Archive for January, 2014|Monthly archive page


In Uncategorized on 01/31/2014 at 18:30

No, not R. C. Sherriff’s 1928 classic war play, but the end of the saga of Arthur I. Appleton, Jr., Petitioner, The Government of the United  States Virgin Islands, Intervenor,  Docket No. 7717-10,filed 1/31/14.

If you’ve forgotten this seemingly-unending tale of unguided Congressional largesse and confusing statutory enactments in support thereof, see my blogposts “Statute of Limitations? Maybe Not”, 12/28/10, “Missed It, But Better Late Than Never”, 8/24/11, “Somebody Does Read This Blog”, 12/4/11, “Farewell to the Virgin”, 5/22/13, and “The Never-Ending Story”, 6/3/13.

Both I and Judge Julian I. Jacobs, s/k/a His Honor Big Julie and hereinafter referred to as HHBJJIJ, have gotten a lot of mileage out of Artie’s four-year mission.

But it looks like it’s finally over. Artie gets summary judgment he owes no tax for three years at issue, but he won’t get his legal fees and admins. IRS is substantially justified.

HHBJJIJ: “A position is substantially justified if it is ‘justified in substance or in the main’-that is justified to a degree that could satisfy a reasonable person’ or has ‘a reasonable basis both in law and fact.’ Pierce v. Underwood, 487 U.S. 552, 565 (1988); Nicholson v. Commissioner, 60 F.3d 1020, 1025-1026 (3d Cir. 1995), rev’g T.C. Memo. 1994-280. Respondent’s position may be justified even if it is ultimately rejected by the Court. Estate of Wall v. Commissioner, 102 T.C. 391, 393 (1994) (quoting Wilfong v. United States, 991 F.2d 359, 364 (7th Cir. 1993)).

“The issue involved in this case was one of first impression. And generally, when an issue is one of first impression, respondent’s position is considered to be substantially justified if (1) respondent’s position is not contrary to any published decision, and (2) a ‘reasonable person [could not] say that it lacked colorable justification.’ Estate of Wall v. Commissioner, 102 T.C. at 394. However respondent’s position in a case involving an issue of first impression will not be considered substantially justified when that position conflicts with the ‘clear and unequivocal’ language of the statute. Nalle v. Commissioner, 55 F.3d 189, 193 (5th Cir. 1995), aff’g T.C. Memo. 1994-182. If respondent’s interpretation of a statute lacks ‘any ligaments of fact’ and is clearly erroneous as a matter of law, Portillo v. Commissioner, 988 F.2d 27, 29 (5th Cir. 1993) (quoting Portillo v.Commissioner, 932 F.2d 1128, 1133 (5th Cir. 1991)), rev’g T.C. Memo. 1992-99, or if none of the arguments offered by the Internal Revenue Service (IRS) during the various states of litigation has a chance of succeeding, Beaty v. United States, 937 F.2d 288, 292-293 (6th Cir. 1991), respondent’s interpretation is considered to violate the clear and unequivocal language of the statute and hence is not substantially justified. Newman v. Commissioner, T.C. Memo. 2012-74.” Order, at pp. 2-3.

The muddled state of the law got IRS confused. Pardonably, says HHBJJIJ.

“…(B)ecause of the complex interaction between the relevant Code sections and the applicable regulations, forms, and instructions, we found respondent [IRS] did not properly recognize that the Code and the regulations directed petitioner to file his income tax return with the VIBIR to fulfill his Federal income tax return filing obligations.

“We do not believe that a reasonable person would conclude that respondent’s position in this matter violated the ‘clear and unequivocal’ language of the statutes, or was clearly erroneous as a matter of law, or lacked colorable justification.” Order, at pp. 4-5.

Of course, finding “clear and unequivocal language” in the Code and Regulations is rather like finding the Philosopher’s Stone, but let’s pass that one.

Artie relies on a Field Service Advice, but that was (a) later trumped by a Chief Counsel Advice, and (b) “is not a document published for public use or issued to a particular taxpayer, rather it is an internal, nonprecedential document provided to employees for their guidance.” Order, at p. 5.

So colorable equals substantially justified.

And IRS, like its predecessor in the Temple, I tell you, went down justified (at least substantially justified).



