that the issue whether the CSG and the CRDS are creditable taxes under I.R.C. section 901(a) is a legal issue of first impression. It is contrary to the Court’s practice to decide legal issues of first impression in the context of small tax cases, which cases are non-appealable and non-precedential. See I.R.C. sec. 7463(b). This is particularly so when the same legal issue is pending in a regular case, which case is potentially appealable and precedential and where the issue therein has already been briefed by the lawyers for both the taxpayer and the Commissioner and is under consideration by the Court.” Order, at p. 2.

Besides, the decision in the full-dress might resolve Jimmy’s and Anne-Marie’s case without the need for any more paperwork.

And STJ Armen denies IRS’ motion to drop the small-claims designation in Jimmy’s and Anne-Marie’s case without prejudice to renewal, if later circumstances warrant (like if the full-dress case gets dropped or settled before a decision, so Jimmy and Anne-Marie can go play in the big leagues).

Tax Court doesn’t sweat the small stuff.


In Uncategorized on 08/06/2013 at 15:54

No, not Karl Marx’s 1867 assault on Truth, Justice and The American Way, but rather a couple of designated hitters by The Great Dissenter, Judge Mark V. Holmes, a/k/a The Judge Who Writes Like a Human Being, who sets out a schema for determining when a contract right is a capital asset (and therefore favorably taxed at capital gains rates when sold) or merely a funnel for ordinary income (in which case it is taxed as such when sold).

This useful refresher is found in Greenteam Materials Recovery Facility PN; Greenwaste Recovery, Inc., Tax Matters Partner, et al., Docket No. 21946-09, and its companion Greenwaste Of Tehama, PN, Zanker Road Resource Management, Ltd., A California Limited Partnership, Tax Matters Partner, Docket No 423-11, both filed 8/6/13.

The Greens sold their assets, which mostly consisted of service contracts to deal with various California municipalities’ waste, to unrelated third parties, and claimed the contracts were capital assets. IRS said no, served FPAAs, and the Greens move for summary judgment.

Of course, the Greens’ tax returns for the year in question never made it into the record, but the Greens claimed in their motion the numbers on the returns were wrong anyway, and supplied new ones. And the contracts never made it into the record either.

So there are enough fact questions to deny summary judgment off the bat, but Judge Holmes has something to say about capital assets.

“When does a sale of rights under a contract create capital gain and when does it create only ordinary income? The Code tells us that capital gain is derived from the sale or exchange of a capital asset. Section 1221 defines a capital asset as ‘property held by the taxpayer.’ (There are exceptions, but none apply here.) But caselaw has made clear that the list of statutory exceptions is not exhaustive, and there are scores, perhaps hundreds, of cases that try to draw clear lines in this especially fuzzy area — none of which petitioner cites. Still, our own research in the area cannot improve on Judge Friendly’s summary of the problem a half century ago:

[I]t has long been settled that a taxpayer does not bring himself within the capital gains provision merely by fulfilling the simple syllogism that a contract normally constitutes ‘property,’ that he held a contract, and that his contract does not fall within a specified exclusion * * *

[I]t would be hard to think of a contract more ‘naked’ than a debenture, yet no one doubts that is a ‘capital asset’ if held by an investor. Efforts to frame a universal negative, e.g., that a transaction can never qualify if the taxpayer has merely collapsed anticipation of future income, are equally fruitless; a lessor’s sale of his interest in a 999 year net lease and an investor’s sale of a perpetual bond sufficiently illustrate why * * *

* * * * * * *

One common characteristic of the group held to come within the capital gain provision is that the taxpayer had either what might be called an ‘estate’ in * * *, or an ‘encumbrance’ on * * *, or an option to acquire an interest in * * *, property which, if itself held, would be a capital asset. In all these cases the taxpayer had something more than an opportunity, afforded by contract, to obtain periodic receipts of income, by dealing with another * * *Commissioner v. Ferrer, 304 F.2d 125, 129-30 (2d Cir. 1962) (emphasis added) (citations omitted), rev’g 35 T.C. 617 (1961).” Order in Docket No. 21946-09, at pp. 3-4.

Judge Holmes goes on: “The lines are not bright in this area. In a very similar case, Foy v. Commissioner,84 T.C. 50, 69-70 (1985), we held that in determining whether the taxpayer’s contract rights that were transferred constituted a capital asset, courts generally consider all aspects of the bundle of rights and responsibilities of the taxpayer that were transferred, specifically including the following six factors:

(1) How the contract rights originated;

(2) How the contract rights were acquired;

(3) Whether the contract rights represented an equitable interest in property which itself constituted a capital asset;

(4) Whether the transfer of contract rights merely substituted the source from which the taxpayer otherwise would have received ordinary mcome;

(5) Whether significant investment risks were associated with the contract rights and, if so, whether they were included in the transfer; and

(6) Whether the contract rights primarily represented compensation for personal services.” Order in Docket No. 21946-09, at p. 5-6.

