No, this is not another celebrity interview. This is the story of Applied Research Associates, Inc. and Affiliate, 143 T.C. 17, filed 10/9/14. Applied is a Personal Services Corporation. Check out Section 448(d)(2) for that, but in brief, it means a corporation providing personal services through its present, past and deceased officers and employees, and their heirs, distributees, etc.

Both sides agree Applied is one such. However, the Drs. Heathington (he an engineer, she an educator), bosses of Applied,  were also honchi (plural of “honcho”) of a cattle breeding outfit, also a C Corp, called Oak Crest. Even though Dr. Engineer went down to Texas to “rope ‘em and brand ‘em and bob off their tails”, Oak isn’t a PSC. Can’t get personal with cows, however up close you get.

Let’s forget that Applied compensated both Drs via 1099-MISC (nonemployee), even though they are officers working for Applied. And that Oak didn’t compensate Dr. Engineer while he was “ridin’, rockin’, ropin’, poundin’ leather all day long”.

What both Applied and Oak did was file a consolidated return. And use the graduated rates in Section 11(b)(1). No, that’s not a new MOS for grunts with M-16s; and if you don’t know what that means, consider yourself lucky.

IRS says Applied and Oak have to use the flat 35% Personal rate of Section 11(b)(2), although we’ll let Applied (which had a profit) net its taxable income against Oak (which, surprise, surprise, had a loss).

IRS argues that the Section 1.1502 regs let IRS break the two corporations’ incomes into separate baskets. And tax each basket accordingly.

Not so fast, says His Honor Big Julie, Judge Julian I. Jacobs (hereinafter “HHBJJJIJ”). While it’s true Section 11 creates two rates for corporations, Reg. Sec. 1502-2(a) doesn’t say that. All it says is that once you’ve netted out intercompany dealings and such, you apply the rate. It says nothing about “baskets”.

And you’ve had the regs that way since 1966, when there was only a single corporate rate (graduated). When Congress hit the Personal Servers in 1987 with a flat rate, Treasury never changed the regs.

IRS claims the regs let IRS treat insurance departments as basket cases, so why not PSCs?

“In his brief respondent [IRS] notes that sec. 1.1502-2(e), Income Tax Regs., imposes a tax on a life insurance department’s income without netting it against any losses of the consolidated group. Respondent asserts that this section grants him authority to impose the qualified personal service corporation’s tax rate on the entire amount of income attributable to the qualified personal service corporation member without taking into consideration losses suffered by other members of the affiliated group. However, respondent states he took a ‘more conservative approach in this case to allow the members to net their income before applying the qualified personal service corporation tax rate’. Because of respondent’s concession, we need not and do not consider netting losses against qualified personal service corporation income.” 143 T. C. 17, at p. 14, footnote 5.

Maybe so for insurance, but not for anything else.

HHBJJJIJ: “Respondent posits that just as insurance company income is taxed separately from the affiliated group’s consolidated taxable income, qualified personal service corporation income is to be taxed separately from the affiliated group’s consolidated taxable income. We disagree.

“Paragraphs (b) through (j) of section 1.1502-2, Income Tax Regs., enumerate taxes to be added to an affiliated group’s tax liability. Qualified personal service corporate income is not one of the enumerated special types of income. Indeed, far from providing qualified personal service corporations with special status, section 1.1502-2(a), Income Tax Regs., includes the income of qualified personal service corporations in the affiliated group’s consolidated taxable income.” 143 T. C. 17, at p. 17.

IRS claims that Applied and Oak are two separate corporations that have special permission to file a consolidated return. But the case IRS cites has to do with disallowance of a Section 162 deduction for preincorporation costs of parent to subsidiaries, which weren’t up and running when the costs were incurred; thus were nondeductible contributions to capital.

No one claims Applied and Oak weren’t doing business during the years at issue. And IRS’s concession that they could net their income and deductions confirms that they are actually doing business, else why allow them any business deductions at all?

