Archive for January, 2015|Monthly archive page


In Uncategorized on 01/30/2015 at 19:32

Back again come Michael Shamrock & Victoria Bigg, Docket No. 28725-11, filed 1/30/15.

Mike & Vic lost in Tax Court, ran to Seventh Circuit, which overturned the loss, and sent Mike & Vic back to Judge Chiechi, who ordered an evidentiary hearing, because IRS asked for one. Mike & Vic wanted Judge Chichi to toss the case altogether.

See my blogpost “I Missed This One”, 12/24/14.

Mike & Vic aren’t happy, so they move for Judge Chiechi to recuse herself from their case.

That’s a heavy-duty diss, and Ch J Michael B. (“Iron Mike”) Thornton isn’t having any.

“It is obvious to the Court that petitioners consider the January 15, 2015 order with which they do not agree as a ruling that is adverse to them. The January 15, 2015 order was not based on any extrajudicial information. That order was based upon a deliberative process of determining what the Court should do on remand from the Court of Appeals in order to comply with that Court’s order, judgment, and mandate. As part of that deliberative process, the Court issued an order dated November 25, 2014 (November 25, 2014 order). In that order, the Court ordered the parties to file a status report in which they were to indicate what they believed the Court should do on remand from the Court of Appeals in order to comply with the order and the judgment of that Court.” Order, at p. 1.

Briefly, “Adverse rulings of the Court are not indications of bias or grounds for disqualification of a judge.” Order, at p. 2. (Citations omitted).

But what evidence is necessary? No one contends that the phony who sold Mike & Vic down the river while claiming to be a lawyer and a CPA, was in fact either a lawyer or a CPA. Or that the phony didn’t lie to IRS as well as to Mike & Vic.

The issue isn’t inadequate representation of counsel. That’s only for criminal matters. The issue is fraud, namely and to wit, that the stipulation Mike & Vic entered into was procured by fraud. And IRS was likewise defrauded in accepting the stipulation.

Applying basic contract law to stipulations, as has been reiterated often enough, isn’t necessarily on the table here.

This was a pre-trial stipulation, as Seventh Circuit emphasized: “The Commissioner likened the petitioners’ stipulations to ‘settlement agreements’ that are ‘governed by general principals of contract law.’ But the petitioners signed pretrial stipulations, which did not reflect the computation of the deficiency and penalties or purport to resolve conclusively the petitioners’ liability. See Lovenguth v. C.I.R., 93 T.C.M. (CCH) 1040, at *3–*4 (2007) (distinguishing stipulations under Rule 91 from ‘settlement stipulations’ and stating that Rule 91 ‘allows us to consider factors that might not be sufficient to upset a contract’).” Shamrock, Case No. 14-1916, at p. 3.

“The Commissioner makes much of the fact that the petitioners did not have a right to effective assistance of a lawyer in their civil tax case. As we understand the Commissioner’s argument, a taxpayer should be bound by any stipulation induced by his representative’s deceit so long as the Commissioner was unaware of the fraud. That contention simply refuses to accept that stipulations must be set aside when ‘justice requires,’ and does not resolve whether these petitioners have articulated a valid reason to set aside the stipulation….. Even though the petitioners had no right to an effective lawyer, the petitioners and even the Commissioner’s counsel all believed they were dealing with an attorney authorized to represent taxpayers before the IRS and the Tax Court. The Commissioner minimizes that deception, but the Tax Court should have evaluated whether it provided good cause to set aside the petitioners’ stipulations.” Shamrock, Case No. 14-1916, at p. 3-4. (Emphasis by the Court) (Citations omitted).

The issue was a deduction. The phony induced Mike & Vic to stipulate pre-trial they were only entitled to half. When the phony ducked out because he couldn’t try the case, his successor, a USTCP, found good argument that Mike & Vic were entitled to all.

I’m still looking for the evidentiary question here. Is IRS claiming they knew the phony was a phony, or that Mike & Vic knew he was a phony? Is IRS claiming that Mike & Vic didn’t rely on the phony’s advice? Or would have settled anyway?

What is the disputed material fact here?

And exactly how is IRS prejudiced? Let them try the case.

Enough already.



In Uncategorized on 01/29/2015 at 23:17


And that’s what saved the day. Unfortunately, the surge that saved the day came too late for Travis L. Sanders.