In Uncategorized on 01/31/2014 at 04:53

That’s  Judge Gustafson. He’ll tell you what you meant to allege, but didn’t, and let the other parties know as well. Can’t do more than that.

On a day when the only T. C. Memo. was a thoroughly baseless claim for kiddie credits, and the designated hitters were mostly clean-ups of pre-Rand refundable kiddie credit deficiencies (see my blogpost “The Rebate Debate – Part Deux”, 11/18/13), it was time to survey the orders.

Every so often there’s a hidden gem. And Judge Gustafson has one, Tracey L. Pinson, Docket No. 12925-13, filed 1/30/14.

Tracey has petitioned for Section 6015 innocent spousiness. Darryl Dennis moves to intervene (late). IRS doesn’t care, and Tracey wouldn’t care, if Darryl would tell her why he’s intervening, what position he takes as to Tracey’s petition, and what he wants Judge Gustafson to do. Since trial isn’t for three months, if Darryl can tell Tracey timely, she can prepare for trial if Judge Gustafson lets Darryl in.

Now some judges would send Darryl back to the drawing board, and tell him to answer Tracey’s not-implausible requests.

But not Judge Gustafson.

He interprets the Notice of Intervention.

“However, the ‘Notice of Intervention’ that Intervenor lodged on January 13, 2014, states as follows:

“The grounds for the intervention and reasons why the intervenor Dennis disagrees with the Petition for Determination of Relief From Joint and Several Liability on a Joint Return served on the intervenor by respondent, are as follows:

“1.            Petitioner and intervenor are married and share the expenses for maintaining their household and supporting their daughter in Maryland.

“2.            Petitioner and intervenor separately filed income tax returns for the 2007 tax year.

“3.            At petitioner’s request, petitioner and intervenor jointly filed U.S. income tax returns on which they reported petitioner’s wage income and withheld taxes, intervenor’s business income and expenses, joint itemized deductions, and a joint tax liability for the tax years 2008, 2009, and 2010. * * *”

“Although the notice does not explicitly so state, it is clear that the outcome Intervenor seeks is that petitioner not be relieved of joint liability. Thus, Intervenor has already provided the information that petitioners seek.” Order, at p. 2.

Aside from pluralizing the (presumably) singular Tracey (does anybody proofread these orders?), Judge Gustafson goes the proverbial extra.

A truly obliging judge.


In Uncategorized on 01/29/2014 at 21:35

Some of us elderly types may remember a television program known as and by the name “Laugh-In”, s/k/a “Rowan & Martin’s Laugh-In”, which flourished some fortyfive years ago. On that show, there would sometimes be a segment entitled “Potpourri”, wherein would be enacted some very short scenes or sketches, or even one-line jokes.

Tax Court today featured but one T.C. Memo., involving a particularly threadbare attempt at a Section 104 exclusion; moreover, there were no designated orders denoted by the Judges of that august body. 

Thus, the humble blogger, in search of grist for the word processing software, was thrown back on the memory of that television show, so long ago.

First, Richard J. Davis & Betty Davis, Docket No. 22483-12, filed 1/29/14, wherein Judge Kerrigan states, in pertinent part, as the expensive lawyers say “respondent filed a motion for entry of decision stating that petitioners did not sing [sic] and return the decision documents.” Order, at p. 1. Song sung blue? 

Next, from a case I blogged more than once, but from which my old friend Charlie Baller, Esq.,  had long since been relieved as counsel, Christina A. Alphonso, Docket No. 17130-08, filed 1/29/14. See my blogposts “A New York Cooperative Conundrum”, 3/8/11, and “A New York Cooperative Conundrum – Part Deux”, 2/6/13.

Apparently new counsel had some trouble with Judge Chiechi’s vocabulary (or maybe their own).