Lest the Drs. Heathington exchange too many high-fives with their able counsel, HHBJJJIJ has a warning shot: “Petitioner’s primary argument is that there is no guidance in the Code, the regulations, or other authority regarding the method of establishing the proper rate or rates of tax on consolidated taxable income where one member, but not all members, of the affiliated group is a qualified personal service corporation. While petitioner is correct that there is no guidance with respect to such a situation, acceptance of petitioner’s position is fraught with danger. Section 11(b) was intended to deny the benefits of graduated corporate income tax rates to qualified personal service corporations. See RA 1987 sec. 10224(a); H.R. Rept. No. 100-391 (Part 2), at 1097 (1987). Although we can envision circumstances where this intent could be circumvented by petitioner’s position, we are nevertheless compelled to find in favor of petitioner.” 143 T. C. 17, at pp. 19-20.

And HHBJJJIJ drops a strong hint to Treasury via IRS that it’s time to amend the regs.

There’s been some back-and-forth in the trade press and even in mainstream media about art as a business, with some commentators averring that IRS was at war with the artists. I stated that wasn’t entirely the case. When someone has a source of income otherwise than from art (or any pleasurable activity), and yet claims one is in the art (or other) business for profit rather than solely for pleasure, while taking heavy duty deductions and losses from the pleasurable business, it does raise questions.

And Revenue Agents need not be art critics, or connoisseurs of these various activities, to start handing out deficiencies.

Case in point: Terry Gene Akey, 2014 T. C. Memo. 211, filed 10/8/14.

Judge Halpern deals with Terry Gene’s claimed losses in his sports memorabilia business based on Terry Gene’s unsubstantiated records (5,000 pages), with no tie-in in his post-trial brief as to what substantiates what.

Judge Halpern isn’t going to try: “Petitioner has in his briefs proposed findings of fact but has not accompanied those proposed findings by references to anything in the record. We have received into evidence eight binders of exhibits, consisting of over 5,000 pages provided by petitioner. Because petitioner has made it virtually impossible for the Court to verify any of his proposed findings that were objected to by respondent [IRS], and because he has violated Rule 151(e)(3), the Court, in making its findings, has disregarded all of petitioner’s proposed findings to which respondent has objected.” 2104 T. C. Memo. 211, at p. 4, footnote 1 (Citation omitted).

Terry Gene is also a periodic nonfiler and a habitual latefiler. This doesn’t help.

So even if you’re a serious devotee of your pleasurable craft, you need to keep records. And be prepared to substantiate deductions. If you want tax deductions, that is.

Gary R. Fears, that is, Docket No. 671-10, filed 10/8/14. Gary is apparently one of the Sugarloaf Fund, LLC, guys that got caught in John E. Rogers’s DADs web. For more about the web, see my blogpost “More Shell Games”, 9/2/11, and for more about Sugarloaf, see my blogpost “Honor Your Partner – Part Deux”, 9/5/13.

Gary, through Sugarloaf, wants Tax Court to tell IRS to reallocate income and deduction among the various players in Mr Rogers’s dodge-ball game.

But he does this as part of a double-barreled motion, both to reopen the record and to order the reallocation.

Judge Wherry is not amused, as he has to toss a couple dozen, as Judge Holmes would put it, motions by IRS to eject Mr Rogers as tax matterer for these multifarious malefactors.

“As an initial matter, Rule 50(a) requires that each motion filed with this Court ‘show that prior notice thereof has been given to each other party or counsel for each other party and * * * state whether there is any objection to the motion.’ The instant motion is silent on these subjects, and respondent represents that Sugarloaf failed to contact respondent concerning the motion before filing it. We could deny the motion on the basis of this foot-fault alone, but we also have more substantive grounds for doing so.” Order, at p. 2.

Moreover, you’re too late, Sugarloaf. “When Sugarloaf filed the instant motion, the Court had already advanced substantially in deciding these complex cases. We are thus able to state that the evidence Sugarloaf proffered would not materially change the outcome. “ Order, at p. 2.

As regards making IRS reallocate income and deductions, that’s a total nonstarter.

“…Sugarloaf identifies no basis for the Court to reallocate tax items among Sugarloaf and its asserted related parties, or to compel the Commissioner to do so. Indeed, ‘section 482 grants no * * * right to a taxpayer to apply the provisions of section 482 at will or to compel * * * [the Commissioner] to apply such provisions.’” Order, at pp. 2-3 (Citations omitted).

