This one takes me back to my days on the stoop of a Bronx apartment building, long ago, in a galaxy far away. We played Baby Base or our version of handball (it would take too long to explain) with the pink rubber ball bearing the jet-black script lettering “Spalding” (pronounce it “Spaldeen”, accept no substitutes, or forever be labeled a foreigner; and yes, it is named for the famous Albert Goodwill Spalding, 1850-1915, pitcher and sporting goods magnate). If a ball went astray, or someone committed a solecism not requiring a graver sanction, the play was scrubbed and a “do-over” declared, occasionally followed by a vociferous colloquy. I’m getting nostalgic; oh, for a fifteen-cent Creamsicle from the Good Humor truck so long since gone!

Anyway, back to serious business. Comes now Special Trial Judge Robert N. Armen, Jr., the “Judge With a Heart” (see my blogpost “Ignorance Is Bliss?”, 11/10/11), and gives a do-over to IRS and Pete Disimone, Docket 23850-12, filed 1/11/13, the same day he got the case from Ch. J. Thornton. Now that’s what I call service!

IRS hit Pete with a $2700 deficiency for TY2009, but didn’t send the SNOD until April 16, 2012. Okay so far, but Pete never responds, and when he gets an “amount due” notice in August, he fires off a Tax Court Petition to redetermine in September, claiming IRS sent the SNOD to the wrong address, and IRS had his new address because he filed his TY2011 return timely in 2012, and that’s where IRS sent the “amount due” notice.

No, says IRS, it’s true you filed, but on April 16 we couldn’t know your new address if you filed April 15; but IRS doesn’t attach a copy of the return or any evidence when they received it to their papers seeking to dismiss for want of jurisdiction (late filing of petition).

STJ Armen: “… respondent [IRS] filed a Response to petitioner’s Objection. In his Response, respondent generally does not dispute petitioner’s factual contentions and specifically ’does not dispute that the filing by petitioner of his 2011 tax return * * * constituted ‘clear and concise notification’ of his new address.” Respondent contends, however, that petitioner filed his 2011 return on April 15, 2012, and that respondent was unable, in one day’s time, to update his records to reflect petitioner’s new address. However, the record does not include a copy of petitioner’s 2011 return nor any transcript showing its date of receipt by respondent. Further, under the circumstances herein, we are unwilling to uncritically regard a statement in petitioner’s Objection as an admission upon which respondent can rely to seek the dismissal of this case.

“Noteworthy is the fact that the year for which respondent determined a deficiency is the calendar year 2009. The three-year period of limitations on assessment has yet to expire. Thus, respondent has several months’ time within which to mail petitioner a statutory notice addressed to him at his current (and last known) address. If respondent were to do so, and if petitioner were then to file a petition with this Court within the statutory 90-day period, this Court would have jurisdiction to redetermine the deficiency.” Order, p. 2. (emphasis by the Court).

So STJ Armen denies IRS’ motion to dismiss, but enters his own order, dismissing the case because the SNOD was sent to the wrong address.

Now the parties have a do-over.

Just Fill In the Blanks

This is the story of the late Dr. Sheldon C. Sommers, physician and art-lover, and his less-than-happy family, wife Bernice, and nieces Wendy, Julie and Mary Lee. Doc Shel had an art collection literally to die for, and he did. But before departing this vale of tears, Doc Shel gifted (or maybe not) his precious collection to the nieces aforesaid, via interests in a limited liability company created for the purpose.

Doc Shel had been married to Bernice but divorced her before he started the LLC. His only blood relatives were the nieces aforesaid. He had the paperwork done, but there were blanks therein, and thereby hangs the tale of Estate of Sheldon C. Sommers, Deceased, Bernice Lang Sommers, Executrix, Petitioner, and Wendy Sommers, Julie Sommers Neuman, and Mary Lee Sommers-Gosz, Intervenors, 2013 T. C. Memo. 8, filed 1/10/13, with Judge Halpern as our docent.