“On January 27, 2014, the Court held a telephonic conference with the parties. During that conference call, petitioner’s counsel in effect advanced again their erroneous view that the word ‘filed’ can be substituted for the word ‘completed’ in the October 25, 2013 Order. The Court reminded petitioner’s counsel that the word ‘completed’ is different than the word ‘filed’ and that the word ‘filed’ is used throughout the October 25, 2013 Order, including twice in the same third ordered paragraph in which the word ‘completed’ is used. The Court informed petitioner’s counsel that the use of the two different words ‘completed’ and ‘filed’ in the very same third ordered paragraph of the October 25, 2013 Order should have alerted them that the word ‘completed’ had a different meaning than the word ‘filed’. The Court also advised petitioner’s counsel that they disregarded the portion of the third ordered paragraph of the October 25, 2013 Order starting with the words ‘taking into account’. Finally, the Court advised petitioner’s counsel that if they did not understand what the meaning of the word ‘completed’ is, they should have arranged a conference call with the Court and respondent’s counsel and/or contacted the General Counsel’s office of the Court for clarification.”  Order, at pp. 1-2.

Finally, following in the footsteps of Imagine Dragon’s third best-selling song of 2013, we have Scott Christopher Ryman, Docket No. 29107-13, filed 1/29/14, wherein Ch J Michael B. (“Iron Mike”) Thornton has IRS get all radioactive.

“ORDERED that, on or before February 19, 2014, respondent shall file a Supplement to the motion to dismiss setting forth whether the ordinary mailing time set forth in respondent’s motion takes into account irradiation of mail to the Tax Court.” Order, at p. 1.

Something new every day in Tax Court.


In Uncategorized on 01/28/2014 at 20:44

If not to your health, then to your wealth or your psychic well-being. Two cases in point from Tax Court today.

Leading off is (or maybe, are) Alvan L. Bobrow and Elisa S. Bobrow, 2014 T. C. Memo. 21, filed 1/28/14. Al is a lawyer specializing in taxation, as he tells Judge Nega several times, and that is his undoing.

Al and Elisa had several IRA accounts between them, and in the year at issue they were playing put-and-take, but claiming all the backs-and-forths were rollovers; rollovers, you remember, are the 60-day free kick a distributee gets to throw a distribution from one IRA into another. A trustee-to-trustee transfer is not a rollover, as distributee never puts paw to paydirt.

Al claims that he gets his once-a-year free kick for each IRA account. No, says Judge Nega, read Section 408(d)(3)(B). “The reference to ‘any amount described in subparagraph (A)(i)’ refers to any amount characterized as a nontaxable rollover contribution by virtue of that amount’s being repaid into a qualified plan within 60 days of distribution from an IRA or individual retirement annuity. The one-year limitation period begins on the date on which a taxpayer withdraws funds from an IRA or  individual retirement annuity and has no relation to the calendar year. Thus, for example, a taxpayer may not make a nontaxable rollover on December 31 in one calendar year and make another nontaxable rollover on January 1 in the next calendar year.” 2014 T. C. Memo. 21, at pp. 8-9.

“Any” means any.

Al ripostes with “… Tech. Adv. Mem. 9010007 (Dec. 14, 1989) and Zaklama v. Commissioner, T.C. Memo. 2012-346 for the position that a taxpayer’s use of funds between the time he takes a distribution from an IRA and the time he makes a repayment of the funds is irrelevant to determining whether the transaction qualifies as a rollover contribution. While we agree with petitioners that the use of funds is irrelevant where the funds include only money and no other distinguishable property, neither Tech. Adv. Mem. 9010007 nor Zaklama bears any relevance to petitioners’ argument that a taxpayer may make more than one tax-free rollover contribution per year.” 2014 T. C. Memo. 21, at pp. 9-10. (Footnote omitted, but read it; it says that Tech Adv. Mems. “…may not be used or cited as precedent and are afforded little weight in this Court.” 2014 T. C. Memo. 21, at p. 9, footnote 3).

Digging into legislative history, Judge Nega finds that the original 1974 version of ERISA limited rollovers to one every three years, but in 1978 Congress scaled that back to one per year. The concern was that there would be too much backing-and-filling, destabilizing the program (and letting taxpayers play games).

Al claims the trustee blew one of the transfers, so it came in a day late for the 60-day saver. But he has no evidence when he or Elisa ordered the transfer, or what the trustee did wrong. And they never applied for the Rev. Proc. 2003-16, 2003-1 C.B. 359 waiver, or tried to use the automatic waiver set forth therein.

Al and Elisa are looking at tax, penalty and interest. Big time.

Al seeks to deflect the penalty. But he has no substantial authority for his position, and didn’t disclose it on their return.