“…Congress enacted section 482 as a sword only for the Commissioner, not as a sword or a shield for the taxpayer. Accordingly, the Court lacks the authority to grant the requested section 482 relief Sugarloaf seeks.” Order, at p. 3.

“Pigs Git Fat, and Hogs Git Et”

No, this is not a further tale of Jonathan Swift’s peripatetic hero Lemuel, but rather a different wanderer in realms of gold. And the folk wisdom abovecited comes from the advice the battle-tested lawyer gives this blogpost’s subject, which he carefully ignores.

Come along with me, if you will, as an old professor of mine used to say, and follow the tangled trail of Richard H. Cullifer, Transferee, 2014 T. C. Memo. 208, filed 10/7/14, as untangled by Judge Laro.

Cullifer started as a banker, but discovered the joys of real estate development. His big strike came when he discovered ammonia. There was a shortage, so he bought a beat-up old chemical plant in Texas’ Pollution Belt, converted it, and started importing ammonia. His vehicle was a C Corp, of course.

So much did the business flourish that Cullifer switched to other chemicals as well, and finally looked to sell. However, his basis in his C Corp stock was, as we say in the real estate development trade, bupkis, and his gain heavy-duty, and trapped in the C Corp.

Enter an exec from a would-be acquirer who introduces Cullifer to (drumroll)–our old chum MidCoast Investments.

Judge Laro: “We observe that MidCoast has been involved in a number of transactions in cases that have come before us. See, e.g. Hawk v. Commissioner, T.C. Memo. 2012-259; Feldman v. Commissioner, T.C. Memo. 2011-297; Starnes v. Commissioner, T.C. Memo. 2011-63, aff’d, 680 F.3d 417 (4th Cir. 2012); Griffin v. Commissioner, T.C. Memo. 2011-61.” 2104 T. C. Memo. 208, at p. 8, footnote 6.

I will not cite to my blogposts covering most of these. By now, my readers, few in number but strong in stomach, must know the games MidCoast and its alter egos played.

Cullifer already sold all the assets, tangible and intangible, of his C Corp (and put $1 million of the proceeds in his personal bank account, but not on his Form 1040).

Now to unload the stock.

Well, the battle-tested lawyer abovecited, Robert Thomas, Esq., sounds the alarm. (“Mr. Thomas is certified by the Texas Board of Legal Specialization in estate planning, probate law, and tax law. Over the past 25 years, Mr. Thomas has represented clients in over 100 corporate purchase and sale transactions.” 2014 T. C. Memo. 208, at p. 6, footnote 4.)

“…I still have the same feeling that any buyer of the stock may not be able to get the tax benefits they think they will get if they ever get audited. But, that won’t be OUR issue as long as we carefully limit our reps and warranties in the sale agreement. * * *

“Mr. Thomas concluded:

“DO NOT SIGN ANY LETTER OF INTENT OR ANYTHING ELSE REGARDING A POTENTIAL … STOCK SALE UNTIL YOU LET ME REVIEW/BLESS IT FROM THE LEGAL END. WE DON’T WANT TO GET TRAPPED HERE.” 2014 T. C. Memo. 208, at p. 18.

So colleague Thomas asks the MidCoast people for representations, guarantees, warranties and indemnities. The go-between says no one will give them, and it’s a roadmap for IRS if they give them.

We’ve all heard that one before. Mr. Thomas gives the right answer, of course.

“Well, …actually it just amounts to me looking out for my client. I’m not trying to kill a deal, make a sale or make a commission here. Where I am from, there is a time-honored axiom of high finance which goes like this: pigs git fat, and hogs git et.” 2014 T. C. Memo. 208, at p. 19.

Need I say more? Well, you know I will.

Cullifer liked MidCoast because he would pass their building on I-95 in Florida. It looked solid.

Mr. Thomas wanted guarantees, etc., from MidCoast, but the final purchaser wasn’t MidCoast, of course, but one of its shell-shills. So Mr Thomas sounded the alarm again.

