Archive for October, 2014|Monthly archive page


In Uncategorized on 10/31/2014 at 22:57

Judge Wherry has the often-quoted advice for Appeals in Larry F. Anderson, Docket No. 2955-11L, filed 10/31/14. Larry and IRS submitted a fully-stipulated case last year, but Judge Wherry bounced it, because Appeals hadn’t considered Larry’s woeful health condition, or whether the trust into which he had placed his principal residence was a dissipation of assets, or whether Appeals got the valuation of his interest in the principal residence right.

So back to Appeals it went. The supplemental hearing yielded communication and production difficulties, but no answer to Judge Wherry’s questions.

Larry also reduced the amount of his proffered OIC because of the lapse of time and his deteriorating condition.

So will there be a supplement to the supplement? You betcha.

Notwithstanding the oft-reiterated “we are a court of limited jurisdiction” mantra, Judge Wherry finds “In some instances, where uncertainty remains or the record indicates that the taxpayer has still not received a proper hearing, we may remand a second time.” Order, at p. 2 (Citations omitted).

Ordinarily remand follows trial, but here a trial would be unproductive unless Appeals considers the questions Judge Wherry asked to begin with. So he tells Appeals, IRS and Larry what Appeals has to consider–again.

Besides, maybe little old limited-jurisdiction Tax Court isn’t as powerless as it sometimes makes out. “See generally Williams v. Commissioner, 119 T.C. 276, 282 (2002) (describing inherent powers of the Tax Court to regulate proceedings before it, including by sanctioning parties for non-compliance with the Court’s rules); Westreco, Inc. v. Commissioner, T.C. Memo. 1990-501, 60 T.C.M. (CCH) 824, 836-837 (1990), aff’d 923 F.2d 854 (6th Cir., 1991) (describing Tax Court’s inherent powers ‘in the discharge of its judicial functions’). “ Order, at p. 3.

Go to it, guys.



In Uncategorized on 10/30/2014 at 16:43

No, I’m not auditioning for the role of Valentin in Faust, or critiquing someone’s performance.  It’s just that before I depart for the Bayou City (or the Magnolia City, if you prefer), I was going to blog whatever was really interesting out of Tax Court today.

But there wasn’t. The two T. C. Memos today had nothing new.

One was a capitalized qualified residential mortgage interest case, of the kind I dealt with in my blogpost “Nice Try”, 2/21/13, specifically Philip C. Smoker, 2103 T. C. Memo. 56, filed 2/21/13.

Cash basis individuals can’t deduct capitalized interest until paid in cash or equivalent.

Second one is the story of a taxpayer who, confronted with a multimillion-dollar buyout, had his tax professionals (CPA and attorneys) try to negotiate a deal, and when they had, signed something else (that the buyerout prepared), which he never had his professionals review. Then when the buyerout characterized the buyout as ordinary, tried to convert it to capital gains by filing Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

Needless to say, this goes nowhere with Judge Cohen. Taxpayer signed documents he never showed his professionals, didn’t give them the numbers on his position in the boughtout entity, and rather than sue when they suggested it, sent a letter to the buyerout that was completely ignored. Then he made up his own documents to recharacterize the transaction. Reliance on experts? Not hardly.

No need for “somber reasoning and copious citation of precedents” today.


In Uncategorized on 10/29/2014 at 19:15

 Or Maybe They Were Right All Along

It’s our old chum Securitas Holdings Inc., and Subsidiaries, 2014 T. C. Memo.225, filed 10/29/14.

Surely you remember Securitas, with or without subsidiaries? No? Then check out my blogposts “Closing the Buch”, 7/2/13, and “Privilege Lost”, 5/29/13.

Both of the foregoing were jousts about the privileged communications between Securitas, its tax advisers PricewaterhouseCoopers, and its attorneys, who worked out the strategy. IRS got the communications, but Securitas gets the win, as Judge Buch tells us.