However, hope springs eternal. “Petitioner husband is an attorney specializing in tax law, a fact which petitioners state several times throughout their briefs as support for the position taken on their 2008 tax return. In support of their argument that section 6664(c) should negate any penalty assessed under section 6662(a), petitioners assert that petitioner husband ‘analyzed the transactions at issue in the light of the provisions of section 408(d)(3), and concluded that the three transactions should all be treated as nontaxable.’ It appears that petitioners would have us conclude that petitioner – husband’s career as a tax attorney is proof that they acted with reasonable cause and in good faith.” 2014 T. C. Memo. 21, at pp. 26-27.

I’m giving Al a Taishoff  “good try”, second class. Judge Nega, however, is much less generous.  Understatement 20% chop sustained.

Next up is (or are) Michael & Heather Lloyd, Docket No. 30691-12L, filed 1/28/14, but the order is only tangentially about Mike and Heather. Judge James S. (“Big Jim”) Halpern dealt with Mike and Heather last week, when he gave IRS summary judgment.

Mike’s and Heather’s lawyer, Louis Samuel, Esq., tried to put in answering papers at the time, but Judge Big Jim bounced them, because they weren’t e-filed.

See my blogpost “(Old) Technophobes, Rejoice”, 12/18/13.

Louis Samuel, Esq., re-files his paper papers as an appendage to two different motions with two different captions, apparently seeking indulgence from the e-filing requirements and trying to get his paper papers back in the record.

Too late, says Judge Big Jim, time for vacation. That is, a motion to vacate the earlier order. But that has to be filed electronically.

Louis Samuel, Esq., “…claims as good cause that he has been an attorney for almost 40 years and for the entire time has filed pleadings by paper. He further claims that, at the time this litigation started, he was not ready nor fully equipped to file papers electronically.” Order, at p. 2.

But unlike William J. (“Old Bill”) Wise, Esq., hero of my blogpost aforementioned, whose Tax Court career stretches back to 1959, and thereby earns Ch J “Iron Mike” Thornton’s exemption from e-filing (and he asked before his clients lost), Louis Samuel, Esq., is not one of the chosen few.

Judge Big Jim: “The mandatory aspect of our e-filing rule indicates our intent that counsel equip themselves to comply with the rule. There remains time for petitioners to move to vacate our order and decision. Counsel therefore has time to equip himself to comply with our e-filing requirements. We do not see good cause to exempt him from complying with those requirements.” Order, at p. 2.

So Louis Samuel, Esq.’s, papers go back to him yet again. And a copy of the order gets served directly upon his clients.

Judge Big Jim knows how to hurt a guy.


In Uncategorized on 01/27/2014 at 23:14

The IRS is getting epistolary, claiming their billets doux aren’t final determinations (and where have we heard that song before? See my blogpost “The Whistleblower Blows It”, 6/20/11), but Judge Cohen isn’t buying. So IRS finds Tax Court has jurisdiction to consider suspension of interest on deficiencies under Section 6404(g) by virtue of Section 6404(h).

And IRS can read the bad news in Charles M. Corbalis and Linda J. Corbalis, 142 T. C. 2, filed 1/27/14.

Charley and Linda claim the deficiencies relate to a loss carryback, and thus the year at issue is within the timeframe of the 1998 IRS Restructuring Act. IRS sent them four different Letter 3477s, saying no appeal and no judicial review. Charley and Linda petition anyway, sending in four lawyers, when IRS sends in one; inference arising therefrom: someone is in trouble.

IRS claims that Tax Court has jurisdiction to determine whether IRS wrongfully failed to abate interest, but not to suspend the accrual of interest.

Judge Cohen: “First, we agree with petitioners that all of section 6404 deals with abatement, of which suspension is a category. A claim that interest should have been suspended for a period is the logical equivalent of a claim for abatement of interest that has been assessed for that period.” 142 T. C. 2, at p. 15.

“The Court has stated, without limitation, that ‘section 6404(h) authorizes the Court to review for an abuse of discretion the Commissioner’s refusal to abate interest under section 6404.’ Urbano v. Commissioner, 122 T.C. 384, 390 (2004) (citing Woodral v. Commissioner, 112 T.C. 19, 22-23 (1999)). We see no persuasive reason why, as suggested by respondent, petitioners should have to seek recourse on their suspension of interest claim in another court. See Hinck v. United States, 550 U.S. 501, 506-508 (2007) (discussing congressional intent to provide exclusive jurisdiction to the Tax Court in interest abatement cases).” 142 T. C. 2, at p. 16.