“One thing right off the top that should be a deal killer–where the hell did Midcoast go? …. The business risk to you without Midcoast or other party with money is that there is no one there to step up and honor the indemnity for tax liabilities fye [(for year ending)] 9/30/04 which would otherwise be due on corp asset sale … if IRS comes calling in 2005, or [the shell-shill] does something screwey post stock sale that gets us in trouble with IRS or whoever. Seems to me Midcoast must be a party or at least guarantee the performance of all obligations, etc of [shell-shill] under the agreement.” 2014 T. C. Memo. 208, at p. 26.

Of course, Cullifer signs on with the shell-shill.

And the shell-shill does the usual roundy-rounder, loading up yet another counterparty with some junk loans, claims a bad debt deduction to offset the gain from the asset sale and the stock sale, and disappears into the night.

Cullifer, true to form, never bothers to include the gain on the stock sale on his 1040.

Unsurprisingly, IRS blows this out of the water.

While Judge Laro blows off IRS’s expert on the subject of economic substance (that’s a mixed matter of fact and law, and the Court will decide that one), it’s clear the bad debt deduction is a joke, as the trash transferred to the counterparty had a basis near zero, not $17 million as claimed.

This is a “Midco” deal, as described in Notice 2001-16, 2001-1 C.B. 730, clarified by Notice 2008-111, 2008-51 I.R.B. 1299. The idea of having an intermediary buy the stock of a C Corp (without reduction for the tax liability of the built-in gain), sell the assets to a genuine buyer, and transfer the net proceeds of sale to the seller of the stock, is identified as a “listed transaction”. And because the intermediary is a judgment-proof shell-shill who tries to offset the taxable gain on the stock with shenanigans as described in the numerous MidCoast cases, the tax liability falls on the transferor (seller) of the stock.

OK, so it’s time to parse the Texas fraudulent transfer statute, and Cullifer falls right into it. He knowingly made this deal to delay, defeat and hinder IRS. I’ll spare you Judge Laro’s extensive analysis.

IRS wants to stick Cullifer with the money MidCoast pulled out of the deal, and concomitant tax, but Judge Laro says no, Cullifer didn’t get that money, so I’ll only nail him for what he did get. And though he got it as the transferee-of-a-transferee, because of MidCoast’s ballet with various shell-shills, that doesn’t matter.

And IRS did make reasonable efforts to collect. They filed liens and did searches against one shell-shill, and the other was hopelessly insolvent, so further efforts were a waste of time. While there might be other parties against whom IRS might go, the liability is joint and several, so IRS can smite one or any, as it chooses. Whereupon Cullifer the smitten can go smite the others by way of contribution, if he can find them.

Takeaway–See my blogpost “Listen to Your Lawyer”, 6/19/14.

Here’s the latest from the Tax Court website.

“The Court’s Web site will be unavailable from 6:00 p.m. to 11:00 p.m. Eastern time on Tuesday, October 7, 2014. No documents may be eFiled through Petitioner Access or Practitioner Access during this time. NOTE: Petitions and notices of appeal may NOT be eFiled and this does NOT apply to petitions and notices of appeal. We regret any inconvenience this may cause.”

Beware, you procrastinators and deadline-jumpers. And it really inconveniences us late-night bloggers.

Amazon.Com, Inc. and Subsidiaries has given me four good blogposts, but now they’ve hit the Big Time.

It’s all about The Big A’s profit-stashing deal with the Luxembourgeois, and whether the aforesaid Luxembourgeois were giving Amazon and its subsidiaries a special tax break to funnel cash to the stash. The EU’s tax hounds are hot on Amazon and subs’s trail.

You can get the AP’s take here. http://www.reuters.com/article/2014/10/07/us-eu-amazon-com-tax-idUSKCN0HW0PP20141007

Remember, you saw it here first.

No, not the Dumont-Vaucaire chanson immortalized by the great Edith Piaf. Rather, this is the story of a truly nothing Form 12153 that Tax Court tosses, while reserving the right to inspect others that IRS treats as no request at all.

Another short-and-sweet full-dress T. C., the story of Daniel Richard Buczek, 143 T. C. 16, filed 10/6/14, Judge Dawson writing for the unanimous court.

