In Uncategorized on 01/16/2015 at 18:09

No, not the long-running Britcom from Grace Brothers department store, nor the current lament from Nina E. (“The Big O”) Olson, National Taxpayer Advocate, that taxpayers and us professionals telephoning IRS cannot get through the understaffed eye-of-the-needle to get even wrong answers that cannot be relied upon. Congress has cut the IRS budget and is mad about the politicizing of the audit process as regards PACs. So if you’re counting on reaching IRS by phone this filing season, best of British luck to you.

Check out The Big O’s annual weep at

Today’s story is about an old chum who finally does get served, namely and to wit, Billy F. Hawk, Jr., GST Non-Exempt Marital Trust, Trustee, Transferee, Nancy Sue Hawk and Regions Bank, Co-Trustees, Et Al., Docket No. 30024-09, filed 1/16/15.

Remember Billyhawk, Mrs Hawk and the Hawklings? No? Then take a gander at my blogpost “Game Ends In No Score”, 5/30/12. This is another MidCoast Financial ring-a-ring-rosie with a C Corp with a huge gain and a basis of bortscht (please pardon an obscure technical term).

The key to the case is what I said back then: “Although the hawklings swear MidCoast got funds to close the purchase of Billyhawk Inc from Mid-Coast’s own monies and a private loan from an offshore, and didn’t strip Billyhawk Inc’s proceeds from the sale to Corley, they don’t have checks, bank statements or anything else to prove it. Every payment to the hawklings came out of MidCoast’s attorneys’ escrow account. If MidCoast did get outside funds, then Billyhawk Inc wasn’t rendered insolvent when the hawklings got the boodle, as the Corley cash was still aboard, so no fraudulent conveyance.”

OK, so now it’s time to prove. And guess what? IRS (or their pals at DoJ) has the dope.

Judge Wells takes up the tale. “One of respondent’s [IRS’] theories in support of transferee liability is that MidCoast purchased the stock using Holiday Bowl’s [Billyhawk Inc.’s] own funds rather than funds from an unrelated third party. After the Holiday Bowl transaction, respondent opened a tax shelter promoter investigation of stock acquisitions by MidCoast and its related entities. The investigation resulted in the convictions of several individuals, including John Ivsan, who is a former partner of Morris Manning & Martin LLP involved in the stock sale of Holiday Bowl.” Order, at p. 1.

Apparently Johnny Esq. was a lead batter in doing the nasty at MidCoast. And Johnny Esq. had the pictures, descriptions and accounts.

“Petitioners have requested from respondent certain unredacted Morris Manning & Martin, LLP ledgers (ledgers) allegedly created by John Ivsan. Petitioners also requested forty-four (44) boxes of evidence respondent provided to the Department of Justice in connection with the criminal investigation of MidCoast Financial, Inc. (DOJ evidence).” Order, at pp. 1-2.

IRS says oh no, this stuff is all ultra-top-secret, sealed with the seal of Section 6103(b)(2), which renders sacrosanct “return information”. The magic boxes and the ledgers name taxpayers and show payments to and from them.

Judge Wells awards IRS an “Oh Please, Second Class”.

“We find respondent’s argument unpersuasive. ‘Taxpayer identity’ is ‘the name of a person with respect to whom a return is filed, his mailing address, his taxpayer identifying number * * * or a combination thereof.’ IRC sec. 6103(b)(6) Respondent does not contend that the ledgers include either mailing addresses or taxpayer identification numbers. At most, the ledgers may contain the names of certain individuals or businesses to whom Morris Manning & Martin, LLP made disbursements or assigned credits and/or debits. Such listing of a name is insufficient for us to conclude that such persons are persons ‘with respect to whom a return is filed’, and neither do such entries identify the nature, source, or amount of income or any other data with respect to a return.

“Even if petitioners are seeking ‘return information’, the ledgers are directly related to the issue of the consideration paid for petitioners’ stock. See IRC sec. 6103(h)(4)(C). If the ledgers show that third party funds were designated for the purchase the Holiday Bowl stock, then it is some evidence, or would likely lead to evidence, that the transaction occurred as contended by petitioners. See T.C. Rule 70(b).” Order, at p. 2.

As for the DoJ stuff, IRS says it doesn’t have that, but has got electronic copies, and makes the same “return information” argument that just failed.

Judge Wells tells IRS to hand over the ledgers and whatever electronic files they have that relate to Billyhawk.

You’ll remember back in May, 2012, IRS was worried about the Billyhawk litigation compromising the criminal investigation of MidCoast. Well, it didn’t, and if the evidence IRS was hoping for did fall from the sky, as the Hawk Squad suggested, it might could be that evidence wins it for the Hawks.

Stay tuned.

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