Moreover, citing a statute whose title should resonate with Tax Court petitioners and practitioners everywhere, “We see no persuasive reason why interest suspension, when enacted in the RRA 1998, was to be treated separately from interest abatement for purposes of judicial review. When the interest suspension provision was adopted in 1998, the judicial review provision was redesignated by the RRA 1998 from section 6404(g) to section 6404(i); it was changed to section 6404(h) in 2002 by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, sec. 112(d)(1), 115 Stat. at 2434. In each version of the statute, the provision for judicial review follows the types of determinations subject to review.” 142 T. C. 2, at p. 17.

While Section 7806(b) says that no inference, implication or presumption arises from the placement of any provision in the Code, Tax Court can consider the use of similar terms and provisions in aid of construction.

And here the statute uses “shall”, not “may”, so no discretion and thus judicial review. Anyway, there is a strong presumption in favor of judicial review of administrative acts.

How to do it: first check the statute to see if it makes the administrative determination (whether or not labeled as such) nonreviewable; then see if there are ascertainable standards against which to review the determination in issue; then see if any special agency expertise is involved, beyond the competence of the Court; finally, will review prevent the agency from carrying on its Congressional mandate. Here, the answers are no, yes, no and no.


But there’s a question whether Charley and Linda ducked the $2 million barrier (see my blogpost “Net Worthlessness”, 1/17/14).

Charley and Linda put in affidavits, but IRS challenges these. IRS also claims Charley and Linda are not the “prevailing party”, but that is meaningless in this context. If they prevailed, no deficiency and no interest. Thus, the only Section 7430 test is net worthlessness.

“Respondent also contends that we should disregard the affidavits and net worth statements of petitioners as unreliable. Respondent acknowledges that in the case of a husband and wife, the net worth test is applied to each separately. See Hong v. Commissioner, 100 T.C. 88, 91 (1993). Respondent also ‘acknowledges that the current state of the law is to use acquisition cost, adjusted for depreciation, rather than fair market value to compute net worth.’ See Swanson v. Commissioner, 106 T.C. 76, 94-97 (1996). However, respondent asserts that fair market value is the better standard to use rather than acquisition cost, citing Powers v. Commissioner, 100 T.C. 457, 483-484 (1993) (accepting fair market values which had declined significantly from acquisition costs), aff’d in part, rev’d in part, 43 F.3d 172 (5th Cir. 1995), and section 301.7430-5(g)(1), Proposed Income Tax Regs., 74 Fed. Reg. 61589-01, 61595-61596 (Nov. 25, 2009). We decline to do so in a case in which the relevant facts have not been determined.” 142 T. C. 2, at p. 23.

So there can be an evidentiary hearing on Charley’s net worth and Linda’s net worth, and have a trial if needed. And though Charley and Linda may not have a slam dunk here, at least they stay on the court (pun intended).


In Uncategorized on 01/24/2014 at 16:59

National Taxpayer Advocate Nina (“The Big O”) Olson has delivered her annual report. I did not devote a blogpost to the report, because it was much of a muchness with those of past years. See my blogpost “Come Sit Down Beside Me And Hear My Sad Story”, 1/13/12. Like Dewar’s Scotch, some things never change.

But now the overstretching and underfunding are reaching to Appeals, as witness two orders. First up, George H. Patton & Felomina F. Patton, Docket No. 16365-12 L, filed 1/24/14. George and Felomina were supposed to be remanded to Appeals for a supplemental hearing; Judge Laro said so, in an order filed 7/1/13, directing that the supp “shall take place at a reasonable and mutually agreed upon date and time, but no later than November 2, 2013.” Order, 7/1/13, at p. 1.

Judge Laro also scheduled dates for preparation and submission of a supplemental NOD, conference between the parties, and filing with Tax Court. And Judge Laro bowed out at that point.

None of the foregoing matters happened. So George and Felomina move for default and dismissal.