Dan has a checkered career, but the real fight is between IRS and Tax Court. Back in 2011, Tax Court decided Thornberry, 136 T. C. 536, which has been a thorn in IRS’s side ever since. Tax Court there decided that it had jurisdiction to review an IRS decision to toss a Form 12153 for complete frivolity, which IRS claimed Section 6330(g) prohibited.

For more about Thornberry, see my blogpost “You’ve Got to Be More Specific”, 4/19/11.

So IRS wants Tax Court to use Dan as the lever to overturn Thornberry, claiming Thornberry “eviscerates” Section 6330(g).

Judge Dawson declines.

“The administrative hearing requests that the taxpayers in Thornberry submitted are in stark contrast to petitioner’s request. A comparison of our review of the section 6330(g) determination with respect to the taxpayers’ hearing requests in Thornberry with our review of the determination with respect to petitioner’s request elucidates the standard we apply in making such a review.” 143 T. C. 16, at p. 4,

“In Thornberry v. Commissioner, 136 T.C. at 363-364, the Court held that the Appeals Office statement in the disregard letters that the IRS collection office could proceed with collection action is a determination for purposes of section 6330(d)(1). We observed that section 6703(a) clearly contemplates judicial review with respect to an Appeals Office determination that a request for an administrative hearing under sections 6320 and 6330 is a specified frivolous submission. The Appeals Office determination that a taxpayer’s entire hearing request is disregarded because his disagreement is frivolous is essentially a determination that the request is a specified frivolous submission. Indeed, the Appeals Office frequently imposes the civil penalty under section 6702(a) on a taxpayer whose hearing request was disregarded because the Appeals Office determined it was frivolous. Consequently, while section 6330(g) prohibits judicial review of the portion of a request for an administrative hearing that the Appeals Office determined is frivolous, it does not prohibit judicial review of the determination by the Appeals Office that the request is frivolous and is disregarded.” 143 T. C. 16, at pp. 10-11. (Citation omitted).

Thornberry did have a couple of valid points in their otherwise frivolous Form 12153, and IRS never stated why they were an attempt to delay, defeat, hinder or obstruct IRS from collecting the revenue. So Judge Dawson (yes, he decided Thornberry) decided Tax Court could review IRS’s tossing of Thornberry without a hearing.

But Dan’s petition “…does not challenge the appropriateness of the collection action, offer or request any collection alternatives, challenge the existence or amount of the underlying tax liability, or raise any spousal defenses. Nor does it make any assertions that would implicitly raise a legitimate issue; for example, it does not assert that the collection action would cause petitioner undue hardship or that he did not receive a notice of deficiency or otherwise have an opportunity to challenge the underlying tax liability.” 143 T. C. 16, at pp. 13-14.

So Dan’s petition is no petition, Tax Court has no jurisdiction, and IRS can go eviscerate Dan.

“In conclusion, the decision entered in Thornberry demonstrates the importance of this Court’s review of the Appeals Office’s determinations under section 6330(g) in protecting taxpayers from determinations that are arbitrary and capricious. Our Opinion today demonstrates that our review does not violate or eviscerate section 6330(g), and we therefore decline respondent’s invitation to overturn Thornberry. This case is distinguished from Thornberry, and we will grant respondent’s motion to dismiss for lack of jurisdiction on the facts presented here.” 143 T. C. 16, at pp. 14-15.

Takeaway- Judges rarely, rarely, rarely overrule their own decisions.

But thanks to a received comment, I have overruled my previous headline.

Once again the Ogden Sunseteers engage in the epistolary barrage that brought them to grief in Thomas M. Comparini and Vicki Comparini, 143 T. C. 14, filed 10/2/14; for more about the Incomparable Comparinis, see my blogpost “Contra Proferentem”, 10/2/14.

This time it’s a short-and-sweet 143 T. C. 15, filed 10/6/14, a unanimous nine-pager from Judge Colvin, possibly a record for brevity. It’s Mica Ringo, whistleblower.

