In Uncategorized on 02/18/2015 at 17:20

I thought at first glance that the tale of 436, Ltd., Robert Heitmeier, Tax Matters Partner, 2015 T. C. Memo. 28, filed 2/18/15, would provide some interest. After all, Judge Holmes (I’m leaving out the honorifics to save time) quoting Mark Twain on the antebellum joys of riverboat pilotage would certainly liven up this blog.

But alas, it’s just another son-of-BOSS phony foreign exchange dodge, the only twist being that outside basis isn’t brought into play in this TEFRA case. Nonetheless, Pilot Bob’s tax dodge gets blown up, with heavy-duty substantial undervaluation penalties.

Read the opinion for an update on Mark Twain’s Mississippi, but as for tax learning, it’s much of a muchness.

More interesting is Tim Sheridan, 2015 T. C. Memo. 25, filed 2/18/15. Tim says he’s going to claim his million-dollar theft loss annually until 2070, 2015 T. C. Memo. 25, at p. 10, but Judge Lauber isn’t buying it for 2009, 2010, or 2011, and the rest of the upcoming years don’t look so good neither.

Unusually for a guest on this blog, Tim is an inventor of something besides tax dodges. “He is the holder of U.S. patent No. 7,415,982, filed in 2001, for a ‘smokeless tobacco vaporizer.’ Certain other patents, which also involve a mechanism for heating materials so that they can be vaporized and inhaled through a tube, predate petitioner’s patent. His patent, like those other patents, precedes by almost a decade the recent rise to popularity of ‘e-cigarettes.’” 2015 T. C. Memo. 25, at p, 3.

Well, where there’s smoke there’s the cliché, but Tim’s device never caught fire (sorry, guys).

So Tim brooded. “He alleges (among other things) that Internet search engines have intentionally demoted his product; that social media platforms have conspired to diminish his product’s visibility; that the U.S. Postal Service has intentionally misspelled the name of his business; that a telecommunications firm has prevented him from sending crucial emails; that his computer has been continuously hacked to prevent him from retrieving important information; and that Wikipedia has improperly removed edits he sought to make to an Internet article discussing vaporizers. He contends that these perceived wrongs have enabled other companies to use his intellectual property and make vaporizer sales that his business would otherwise have made.” 2015 T. C. Memo. 25, at p. 3.

Like river pilot Heitmeir, Tim runs aground. Tim has no proof of anything. Instead “… he derives his damages by applying various formulas of his own creation, which apply estimates and randomly assigned multipliers to geographic populations, Internet traffic, total market, competitors’ sales, and other items.” 2015 T. C. Memo. 25, at p. 4.

Tim has been up to Fourth Circuit on his attempt to enjoin the collection of the deficiencies herein, but the Anti-Injunction Act (26USC§7421(a)) blew that away. Fourth Circuit was less than kind to Tim. “The Court of Appeals termed ‘nonsensical’ petitioner’s claim that he was entitled to a refund of $20 billion on account of losses he had suffered over the life of his patent.” 2015 T. C. Memo. 25, at p. 5.

Merely owning a patent doesn’t prove infringement. The theft loss in Section 165(e) requires criminal misappropriation, which Tim can’t prove.

Anyway, Tax Court isn’t the place to try a patent infringement case. “See 35 U.S.C. sec. 281 (2006) (‘A patentee shall have remedy by civil action for infringement of his patent.’); 28 U.S.C. sec. 1338(a) (2006) (‘The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents[.]’).” 2015 T. C. Memo. 25, at p. 8.

“Petitioner clearly is not claiming a loss deduction for ‘theft’ but for alleged damage to his business from supposed anticompetitive behavior. Such damages, if they can be proved, are not deductible as ‘theft losses’ under section 165(e).” 2015 T. C. Memo. 25, at p. 10.

Inventive to the last, Tim “…contends that he is entitled to his $1 million deductions under section 186. Section 186(a) provides that, ‘[i]f a compensatory amount which is included in gross income’ is received for a ‘compensable injury,’ a deduction is allowed equal to the lesser of the ‘compensable amount’ or ‘the unrecovered losses sustained as a result of such compensable injury.’ Section 186(b)(1) defines a ‘compensable injury’ to include ‘injuries sustained as a result of an infringement of a patent issued by the United States.’ 2015 T. C. Memo. 25, at pp. 10-11.

I wanted to give Tim a Taishoff “Good Try, Second Class” for the last one, but Judge Lauber won’t let me.

“Even if petitioner could establish patent infringement, which he has not done, he has not alleged that he received, or included in gross income for 2009, 2010, or 2011, any ‘compensatory amount.’ See sec. 186(c) (defining ‘compensatory amount’ to mean an amount received ‘as damages as a result of an award in, or in settlement of, a civil action for recovery for a compensable injury’). Section 186 has no possible application here.” 2015 T. C. Memo. 25, at p. 11.

And Tim gets a penalty kick thrown in. He had no good-faith claim for a tax break. If he claims his patent was infringed, let him sue.



  1. […] Lew Taishoff was intrigued by the introduction, but lost interest when he noted it was a Son-of- BOSS case. […]


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