Ch J Michael B (“Iron Mike”) Thornton orders IRS to respond by Valentine’s Day. Wonder what the response will be.

Now this might seem an inconsequential bureaucratic slip-up, of the kind that happens all the time.

Except there’s another, and this time Ch J Iron Mike isn’t so gentle with IRS. This is Larry Eugene Alflen, Docket No. 3739-13L, filed 1/24/14.

Larry was remanded to Appeals to consider updated information for collection alternative as a result of a motion by IRS. Didn’t happen, “…due to ‘an administrative oversight on the part of’ respondent’s counsel.’” Order, at 1.

So IRS got more time from Tax Court, even though they never asked for more time.

IRS blew past date No. 2, and explained that their St Paul MN office was working on it, waiting for more information from Larry’s representative, but Larry was hospitalized.

However, the hearing was supposed to take place at the Denver, CO office, and nobody asked Tax Court for an order permitting them to move the location.

And the SO in St Paul, MN, needs another 45 days to finish up with the paperwork.

Ch J Iron Mike has had about enough. “The Court notes as an initial matter that the hearing was to be completed by December 23, 2013, not January 6, 2014. The Court further notes that the hearing was to take place with the Denver, Colorado Appeals Office. And finally, the Court notes that at no point did respondent [IRS] submit a motion for extension of time within which to conduct the hearing.” Order, at p. 2.

So he gives Appeals until 2/28, with no more delays absent an appropriate motion.

Justice delayed is…you know the rest.



In Uncategorized on 01/24/2014 at 11:31

 Or, Here We Go Again

 A rather cryptic order from Ch J Michael B. (“Iron Mike”) Thornton sending Gerdau Macsteel, Incorporated, and Related Subsidiaries, Docket No. 12642-01, filed 1/23/14, back to Judge Marvel “for purposes of conducting any further proceedings pursuant to the just-referenced appellate mandate.” Order, at p. 1.

What “appellate mandate”, you may ask? Nothing in the trade press or blogosphere about a mandate from the Fifth Circuit issued 1/10/14.

And why, do you ask, am I blogging about this case yet again? See my blogpost “Macsteal”, 8/30/12, wherein I breezed through 214 pages of Judge Marvel’s prose anent the misdoings of Deloitte and Gerdau Macsteel etc.

I was perplexed by this “mandate”. I put in a call to lead counsel for the taxpayer, and if it is ever returned (and if I am given permission to disclose), I will provide such enlightenment as I may.

For the time being, however, it would seem that all Judge Marvel’s lucubrations, analyses and deconstructions have gone for naught.

Here’s the scoop from PACER for Fifth Circuit:

“COURT ORDER granting joint stipulation of the parties to dismiss the cross appeal pursuant to Fed. R. App. P. 42, filed by Appellant Cross-Appellee CIR and Appellee Cross-Appellant Gerdau Macsteel, Incorporated and Affiliated Subsidiaries [7535212-2]; FURTHER granting the joint stipulation of the parties to vacate the decision of the Tax Court and remand the case, filed by Appellant Cross-Appellee CIR and Appellee Cross-Appellant Gerdau Macsteel, Incorporated and Affiliated Subsidiaries [7535207-2]. Judge: CDK, Judge: WED, Judge: JWE. [13-60132] (DLJ).”

Vacate the decision and remand the case? Here we go again.


In Uncategorized on 01/23/2014 at 20:42

See my blogpost “The Fix Isn’t In”, 3/11/13. One way to make alimony not to be includible gross income to the payee is to have the divorce decree or separation agreement fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support or children of the payor spouse. That’s straight out of Section 71(c)(1), and it’s what saved Brendon James DeLong in my blogpost abovecited.

And it torpedoes Wendy P. Trebat F.K.A. Wendy P. Pellegrini, in an off-the-bench opinion from Judge Kerrigan, Docket No. 28736-12S, filed 1/23/14.

Although this is a small-claimer and can’t be cited, the reasoning may be useful to the practitioner.