No, this surge had nothing to do with Iraq. This surge was the surge that Travis’ surge suppressor outfit was suppressing. The outfit threw off much money, funneled to Trav via his grantor trust’s interest in a Virgin Islands limited partnership, the kind that IRS described as a scam in IRS Notice 2004- 45, Meritless Filing Position Based on Sections 932(c)(4) and 934(b).

If that sounds familiar but you can’t quite place it, check out my blogpost “Catching Up”, 9/30/13, the ongoing saga of la famille Vento and their excursion to our Insolvent Islands in the Sun.

Trav entered into the usual employee leasing deal, dreamt up by VI tax whiz Marjorie Roberts, Esq., ex-Treasury maven for Virgin Islands Bureau of Internal Revenue (VIBIR). He gets VI CPA Scott Blair to do his taxes, and he files as a bona fide resident of VI for the years at issue.

Now when dealing with la famille Vento aforesaid, Judge Hardiman in Third Circuit set down the basic rules for VI residence, which gives escape from mainland taxation and bestows on that happy crew all the unguided largesse with which bona fide residents of those isles are favored.

But Trav went above and beyond, as the gamers say.

IRS claims Trav wasn’t a bona fide VI resident, but the four (count ‘em, four) lawyers on Trav’s side (plus one from the Virgin islands government, intervenor) suppress the five lawyers from IRS, and Judge Kerrigan rules the SOL bars IRS’s SNOD, because Trav filed properly with VIBIR per IRS’s confusing instructions and publication.

Trav “…maintained a checking account at Banco Popular de Puerto Rico in St. Thomas, USVI. The address for the checking account was a USVI address. Decedent reported his residence as St. Thomas, USVI, on his license and certificate of marriage. Decedent was married in the USVI….. [Trav] had bank accounts with UBS Financial Services, Inc., in the USVI and First Bank in St. Thomas in the USVI. [Trav’s] checks for his First Bank account showed a USVI address as his address.” 144 T. C. 5, at p. 9.

So marrying a Virgin (Islander) really helps the cause.

But Trav doesn’t show up for the victory party. Trav died while the case was pending, so we have Estate of Travis L. Sanders, Deceased, Thomas S. Hogan, Jr., Personal Representative, Petitioner, and the Government of the United States Virgin Islands, Intervenor, 144 T. C. 5, filed 1/29/15.



In Uncategorized on 01/28/2015 at 16:06

Were I the true grammatical stickler that some have called me, I would have entitled this post “See With What We Have To Deal.” But Mr Jefferson’s (and Judge Holmes’) “decent respect to the opinions of mankind” (and even more so of womankind) requires I should forgo that locution.

Here is an extract from a curriculum vitæ, or more properly a cursus honorum, of a currently-sitting Tax Court STJ. “Received undergraduate and law degrees, Villanova University, 1971 and 1974. Admitted to New Jersey Bar, 1974. Served as law clerk, New Jersey Superior Court Judge. Associated with law firm in Bridgeton, NJ, 1975, also serving as city prosecutor. From 1977 until appointment as Special Trial Judge, employed by the Office of Chief Counsel, Internal Revenue Service, as attorney, Washington, DC, District Counsel’s Office. In 1983, appointed Special Trial Attorney on staff of the Associate Chief Counsel, Litigation. From 1992 to 1994, assigned to the Office of Special Counsel, Large Case. Appointed Special Trial Judge, United States Tax Court, on August 7, 1994.”

Impressive, right?

Much less impressive is a certain blogger’s resume: “BA cum laude Hunter College (Bronx) 1963; LL.B. Cornell Law School, 1966 (Moot Court Board); U. S. Army, 1967-1969. Ten years New York State Attorney General’s Office Grade 28 Attorney. Private law practice, large and small firms and solo, 38 years. Admitted New York State, US District Courts Eastern and Southern Districts, United States Tax Court. Enrolled Agent.”

And this is what that esteemed jurist and this much more humble practitioner has to deal with. No opinions today, so here’s a designated hitter.

Jerald E. Sark, Docket No. 20861-14, filed 1/28/15. Case comes up on motion to dismiss for failure to state a claim.

For you civilians, that means that the petition doesn’t set forth any facts that establish the petitioner’s legal right to anything.