The issue is deductibility of insurance premiums to a captive. Two more old friends make the scene, Rent-A-Center and Acuity. For Rent-A-Center, see my blogpost “Insurance – Are You Sure?”, 1/14/14. For Acuity, see my blogpost “Say “Hello” To Judge Nega”, 9/4/13.

Securitas is a Swedish company that goes into the US security business (not stocks-and-bonds, uniformed guards with guns). They buy up Pinkerton’s and Burns Detective. This means tons of vehicles, personnel (workers’ comp and employer liability, cash galore, and all kinds of whatever other liability plaintiffs’ counsel can come up with). Insurance costs a mint in the free world, so Securitas sets up a captive in VT.

Costs cut, but Securitas has a better idea. It gets the VT regulators to allow the captive to lend all but $1 million of its capital to its parent (Securitas). Then, to make sure it’s covered (and has a great tax dodge), it sets up a captive reinsurer. Guess where? [Cue the Kerry Pipers]. The Emerald Isle, now Emerald because of all the cash stashed there. Now Securitas can take the insurance premiums for its onshore cover, wash them through VT, and deposit them at the end of the rainbow (and Ireland has great rainbows). And benefit from the Irish corporate tax rate, which is a pittance, on the millions stashed in the land of céad míle fáilte.

OK, we have shifting of risk, does it look like insurance, balance sheet, risk distribution (spreading the risk), and reasonableness of premiums and capitalization.

Now remember our old chum Centaur, the IL Section 501(c)(15)? The whole jumpball, or rather both jumpballs involving Securitas discussed in my blogposts abovecited, was about selling Centaur stock to preserve its Section 501(c)(15) status undefiled by control group attribution. Securitas picked up Centaur when it bought Burns Detective.

Well, by creating the reinsurance dodge and sterilizing the VT captive with a guaranty of performance, so that the VT captive wasn’t an insurance company for US tax purposes, Centaur wasn’t part of a US insurance control group and could keep its Section 501(c)(15) virtue intact. And Securitas could keep its Centaur stock, and save it for a rainy day.

So the whole confidentiality fight was a sideshow.

At the close of play, the Irish Re turns out to be real. Capitalized enough; Securitas’s plenteous activities furnish diversified risk; the premiums are reasonable (IRS concedes that); the policies are real on their face, and the fact that some were signed after the stated effective date doesn’t invalidate them; the risks are insurable risks; the guaranty from Securitas to the VT captive doesn’t by itself invalidate the shifting of risk; and the bookkeeping arrangements of paying by ledger entry doesn’t prevent risk-shifting, because it is unrealistic to expect members of a control group to cut checks to one another, and such payment arrangements are commonplace.

Of course, both the VT captive and the Irish Re kept separate books, had their own directors’ meetings, and had their own bank accounts.

Securitas wins, third time out. And a Taishoff “good job”, first class, to Michael Francis Kelleher, Esq., and his team.

Full disclosure: I worked for Burns Detective Agency, as it was then, one summer fifty years ago, as an unarmed guard at a Brooklyn brewery (now defunct). But that’s definitely another story.


In Uncategorized on 10/29/2014 at 17:56

Steven R. Rader is a plumber, consolidated with Vivian L. Rader, 143 T. C. 19, filed 10/29/14, but it’s Steve’s story all the way. IRS concedes that it’s all about Steve.

Steve and Viv didn’t bother to file tax returns for a bunch of years, in one of which they unloaded some real estate (character of which not stated, but it matters) they both owned. For that year they got withheld the FIRPTA 10%.

For those who don’t deal with income taxation of real estate, every transferor of US real property (except certain low-budget principal residences) must either provide a TIN to the transferee, or the transferee must withhold 10% of the gross proceeds and remit same to IRS, along with Form 8288-A.

Now FIRPTA means Foreign Investment in Real Property Tax Act (of 1980); but Steve and Viv are both US citizens, so why the 8288-A? Neither one provided a TIN. The real estate was all in CO, so it was the usual Western escrow closing, run by a title company. I’ve done CO deals; to my New Yorker eyes they’re weird, but I’m sure the CO title company would say the same about my hometown.