All the Greens claim is that revenue under the contracts wasn’t guaranteed, but that doesn’t make them capital assets, any more than any of us has capital gains on the pittances we finally collect, because it’s not certain that our clients will pay us (and you can say that again!).

And in Docket No. 423-11, the Greens argue that their allocation of items in the contract of sale must be respected, but that’s a total nonstarter. “The Court also agrees with the Commissioner that Greenwaste of Tehama’s seems to argue that the Commissioner must respect the allocation of the purchase price that it and Waste Connections may have agreed to. We rejected this very proposition years ago. (And both parties must be prepared, if they do not settle this case, to become conversant in the numerous conflicting lines of caselaw on this question.).” Order at Docket No. 423-11, at p. 3. (Citations omitted, but read them. And see my blogpost “Buying Trouble”, 1/18/12, for another look at the allocation question).

So guys, hit the books, or the internet, and do your homework.


In Uncategorized on 08/06/2013 at 08:09

No, not Stobie Creek, but John Hancock Life Insurance Company (U.S.A.), as Successor in Interest to John Hancock Life Insurance Company (f.k.a. John Hancock Mutual Life Insurance Company) and Subsidiaries, et al., is up a different creek, leading off 141 T.C. in 141 T. C. 1, filed 8/5/13.

And the reason this blogpost is a day late (but hopefully not a dollar short) is that I wanted to reflect on the 244 pages of Judge Haines’ prose before leaping onto the internet.

Remember the “synthetic leases” of the 1980s? No? Take a look at FAS 13, the accounting guide to leveraged leases and off-balance-sheet finagling. The idea was to put up 20% of the deal, borrow 80% nonrecourse, lease and lease back (later buy and lease back, when IRS blew up the lease and lease back deals (called LILOs) under Section 467) from a tax-indifferent, take heavy depreciation and interest deductions, when in fact all the cash you were going to owe was put in secure accounts, so that all payments were made out of those accounts. Your transaction costs were the broker’s commission and the tax-indifferent’s vigorish for doing the deal.

And the nonrecourse debt was off-balance-sheet per FAS 13.

I remember a CLE program given at that time, run by a now-defunct abstract company, where these were extolled. I denounced them publicly as a fraud. As usual, nobody listened.

The American Jobs Creation Act of 2004 put paid to the whole game, but prospectively only; those deals then in place, to the extent compliant with pre-existing law, were unaffected.

John Hancock, needing to offset investment gains, found itself besieged by various brokers peddling this dodge. So it did deals with the Austrian State Railways, the Belgian State Railways, the City of Dortmund in Germany, and some Austrian and German public utilities.

IRS first claims that these aren’t leases at all but financing arrangements, so John Hancock’s depreciation and loan interest deductions are out, but they do get some other interest income and minor deductions. None of the other deductions IRS gives John Hancock comes close to the roughly $560 million in deficiencies, not counting interest and penalties (which Judge Haines doesn’t discuss, but which will surely surface after the Rule 155 beancount he orders).

So we have the trial. “The Court held a five-week special trial session in Boston, Massachusetts. The record in these cases includes the testimony of 53 witnesses, over 3,600 exhibits, over 4,000 pages of trial transcripts, and over 1,000 pages of briefing.” 141 T. C. 1, at p. 76.

Bottom line is that IRS wins. If international wheeling-dealing  sings your song, you can read all about it.

But the point I want to make here is why IRS wins. IRS’ initial attack is substance over form: John Hancock never had benefits and burdens of a net lessor or of an owner. It only had cash at risk in two deals, and even those were financing deals, not leases. For the rest, it was a roundy-round with the cash, with John Hancock getting the write-offs, and, though it wasn’t 100% certain that the indifferents would buy out of the leases at the bail-out date, it was probable enough to satisfy Judge Haines that John Hancock would not be buying electric power in Austria or running high-speed expresses from Brussels to Paris. And that’s what carries the day.

Now IRS got cute at the pre-trial memorandum stage. IRS wild-carded in an economic substance argument, that they hadn’t raised in the SNODs or in their answer.

John Hancock moved to preclude any evidence IRS might offer on that score from the 53 witnesses or the 3600 exhibits, but Judge Haines let it all in. However, IRS had the burden of proof, and the Health Care Reform Act codification plays no part.

IRS relies on its expert, Dr. Thomas Lys, who, Judge Haines notes, “has previously testified for the Government in other Federal leasing cases.” 141 T. C. 1, at p. 82. Professional witness, maybe?

But the Prof lets the IRS down, and IRS loses on economic substance, because IRS can’t carry the burden of proof.