“These consolidated cases arose as a result of two notices of deficiency issued to petitioner in January 2007. One notice determined gift tax deficiencies of $245,733 and $209,723 for 2001 and 2002, respectively. The other determined an estate tax deficiency of $542,598. The gift tax deficiencies (challenged by petitioner in docket No. 9305-07) are premised on respondent’s position that, in reporting as taxable gifts decedent’s December 27, 2001, and January 4, 2002, transfers of LLC units to the nieces (2001 and 2002 transfers), a position which petitioner now rejects as improper, petitioner undervalued those units for Federal gift tax purposes.” 2013 T. C. Memo. 8, at p. 4.

So why is Bernice here? Well, after Doc Shel divorced her and gifted (or didn’t) the artwork to the nieces aforesaid, he and Bernice remarried, after which Doc Shel died, fewer than the three magic years after the gift (or non-gift). Doc Shel, at the time of the gift (or non-gift), was a resident of the State of Indiana, home of raconteurs George Ade, Ernie Pyle and Jean Shepherd.

His Indiana counsel set up the LLC, Doc Shel signed over the artworks, including but not in any way in limitation of the generality of the foregoing, as the high-priced lawyers say, a few by Bernard Buffet, Charles Burchfield, Alexander Calder, Salvador Dali, Edward Hopper, and Joan Miro.

Standard operating procedure is to create LLC as a special purpose entity, ringed round with a moat of operating agreement provisions to prevent sale, dispersal or falling into hands of deadbeat spouses, profligate offpsring or their multiplex creditors. Now to get the LLC interests out of Doc Shel into the hot little hands of the nieces aforesaid without incurring gift tax.

“Decedent then would make gifts to the nieces, over a period of time, of his interests in it. The attorneys explained to decedent that, if the artwork was owned by a limited liability company, subsequent gifts of minority interests in it would have a lower value than gifts of the artwork itself because the recipients could not freely resell the interests and would lack control of it.” 2013 T. C. Memo. 8, at p. 9.

In other words, minority interest discount and limited scope of sale would decrease the FMV of the individual interests each niece aforesaid got. And the artwork was already spread out among the residences of the nieces aforesaid.

Because the unified credit was scheduled to increase over two years, Doc Shel and his advisers decided to split the gifts. “The idea was for decedent to give the nieces, in 2001, LLC units in an amount not to exceed his “basic exclusion amount” ($675,000) plus the three $10,000 annual exclusions then available. He then would transfer any remaining value (in the form of LLC units) in 2002 or in a later year.” 2013 T. C. Memo. 8, at p. 9. In the later years, he hoped to use the annual exclusion amounts, as they increased.

Okay, but as it wasn’t known in Year One (2001) what was the worth of the art, the documents left the percentages of LLC interests blank in the assignments, to be filled in when they got the appraisal.

They got the appraisal in 2002. There was good news and bad news. First the good news: the appraisal was way higher than Doc Shel or his advisers expected. Their reaction would have looked great on Antiques Roadshow. The bad news: the basic exclusion amount was way low, the annual exclusions a joke, so much gift tax would follow.

So the assignment of LLC interests was amended in 2002 to provide that the nieces aforesaid would pick up whatever gift tax wasn’t basically or annually excluded. And the blanks were filled in with the percentage interests each was getting.

Then, you remember, Doc Shel remarries Bernice, and dies. Bernice is Doc Shel’s sole legatee and executrix. The good news–Bernice gets everything. The bad news–everything includes a thwacking great estate tax bill, as the Indiana appraisal was way low, and gifts inside the three-year curtain are included in the estate.

Bernice wants either the gifts canceled and her marital exclusion boosted thereby, or the nieces to eat the enhanced gift tax and estate tax based on the true value if they get to keep the gifts.

In the meantime, Bernice and the nieces aforesaid battle it out in an Indiana arbitration (Bernice loses; arbitrator finds Doc Shel surrendered dominion and control in Year One notwithstanding blank spaces in the assignment), which the Indiana intermediate appellate court affirms. Then Bernice goes to New Jersey (Doc Shel moved from Indiana to New Jersey when he remarried Bernice, and died there) and tries her luck in their courts, but strikes out there as well. The advisers were dual agents for Doc Shel and the nieces aforesaid; all they did was fill in the blanks.