“In a notice of deficiency… respondent [IRS] determined a deficiency in, and imposed additions to tax with respect to petitioner’s 2011 Federal income tax. According to the notice, petitioner received ‘Nonemployee Compensation’ during 2011, but failed to file a 2011 Federal income tax return reporting that income. These points are not disputed by petitioner in the petition, amended petition, or in anything else he has submitted. Instead, in page after page of frivolous assertions, petitioner, who was living in Texas when the petition was filed, insists that he is not subject to Federal income taxation or otherwise obligated to have filed a 2011 Federal income tax return. Given the amount of income attributed to him in the notice, he is mistaken on both points… and nothing else needs to be said in that regard. See Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).” Order, at p. 1 (Citations omitted, but they’re the usual ones).

“We further note that nothing in the petition, amended petition or anything else submitted by petitioner suggests that the deficiency is overstated because petitioner is entitled to deductions not taken into account in the notice. And to the extent that anything submitted by petitioner explains his failure to file a 2011 Federal income tax return, the explanation hardly constitutes reasonable cause.” Order, at p. 2.

Of course, Jerald gets tossed, with a showing of the usual Section 6673 yellow card.

So, gentle reader, spare some pity for Exalted Lew, with a wee bit of pity left over for Humble Lew, as we deal with this stuff.


In Uncategorized on 01/27/2015 at 15:51

Besides Judge Holmes, Of Course

I cannot think too many people, even among the loyal 135 who follow this my blog (a poor thing, but mine own), are hanging breathless on the answer.

But since on this day of the great Snowmageddon, as the media have dubbed NYC’s non-event but Boston’s blizzard, the teletubbies at 400 Second Street, NW, have launched neither opinion nor designated hitter, I am relegated to reading orders yet again.

And I find that Chenery is once more coming to bat. No, not the two-time Supreme Court extravaganza, quoted by Judge Holmes in my blogpost “He Loves Chenery”, 12/17/14. No, this is a similarly-named entity that showed up on my blogpost “‘Oh No, It Isn’t!’ ‘Oh Yes, It Is’”, 6/3/14.

In the latter order, what IRS at first claimed wasn’t a NOD turns out to have been a NOD, and IRS conceded it was. So Chenery gets a hearing, right?

Not quite yet. First Ch J Michael B. (“Iron Mike”) Thornton must take it off the calendar for March 2 in Our Nation’s Capital, and then find some Tax Court Judge to deal with Chenery and its problems, “by trial or otherwise in due course,” Chenery Management, Inc., Docket No. 23888-13L, filed 1/27/15, at p. 1.

Well, you remember Tax Court acquired fresh talent last December, so Ch J Iron Mike looks over the rookies and assigns this case to Judge Tamara W. Ashford, who first appeared in my blogpost “New Kids on the Block”, 12/22/14.

As I said in my blogpost “Even More Impressive”, 1/1/15, “I look forward to posting many more scintillating opinions from Judge Ashford.”

Maybe she’ll even love Chenery.




In Uncategorized on 01/26/2015 at 17:34

The sixty-buck-ticket-to-justice, if invoked, can lead the invokers down paths not dreamt of when they mailed in the petition for redetermination of deficiency.

Maybe you don’t owe Our Nation’s Treasury at close of play, but if you think Mr. Lew and his coadjutors owe you, you can’t just walk away from 400 Second Street, NW.

Case in point, Neal G. Brower & Deborah A. Brower, Docket No. 22260-14, filed 1/26/15.

Neal & Deb filed the petition all right, but now move to dismiss, attaching a “no change” letter from IRS.

Now maybe their motion should be recharacterized as a motion for entry of decision, because dismissing a petition for redetermination of deficiency, where Tax Court has jurisdiction, means entering decision for everything IRS claimed in the SNOD.

And Ch J Michael B. (“Iron Mike”) Thornton is a master recharacterizer. Not a Tax Court working day goes by without Ch J Iron Mike spinning straw into gold–or whatever.

But IRS is not happy. It seems Neal & Deb submitted an amended return, claiming they’re owed money, and IRS wants to duke it out here and now.

Ch J Iron Mike, exponent of judicial economy, agrees.

Motion to dismiss denied, and “…petitioner shall file an Amendment To Petition setting forth, if so be the case, their claim for overpayment….” Order, at p. 1.