Mica got a turn-down from the Ogden Sunseteers that read as follows: “We have considered your application for an award dated …. Under Internal Revenue Code Section 7623, an award may be paid only if the information provided results in the collection of additional tax, penalties, interest or other proceeds. In this case, the information you provided did not result in the collection of any proceeds. Therefore, you are not eligible for an award.” 143 T. C. 15, at p. 3.

Sounds like a determination, no? Well, it did to Judge Colvin and the 400 Second Street, NW gang. And it certainly did to Mica, who banged in a timely petition.

But the Ogden Sunseteers repented at leisure. Seven months after they turned down Mica, and six months after Mica’s timely petition, the Ogden Sunseteers hit Mica with the following: “The L-1010 letter… was sent to you in error. We are still considering your application for award F-211. We are sorry for this inconvenience.” 143 T. C. 15, at p. 4.

OK, so where does that leave Mica’s petition?

The Ogden Sunseteers and Mica agree: forget the petition, no jurisdiction, let the Sunseteers deal with Mica’s F-211 whenever. So IRS moves to dismiss for lack of jurisdiction, and Mica doesn’t object.

No, say Judge Colvin and the 400 Second Street gang, we object. “Respondent contends that the Court lacks jurisdiction in this case, and petitioner does not object to respondent’s assertion. However, our jurisdiction is not expanded or contracted by the positions of the parties. Thus, it is not dispositive that both parties claim that we lack jurisdiction.” 143 T. C. 15, at p. 5.

Judge Colvin will decide that his own self. And he does.

A Court gets jurisdiction based on the facts when its jurisdiction is first invoked. It retains jurisdiction until decision or other judicial determination.

And a whistleblower determination is no different than a SNOD, when it comes to Tax Court jurisdiction. “Thus, even if a determination in a notice of deficiency is erroneous or the Commissioner concedes the determination in full, the notice is generally not rendered void but continues to provide a basis for our jurisdiction.” 143 T. C. 15, at p. 8. (Citations omitted).

Moreover, a NOD is treated just the same. “Similarly, the Court does not lose jurisdiction when the Commissioner wishes to revoke or issues in error a notice of determination in a collection case.” 143 T. C. 15, at p, 8. (Citations omitted).

So motion to dismiss denied. There sure was a determination and a timely petition.

So now what? A motion to enter decision, stating that there’s no decision?

Yes, I’m paraphrasing Virgil. Mr Peter Reilly over at Forbes e-mailed me to inquire why I hadn’t anything to say about the interface between Section 183 and Section 162 in  Susan Crile, 2014 T. C. Memo. 214, 10/2/14. Well, I found nothing new in the 53 pages of Judge Lauber’s prose. The history of losses in an artist’s career I covered back in 2013 in my blogpost “And All that Jazz”, 8/14/13, and the ordinary-and-necessary in many places, but where it interfaces with Section 183, in my blogpost “I’ve Got the Horse Right Here”, 4/9/14.

So much of the opinion deals with Susan’s illustrious career and accomplishments, that I thought it better suited to the introduction to a catalogue raisonnée than to a blogpost on taxes.

And that art can be a “trade or business”, see Judge Kerrigan’s opinion cited in “And All That Jazz”, supra, as my high priced colleagues say.

So much for art. Now for the man.

And the man in this case is The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable Foe of the Partitive Genitive, Mark V. Holmes.

Only this time he’s concurring, not dissenting. I’m going back to Thomas M. Comparini and Vicki Comparini, 143 T. C. 14, filed 10/2/14.

The concurrers are afraid that the majority has opened the door to epistolary ping-pong, with the claimant able to pick which letter, of the back-and-forth letters is the “determination” from which to petition.

“The Court’s holding that a claimant may file a petition, at his option, in response to any of a series of letters referring to the denial of his claim is difficult to reconcile with the 30-day jurisdictional filing period that Congress placed in section 7623(b)(4). The Office has not hesitated to send multiple letters to claimants in an effort to demonstrate its good faith in acknowledging their queries and submissions. A claimant who has received a determination letter denying his claim and who has neglected to file a Tax Court petition within 30 days may have little difficulty stimulating the issuance by that Office of one or more additional letters reaffirming the previous letter(s). If each subsequent letter falls within the statutory phrase ‘any determination,’ claimants can end-run the 30-day jurisdictional filing period filing period with comparative impunity.” 143 T. C. 14, at pp. 35-36.