Not a whit dismayed, Bernice claims in Tax Court that Federal law is different, collateral estoppel and issue preclusion don’t work, whether the Indiana or the New Jersey variety.

After much palaver, Judge Halpern finds “Petitioner is collaterally estopped by both the Indiana and New Jersey decisions from arguing (1) that the 2001 and 2002 gifts were not gifts for Federal gift tax purposes and (2) that, in making those gifts, decedent retained a section 2038(a)(1) power to ‘alter, amend, revoke, or terminate’ those gifts until that power was relinquished on April 11, 2002.” 2012 T. C. Memo. 8, at pp. 42-43.

Bernice makes much over the blank spaces in the assignment, claiming these showed Doc Shel could have altered, amended, etc., the gift. No, says Judge Halpern: “We interpret the 2001 and 2002 gift documents in the context of the overall agreement among decedent and the nieces, which was for him to give his LLC units to them free of any obligation on his part to pay gift tax. On December 27, 2001, and January 4, 2002, the actual number of LLC units that decedent could transfer on those dates, free of gift tax, was unknown because the parties had not yet received the … valuation. The parties agreed, however, that once they had received the … valuation the blank LLC share amounts would be filled in on the basis of that valuation. Thus, the blanks manifested the parties’ intent to have [advisor] complete the gift documents consistent with their agreement that decedent give his LLC units to the nieces free from Federal gift tax. The parties’ intent with respect to the blanks was to have [advisor] carry out the terms of the original agreement, not to grant decedent the right to alter, amend, revoke, or terminate it. When the … valuation came in higher than expected, [advisor] advised the nieces that both prongs of their agreement with decedent could not be realized because decedent could not transfer all of his LLC units and still avoid gift tax; i.e., the 2002 gift would be subject to tax. The nieces and [advisor] were able to preserve the terms of the original agreement by having the nieces agree to pay the 2002 gift tax associated with the 2002 gift (a solution to the problem that had been discussed during the nieces’ initial meeting with [advisor]), and the original 2002 gift document was modified to reflect that undertaking on the part of the nieces. That modification and the other (nonsubstantive) modifications to the 2001 and 2002 gift documents carried out the parties’ original agreement; they did not alter or amend it.

“In essence, filling in the blanks was to be a ministerial act of completing, not revising or abandoning, the terms of the parties’ original agreement. The one substantive change that did occur (the nieces undertaking to pay any gift tax) was required and previously contemplated as a means of satisfying the one condition that had been built into the original agreement: that decedent not be subject to gift tax. That change enabled decedent to give all, rather than a portion, of his LLC units to the nieces, tax free, just as the parties intended.” 2013 T. C. Memo. 8, at pp. 44-46 (footnote omitted).

So it’s time to try the valuation of the art, and who must pay what by way of estate tax and gift tax.

Most Tax Court cases do not deal with novel or interesting points of law, or reinforce our present understanding with apt illustrations. But every so often there comes a case that, while neither introducing the new nor rejuvenating the old, tells a story that brings a smile to even the most jaded and trench-weary practitioner.

Such is the tale of Ronald S. Mills and Judy A. Mills, 2013 T. C. Memo. 4, filed 1/9/13, Judge Wherry carefully sticking to the facts. He lets Ron and Judy’s tale speak for itself.

Ron and Judy are real estateniks, running their business through three wholly-owned LLCs in (where else?) California. The LLCs were created, and their tax returns filed, by accountant Robert A. Sandlin.

Robert A. wasn’t a certified public accountant, but he was an enrolled agent, at least until he was placed on the inactive list in the year immediately preceding the year at issue. Judge Wherry explains: “An enrolled agent is an individual ‘who demonstrates special competence in tax matters by written examination administered by, or administered under the oversight of, the Director of Practice [now the Office of Professional Responsibility] and who has not engaged in any conduct that would justify the censure, suspension, or disbarment of any practitioner’. 31 C.F.R. sec. 10.4(a) (2007).” 2013 T.C. Memo. 4, at p. 4, footnote 4.