“Having found that a net present value analysis may be useful in these cases, we turn to respondent’s argument that the ABC reports do not provide reliable pretax economic returns and thus that Dr. Lys’ net present value calculations should control. We disagree. If, as Dr. Lys opined, the proper test of profitability requires an investor to accumulate a return on an investment and discount the return back at the same rate and over the same period, any investment with transaction costs would always produce a pretax loss. In fact, Dr. Lys stated at trial that the actual pretax cashflows from the test transactions were ‘irrelevant’.

“At trial petitioners presented Dr. Lys with a simple example to illustrate this point.

“Q:            So my simple example is: Assume that you walk into your stockbroker and you have $101,000 in your pocket.

“A:            Uh-huh.

“Q:            And you buy a $100,000 bond – –

“A:            101 or –

“Q:            A $100,000 bond, because there are going to be some transaction costs.

“A:            Okay.

“Q:            The broker is going to charge you $1,000 for that transaction.

“A:            That’s correct.

“Q:            Using your methodology, assume my bond is 4 percent – – you would calculate the present value today of that bond at maturity, you would take the $100,000 and accumulate it forward at 4 percent, and then you would discount it back at 4 percent. Am I right?

“A:            Correct.

“Q:            So on a present-value basis, the value of my investment is [$]100,000.

“A:            That’s correct.

“Q:            But I have [$]101,000 invested.

“A:            That’s correct.

“Q:            Is that a value-destroying investment?

“A:            Yeah. But may I specify, Your Honor? But I get a service. What the broker did is – – I had a problem. I had $100,000 today, and I didn’t want to have $100,000 today, I wanted to have $100,000 tomorrow, or whenever that period is. The $1,000 transaction fee is something that I voluntarily paid for getting $100,000 tomorrow.” 141 T. C.1, at pp. 136-137.

Judge Haines isn’t buying. “Neither Dr. Lys nor respondent [IRS] has provided a logical explanation to support a real world application of his method and calculations. As a result, the record does not include a credible net present value calculation.” 141 T. C. 1, at p. 139.

There’s more, enough to knock Dr. Lys completely out of the box, but this is enough.

Let’s go back to my blogpost “Woodshedding Your Experts – Stobie Creek Part Deux”, 1/10/11, wherein I said “(T)he takeaway for counsel? As with currency trades, every litigated case has a ‘sweet spot’, the one disputed point your side must prove to win.  Before choosing experts, ask what you want your experts to establish to hit the ‘sweet spot’. Work with them. Learn their craft, so far as possible. And sweat them good, both in preparation of their reports and in preparation for depositions. And if they can’t properly opine, it’s time for a major heart-to-heart with the taxpayer-client.”

I would add that if, after the time has run for you to amend your pleadings, you have a bright idea, make sure your expert is on board.

And that what your expert tells you and the judge bears some relation to reality, not just to what you want to hear.




In Uncategorized on 08/05/2013 at 18:48

As I stated in my blogpost “Whoso Would Intervene, Though He Were Dead”, 8/2/13, “I called chambers and left a message. Let’s see what reply, if any, I get. Following.”

Well, I got a telephone call today from Ross Sharkey, Esq., Judge Gale’s law clerk, who stated that I got Section 6015(e)(1)(A) wrong in that blogpost, and that the earlier date for filing the petition in Lesley A. Hudson was May 22, 2012, notwithstanding that it was eight months after Lesley filed her Form 8857 request for innocent spouse relief (September 23, 2011).

And, he said, the prospective intervenors in the non-designated order were the late Mark’s children, and not those of the late Mark and Lesley (as there apparently weren’t any of the latter).

I told Mr. Sharkey I would promptly post a clarification to correct any misstatements I made.

So I went to my trusty online source for Federal law, the Cornell Law Institute, my alma mater’s gift to us practitioners.

And I was wrong, and Mr. Sharkey is right. Section 6015(e)(1)(A) gives IRS a six month leeway to deal with a Form 8857. The innocence-seeker has to wait the six months to let IRS decide what to do. If IRS does nothing, then the petition is timely if filed. But if IRS (or Appeals) has mailed a NOD denying the innocence-seeker’s plea, then the petition is timely if filed within ninety days thereafter.

Second error (I really had a bad day on 8/2/13): the heirs-at-law who could intervene in the non-designated Lesley A. Hudson case were the late Mark’s kids, who weren’t the children of both the late Mark and Lesley, as I erroneously stated. Heirs-at-law, of course, get their status as such under State law, and can include children of the decedent by blood or adoption, as State law may permit.

Thanks, Mr. Sharkey.


In Uncategorized on 08/02/2013 at 19:46

I live on a tiny island off the coast of North America, a mere 22.96 square miles (that’s 59.5 square kilometers, for you metrologists) in area. For years I have bemoaned the scarcity hereabouts of one of life’s pleasures, which hails from an even smaller locale, deep in the heart of Texas.