Takeaway– When you petition, more than you think is on the table.




In Uncategorized on 01/26/2015 at 17:15

And all the rest of it, as the Swan of Avon put it in Act II, Scene vii.

Well, we’ve got plenty of winter wind, and it’s blowing pretty good here in The City That Never Sleeps. So I decided to follow the lead of the Federales, including but without in any way limiting the generality of the foregoing, as my canceled-out-of-Com’r-Koskinen’s-lunchtime-remarks-tomorrow colleagues would say, the crowd at 400 Second Street, NW, who can teletubby today if they wish.

I’m teletubbying today my own self. For the benefit of readers seeking a glossary (see my blogpost “Maybe Not So Obvious – Part Deux”, 1/22/15), the Federales call it “telework”; I prefer “teletubby”, as it involves sitting at one’s computer or smartphone as opposed to bestirring oneself and venturing abroad.

Now that the overture is finished, here is the mini-opera. It’s Dennison R. Heuer, Jr., Docket No. 5076-14, filed 1/26/15, an off-the-bencher from Judge Kathleen Kerrigan.

Here’s a fine example of “man’s ingratitude” and indeed the winter sky is not as biting as “benefits forgot.”

Denni plunders his 401(k) to the extent of $69K, but hadn’t reached the 59-1/2 year safe harbor. He did report the income (he got a 1099-R) and prepared his own return, being one of a dwindling band who does.

But Denni left off the 10% Section 72(t) addition or penalty or whatever it is. IRS hits Denni with the 10% plus the 20% five-and-ten substantial understatement chop.

Denni claims hardship.

“Petitioner contends that he made the withdrawal from his 401(k) due to financial hardship. He testified that by making the withdrawal he was able to retain his employees and eventually sell his company. He testified further that the new owners of his company retained the employees. Without making the withdrawal from his retirement account, petitioner believed that he would be unemployed.” Order, at p. 6.

Tough, Denni, says Judge Kerrigan. “We have considered similar claims in the past and have observed that there is no authority in the Code, the legislative history, or caselaw for a general financial hardship exception to the imposition of the 10% additional tax on early distributions. While we are sympathetic to petitioner’s position, the Court may not add an exception to section 72(t) by judicial fiat and we are obliged to apply the law as written.” Order, at pp. 6-7 (Citations omitted).

But Denni’s tale is not solely one of woe.

“Petitioner prepared and filed his own tax returns. This is not a situation of omission of income or an exaggeration of deductions, but rather the proper reporting of income governed by the Code, the regulations, and the interpretation of the relevant statutory provisions by numerous cases. On the record before us, we are satisfied that petitioner acted in good faith and with reasonable cause with respect to that portion of the underpayment relating to the 10% additional tax under section 72(t).” Order, at p. 8. (Citation omitted).

Denni gets hit with the 10% addition, but not the 20% chop.





In Uncategorized on 01/23/2015 at 17:16

No, not a 1950s-style film noir, rather Judge Kerrigan protecting everyone’s privileged, attorney work product and trade secrets in a pair of designated hitters, Eaton Corporation, Docket No. 5576-12, filed 1/23/15 and Medtronic, Inc. & Consolidated Subsidiaries, Docket No. 6944-11, filed 1/23/15.

Breaker breaker, good buddy, remember Eaton Corporation and its battle with IRS over its offshore circuit breaker manufacturing? No? Then check out my blogposts “Advance and Retreat”, 6/26/13, and “Walk Right In, Set Right Down”, 10/15/14.

Looks like we’re not going to be listenin’ to Lacey after all. Lacey was one of the key players in shooting down Eaton’s advance pricing agreements. Apparently John Hinding was another key player, and Eaton’s counsel wants another crack at Johnny as well as another crack at Lacey, with them answering the questions IRS’s counsel told them not to answer. IRS claims their testimony would reveal privileged matter and attorney work product.

Judge Kerrigan: “Petitioner has already had the opportunity to depose Ms. Lacey and Mr. Hinding. During these depositions deponents were instructed not to answer questions on the grounds responses would have resulted in providing privileged information. See Rule 70(b)(1) (the information or response sought through discovery may concern any matter not privileged and which is relevant to the subject matter involved in the case).” Order, at p. 1.