Bob was nothing if not inventive: “As stated, Mr. Sandlin assisted petitioners in forming the three LLCs. Petitioners relied on Mr. Sandlin to establish depreciation schedules for the assets held by the LLCs. Mr. Sandlin also told petitioners that they could amortize the value of Mr. Mills’ contribution of his life, time, and expertise in real estate management.” 2013 T. C. Memo. 4, at p. 4.

This is akin to the old basis-in-labor protester argument; see my blogpost “An Obliging Judge”, 10/18/12.

Needless to say, this earns Ron and Judy a $111K deficiency in tax and a $18K late filing addition, both of which they concede. But they want to fight about the $22K Section 6662(a) accuracy penalty.

They relied on Robert A.

Alas, “A trial was initially set for the trial calendar session beginning December 5, 2011, in Los Angeles, California. On December 7, 2011, we granted petitioners’ oral motion to continue the case to allow them time to speak with their former adviser, Mr. Sandlin. Petitioners and respondent had only just found Mr. Sandlin, who was then residing in Colorado at a Federal penitentiary.

“Mr. Sandlin, when he was not advising taxpayers to amortize the value of their own lives, was stealing money from clients’ individual retirement accounts using forged power-of-attorney forms. He also kept for himself client money that he had promised to pay over to Federal and State taxing authorities to settle outstanding tax liabilities. On January 22, 2009, Mr. Sandlin pleaded guilty to one count of wire fraud under 18 U.S.C. sec. 1343 and one count of willfully causing another to commit wire fraud under 18 U.S.C. sec. 2(b). On March 18, 2010, as part of an amended plea agreement, Mr. Sandlin agreed not to prepare Federal tax returns, represent people before the IRS, or hold himself out as an enrolled agent.

“The trial went forward without Mr. Sandlin and was held in Los Angeles on March 12, 2012.” 2013 T. C. Memo. 4, at pp. 5-6.

Ron came up with the valuations of his life and experience, based upon which he took the deductions; he wasn’t a passive bystander. And while Robert A. might once have been an EA, he wasn’t when he prepared the returns at issue, and the record didn’t show when he first became an EA,  nor what other special expertise he had.

“Finally, petitioners must also show that they relied upon Mr. Sandlin’s advice in good faith. Petitioners’ main reason for trusting Mr. Sandlin was that he had the trappings of success: a boat and a busy office. But an appearance of prosperity is not necessarily synonymous with competence.” 2013 T. C. Memo. 4, at p. 11.

So Ron and Judy get the penalty.

That must explain my career; I never had a boat.

There’s a Won’t

No, not a testamentary instrument here, but a Designated Order from STJ Armen (“The Judge With a Heart”) in Gary & Janet Will, Docket No. 25519-11, filed 1/8/13. So there are two “Will”s. And the “won’t” refers to STJ Armen’s denial of an IRS motion to introduce evidence after making a motion for summary judgment.

Trial is calendared for February this year, but in December IRS moves for summary judgment. I like summary judgment; it smokes out the other side and provides cheap discovery. “Marshal and lay bare your proofs”, and put it all in writing, under oath, is my kind of discovery.

Gary & Janet have until Thursday to respond, and it’s now only Tuesday, so STJ Armen is awaiting their response.

Meantime, “Most recently, on January 4, 2013, respondent filed a Motion For Leave To File 91(f) Motion Out Of Time. On that same date, respondent lodged a Motion to Show Cause Why Proposed Facts and Evidence Should Not Be Accepted As Established, and attached thereto a proposed Stipulation Of Facts incorporating some 16 exhibits. Eight of these 16 exhibits (Exs. 3-J through 7-J; 9-J through 11-J) consist of documents already a part of the record in this case (e.g., a copy of the petition filed to commence this case). The remaining 8 exhibits consist of copies of the notices of deficiency (Exs. 1-J, 2-J) from which petitioners appealed to this Court; the Appeals Case Memorandum (Ex. 8-J); petitioners’ Forms 1040 for the years in issue (Ex. 12-J); petitioners’ Submission Of Evidence (Ex. 13-J); and various IRS transcripts (Exs. 14-J through 16-J) pertaining to the years in issue.” Order, p. 1.

