An  Alternate Meaning Tells The Story

I am a journalist. The Cyber Age has made every blogger a journalist, quite as much as our colleagues of the hard copy and radio/television. Without meaning to boast, this blog has been read in over 130 countries, commonwealths, dependencies, trust territories and all like that. And these blogposts have been read more than 42,000 times in the three years of this blog’s existence.

I want to stand with my journalist colleagues, living and dead, around the world. People may not like what we write or speak. That’s all right; they can comment, start their own counter-blogs, or ignore us altogether.

But murder is out. If your religion, belief system, or whatever, is so weak that anyone with a keyboard or a microphone can insult it, you should really question why you believe it. You are perfectly free to insult mine–it has been insulted, persecuted, denounced, derided, banished, exiled and denigrated by those far abler and much more powerful than you. It has survived all the foregoing.

This being a non-political blog, I did not want to jump into a fray that I can fight elsewhere. And that we all should fight, wherever and whenever.

The matter here, however, transcends politics. I want to add my voice in this place to “Je Suis Charlie”.

But my wandering mind came upon an almost-forgotten slang phrase I hadn’t heard since the last time I was in England 25 years ago. It went something like “I was a right Charlie for believing that story.”

So we’re all Charlie. Just not right Charlies. That distinction we can leave to those whose beliefs are so weak they can be insulted. By Charlies.

Many times, when a Tax Court opinion is rendered, the story isn’t over. While sometimes Tax Court judges do indulge in arithmetic (see my blogpost “Tax Court as Preparer?”, 9/17/12 but even there a Rule 155 beancount followed), most of the time, to permit Tax Court to render a decision (how much money, if any, is owed?) when arithmetic is needed, Tax Court invokes Rule 155.

That sends IRS and petitioner(s) off to do the numbers. If they agree, then entry of decision follows. If not, each submits their own numbers, and they can argue about them, and the judge will choose her (or his) own.

But–and here’s the point (and my readers will doubtless say “And about time, too”) — Rule 155(c) keeps them on the straight-and-narrow.

“Any argument under this Rule will be confined strictly to consideration of the correct computation of the amount to be included in the decision resulting from the findings and conclusions made by the Court, and no argument will be heard upon or consideration given to the issues or matters disposed of by the Court’s findings and conclusions or to any new issues. This Rule is not to be regarded as affording an opportunity for retrial or reconsideration.”

Except it doesn’t. Judge David Gustafson, obliging as always, doesn’t bother reciting the Rule.

He just tells Jackie H. Robinson, and Estate of Lolita I. Robinson, Jackie H. Robinson, Adm’r, Docket No. 248-11, filed 1/8/15, that he isn’t having any more argy-bargy about what he concluded in 2014 T. C. Memo. 120, filed 6/16/14 (and no, I didn’t blogpost it, because it’s the usual unsubstantiated deductions).

Now ordinarily, even though Judge Gusfason’s order is a designated hitter, I’d skip it, because there’s nothing here to long detain the tourist (or anyone else).

But the problem is endemic. Pro ses like Jackie H. don’t know Tax Court rules and won’t look them up. So maybe each reference to a Rule 155 beancount, rather than the throwaway line “Decision will be entered under Rule 155”, should include at the end of the opinion a statement like “The parties shall prepare and exchange computations within the time limits of, and in the manner set forth in, Rule 155. No additional, further or other argument is permitted.”

Will petitioners obey? Not if they want to stall; but disregarding the Rules, when made explicit, may be grounds for a Section 6673 delay-of-game chop.

It’s nearly sixty years since I was introduced to the principle herein at the head above stated (as my expensive colleagues would say) by my junior high school classmate David Botstein, now Dr. David Botstein, now or formerly head of Lewis-Sigler Institute for Integrative Genomics, whatever they may be, at Princeton University.

I forget what point he or I was arguing, but he asserted that he was right based upon “the principle of dogmatic assertion”. He probably was right, at that.

But the principle comes to the aid of Lawrence Ebert and Rebecca Ebert in 2015 T. C. Memo. 5, filed 1/7/15.