Anyway, Eaton’s counsel got a memo from IRS addressing the whys and wherefores, redacted to protect work product. Depositions are extraordinary in Tax Court, only allowed when nothing else works. And privileged matter and attorney work product are off the table in all events.

Now Eaton can try to prove that IRS was arbitrary and capricious, without any idea of who said or did what.

Medtronic is another long-running show, but Judge Kerrigan is more sympathetic to the Meddies. She unloads a six-page saddle blanket that covers just about everything.

To get there, “The Motion for Protective Order is accompanied by an affidavit by Gary L. Ellis, Executive Vice President and Chief Financial Officer of petitioner. This affidavit contends that petitioner has made a significant effort to ensure that all of petitioner’s officers, employees, contractors, and agents guard confidentiality of proprietary information. The affidavit further contends that petitioner will sustain irreparable economic harm from proprietary information being divulged. Petitioner contends the release of proprietary information would allow competitors to determine petitioner’s current business strategies, strengths, and weaknesses in the market.” Order, at p. 1.

After the ritual nod to “the goal of this Court to provide as robust a public record as possible” (Order, at p. 2), Judge Kerrigan nevertheless affirms the “commonsense proposition” that spilling the Meddies’ beans would hurt them.

But since Gary L limits the requested sealing of the record specifically to certain items, Judge Kerrigan erects the fortifications with some precision, while trying to “enable the largest possible percentage of the trial record to be made available for ultimate public inspection, consistently with the protection of petitioner’s proprietary information.” Order, at p. 2.

See for yourself.


In Uncategorized on 01/22/2015 at 17:27

No, not Betty MacDonald’s 1945 humorous account of chicken-ranching in Chimacum, Washington (wherever that is).

Today we have the story of Suffering Nichelle G. Perez, 144 T. C. 4, filed 1/22/15. And it’s quite a story.

Who better to tell it than The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Imperturbable, Irrefragable, Illustrious, Indomitable, Indefatigable (but never Impetuous or Inconsiderate) Foe of the Partitive Genitive, His Honor Judge Mark V. Holmes?

Suffering Nichelle’s suffering has induced an outpouring of legal talent rarely seen in a five-figure unreported income case. From left to right, we have “Professor Bridget Crawford of Pace University School of Law; Professor Lisa Milot of University of Georgia School of Law; and Professor Timothy M. Todd of Liberty University School of Law.” 144 T. C. 4, at p. 2. Judge Holmes thanks these renowned scholars for their “outstanding pro bono work on the unprecedented question this case raised.” Idem, as my high-priced colleagues would say; that means “in the same place as the last-cited item”, for those of you who are human beings and not lawyers.

Suffering Nichelle claims her egg dealings caused her suffering. And they literally are her eggs.

Suffering Nichelle donated human ova, of her very own manufacture, to a for-profit called Donor Source International, LLC. Suffering Nichelle was able to pass the strict scrutiny of DSI, LLC.

“…only nonsmokers between the ages of 21 and 30 who have no family history of cancer or personal history of infertility or mental disorders will pass the initial screening. For those who pass, the donation process begins with an online application; and, if selected, potential donors are invited for a consultation to go over the time commitment, needed medications, and risks of egg donation. They are also subjected to a series of psychological and physical evaluations, including blood tests, pap smears, breast exams, and pregnancy tests. Once approved, the potential donor creates an online profile that includes a picture, a description of her family history, and other personal details for prospective parents to view.” 144 T. C. 4, at p. 3.

Suffering Nichelle does this to relieve the suffering of persons unable to conceive a child, and provide the happy outcome described in Psalm 113:9.

Well done.

Except Nichelle got $20K during the year at issue, and a 1099 therefor. Now the contract she signed with DSI, LLC and the intended recipients clearly state she is being paid for her “…time, effort, inconvenience, pain, and suffering in donating her eggs. This fee is for Donor’s good faith and full compliance with the donor egg procedure, not in exchange for or purchase of eggs and the quantity or quality of eggs retrieved will not affect the Donor Fee.” 144 T. C. 4, at p. 5.

The contract also states that Nichelle is not being paid for the eggs, she isn’t selling body parts and she assumes all medical and physical risks. She signed a similar contract with prospective donees. DSI, LLC swears they can sue Nichelle for breach of contract if she didn’t follow the procedures, which included blood draws, hormone injections and invasive ultrasound examinations.