Given the undecided motion for summary judgment, and the fact the trial is set for next month, this motion may be moot. But even if the motion for summary judgment fails, IRS can put those documents in at the trial, to the extent relevant.

So the motion is denied.

Takeaway– Make sure you don’t waste time making motions that will not succeed, and make sure, when you move for summary judgment, to “Marshal and lay bare your proofs”, all of your proofs.

Fillmore L. Carr was an IRS Revenue Agent who settled an employment claim (nature of claim unspecified, but not physical or bodily injury) for $20K, net of withholding. But Fill didn’t bother to put this happy fact on his 1040 in the year he received payment (six years after the stipulation of settlement in the employment claim; again, for reasons unstated).

So we get Special Trial Judge Lew Carluzzo (great first name, Judge) handing Fill a confirmed deficiency, with the prospect of a substantial understatement addition to tax after the Rule 155 bean-count.

You can read the whole story in Fillmore L. Carr and Darlene Carr, 2013 T. C. Sum. Op. 3, filed 1/7/13, a 7463 “just sayin’”.

“Petitioners did not include any portion of the settlement payment or the accrued interest in the income reported on their return. The income tax refund claimed on their return, however, takes into account the Federal income tax withheld from the settlement payment.” 2013 T. C. Sum. Op. 3, at p. 4.

It gets better (or worse, depending upon your point of view). “According to the petition, the ‘Form 1099-INT’ and the ‘Form W-2’ are ‘in error’, but no allegations of facts in support of these assignments of error are made in the petition. Petitioners’ inartful pleading, their failure to submit a pretrial memorandum, and petitioner’s vague presentation at trial make it difficult for us to understand the precise nature of their challenge to the deficiency here in dispute. As best we can determine from what is included in the record, it appears that petitioners challenge the deficiency upon the following grounds: (1) the settlement payment and the interest are specifically excludable from income pursuant to some provision of the Internal Revenue Code; and (2) if the settlement payment and the interest that accrued on that settlement payment are includable in their income, then the proper year of inclusion is 2002, the year the settlement agreement was entered into, and not 2008, the year the payment was made.” 2013 T. C. Sum. Op. 3, at p. 6.

Judge Lew is nothing if not to the point. To answer the exclusion question: “The simple answer is no; neither item is excludable from petitioners’ income.” 2013 T. C. Sum. Op. 3, at p. 6.

Oh yes, and Fill and defaulting Darlene are cash basis taxpayers, and they admit they are. Anyway, their claim the settlement proceeds were received in an earlier year makes no sense, because they received six years’ worth of interest, which couldn’t possibly have accrued in the year of settlement.

Finally, Judge Lew drives home the point: “Petitioner is not an unsophisticated taxpayer; as noted, he is a former IRS revenue agent. We would expect that if petitioners’ position was supported by one of the exclusions from income set forth in one of the sections included in subtitle A, chapter 1, subchapter B, part III of the Internal Revenue Code, our attention would have been directed to that section.” 2013 T. C. Sum. Op. 3, at p.7.

Fill never pointed to a Code section exempting payment of employment claims from tax, largely, I suspect, because there isn’t one.

I guess all his years as a revenue agent, listening to lame arguments, spurious excuses, misconstructions of the IRC and the Regulations, protester nonsense and downright lying from hapless or mischievous taxpayers, finally got to Fill, and he succumbed. It must be an occupational hazard. Tax law rots the mind and erodes one’s moral sense.

Judge David Gustafson fans will remember the obliging judge from Thomas John Babcock, Docket No. 21863-11, Order filed 10/19/12, who endeavored to track down Thomas John when he wasn’t getting the message. To refresh your recollection, see my blogpost “We’ll Come to You – Part Deux”, 10/12/12.

Judge Gale, not to be outdone, goes searching for the heirs at law, distributees, legatees, personal representatives and general hangers-on of the late Gordon F. McCaleb, in Docket No. 656-12S, Order filed 1/4/13.