When Wendy cut the tie that bound her to Edward, the Marital Settlement provided Edward would pay Wendy “‘unallocated maintenance’ of $4,500 per month, which would be reduced to $2,250…, and would cease [on a date certain]…. These payments would cease upon the death or remarriage of petitioner or upon petitioner’s cohabitation with another person. The Marital Settlement Agreement further stated: ‘The sums paid by Edward to [petitioner] pursuant to this paragraph *** are acknowledged to be paid incident to Edward’s legal obligation to support Wendy. Said sums shall be includable in the gross income of Wendy and deductible from the gross income of Edward for the purpose of federal *** taxation within the meaning and intendment of Sections 71 and 215 of the 20 United States Internal Revenue Code’.” Order, at p. 5.

Edward’s attorney was on the ball, but about a year later, the deal was modified. The original deal was “set aside and held for naught”. Order, at pp. 5-6. The new deal was a straight unallocated $4,500 per month for seven years, no phaseouts and no fixing, and no word about tax consequences or incidents.

Wendy went to a preparer recommended to her, who worked for “a national firm”, Order, at p. 6. No word about the preparer’s qualifications, whether Wendy told the preparer the whole story, and whether Wendy thought the whole thing was too good to be true. In any case, she reported none of the cash Edward gave her in either of the two years at issue.

IRS hits Wendy with a SNOD, claiming the 20% accuracy hit for both years, but concedes one of them.

Wendy claims it was all child support (she and Edward had two little Pellegrinis). But the cutoff of payments isn’t related to either child coming of age, leaving school or anything else. And the payments remained unallocated.

Judge Kerrigan slides over the termination-at-death provision of Section 71(a), but Edward’s deduction isn’t at issue. Whether or not Edward gets the deduction, it’s still gross income to Wendy.

No fix, no exclusion.

But Wendy’s paid preparer rescues her from the second of the 20% chops IRS wants to give her. “Petitioner contends that the payments were for support of her minor children. She did not believe the payments were alimony; and she believed that the payments were related to her children graduating from high school. Petitioner hired a tax preparer who had a good reputation in the community. Petitioner had reasonable cause and acted in good faith. We hold that petitioner is not liable for the accuracy-related penalty….” Order, at p. 11.

Compare and contrast Judge Kerrigan giving Wendy a bye with STJ Daniel A. (“Yuda”) Guy laying a blast on Mark Anthony Rael, who likewise used a preparer from a national firm, but got the chop. See my blogpost “It Depends”, 10/22/13.


In Uncategorized on 01/23/2014 at 16:29

We’ve all heard the oft-quoted statement ascribed to the great mathematician: “Insanity is doing the same thing over and over again and expecting different results.”

Proofs of this are commonplace, and STJ Daniel A. (“Yuda”) Guy has a designated hitter to reinforce the point. This is the story of Andrew Leyva, Docket No. 3223-13, filed 1/23/14.

Andy is a frivolity merchant who has made the trip to Tax Court before now, getting a $5k Section 6673 zing back in December, 2010. It seems he’s a disciple of Scott F. Wnuck, as to whom see my blogpost “One’ll Get You Five”, 5/31/11.

For a look at Andy’s previous joust with Tax Court, see Judge Marvel’s off-the-bencher in Docket No. 25427-09, filed 12/10/10. And Ninth Circuit affirmed on a “not for nuthin’” basis.

But not a bit abashed, Andy’s at it again. It’s another all-zeros 1040 with an “I’m not taxable” argument that bites the dust just like his last venture.

STJ Yuda: “Petitioner failed to allege any facts in his petition or reply to respondent’s [IRS’] motion contradicting the essential allegations in respondent’s motion or identifying a genuine dispute as to a material fact. Petitioner simply makes vague arguments that he is not required to pay income taxes on his wages and other earnings, and is not liable for an accuracy-related penalty. Simply put, petitioner’s arguments are frivolous and groundless. Under the circumstances, we see no need to catalog petitioner’s arguments and painstakingly address them. As the Court of Appeals for the Fifth Circuit has remarked: ‘We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.’ Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).” Order, at p. 2.

STJ Yuda also notes Andy’s past performance, which earned him the $5K zing from Judge Marvel and affirmance thereof by Ninth Circuit: “We note that petitioner is no stranger to the Court. Notwithstanding the imposition of a penalty under section 6673 at docket No. 25427-09, petitioner has persisted in making frivolous arguments to this Court in this case. We can only conclude that petitioner instituted these proceedings primarily for the purpose of delay. Under the circumstances, we conclude that a section 6673 penalty of $15,000 is well warranted here.” Order, at p. 3. (Footnote omitted; it’s a brief account of Andy’s previous frivolity).