And the title company didn’t bother with the back-and-forth that would take place at a New York closing, where all (or almost all) of our form contracts require either a Section 1445 certificate (US personhood) or withholding, and failure to provide one from what seem to be US people would raise eyebrows, at a minimum. No, the title company just withheld.

Since the deficiencies at issue are all to do with Steve’s plumbing operation, but since the 10% withholding impacted Viv’s share of the proceeds from the jointly-held realty (presumably community property in CO, no? Help me out here, Colorado colleagues), shouldn’t Viv get credit for her share of the 10% withheld, as IRS isn’t hitting her up for any tax?

Yes, if she had timely filed. But she never filed, and the payment date (of the 10% withheld), which is deemed to be April 15 of the year following the year of closing, is more than two years before IRS issued Viv the SFR that covered that year.

See my blogpost “Lookback in Anger”, 12/12/11. If you don’t file, you get a two-year-from-payment lookback, not the three-years-from-filing lookback. Nonfilers cannot be as well off as filers.

Now Steve doesn’t get a break on the 10% either, because in computing a deficiency, the credit for the 10% withheld (Section 33) is expressly excluded from the deficiency computation (Section 6211(b)). And all the deficiencies are Steve’s alone.

Tax Court can’t consider any entitlement Steve might have to a Section 33 credit, even assuming that he can get past the two-year lookback.

Incidentally, although one of Steve’s arguments has merit, that doesn’t save him from a Section 6673 frivolity chop, because Judge James S. (“Big Jim”) Halpern decides Steve was stalling by interposing protester arguments to excuse his nonfiling.

Steve’s winner was based on IRS’s amended deficiencies, which IRS increased by changing Steve from single status to MFS. But the amended deficiencies also increased the Section 6651(a) (2) failure-to-pay-timely chop that IRS claims.

“All of those increased amounts are computed on attachments to the amendments to answer, which attachments consist of a new Form 4549-A, a Form 5278, and computations of the various penalty amounts and of petitioner’s self-employment tax for 2003-06. Respondent has failed to attach to his amendments to answer a Form 13496 for any of the years covered by the amendments to answer. The Form 13496, in pertinent part, states: ‘The officer of the IRS identified below, authorized by Delegation Order 182, certifies the attached pages constitute a valid return under section 6020(b).’”. 143 T. C. 19, at p. 26.

So what’s up with that? Judge Big Jim will tell you: “However, without their having been subscribed to or certified by an authorized Internal Revenue Officer or employee, under those same authorities, the attachments do not ‘purport[] to be’, and do not constitute, a section 6020(b) return [SFR] for any of the… tax years. Therefore, we sustain the section 6651(a) (2) additions to tax set forth in the notice … and reject the increases to those amounts set forth in respondent’s amendments to answer.” 143 T. C. 19, at p. 27.

See my blogpost “Doesn’t Anybody Read Their Papers?”, 10/27/14.

Before I say goodbye to Steve and Viv, I want to take up the cudgels for the CO title company that closed Steve’s and Viv’s deals. Judge Big Jim thinks they didn’t know the law, specifically Section 1445.

“Also exempt from the requirement to withhold under sec. 1445(a) are sales of U.S. real property interests for $300,000 or less if ‘the property is acquired by the transferee for use by him as a residence’. See sec. 1445(b) (5); sec. 1.1445-2 (d) (1), Income Tax Regs. Petitioners’ … real property sales were for $250,000 and $25,000, respectively. The record is silent regarding the buyers’ intended use of the properties, and we can only assume that the title company payor did not avail itself of the sec. 1445(b) (5) exemption either because (1) the buyers did not intend to use the properties as a residence or (2) it was not aware of the exemption.” 143 T. C. 19, at pp. 19-20 (footnote 9).

Don’t assume too much, Judge. I think the title company knew the exemption “richt weel”, as they say in Gleesca.