But Judge Holmes answered the question. See my blogpost “The Great Dissenter”, 12/28/11. “Once again, Judge Holmes says it in a footnote: IRS could clear this up in the abusive shelter area by creating a single-track deficiency procedure, where both partnership and partners are in it together. 137, T.C. 17, at p. 44, footnote 3.”

The Sunseteers can send any number of letters, as long as they put in the magic words that state unequivocally that claimant has reached the end of the trail in the letter that starts the Section 7623(b)(4) clock running. Like “determination” and “the file is closed.” and “file a petition with Tax Court”.

The old maxim from contracts (“documents are construed against the drafter”) applies to Whistleblower Office determinations, although Tax Court goes the long way round to get there, in Thomas M. Comparini and Vicki Comparini, 143 T. C. 14, filed 10//2/14.

Part of the difficulty is the two Murray S. Friedland cases. Remember Murray? Well, since his fifteen minutes of fame is long since over, check out my blogposts “Whistleblowers, Beware!”, 9/7/11 and “A Book and a Modest Proposal”, 5/22/12.

There’s much discussion in the concurring opinion about whether the majority has disapproved the results in the two Murrays, and whether the words “any determination” in Section 7623(b)(4) mean that a claimant can engage in continuous epistolary intercourse with the Ogden crew, and choose which letter they claim is a determination, and petition therefrom, defeating the 30-day SOL.

Of course, as Judge Colvin, writing for the majority, stresses (as if further stress were necessary) “It is well established that no particular words are required for our jurisdiction under sec. 7623(b)4). Cooper v. Commissioner, 135 T.C. 70, 75 (2010). … we do not mean to imply that any of the particular words in the … letter must be present in letters sent by the Whistleblower Office in other cases in order for this Court to have jurisdiction.” 143 T. C. 14, at p. 9, footnote 7.

Tom and Vicki sent IRS a Form 211. Ogden generously assigned four claim numbers, and sent Tom two letters and Vicki two letters. All four said “fuggedaboutit”, but also said if they had any questions, give us a call. And none ever used the magic word “determination”.

So Tom and Vicki sent some fresh documents, and IRS sent them one letter, relating to only one claim number, saying “our determination remains the same” and “we are closing our file”.

Tom and Vicki petition, timely for letter five, but too late for one through four. IRS moves to dismiss as untimely.

Well, letter five clearly states the administrative process is over, and Ogden made a determination.

What about letters one through four? In the first place, Tom and Vicki didn’t petition any one of the four, so whether or not they would have been determinations is not before the court.

But more to the point, “…we do not expect whistleblower award claimants to parse letters they receive from the Whistleblower Office to identify slight variations in those letters for clues as to whether the 30-day period to file a petition has commenced.” 143 T. C. 14, at p. 12.

So letter five is enough of “any determination” to confer jurisdiction on Tax Court. And the concurrers agree there’s jurisdiction, but try to keep the Friedland cases in the game.

I leave the jurisprudential argy-bargy to those turned on by that sort of thing.

But why get into the semantics of “any determination” in Section 7623(b)(4), or go into the Friedland morass? Both Friedland cases were Memos, not full-dress T.C.’s, so limit them to their specific facts. But the majority and the concurrers spend a lot of time deconstructing poor old Murray S.

Judge Colvin talks about how Ogden is trying to be nice to claimants, but that is a trap for the unwary.

While no specific form of determination is mandated by statute, or even that a determination need be written, shouldn’t whatever a notice says and however it may be given be unequivocal? Whistleblower notices of determination are rarely given to attorneys or USTCPs.

And Ogden drafted these letters. When I was studying law in the last millennium, I was taught that documents are construed against the drafter.

So I offer a humble suggestion to the Ogden Sunseteers: try this on for size.

“This letter is a determination as defined in 26USC§7623(b). This Office will not receive or consider any further communication from you, written, oral or electronic. If you disagree with this determination, your sole remedy is a petition to United States Tax Court as set forth in 26USC§7623(b)(4).”

Clear enough?