Finally, Nichelle had to have a massive hormone injection, be anaesthetized, and suffer various physical symptoms, the details of which I’ll spare you.

As this is a non-political blog, I refrain from making a personal comment about women’s rights over their own bodies, which usually takes the form of telling men (myself included) to shut up. I now return to the tax aspects.

Nichelle went online, talked to fellow donors, and decided that, as she was paid for pain and suffering (and she did suffer), the payment wasn’t taxable.

Of course both DSI, LLC and the prospective donees disclaimed all tax advice of whatever kind.

Judge Holmes agrees that this isn’t a case of a sale or exchange. “We acknowledge that this case has received some publicity in tax and nontax publications, which is why it is important to state clearly what it does not concern. It does not require us to decide whether human eggs are capital assets. It does not require us to figure out how to allocate basis in the human body, or the holding period for human-body parts, or the character of the gain from the sale of those parts.” 144, T. C. 4, at p. 5 (Footnote omitted, but read it; one of the amici, Prof. Milot, has authored a disquisition entitled “What Are We–Laborers, Factories or Spare Parts? The Tax Treatment of Transfers of Human Body Materials,” for the Washington & Lee Law Review. I cannot imagine what General Lee, asleep on the campus of that illustrious university, would say).

So here we don’t have a sale. But was Suffering Nichelle paid for services or for suffering?

She had to go through the entire process. “… Perez’s compensation depended on neither the quantity nor the quality of the eggs retrieved, but solely on how far into the egg-retrieval process she went. On this key point, the testimony of both parties to the contracts agrees with the contract language. We have to find that Perez was compensated for services rendered and not for the sale of property.” 144 T. C. 4,

Of course, payment for personal services is taxable. But payment of damages for physical sickness or injury isn’t.

The magic word in Section 104 is “damages.”

Going back in time, the exclusion from tax required a tort-type claim and recovery, but that got changed. The current Reg (1.104-1(c)(1)) says “Section 104(a)(2) excludes from gross income the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness.” 144 T. C. 4, at p. 12.

But as they say in The City of Light, “plus ca change, plus que c’est le meme chose.” The word “damages” is still around.

Nichelle claims that the Reg exceeds the statutory limits of Section 104(a)(2).

So Judge Holmes has to “pull into the Chevron Station”, 144 T. C. 4, at p. 13. In doing so, Judge Holmes sideswipes Mayo Clinic. See my blogpost “Carpenter, Colony, Chevron and Mayo”, 4/26/11.

Nichelle claims Congress hasn’t spoken, because Congress hasn’t defined “damages”, so we next go to the “arbitrary or capricious or manifestly contrary to the statute” Chevron text that Mayo applied to taxation.

OK, says Judge Holmes, but the cases Nichelle and amici cite go to settlements of claims, whether commonlaw or statutory. Here, however, there was no claim to settle: Nichelle agreed she waived all claims for medical or physical injury. In advance. Now if she had waived after the fact, maybe she might have had a better shot. But I can’t think DSI, LLC would play “trust me, trust me”, much less the donees.

“Perez very clearly has a legally recognized interest against bodily invasion. But we must hold that when she forgoes that interest–and consents to such intimate invasion for payment–any amount she receives must be included in her taxable income. Had the Donor Source or the clinic exceeded the scope of Perez’s consent, Perez may have had a claim for damages. But the injury here, as painful as it was to Perez, was exactly within the scope of the medical procedures to which she contractually consented. Twice. Her physical pain was a byproduct of performing a service contract, and we find that the payments were made not to compensate her for some unwanted invasion against her bodily integrity but to compensate her for services rendered.” 144 T. C. 4, at pp. 16-17.

But what about the 1996 Small Business Job Protection Act, which supposedly got rid of tort-type recovery as a predicate for Section 104 relief? That was for no-fault recoveries, like Workers’ Comp or automobile no-fault recoveries, where the injured party gets paid regardless of an affirmative finding against the party inflicting the injury.