So if one’ll get you five, five will get you fifteen.

Wanna bet that Andy petitions from the NFTL or Notice of Levy?



In Uncategorized on 01/22/2014 at 17:16

That oft-repeated parental admonition comes from Ch J Michael B. (“Iron Mike”) Thornton, addressed to Sarah A. Cornish, in Docket No. 13387-13 L, filed 1/22/14, a day when Tax Court is either snowed in or snowed under, as there are no opinions and only one designated hitter, which I find need not long detain the reader.

 Sarah and husband Cornell D.M.J. Cornish get a SNOD, and Cornell D. M. J. timely petitions under a different docket number. Sarah amends to add herself to Cornell D. M. J.’s petition; so far, so good.

But simultaneously therewith, as the white snowboot lawyers hereabouts say, Sarah files a petition seeking review of a NOD for collection, attaching a CP22E letter. For a quick-and-dirty overview of the CP22E letter, see

Of course, the IRS website and its simplistic explanations are no substitutes for the law and regulations, but it might help point the way forward.

And of course, a CP22E is not a NOD, but Sarah isn’t finished.

IRS moves to dismiss for lack of jurisdiction as to the non-existent NOD, and supplements same; to the extent Sarah raises objections to the SNOD, that’s covered by the earlier petition Cornell D. M. J. filed, and she signed onto, so this petition is duplicative. One size fits that one.

Ch J Iron Mike: “Respondent [IRS] states in the Supplement that on the basis of diligent search conducted of respondent’s records, respondent has determined that petitioner has not filed a claim for relief from joint and several liability for [the year at issue] and respondent has not issued petitioner a final determination under section 6015, I.R.C.

“…petitioner lodged a Motion To Strike Motion To Dismiss. The Motion To Strike Motion To Dismiss is in the nature of an objection to respondent’s motion, and the Court recharacterized it as such. …petitioner filed a Reply to Respondent’s Supplement.” Order, at p. 2.

Now for the limited-jurisdiction litany, straight from the word processor. Tax Court has limited jurisdiction, can’t exceed it. In collection cases, there must be a NOD and a timely petition, absent either of which, Tax Court, paraphrasing the immortal words of  Mick Jagger’s and Keith Richards’ 1965 hit, “can’t get no…jurisdiction.”

And the same goes for innocent spousiness, in case Sarah wants to walk that walk. However, there’s a byway. “In the alternative, a taxpayer may invoke the Court’s jurisdiction under section 6015, I.R.C., if the Commissioner fails to issue a final notice of determination within 6 months after the taxpayer has filed an election for relief from joint and several liability. I.R.C. sec. 6015(e)(1)(A)(i)(II).” Order, at p. 2.

And see my blogposts “Whoso Would Intervene, Though He Were Dead”, 8/2/13, and “Whoso Would Intervene – Part Deux”, 8/5/13.

Sarah claims she did ask for innocent spousiness. Ch J Iron Mike doesn’t like the way she asked, and neither does the regulation. In fact, Ch J Iron Mike is so peeved he confuses the gender of the petitioner.

“In his [sic] Reply to Respondent’s Supplement, petitioner contends that she in fact requested relief under section 6015, I.R.C. She points to her phone records and contends that she requested relief by calling respondent’s phone numbers and writing a letter to the ‘Director of the I.R.S.’ as well as during discussions with respondent’s employees.

“Section 1.6015-5, Income Treas. Regs., provides that to request relief, the requesting spouse must file a Form 8857, Request for Innocent Spouse Relief, submit a written statement containing the same information required on the Form 8857, or submit information in the manner prescribed by the Treasury and I.R.S. in forms. The Instructions for the Form 8857 further detail how such relief should be requested. They provide the address for mailing the request and fax numbers. Petitioner did not request relief in the manner specified in the Instructions for Form 8857.” Order, at p. 3.

Anyone wanna bet Sarah wouldn’t have known Form 8857 or its pendant instructions from the label on a can of soup?

So, no NOD, no judicially-cognizable innocent spouse request, and the SNOD is already sub judice.

Sarah is out.