In Uncategorized on 03/11/2014 at 18:30

Yes, it’s a tax protester case, but the above demand is not made by the protester herself, but by IRS and Appeals, who realizes that they blew a NOD and need to correct it.

And to whom do they turn but the Man for Remand, The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter and foe of the partitive genitive, Mark V. Holmes?

See my blogpost “Back to the Future”, 8/1/11.

But this is the story of Judy Macdonald, 2014 T. C. Memo. 42, filed 3/11/14, completing my hat-trick of blogposts for today.

Judy is an old-time frivolity merchant. “Judy Macdonald has been filing frivolous tax returns or no returns at all since at least 1985. The Commissioner finally caught on and filed notices of federal tax lien (NFTLs) covering 18 years; he also assessed frivolous return penalties against her for 12 of them. Since then, Macdonald has only made more frivolous arguments. She demanded a collection due process (CDP) hearing and then failed to show up. She petitioned this Court, and then refused to engage in informal discovery, never signed a stipulation of facts, and didn’t appear at calendar call.” 2014 T. C. Memo. 42, at pp. 1-2.

This looks like a case for the remark Judge Holmes provided in the case of John Ryskamp, “Enough” See my blogpost thus entitled, 1/8/14. But not quite.

“What makes this case unusual is that the Appeals officer determined–at the CDP hearing that Macdonald skipped–several points in her favor. He then issued a notice of determination that concluded that tax assessments for six of the years were invalid. The Commissioner objected to this conclusion, and the Appeals officer then testified at an abbreviated trial. He said he was well and truly mistaken, and he even joined in the Commissioner’s request that he be found to have abused his discretion in ruling, even in part, in favor of the absent nontaxpayer.

“This was an odd request, oddly made, and we asked the parties to brief the question of what we should do.” 2014 T. C. Memo. 42, at p. 2.

So IRS put in a brief (Judy of course didn’t). “The Commissioner’s argument was simple: The Appeals officer had abused his discretion by applying the wrong rule of law when he mistakenly reasoned that he had to verify whether Macdonald had received the notices of deficiency sent to her for those tax years, and not simply whether the IRS had sent them to her last known address. See sec. 6212(b). He asks us to rely on the credible testimony at trial from the Appeals officer saying that he had made a mistake.” 2014 T. C. Memo. 42, at p. 6.

Apparently Judy sent IRS a letter with an address different to that which she used on the last (frivolous) return she filed. But that isn’t enough to give IRS notice, and a number of cases have so held.

“Simply putting a different return address on an envelope or letter mailed to the IRS is not enough. The Commissioner realizes this now, and asks that we decide that the supplemental notice of determination was invalid and that we uphold the NFTLs…. Unsure of exactly what to call this motion, he labeled it a motion to conform the pleadings with the proof.

“It is unclear if we can do anything about this ourselves.” 2014 T. C. Memo. 42, at p. 9.

Remember, Tax Court is a court of limited jurisdiction. Only the taxpayer can appeal a NOD. There’s also the question of standing.

“But the unusual position that the Commissioner finds himself in raises several intricate questions:

“What allows us to broaden the subject matter of our review from the portions of the determination that a petitioner challenges to portions that the Commissioner disagrees with?

“Does such a challenge by the Commissioner involve a jurisdictional problem of standing?–after all, the Code gives standing to appeal only to the taxpayer, not to “any aggrieved person” or similarly broader class.

“Would it matter that the Commissioner could not himself petition to challenge the determination?”

2014 T. C. Memo. 42, at pp. 10-11. (Footnotes omitted, but read footnote 3 at p. 11, where Judge Holmes talks about the government suing itself; Appeals is separate from IRS (it says), so can IRS petition to review Appeals?).

So what does Judge Holmes do? Well, he takes a leaf from one of his own opinions; see my blogpost “The Busted Stipulation”, 1/27/12. And punts.

“We think it best in such an uncertain situation to remand the case a second time: We’ve hinted in the past that we can remand if it would be ‘helpful’. Phrased another way, ‘we return a case to Appeals if we consider a rehearing “necessary or productive.”’

And that is what we’ll do here.” 2014 T. C. Memo. 42, at pp. 11-12 (Citations and footnotes omitted).

But read footnote 4 at p. 12. If the remand results in a new NOD, only that NOD is up for review. The new NOD is a supplement to the old, not a new NOD. All previous NODs are gone, and Judge Holmes expects that principle will apply here.

IRS wants to give Judy a Section 6673 hit, but Judge Holmes says she’s a first-timer in Tax Court, and shows her the yellow card. Next time she should play nice.


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