Obliging. That’s Judge David Gustafson, and he shows it again in Sarah Kurko, Docket No. 24040-13L, an off-the-bencher filed 12/30/14.

Judge Gustafson is super-obliging both to Sarah, whose troubles were delineated in my blogpost “Elected, Depressed and Disabled”, 11/12/14, and to the hardworking, humble blogger. Judge Gustafson designates his off-the-benchers and makes my job easy; thank you, Your Honor.

The punchline of my aforementioned blogpost was that IRS should tell Judge Gustafson and Sarah whether or not they’d remand to Appeals to consider Sarah’s Section 6511(h) financial disability.

Showing true holiday spirit, IRS took Sarah to trial. And Judge Gustafson, obliging as always, told IRS to remand.

IRS’s key witness was the SO who heard Sarah’s plea. A great witness.

“She had been an SO for more than 10 years. She estimates that she has handled 450 cases per year (i.e., more than 4,500 cases by the current time) and states that she cannot recall the details of the cases. At trial several of her answers to questions about what was said on a given subject in Ms. Kurko’s case were in the nature of ‘Nothing that I can recall’ or ‘Nothing that I can remember’, and she appeared to indicate that in fact she had no recall of Ms. Kurko’s hearing. For each case the SO prepares a ‘Case Activity Record’ on which she makes dated entries of her contacts with the taxpayer, but it is clear that she does not attempt thereby to give a transcript of her conversations nor even to note every specific subject that is discussed. Consequently, some of what we find Ms. Kurko said over the telephone does not appear in the SO’s case activity record or other documents in the IRS’ record for this case.” Order, at pp. 5-6.

Heaven forfend that anyone prepare a witness. What a pleasant surprise it is when your witness puts a Sidewinder in your afterburner.

IRS of course argued the “record rule”, which we’ve heard many times. OK, says Judge Gustafson, First Circuit, to which this case would be appealable, is a “record rule” jurisdiction. “This position involves two difficulties– first, that it is unclear whether a contention (explained below) that a credit elect overpayment should be applied to the liability is an ‘issue relating to the unpaid tax’ (sec. 6330(c)(2) (A)) that would be subject to the record rule; and second, that it is unclear whether a taxpayer seeking a credit elect is ‘seeking redetermination of tax liability’ for purposes of section 7482(b) (1) (A) or whether instead appeal would be to the D.C. Circuit (sec. 7482(b) (flush language)).” Order, at pp. 10-11.

Whatever, says Judge Gustafson, I’ll buy the record rule argument. Except the record here is so bad that it fails to explain the basis for the administrative action, which triggers an exception to the record rule. So evidence aliunde, as my expensive colleagues would say, may be introduced.

The SO, whether “from overwork or inattention… failed to record Ms. Kurko’s insistence that her disability accounted for her late 2008 return, and in its determination IRS Appeals failed to address that contention….” Order, at p. 11.

Sarah claims entitlement to a credit for a past overpayment, but she was a year late asking for it. See the Section 6511(b) lookback rules. So she gets neither refund nor credit on her next year’s taxes. But she claims she was financially disabled, which, if the disability lasted the fourteen months she claims, would toll the statute of limitations and let Sarah get her credit, which would erase the deficiency.

Now Sarah, pro se of course, didn’t mention Section 6511(h) or use the phrase “financial disability”. So what, says Judge Gustafson, she doesn’t have to; she said she’d been hospitalized, applied for disability insurance, said she’d been unemployed–that was more than just saying “I’m depressed” (and anyone dealing with IRS has ample excuse to say “I’m depressed”, but that alone doesn’t trigger Section 6511(h)).

The SO claimed that, in her 10 years before the mast, she’d never heard of “financial disability”. Maybe not, but even without hearing the magic words, “it was incumbent on Appeals to entertain the contention and request the information that would have substantiated it.” Order, at p. 14.

Appeals, go to it.

Takeaway–Practitioner, build your record. Make sure everything and anything that can help the client gets into the record. Or if not, document what the party preparing the record (IRS employee) leaves out. To paraphrase a remark made in a much more exalted circumstance, “by his own record he standeth or falleth.”