It’s in advance of litigation, or in lieu of litigation. Further, the amendment “…helped tax regulation keep up with a bit of a shift in American law toward administrative or statutory remedies and away from common-law tort for some kinds of personal injuries. It is not at all arbitrary, capricious, or manifestly contrary to the Code. But it also doesn’t help Perez. We completely believe Perez’s utterly sincere and credible testimony that the series of medical procedures that culminated in the retrieval of her eggs was painful and dangerous to her present and future health. But what matters is that she voluntarily signed a contract to be paid to endure them. This means that the money she received was not ‘damages’.” 144 T. C. 4, at pp. 19-20.

And, looking forward to Super Sunday, Judge Holmes turns to the sports pages.

“We conclude by noting that the result we reach today by taking a close look at the language and history of section 104 is also a reasonable one. We see no limit on the mischief that ruling in Perez’s favor might cause: A professional boxer could argue that some part of the payments he received for his latest fight is excludable because they are payments for his bruises, cuts, and nosebleeds. A hockey player could argue that a portion of his million-dollar salary is allocable to the chipped teeth he invariably suffers during his career. And the same would go for the brain injuries suffered by football players and the less-noticed bodily damage daily endured by working men and women on farms and ranches, in mines, or on fishing boats. We don’t doubt that some portion of the compensation paid all these people reflects the risk that they will feel pain and suffering, but it’s a risk of pain and suffering that they agree to before they begin their work. And that makes it taxable compensation and not excludable damages.” 144 T. C. 4, at p.20.



In Uncategorized on 01/22/2015 at 15:39

Again I’m brought up short by a reader of this blog, when I assume that something is obvious. See my blogpost “Maybe Not So Obvious”, 8/28/11.

This time it’s Mr. T. J. Walker, who finds some of my abbreviations and slang  incomprehensible.

Mr. Walker is right. No readers need play guessing-games here; Tax Court and tax law are sufficiently obscure.

So here’s a brief glossary of terms and abbreviations, with more to follow if time (and reader interest) permits. And if some items are really obvious, I nevertheless include them because, as G. M. Fraser once remarked “someone, somewhere, is sure to clamor for enlightenment if I don’t.”

CAP – Collection Appeal Process. Like a CDP (see below), but no Tax Court review.

CDP – Collection Due Process hearing. See 26USC§6320 and 26USC§6330.

CFR – Code of Federal Regulations. All the published regulations of Federal Administrative Agencies. Available online from

CPA – Certified Public Accountant. For my non-US readers, the equivalent of a Chartered Accountant.

Designated Hitter – A Tax Court designated order. For more details, see

EA – Enrolled Agent. See 31CFR§10.4.

FRCP – Federal Rules of Civil Procedure. Available online from

FRE – Federal Rules of Evidence. Available online from

NIFL – Notice of Intent to File Lien.

NITL – Notice of Intent to Levy.

NOD – Notice of Determination. Usually from Appeals after a CDP or equivalent hearing, but can come from Whistleblower Office (the “Ogden Sunseteers”) determining a whistleblower claim.

Off-the-bencher – A Tax Court opinion rendered from the bench after hearing. See 26USC§7459(b). The transcript of the Judge’s oral remarks is the opinion (or order and decision).

Partitive Genitive – A syntactical form carried over from Latin, where one shows an object as a part of a greater whole, as in “a cup of coffee”, “a couple of rounds of briefing”, etc. Much derided by His Honor Judge Mark V. Holmes

Reg – Regulation. Usually Treasury Regulation. See CFR above.

Rounder – A frequent Tax Court litigant. May or may not be found by the Court to make protester or frivolous arguments. IRS periodically publishes notices setting forth what it defines as frivolous arguments.

RTRP – Registered Tax Return Preparer. One who qualified under the now-extinct Shulman-Williams registration regime, abolished by Loving v IRS, No. 13-5601, USCADC.

SNOD – The Statutory Notice of Deficiency, also known as the “ninety-day letter” or “ticket to Tax Court”.

State Abbreviations – I use the United States Postal Service version, i.e., CA for California, AZ for Arizona.

Summary J – Summary judgment. Judgment on the law without need for a trial, as no material facts are disputed. See FRCP§56.

The Hill Far Above – Location of Cornell University Law School.

USCA – United States Circuit Court of Appeals.

USCFC – United States Court of Federal Claims.

USDC – United States District Court. Usually followed by State (or District or Commonwealth or Territory) designation, and geographical designation, i.e., E (Eastern), W (Western), N (Northern), S (Southern), or M (Middle). Thus, I’d write United States District Court for the Middle District of Tennessee as USDCMDTN, and United States District Court for the Eastern District of New York as USDCEDNY.