I have brought the same home in airline checked baggage, on buses, and in the back of rented cars, from Texas, Pennsylvania, the District of Columbia and Delaware.

I was delighted when, some months ago, the other signer of our joint return discovered the magic potion at a barbecue restaurant accessible by public transport. On draft, yet.

But something even better followed. One of our island’s better-known gastronomic-organic supermarkets was pleased to become the local dispenser of the same. The proper way, in longnecks.

Shiner Bock has come to New York City. You are invited to join me in a chorus of “Rock Around the Bock.”


In Uncategorized on 08/02/2013 at 18:13

If I may misquote a much more significant statement, “whoso would intervene, though he were dead, yet shall his heirs”. That’s Judge Gale’s message in Lesley A. Hudson, Docket No. 13256-12S, filed 8/2/13, but not the designated hitter of the same name and number. I’ll get to that one further along.

Lesley gets hit with two SNODs, claims innocence for both per Section 6015, but notes that the other taxpayer on the returns for those years was the late Mark, her husband, now three years dead. Two years’ worth of deficiencies were at issue, 2008 and 2009, but Lesley is timely as to only the second.

When two persons file a return, each is entitled to have his or her tax liability separately determined as to him or her. But just because a party entitled to have that liability determined isn’t properly before Tax Court, the petition can’t be dismissed unless that absent party is given a reasonable chance to come in.

Obviously the late Mark can’t intervene. But Lesley was pro se, didn’t have a lawyer before, and so she catches a break.

Judge Gale: “We accordingly construe Lesley Hudson as having filed the petition in this case on behalf of herself and Mark Hudson. Because he is deceased, Mark Hudson is not a proper party to these proceedings. The interest of Mark Hudson’s estate in this litigation can be represented by any individual with capacity under Rule 60(c), and the Court is authorized by Rule 63 to order substitution of such individual as a party. Local law is applied to determine who has the capacity to be substituted as a party.” Order, at p. 2.

So, since this is a California case, Judge Gale checks California law, decides Mark’s and Lesley’s kids are apparently heirs at law, and on filing the requisite California affidavit can pursue whatever remedies the late Mark might have had. So they get a thirty-day window to show up, both to contest the deficiency, and also to oppose or support Lesley’s request for Section 6015 relief.

Now for the designated hitter, same petitioner, same docket number. Here Judge Gale got his dates wrong, but he allows Lesley to fight her innocent spouse claim as to the first of the two years at issue, even though her petition isn’t timely as to the deficiency for that year.

Lesley filed her petition May 29, 2012, bearing legible USPS postmark May 22, 2012. IRS first can’t find the 2008 deficiency, but when they do, it was mailed October 26, 2011, so while Lesley is timely for the 2009 deficiency, she’s too late for 2008.

Judge Gale: “However, we will not dismiss the case at it relates to 2008 entirely, because we construe the petition as also seeking our review of petitioner’s request for innocent spouse relief for that year. See sec. 6015(e). All claims in a petition should be broadly construed so as to do substantial justice, and a petition filed by a pro se litigant should be liberally construed. In the petition, petitioner references her filing of a request for innocent spouse relief for 2008 and 2009, and articulates reasons why she believes she should not be jointly and severally liable for the deficiencies asserted for those years. Respondent attached to the answer a copy of the Form 8857, Request for Innocent Spouse Relief, petitioner filed with respect to 2008 and 2009, which was stamped ‘received’ by respondent’s Innocent Spouse Cincinnati Service Center on September 23, 2011.” Order, at p. 2. (Citations omitted).

OK, so Lesley is in as to her innocence, if she’s Section 6015 timely, even if she’s blown the Section 6213 deadline.

But here’s the date problem: “Section 6015(e) provides an individual taxpayer the right to petition the Tax Court to determine the appropriate relief available to the taxpayer under section 6015, if such petition is filed at any time after the earlier of: (1) the date the Secretary mails a notice of determination with respect to a taxpayer’s request for innocent spouse relief (so long as the petition is filed before the close of the 90th day after the date such a determination is mailed); or (2) the date which is 6 months after the date the taxpayer requests innocent spouse relief from the Secretary. Sec. 6015(e)(1)(A). Here, the parties agree that respondent has not issued a notice of determination with respect to petitioner’s request for innocent spouse relief. Six months after September 23, 2011, was March 23, 2012; accordingly, the petition timely invoked our jurisdiction to determine whether innocent spouse relief is available to petitioner for 2008.” Order, at p. 3.

Yes, if the petition had been filed March 22, 2012. But it wasn’t, was it? It was filed May 22, 2012, and that’s eight months, not six months.

I called chambers and left a message. Let’s see what reply, if any, I get. Following.