More to the point, they were dealing with Steve and Viv and their shenanigans, which aforesaid shenanigans were enough for Judge Big Jim to hit them with a $10K frivolity chop. If I were title company’s counsel, and a transferor didn’t give me a Section 1445 FIRPTA cert, even if s/he were Uncle Sam his own self, and the realty were the original Little House on the Prairie, I would have told the title company to take the 10%, slap up a Form 8288-A, and ship them both to the Ogden Service Center, by registered mail the same day.

My client should take a chance of getting involved with some tax dodge? They should trust Steve and Viv, and whatever tale the transferee/buyer tells them? As they say on the roads in the Great West, that’s a thwacking great negatory, good buddy.


In Uncategorized on 10/28/2014 at 17:23

Even an Obliging Jurist can get a wee bit testy with those who, seeking the aid (or at least the intervention) of Tax Court, hang up the phone on the Judge who has charge over their tax fate.

Now we all know how obliging Judge David Gustafson can be. He gives brief courses in income tax law, offers to try cases in the slammer wherein petitioner temporarily (but not shortly) resides, and is otherwise graciously accommodating to the varied, and sometimes hapless, petitioners who swim into his ken.

But today, the milk of human kindness is somewhat curdled for Roland O. Ladipo & Folorunso O. Ladipo, Docket No. 1643-14S, filed 10/28/14. And I really can’t say I blame Judge David Gustafson.

Here’s the preamble. Roly and Folorunso petitioned a year ago, trial was set back in July of this year for November, and IRS put in their pretrial brief earlier this month. Neither Roly nor Folorunso did anything.

Here’s the story from Judge Gustafson: “To learn more about the status of the case, the Court initiated a telephone conference call with the parties. … a telephone conference took place in which petitioner Folorunso O. Ladipo participated. She explained that this case concerns the tax matters of her husband Roland O. Ladipo and not her own and that she is unfamiliar with the case and its issues. She agreed to pass along to Mr. Ladipo the Court’s instructions that he call the chambers of the undersigned judge for the purpose of conducting a pretrial telephone conference in which he would participate.” Order, at p. 1.

Makes sense, right? To quote myself: “Now we combat-hardened practitioners love a conference. We can invoke justice and mercy, walk humbly, ingratiate ourselves, and get a sense of how the judge will deal with us when the green light goes on.” From my blogpost “Golightly? Go Very Lightly”, 9/4/14.

Roly would have done well to read and heed.

However, Roly read neither your humble servant nor, apparently, the late Dale Carnegie.

“However, when Mr. Ladipo telephoned the chambers of the undersigned judge, he declined to participate in a conference call, stating instead to chambers staff that he would not speak to anyone about the case without his attorney. Since no attorney has appeared in this case, this is not a reasonable position for Mr. Ladipo to take. The Court will therefore order Mr. Ladipo to participate and now offers to the Ladipos these general reminders that the Court would expect to give in a phone conference….”Order, at p. 1.

Show up ready for trial, Roly, with documents and witness lists exchanged with IRS. And while you’re at it, get on the horn with that Obliging Jurist Judge David Gustafson immédiatement, and spill, baby, spill.

Oh, btw, here’s the rest of the story of the star of my abovecited blogpost, Chushanrishatham Jeconiah Golightly.

Among other delictions, although IRS offered ChushJec a settlement, he didn’t respond. Finally, on September 15, 2014, the day I wished I had been in Lubbock to see this for myself, IRS moved at trial to dismiss as aforesaid. Of course, ChushJec never showed.

Judge Nega went the proverbial twain. “At the Court’s request, the trial clerk called petitioner to inform him of his mandatory attendance at which time petitioner abruptly ended the call by ‘hanging up’ the phone on the trial clerk.” Order, at p. 1.

Gotta give the man credit; he’s consistent. He also had his case tossed, and IRS can now lien, levy and descend heavily upon Mr. Golightly.