Larry is fighting over a big $1410 of dividend payments he claims he never got, but IRS says he did. Although the deficiency can’t be all that great (Judge Colvin doesn’t say what IRS claimed it was, but states that it is “relatively small”, 2015 T. C. Memo. 5, at p. 6), Larry doesn’t take the small-claimer route, but goes for the big enchilada.

IRS has a recent letter from Computershare, the then registered agent for BNSF (whose shares Larry admits he owns), and a copy of a 1099-DIV they claim they sent Larry. Larry says everything got mixed up when The Oracle of Omaha bought BNSF and changed the registered agent from Computershare to Wells Fargo.

He kept calling Computershare and Wells Fargo about all manner of issues with his stock, he claims, but had no luck. And as to the letter IRS produced, Larry says he called the telephone number on the letter and got a recorded message that told him nothing.

Larry wants a burden shift, but Judge Colvin uses the preponderance-of-evidence gambit.

And Larry’s vociferous assertions, in support of a minimal tax break, carry the day.

“As with many other cases decided by this Court, see, e.g., Diaz v. Commissioner, 58 T.C. 560, 564 (1972), ‘[t]his case epitomizes the ultimate task of a trier of the facts–the distillation of truth from falsehood which is the daily grist of judicial life.’ The documentary evidence that respondent provided conflicts with petitioner husband’s detailed and energized testimony. We must resolve that conflict.” 2015 T. C. Memo. 5, at p. 4. I think you meant “energetic” testimony, Judge.

Howbeit, “We decide whether a witness’s testimony is credible based on objective facts, the reasonableness of the testimony, the consistency of statements made by the witness, and the demeanor of the witness. We may discount testimony which we find to be unworthy of belief… but we may not arbitrarily disregard testimony that is competent, relevant, and uncontradicted…. Petitioner husband has devoted a substantial amount of time to contest the relatively small amount of tax liability at issue here, and he testified consistently, clearly, and with considerable conviction in explaining the negative–that he did not receive the disputed dividend payments. He has persuaded us that he did not receive the disputed dividend payments in 2009.” 2015 T. C. Memo. 5, at pp. 5-6. (Citations omitted).

As for the “daily grist of judicial life”, see my blogposts “Practicing Accountancy Can Be Hazardous to Your Health”, 12/26/12, and “A Non-Christmas Carol”, 12/23/13.

Takeaway–Practitioners and petitioners, remember the words of Matt Hammond and Chris Rohman, not to forget Dr. David Botstein: “Say it loud.” And say it often.

That’s Judge Lauber’s word to MoneyGram International Inc., and Subsidiaries, leading off T. C. 144, at 144 T. C. 1, filed 1/7/15.

MoneyGram claims it’s a bank. Why, you may ask. Well, there’s about $82 million in deficiencies for four (count ‘em, four) tax years riding on the answer. If MoneyGram’s a bank, their worthless securities write-off against ordinary income stands up; if not, they’re capital losses, and must be written off against capital gains for the appropriate years at issue.

Here’s MoneyGram’s story. “MoneyGram sells money orders and money transfer services to consumers through ‘agents.’ These agents include banks, credit unions, supermarkets, convenience stores, and other retail locations. MoneyGram’s agents range from wellknown businesses such as Wal-Mart (during the years in issue), Albertson’s, and CVS Pharmacy, to thousands of ‘mom and pop’ convenience stores. MoneyGram sells payment processing services directly to banks and other financial institutions.” 144 T. C. 1, at p. 4.

Well, don’t banks do that? Yes, but. Check out Section 581. To be a ”bank”, and get the bank  tax goodies, the entity must be Federally or State regulated as a bank, make loans and receive deposits. Here MoneyGram stumbles out of the starting gate.

“In a typical money transfer, a consumer goes to the location of a MoneyGram agent, completes a form, and pays the agent the money to be transferred (plus a fee). This form explicitly states that the agent is not accepting a ‘deposit.’ 144 T. C. 1, at p. 5.

Moneygram also processes payment of official bank checks for more than 1900 banks, thrifts and credit unions for one of the years at issue.