USFC – United States Court of Appeals for the Federal Circuit.

USPS – United States Postal Service

USSC – United States Supreme Court, sometimes also known as “The Supremes.”







In Uncategorized on 01/21/2015 at 15:43

I guess I’m getting old. I began a couple of recent blogposts with recollections of events sixty years ago. So I’d better bring the recollections closer to modern times.

OK,  around forty-five years ago, I was discussing a judicial decision (not involving tax) with a very senior member of our profession (he was admitted to practice the year before I was born). The decision interpreted a statutory provision that employed the word “all.”

I pointed this out, to which the gentleman remarked, “What a novel concept. All means all.”

Well, today we have a full-dress T. C. from Judge Wells, John Chase Lee, 144 T. C. 3, filed 1/21/15. And “any” means “any.”

At his CDP, JC didn’t raise nonreceipt of the Letter 1153 that triggered his right to object to the TFRPs, which IRS seeks to take out of his hide.

IRS says “game over, can’t contest liability, summary J for IRS.”

Not so fast, says Judge Wells.

“In reaching our decision, we must decide whether the requirements of any applicable law and administrative procedure have been met.” 144 T. C. 3, at p. 3.

IRS claims JC was personally served by the RO at a meeting with JC on March 30 (they never claimed mailing to last known address). But “(T)he Integrated Collection System History Transcript (ICS Transcript) that respondent submitted with the declaration shows a March 30… entry which does not refer to the Letter 1153. Instead, an entry on March 31… the day after the meeting, states: ‘In addition to GM entry above * * * both Bains and [JC] were personally served 1153’. 144 T. C. 3, at p. 5.

JC never petitioned the Letter 1153. He did petition the NOD from Appeals.

There is no SNOD for TFRPs; the Letter 1153 serves that function. If you want to fight liability (whether in whole or in part), you must petition from the Letter 1153.

If you didn’t, your only out is Section 6330(c)(2)(B), namely, viz., and to wit, that you were never served with the Letter 1153. That IRS issued the Letter 1153 is all very well, but though necessary, is not sufficient. You must have gotten it, or refused it, or failed to tell IRS when they mailed it where you were if you moved from your last known address.

See my blogpost “You Didn’t Get It – Part Deux”, 5/31/13, for the difference between assessing TFRPs and having the opportunity to contest liability.

At the CDP, the SO must verify that any and all requirements of law and administrative regulations have been met. And that is so whether or not the appellant raises any at the CDP.

The prohibition on raising issues related to the imposition itself applies only to the tax (or TFRP), not the notice (the Letter 1153). No notice, no opportunity to contest.

Judge Wells explains the difference between tax issues (Section 6630(c)(2)) and verification issues (Section 6330(c)(1)).

“Section 6330(c)(2) issues such as spousal defenses or collection alternatives cannot be a part of the Appeals officer’s determination unless raised by the taxpayer…. The concern… is that litigating new issues in Court without any prior consideration by the Service would frustrate the administrative review process created by section 6330…. In contrast, the section 6330(c)(1) verification requirements will always form part of the determination because the statute requires their consideration at the hearing regardless of whether the taxpayer raises the issue…. Because section 6330 requires Appeals officers to independently consider section 6330(c)(1) issues at the hearing, they are not ‘new’ when asserted in Court and there is no danger of frustrating the administrative review process.” 144 T. C. 3, at pp. 16-17. (Citations omitted).

This is summary J, so JC needn’t put in evidence admissible on a trial; he need only state facts that, if he can prove them with proper evidence, creates a material issue.

And he does. He says he always replies to IRS billets doux and there’s evidence of this, and he claims he had nothing to do with payroll or any of that.

IRS doesn’t produce a copy of the signed Letter 1153. IRS doesn’t produce an affidavit from the RO who allegedly served JC with the Letter 1153 on March 30. The TCS transcript says nothing about serving the Letter 1153 on March 30, only adding it as an afterthought the next day.

Not good enough.

When it comes to proper issuance and service of a Letter 1153, “any” means “any”. Whether or not the appellant raises it.

Takeaway for IRS- Admission of service or affidavit of service would help, and better still is hand-and-mail.