The late Gordo was fighting a $4K deficiency (IRS conceded the accuracy penalty). Gordo’s story:  “Respondent used a zero basis to calculate the income petitioner realized from his sale of the stock options. In his petition, petitioner acknowledged that the deficiency ‘was due to stock options that were left off the return’ but alleged that he paid ‘tax on the income through payroll withholding’ and that he ‘should have included basis to the extent of sales’ on a Schedule D, Capital Gains and Losses, that ‘should have been included with the return and was not’.” Order, p. 1 (Footnote omitted).

Comes the trial, and Gordo doesn’t show. IRS explains, in the immortal words of Starfleet Surgeon Commander Leonard McCoy to Starfleet Starship Captain James T. Kirk, “He’s dead, Jim.”

IRS says throw out the case for want of timely prosecution, insomuch as Gordo has shuffled off this mortal coil without leaving behind him executor, administrator, personal representative, or any of the consolations of probate law. Or more elegantly: “Respondent’s counsel filed a motion to dismiss for lack of prosecution. Therein, respondent advises that petitioner did not leave a will and that no representative or fiduciary is currently authorized to act on behalf of petitioner’s estate. Respondent further advises that petitioner’s only ascertainable heirs are his surviving issue….” Order, p. 2.

Judge Gale denies the motion, with copious citation to relevant State law; petitioners come and go, but Tax Court cases go on. “This Court’s jurisdiction over a case continues unimpaired by the death of a petitioner, even when there is no personal representative appointed to act in the place and stead of the decedent. Indeed, our jurisdiction resulting from a properly filed petition continues until our functions are terminated by decision or dismissal. An order dismissing a case for lack of prosecution is considered a decision that the deficiency is the amount determined by the Internal Revenue Service. Sec. 7459(d). In situations similar to the present case we have recognized that there may be survivors whose monetary interests are capable of being affected by satisfaction of the liabilities which will be determined consequent upon a dismissal for lack of prosecution. Accordingly, we have found it appropriate to give notice of the proceedings to those whose interests stand to be affected, so that they may have an opportunity to be heard if they so desire.” Order, p. 2. (Citations omitted.)

And Rule 63(a) lets the judge, on his or her own initiative, order substitution of a proper party to carry on the fight of the dear departed (and incidentally to protect his, her or their wallet or wallets).

So Judge Gale cites the aforementioned State law at length, and even includes a copy thereof (cribbed from Westlaw) to be served on the aforesaid issue of the late Gordo, together with copies of this Order, and even gives the Clerk of the Court the last known addresses of the aforesaid issue to make it easy to mail the same.

And Judge Gale extends an invitation to the heirs, good for thirty days, in the immortal words of Charles Lutwidge Dodgson, “will you, won’t you, will you, won’t you, won’t you join the dance?”

The Tax Court Judges are so obliging.

And Socially Insecure

That’s Jim Brady’s plight in James Brady and Mary Brady, as Jim bats lead-off in 2013 T.C. Memo. 1, filed 1/3/13, Judge Goeke pitching the bad news.

Jim forgot to report about $1.5K in dividends, so he gets an underreporting penalty, but that’s the least of Jim’s problems.

Jim is a retired Wall Street floor broker with a varied background–“Before his employment as a broker, Mr. Brady worked in sanitation, construction, as a sergeant in the U.S. Marines, and as a New York Stock Exchange clerk.” 2013 T. C. Memo. 1, at p. 12, footnote 3.

Jim was disabled and getting paid by Unum under a disability policy–payments concededly non-taxable, but the policy provided that if Jim could get Social Security, he would have to take it and pay Unum back out of whatever he got from SSA. And Social Security is taxable, up to 85% of benefits.

Jim strikes out with SSA the first time around, loses appeal number one, but wins an administrative hearing and gets $87K, of which $73K is retroactive benefit money he owes Unum for past benefits.

Jim goes to Ronny, a CPA and lawyer, to do his return. Ronny reports Jim’s $14K current benefits, but nets out the retro Jim paid Unum. Jim admits on the trial he forgot to give Ronny the 1099s he got for the dividends.

No good, says Judge Goeke, Jim owes tax on the whole enchilada, at least up to 85% thereof. If it was a payback to SSA for past benefits, that can be netted, but not paybacks to private insurers. See Section 86(d)(2)(A).