But MoneyGram is not subject to OTS, FDIC, OCC, or those guys. It is regulated by Treasury pursuant to Art. 31, USC, which is the Circular-230 part, but that other stuff I haven’t read either. American Express Travel Related Services and Ezra Cornell’s brainchild Western Union are also regulated thereunder.

And never has MoneyGram told the SEC or its stockholders, past, present or would-be, that it is a bank.

Judge Lauber has a lot more to say about how “money service businesses” like Moneygram are regulated, both by the Federal Government and the States, so if your Sominex has gone past its pull-date, you can read all about it. I’ll spare you.

Bottom line–Banks are 12 USC, money servicers are 31 USC, and never the twain shall meet.

MoneyGram’s problems resulted from the credit meltdown during what W. H. Auden would have called “a low, dishonest decade”.

Mired in junk paper which rendered its net capital below State law money transmitter standards and therefore threatening its State licensure, MoneyGram recapitalized, and took heavy-duty losses in consequence thereof.

Now there are two classes of junk here: REMIC and non-REMIC. The REMICs are settled; it’s the non-REMICs at issue, but I suspect the result would be the same for both classes of junk.

The non-REMICs are concededly debt backed by a security, so available as only as a capital loss under Section 165(g)(2)(C).

But there’s an exception. Don’t you love exceptions? Section 582 provides that, notwithstanding Section 165(g), banks get Section 166 ordinary write-offs. Nothing like having the most powerful lobby in Washington. But I must remember this is a non-political blog.

But to be a bank, the entity must take deposits, make loans, and be regulated by Federal or State banking regulatory authorities. However, courts look to a “practical, commercial, functional approach” (144 T. C. 1, at p. 20, Footnote 5).

In short, “An entity is not ‘a bank or trust company incorporated and doing business’ under section 581 unless it is a ‘bank or trust company’ within the ordinary meaning of those words.” 144 T. C. 1, at p. 25.

So a bank is like pornography. Echoing Justice Potter Stewart’s celebrated remark, we know it when we see it.

And MoneyGram doesn’t make the cut. The money that it gets from its agents are not deposits from the public. Any advances MoneyGram makes on behalf of agents or the banks whose checks it pays have to be paid up very quickly, and the general public cannot deal directly with MoneyGram, either by depositing money or borrowing.

And whatever MoneyGram claims public policy should be, Congress enacted what it enacted. And Judge Lauber can’t change that.

We lawyers get too cynical too fast. I started out much as the Lord Chancellor in Iolanthe: I would never “assume that the witnesses summoned in force, In Exchequer, Queen’s Bench, Common Pleas, or Divorce, Have perjured themselves as a matter of course.”

In that Grove of Academe On The Hill Far Above (courtesy of Myron C. Taylor, Esq.), we were taught that cases are decided based on the weight of the credible evidence. But in after years I have been heard to quip that cases are decided based on the weight of the credible perjury. Especially when I lost.

But hear now The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Imperturbable, Indefatigable, Irrefragable, Illustrious and Irrepressible Foe of the Partitive Genitive, Mark V. Holmes.

It’s an off-the-bencher on a day when Tax Courtiers can take unscheduled leave or teletubby, so there are no opinions and no designated hitters.

It’s the story of Frederick Michael Young, Petitioner, and Rasheda O. Donner, Intervenor, Docket No. 16400-13, filed 1/6/15. And Judge Holmes does get an epiphany.

“This is an innocent spouse case in which everyone testified truthfully and credibly, unlike many innocent spouse cases. They may disagree but there has been not been the blatant dishonesty that plagues this particular area of tax law.” Opinion, at p. 3.

Great start! Honest, candid witnesses. That guarantees the outcome in such a case.

The parties don’t get what they want.

When Fred and Rash divorced, owing tax they properly reported but couldn’t pay because their jointly-owned-and-operated business hit bad patches, they wanted the tax bill split fifty-fifty. Fair enough; they both worked in the business, so the divorce decree said each must bear his or her half.

But taxes don’t work that way. Judge Holmes explains: “The parallels that are used for many married couples is like roommates who agree to share the utility bill; one side paying the electric bill one month and the other roommate paying the bill the second month. That may be a legally binding contract between those two roommates, but the utility company, if both names are on the bill, has the right to come after you both and the IRS is a little bit like the electric company in this regard.” Opinion, at p. 5.