Read all about it, all five pages’ worth, sub nom (as my already retired and on the golf course colleagues would say) Chushanrishatham Jeconiah Golightly, Docket No. 11703-10L, filed 10/21/14.

And this is what I am reduced to, on a day when there are neither opinions nor designated hitters out of Tax Court.




In Uncategorized on 10/27/2014 at 16:21

Before lodging, filing and serving them, I mean.

I’ve complained about proofreading lapses in Tax Court orders often enough. However, lest I be thought a nitpicking curmudgeon when it comes to Tax Court only, I have two examples of submissions by attorneys that should not have gone out the door, or on the e-filing website, without a second hard look.

There may be more today, but I got tired of looking for them. So here’s one from IRS and one from petitioners’ counsel.

Let’s start with petitioners. Johanna Hernandez, Docket No. 10312-14, filed 10/27/14. There’s a companion case, Gary Martell, 22347-14, filed 10/27/14, but I’m working from the text of the Hernandez order, authored by Ch J Michael B. (“Iron Mike”) Thornton.

Reading this order, you’ll see why Ch J Iron Mike doesn’t bear that sobriquet for nothing. Ch J Iron Mike told Johanna to amend her petition.

Here’s what her attorneys did.

“…Johanna Hernandez, petitioner in Docket No. 10312-14, and Gary Martell, petitioner in Docket No. 22347-14, eFiled a Motion To Consolidate Docket Numbers. Attached to the Motion To Consolidate Docket Numbers is an Amended Petition. The Amended Petition bears no docket number, and the names of both petitioners improperly appear in the caption. The Amended Petition is improperly attached to the motion to consolidate instead of being filed as a separate document.” Order, at p. 1.

That’s the least of Johanna’s problems, however.

“Petitioners’ Motion To Consolidate Docket Numbers is also improper. Pursuant to Rule 141(a), Tax Court Rules of Practice and Procedure, ‘a motion to consolidate cases may be filed only after all the cases sought to be consolidated have become at issue.’ Pursuant to Rule 38, Tax Court Rules of Practice and Procedure, ‘[a] case shall be deemed at issue upon the filing of the answer, unless a reply is required under Rule 37, in which event it shall be deemed at issue upon the filing of a reply or the entry of an order disposing of a motion under Rule 37(c) or the expiration of the period specified in Rule 37(c) in case the Commissioner fails to move’. As [sic] follows, the motion to consolidate is premature.” (Order, at p. 1; I think Ch J Iron Mike meant to say “It follows that the motion to consolidate is premature”).

So Johanna, file a proper amended petition, and tell your attorneys to follow the Rules.

So that IRS doesn’t feel left out, here’s one of theirs. Saynab Hassan, Docket No. 21218-13S, filed 10/27/14. Saynab has enough troubles. She lives in Columbus, OH, she can’t drive, but there’s no courtroom space in Columbus, OH, so Saynab was told to show up in Cincinnati, OH.

In a teleconference, Saynab asked again for Columbus, but was told no space available, so get to Cincinnati.

But the Judge continues the case sua sponte, because he feels Saynab’s pain, and maybe the hard-laboring crew at 400 Second Street, NW, can find some room in the proverbial to put Saynab.

Now if I tell you that the Judge in this case is That Obliging Jurist, Judge David Gustafson, will you be surprised? Not if you’re a regular reader of this blog. I can’t count how many times That Obliging Jurist has gone the twain, when many wouldn’t even go the mile.

But there’s more. IRS hasn’t precisely covered itself with glory in getting this case ready for trial.

“…we doubt that this case has been given sufficient attention by respondent [IRS]. The pretrial memorandum was evidently constructed from templates, which in itself may be an economical and sensible practice; but in this case the memorandum as filed refers to ‘children’ (whereas the exemption for only one child is apparently at issue here) and refers to the child as petitioner’s ‘grandchild’ but then states contradictorily that the exemption deduction for a ‘qualifying child’ is unavailable because ‘the children [sic] are not related by blood to petitioner’. Respondent should determine which qualifications are actually lacking, in its view, and give petitioner the opportunity to respond to those focused contentions.” Order, at p. 2.