Judge Goeke: “We addressed a similar issue involving reimbursement of funds to a private insurer in Seaver v. Commissioner, T.C. Memo. 2009-270. In that case we held that when a recipient of Social Security benefits is required by contract to reimburse a third party for tax-free benefits previously received, the recipient is not entitled to a deduction for the reimbursement. Id., slip op. at 7. We stated that we were not ‘free to question’ the choices that Congress had made regarding Social Security benefits and benefits paid by a private insurer.” 2013 T. C. Memo. 1, at pp. 5-6.

Tax Court may not be free to question Congress’ choices, but I am. This is another way that a disabled person, who has no other sources of income but relies on insurance (whether private or governmental), gets mistreated. And that’s regardless of partisan issues; this is a non-political blog, friends.

So Jim is on the hook for the tax. But he relied on Ronny, the attorney and CPA, so penalties only for the dividends.

Now for yet another example why one should hire a lawyer with Tax Court experience, or a Tax Court admittee, that rare specimen who passed through the needle’s eye, for a Tax Court trial. Jim might have made a Section 86(e) election, and adjusted the taxable amount of the benefits he received. Maybe it would have helped him, although IRS said it wouldn’t, even if he could so elect four years after the fact, which IRS did not concede.

“At trial the Court inquired whether petitioners would like to make the section 86(e) election if the election would aid them and if making the election so long after filing their 2008 return was possible. Petitioners stated that they would. However, not only have we found no authority for making the section 86(e) election so long after the filing of the relevant tax return, but respondent has stated in his brief that ‘based on the petitioners’ income in the previous years’, even if a section 86(e) election was made it ‘would do nothing to limit petitioners’ tax liability.’  Petitioners’ tax returns (or other statements of income) for 2005 through 2007 were not introduced into evidence for our review, and petitioners did not dispute respondent’s statement. Given that the burden of proof is on petitioners, we find they have not proven that the section 86(e) election is of any consequence in this case. We will not proceed to address whether it is possible for petitioners to make such an election with respect to 2008 at this late date.” 2013 T. C. Memo. 1, at p. 7. (Footnote omitted).

The omitted footnote says Jim had a chance to file a post-trial brief after IRS had filed theirs, but Jim didn’t. There may be no authority to allow a late-filed Section 86(e) election, but it might have been worth asking. There doesn’t seem to be any authority denying it.

Pity the pro se in Tax Court.

Slow start to 2013 in Tax Court, just one Section 7463 that’s the ordinary substantiation rehash, so let’s go to the Designated Hitters. Judge Morrison denies summary judgment to Brad Glazer, in Bradley Glazer, Docket No. 10777-12S, filed 1/2/13, on his alimony deductions for both of his ex-wives.

Brad claims Madra, Wife No. 1, was entitled to alimony per their divorce decree if her disability payments were cut or extinguished. But he only proffers the decree allegedly supporting this claim in his reply to IRS’ response to Brad’s motion for summary judgment.

No good, says Judge Morrison: “Respondent has not had a chance to respond to petitioner’s reply or to the documents attached to this reply. Rather than ordering further briefing of the summary-judgment motion, it is more efficient to leave these documents to be introduced by petitioner at trial and for respondent to present his views of the documents then.” Order, p. 1.

Summary judgment means “marshal and lay bare your proofs” to begin with, right? Brad didn’t, so Brad’s payments to Mad, and the basis therefor and the deductibility thereof, must await the trial.

And Brad has another alimony issue, this time with Wife No. 2, Helena.  Here again Brad pays and wants the deduction. And again Judge Morrison squelches him: “However, his 2001 divorce decree from Helena Glazer made no provision for ongoing alimony payments. Although petitioner alleges that his signature on a Form I-864 imposed on him an obligation to provide support to Helena Glazer, petitioner did not show through acceptable documents, affidavits, or sworn declarations, that he signed any Form I-864.” Order, p. 2.

So Brad must prove Mad’s entitlement, and deal with Helena and the elusive I-864. Should be a fun trial.

Incidentally, I-864 is not a six-lane horror show with feeder roads and fast fooderies, but rather an Affidavit of Support for immigration purposes.