There are exceptions, of course. I ask you, what would tax practice be without exceptions? The exception is our friend Section 6015(f). As there are no deficiencies, because no one challenges the returns Fred and Rash filed, Fred can get relief, if he can pass the factors tests, which, by virtue of his candid, forthright and honest testimony, he can’t.

IRS denied Fred’s request, but their reasons were “bizarre”, to use Judge Holmes’ term. They claim Fred filed a fraudulent return and made fraudulent conveyances. “There’s just no evidence of that in the record, there was no evidence at the trial. The Commissioner’s lawyers in this case didn’t defend this bizarre conclusion, and no doubt it offended Mr. Young and may have been one of the reasons that prompted him to file this petition seeking appeal.” Opinion, at pp. 7-8.

And Judge Holmes assures Fred that there’s no hint of any wrongdoing on his part.

Judge Holmes sums up: “So to summarize here we have a couple that’s divorced and a former husband who is compliant with his ongoing tax obligations. These factors weigh in favor of relief. The fact that he knew the taxes weren’t getting paid at the time that he filed the returns, weighs against relief, and all the other factors are neutral.” Opinion, at p. 10.

Tax Court can’t help Fred. But since the State court where the divorce was granted retained jurisdiction over joint debts, maybe Fred can get help there.

See my blogpost “Innocence is Bliss?”, 11/10/11, wherein I stated :” A repentant sinner saved by his wife’s tears, and an honest witness on a trial–proves the old saying–‘No good deed goes unpunished’–totally.”

Any number of Tax Court cases go off on whether the SNOD was mailed to the “last known address” of the taxpayer. It is the taxpayer’s principal jurisdictional handle to dispute the tax sought to be collected in a CDP. It is often the reason that a petition is dismissed on the grounds that the SNOD is invalid if not so mailed.

But today, STJ Lewis (“Who Needs Spellcheck”) Carluzzo blows off the question. Because it really doesn’t matter.

This is the story of John Earl Beldon, Docket No. 6900-14, filed 1/5/15.

IRS moves to dismiss John Earl’s petition, on the usual grounds — John Earl was late.

John Earl was at all relevant times an involuntary guest of the State of Kentucky, and IRS was content to let John Earl remain in CNC as long as his guest status, which will run beyond the SOL.

The SNOD was mailed to an address not the same as on John Earl’s last filed tax return.

“Furthermore, petitioner did not advise respondent that the address shown on his most recently filed return was no longer valid. See sec. 301.6212-2(a), Proced. & Admin. Regs. Instead, the notice is addressed to petitioner at an address obtained by respondent after consulting the National Change of Address database maintained by the United States Postal Service (USPS). See sec. 301.6212-2(b)(2)(i), Proced. & Admin. Regs. According to petitioner, he did not submit a change of address to the USPS, and he did not otherwise authorize anyone to do so on his behalf.” Order, at p. 2.

John Earl wants IRS to drop the additions to tax and interest IRS keeps billing him, but STJ Lew says that those aren’t in Tax Court’s jurisdiction. Anyway, John Earl doesn’t dispute that he owes tax.

STJ Lew really isn’t interested.

“From a practical point of view it seems that dismissal of this case will have little negative effect on petitioner. After all, we could not in this proceeding address petitioner’s request that the additions to tax and interest be waived, and respondent has indicated that he has no intention to collect a tax that petitioner apparently agrees is owed.” Order, at p. 2..

But if John Earl and IRS want to fight, far be it from STJ Lew to stand in their way.

“Under different circumstances, we would address the issue of whether the notice was properly sent to petitioner’s last known address. We see little point to do so here not only for the practical reason just noted, but because petitioner’s incarceration has prevented a complete record on the point. That being so, we will leave that issue open to be disputed by the parties in a different forum if necessary.” Order, at p. 2.

The webmeister at 400 Second Street, NW, finally got around to putting Judge Tamara W. Ashford’s curriculum vitæ on the Tax Court website, and it is even more impressive than was set forth in the White House version, which was all that was available before now.

I look forward to posting many scintillating opinions from Judge Ashford.

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