Judge Gustafson is truly obliging. But a little bit of preparation, and maybe a second (or third) read-through of your papers, and a glance at the Tax Court Rules, goes a long way, for attorneys on both sides of a case.


In Uncategorized on 10/24/2014 at 16:23

When a Judge admits that he is not all-wise, all-knowing– moreover, when he does not lustily join in Sir W. S. Gilbert’s immortal words “The Law is the true embodiment. Of everything that’s excellent. It has no kind of fault or flaw, And I, my Lords, embody the Law,”– then he truly gets a tip of my battered old Stetson.

And who else should receives this accolade today, but that distinguished jurist, The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Inveterate, Indefatigable Foe of the Partitive Genitive, The Honorable Mark V. Holmes?

[Unhappily, Aaron Copland is not here to favor us with a Fanfare for the Uncommon Man].

Judge Holmes says he learned something both from IRS and from Brenda Bradsher & Kenneth McCormack, Docket No. 17773-13, filed 10/24/14. And a Taishoff  “good job” to counsel for both parties, Thomas F. Virr, Esq., for Bren & Ken, and Brooke S. Laurie, Esq., for IRS.

Judge Holmes explains his bemusement: “The petition that Ms. Bradsher and Mr. McCormack filed included as an attachment an IRS notice that is on a notice-of-deficiency form but plainly stated that it is a disallowance of a refund claim. This puzzled the Court because it had never before seen such a notice, and thinking this might not be a deficiency case at all it issued an order to the parties to show cause why the case shouldn’t be dismissed for lack of jurisdiction.” Order, at p. 1.

But IRS was right. Here’s the chronology. Bren & Ken file return in Year One and pay tax. Bren & Ken file for refund of tax paid in Year Two. IRS denies refund and assesses deficiency in one single notice in Year Three. Bren & Ken timely petition.

IRS can deal with both in one notice, and its manual says so. See IRM

But wait, there’s more. “More importantly, as the parties patiently explained, IRC § 6512 contemplates treating the disallowed claim for a refund as a claim under our overpayment jurisdiction, so there is no problem with our jurisdiction. See IRC § 6512(b)(3)(C)(i). (There is even a somewhat similar case in which we’ve already explained why we have jurisdiction in these circumstance.)” Order, at p. 2. (Citation omitted, but note the case; it may come in handy).

“Having thus learned something new, there is nothing left for this division of the Court but to…” discharge the order to show cause. Order, at p. 2.

That’s what makes this so much fun–there’s always something to learn.


In Uncategorized on 10/23/2014 at 16:43


 Those hardy persons still reading this blog may wonder why I devote so many blogposts to mailing misadventures. Exemplia gratia, as my classically-educated colleagues would say, “Bless ‘Em All”, 10/14/14.

Well, this is where a great number of Tax Court petitions run aground, relegating taxpayers with colorable claims from the free kick of USTC to the pay-to-play route at either USDC or USCFC. And it’s a danger point for the in-the-trenches preparer who must rely upon others to lug the magic envelope to the posties or the people in purple-and-black (or brown and brown, or yellow-and-red). Here be dragons, indeed.

Yet another case in point, this one from yesterday, 10/22/14. I must have fallen asleep as I prepared the blogpost yesterday night, because my literary effusion vanished into cyberspace. So here it is again.

The case is Joseph Sanchez, 2014 T. C. Memo. 223, filed 10/22/14, opinion by the Judge With A Heart, STJ Armen. But STJ Armen, bighearted as ever, cannot help Joe, who misplaced his trust upon an unnamed third party, and lost by one day his sixty-buck ticket to justice.

“Affixed to the envelope was a ‘stamp’ printed by a third party from her computer using software from and a certified mail sticker. The ‘stamp’ reflected the ‘’ logo, ‘$4.70’ of ‘US Postage First-Class’, a five-digit number that presumably corresponds to the ZIP Code from which the ‘stamp’ was generated, and ‘MAR 03 2014’. The ‘stamp’ also includes a string of alphanumeric characters whose meaning is not disclosed in the record.” 2014 T. C. Memo. 223, at pp. 3-4. (Footnote omitted).

