In Uncategorized on 01/03/2014 at 19:55

No, not the 14-season television series rated number 43 on the all-time list by TV Guide, rather the extraordinary set of Orders out of Tax Court today, Friday, January 3, 2014.

Fridays are usually dull down at 400 Second Street, NW, and given the snowstorm and announcement that US gov’t workers could come in or stay home and work, as they chose, I expected little. I wasn’t surprised the designated hitters were rather poor, two stalls and another exegesis of Section 152 and related familial carryings-on.

But then I went a little farther on.  So here’s the potpurri of gems extracted from the dross by the unremitting toil of yours truly.

First up, Sumner Redstone, the Viacom king. Sumner was having a set-to with IRS over a 1972 gift of stock, as to which he never filed a 709. See my blogpost “The Flavor Du Jour”, 12/9/13. Judge Lauber blew off Sumner’s laches defense (delay of game doesn’t stop the US of A). So now IRS wants summary judgment. And Judge Lauber gives Sumner and his legal team until February 3 to find some material facts in dispute, and lay them bare. Read all about it in Sumner Redstone, Docket No. 8097-13, filed 1/3/14.

Next up, echoes of Jerry Rawls. Remember Jerry? No? Well, see my blogpost “Hail, All Hail Cornell”, 12/5/12. But this Order isn’t about Jerry’s case, only citing it for authority. This lofty Order (sorry, guys) can be found in Edge Lofts Master Tenant, L.P., A Missouri Limited Partnership, Edge Lofts MT GP, LLC, A Missouri Limited Liability Company, Tax Matters Partner, Docket No. 424-11, filed 1/31/4.

This was a Section 47 rehab credit case; that’s the historic structure thing. “Respondent had determined that petitioner improperly included more than $2 million in developer fees as qualified rehabilitation expenses for 2006. Respondent then mailed a Final Partnership Administrative Adjustment to petitioner (Limited FPAA). Respondent also mailed a Final Partnership Administrative Adjustment to Loft’s tax matters partner (Loft FPAA). The Limited FPAA purports to give effect to only the qualified rehabilitation expenditure adjustments respondent determined in the Loft FPAA. The Limited FPAA adjusted no independent partnership item of Limited for 2006.” Order, at p. 1 (Footnote omitted, but it’s important).

Here’s the omitted footnote: “The partnership-level proceeding involving the partners of Loft, Tax Court Docket Number 425-11, has not been completed.” Order, at p. 1, footnote 2.

So both IRS and Limited move to dismiss the petition, as the only result of the FPAA is a computational numbers shift. Judge Kroupa: “An FPAA containing solely computational adjustments of partnership items of a source partnership that respondent issues before completion of the source partnership-level proceeding is ineffective to confer jurisdiction on this Court. Rawls Trading, L.P. v. Commissioner, 138 T.C. 271 (2012).” Order, at p. 2.

But wait–there’s more. If I were doing a separate caption for this one, it would be “Do The Math Before You Send the Check”. This is Chief Judge Michael B. (“Iron Mike”) Thornton’s advice to Christopher Cruz, Docket No. 26650-13S, filed 1/3/14, but that “S” won’t be there long.

Chris was over the $50K brightline, so his “S” was in jeopardy. His attorney-in-fact, Allgood, sent in a check for $500, hoping to take Chris under the radar. Unfortunately, it wasn’t all good (sorry, guys).

Ch J Iron Mike: “John Allgood filed a Response on behalf of petitioner. Although this response was filed by the Court, petitioner should note that this Court does not recognize powers of attorney, and all filings should be made by petitioner or by a practitioner admitted to practice before this Court.” Order, at p. 1.

And see my blogpost “Powerless”, 9/14/12.

Anyway, even if John Allgood were a practitioner admitted to practice before Tax Court, he can’t add. “The Response to the Court’s Order To Show Cause states that petitioner paid $500.00 to respondent to bring the amount in dispute for tax year 2007 below the $50,000 jurisdictional maximum for small tax case procedures. For the small tax case election to be valid, the ‘amount of the deficiency placed in dispute’ may not exceed $50,000 for any one taxable year. I.R.C. sec. 7463(a), (e);  Kallich v. Commissioner, 89 T.C. 676, 679-680 (1987). The ‘amount of the deficiency placed in dispute’ includes the deficiency and any additions to tax and penalties determined by respondent in the notice of deficiency upon which the case is based, I.R.C. sec. 7463(e), less any concessions made by petitioner. The amount of deficiency (when including additions to tax and penalties) for tax year 2007 exceeds $50,000, even if petitioner’s $500.00 payment is viewed as a concession.” Order, at p. 1.

So Chris loses his “S”. For the right way to deal with the problem, see my blogpost “Who Says It’s a Small-Claimer?”, 8/1/13.

The next one deserves its own blogpost, as Judge Holmes finds an unlikely ally in his war on the partitive genitive. Stay tuned.


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