Of course, “MAR 3 2014” is the magic last day of the 90, mailing on which would get Joe out of the starting gate at Tax Court and into the race to fight off the $13K of tax and penalty in the SNOD. See again Section 7502.

Except it doesn’t. Joe’s trust in, and worse, in his unnamed third-party helper, avails him not.

Joe’s correspondence doesn’t show up at 400 Second Street, NW for a week. It bears a USPS postmark, clearly legible, as follows: “Salt Lake City UT – TUE 04 MAR 2014 – 841 PM”. Joe is therefore a day late and much more than a dollar short.

Joe used certified mail, and that helps, but the date of mailing must be evidenced by a USPS postmark, and only if same be lacking or illegible may extrinsic evidence be introduced. See Section 301.7502-1(c)(1)(iii)(B)(3), Proced. & Admin. Regs. Where there are dueling postmarks, USPS wins.

Worse, Joe’s factotum sinks Joe’s boat.

“In support of his argument petitioner provided a statement by the third party who prepared the petition for mailing and then delivered it to the post office. In her statement the third party describes how on Monday, March 3, 2014, after being ‘given documents to mail’, she printed postage using software, added extra postage for certified mail, and then took the petition to the U.S. Post Office…for deposit into the mail. The third party candidly states that in order to ‘avoid[] the long lines’ at the post office, she dropped the petition off without having a certified mail receipt stamped by a Postal Service employee and that as a consequence ‘the sender has no documentation showing * * * [the post office] received the certified package’ on March 3, 2014.” 2014 T. C. Memo. 223, at p. 6.

I would point out that, in post offices where there are automated postal machines that dispense postage and receipts maintained by USPS, it might be tempting to rely on the machines. I myself have suggested that; see my blogpost “Going Postal”, 2/4/13. After Joe’s debacle, though, I’m not so sure. After all, the technophobes and Luddites still reign, and the posties may have the magic touch, after all.

And I also point out that maildrops inside post offices aren’t cleared as often as one might wish.

Finally, in my local post office there’s a sign on the maildrop as follows: “Items delivered after 5 p.m. will bear the next day’s postmark.” I wonder if such a sign appeared in Joe’s local post office.

Many years ago, in its pre-USPS incarnation, the post office had a slogan: “Mail early in the day, It’s the better way.”

Just ask Joe.


In Uncategorized on 10/22/2014 at 22:32

Not Hardly

Older readers of this chronicle may remember STJ Lewis (“The Right Spelling”) Carluzzo in his role as tax return preparer. For the newer among the faithful, check out my blogpost “Tax Court As Preparer?”, 9/17/12.

Well, STJ Lew bailed on the tax return preparation gig, but Duane Morley Cox & Jeanne Cox, Docket No. 26501-13S, filed 10/22/14, want Ch J Michael B. (“Iron Mike”) Thornton to copy edit their amended petition.

“…petitioners filed a Motion To Change or Correct Caption. In that motion petitioners seek to have the Court ‘correct’ various typographical error [sic] in the exhibits attached to petitioners’ amended petition….” Order, at p. 1.

After all, Ch J Iron Mike tells them “…we issued an order correcting the spelling of Mr. Cox’s middle name from Marley to Morley.” Order, at p. 1.

So maybe Duane Morley and Jeanne were confused, and thought that only Tax Court Judges could proofread papers.

They should read some Tax Court orders for a couple days, as Judge Holmes would say. That would disabuse them of the notion that anyone proofreads these orders.

Howbeit, Ch J Iron Mike isn’t a proofreader.

“Petitioners are advised that if they wish to correct various typographical errors in exhibits attached to their amended petition, petitioners should do so by filing a motion for leave to file an amendment to amended petition and lodging therewith, an appropriate amendment to amended petition containing such corrected exhibits.” Order, at p. 1.

We don’t do tax prep and we don’t do proofreading.


In Uncategorized on 10/21/2014 at 17:47

No, Judge Whelan won’t allow that. Take a look at a small-claimer, Nanette J. Martarano and David Martarano, 2014 T. C. Sum. Op. 101, filed 10./21/14.

It’s the usual non-substantiation, but with a double twist.

The only one to show up for trial is Nanette. Nanette is what she calls “a tax professional.” Judge Whelan elucidates: “She has worked for H&R Block for five years, and she is working to become an enrolled agent of the Internal Revenue Service.” 2014 T. C. Sum. Op. 101, at p. 3.

Leaving aside the fact that an “enrolled agent” is anything but an agent of IRS, Nanette is not off to a great start.

First, Nanette claims that IRS’ transcript of her and Dave’s return introduced by IRS is incorrect, and she said so at audit and at the trial, although she stipulated that the transcript was correct pre-trial. She never puts in at trial what she claims is the true return, but puts her numbers in her pre-trial memo.

And she’s been in Tax Court on similar issues before.

Next, “At the start of trial in this case petitioner admitted that, after filing her petition, she did not contact respondent’s attorney and she failed to respond to the numerous attempts of respondent’s attorney to contact her. In addition, petitioner did not respond to respondent’s so-called Branerton letter, in which respondent offered to begin informal discussions and discovery through a pretrial settlement conference.” 2014 T. C. Sum. Op. 101, at p.9. So she also violated the Standing Pre-Trial Order, the “play nice and make nice”.

But Nanette is not done. “It was not until three days before the calendar call that respondent’s attorney received a packet of documents from petitioner. At trial petitioner also sought to introduce other documents not included in the packet and not provided to respondent’s attorney before trial. In an attempt to assure the fairness of these proceedings, the Court did not accept into evidence any document that was not included in the packet of documents provided to respondent’s attorney before trial. Furthermore, the Court did not accept into evidence copies of petitioners’ personal bank statements that had been substantially altered by redaction. Petitioners had not shown the original statements to respondent’s attorney before trial, and she did not have them available for inspection in Court.” 2014 T. C. Sum. Op. 101, at p. 9.

OK, Nanette’s attempted ambush fails, and she gets nailed for the deficiency asserted. So IRS won it all, right?

Not quite. Maybe IRS’ counsel was a trifle peeved at Nanette’s gameplaying, so counsel tries one on Nanette.

IRS moves to conform the pleadings to the proof. This is the Rule 41 “if you agree to try it, it doesn’t matter that you didn’t plead it” provision.

IRS claims that Nanette’s proof bespeaks negligence, and wants a 20% chop.

Judge Whelan isn’t biting.

“Respondent’s motion does not mention the reasonable cause exception for underpayments provided by section 6664(c)(1). Under that exception, the section 6662 penalty is not imposed with respect to any portion of an underpayment if the taxpayer shows that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, that portion.” 2014 T. C. Sum. Op. 101, at p. 16.

Of course, Nanette billed herself as a “tax professional”, so reliance on experts is a very thin twig on which to hang one’s good faith.

Still, Nanette was ambushed. “Respondent’s motion was made at the end of trial. Indeed, respondent’s attorney made the motion immediately before the case was adjourned. We do not quarrel with the timing of respondent’s motion. A motion under Rule 41(b)(1) may be made ‘at any time.’ Nevertheless, except for respondent’s oral motion, there was no mention of the accuracy-related penalty under section 6662(a) during these proceedings and, thus, nothing to suggest that petitioners had any reason to suspect that respondent planned to assert the penalty.” 2014 T. C. Sum. Op. 101, at p. 17 (Citation omitted).

So no go on the penalty.

But I suggest Nanette put in some extra studying time on penalties and additions to tax, and Tax Court procedure, before she takes the SEE to become “an enrolled agent of the Internal Revenue Service”.