Tax Court’s website is once again warbling with Walt today, 5/15/15 (and another Happy Palindrome Day to one and all).

Here’s the story.

“SITE OUTAGE NOTICE:

“The Tax Court’s Web site, including Petitioner Access and Practitioner Access, will be unavailable from 5:00 p.m. until 11:00 p.m. Eastern Time on Friday, May 15, 2015, to allow performance of emergency electrical work. No documents may be electronically filed (eFiled) during this time.

“We are sorry for any inconvenience this may cause. Thank you.”

Wilfredo A. Ruiz-Caban is singing Sammy Cahn’s and Jimmy Van Heusen’s 1960 hit with vigor, as STJ Lewis (“That Name Just Slays Me”) Carluzzo lets in Wilf’s petition after the second mailing from IRS.

Read all about it at Docket No. 20805-14, filed 5/14/15, another STJ Lew off-the-bencher, or, better still, read my blog now, as the Tax Court website will drop out at 5:00 p.m. Eastern today, for an emergency electrical fix.

Wilf’s petition is about 95 days late, if you take the first SNOD mailing as the determinative factor. Wilf was living at his current address, and claims he notified USPS of his changed address the year before, but IRS used his old address and got the mailing back undelivered.

IRS claimed Wilf never gave them the magic “clear and concise written notice.”

STJ Lew: “…he does not claim that he gave respondent clear and concise written notice of his current address before the notice was issued. Instead, petitioner argues that the change of address that he registered with the U.S. Postal Service operated to change his ‘last known address’ from his previous address to his current address. See section 301.6212-2(b) (2), 20 Proced. & Admin. Regs. Respondent argues that the record does not contain sufficient information to determine whether that regulation applies. If it does, then the notice is invalid and we lack jurisdiction on that ground. If the regulation does not apply, then the notice is valid and we lack jurisdiction because the petitioner was not filed within the period prescribed by section 6213(a), as pointed out in respondent’s motion. See Rule 13(a); Monge v. Commissioner, 93 T.C. 22, 27 (1989). Either way, we would be without jurisdiction and petitioner’s challenges to the deficiency would have to be, and could be made in a different Federal court (refund procedures) or a different proceeding in this Court (section 6330(d) proceeding).” Order, at pp. 5-6.

But Wilf is persistent; he wants to be in Tax Court, and he’ll fight to stay there.

“As it turned out, because of a contact made by petitioner to one of respondent’s service centers, a copy of the notice was mailed to petitioner at his current address… (remailed notice), and the petition could be treated as timely filed with respect to the remailed notice. See section 6213(a) and 7502. That being so, petitioner argues that the Court has jurisdiction.” Order, at5 p. 6.

Now maybe Wilf didn’t realize that, if he could prove the SNOD wasn’t mailed to his last known address, he could disregard the SNOD entirely, the SOL would run before IRS could get him a new SNOD, and he could walk away unscathed. Or maybe Wilf was concerned he couldn’t win that face-off, and by offering to stay onboard, he had a better chance of beating the SNOD.

Wilf is a self-represented, and he isn’t doing so bad.

IRS plays the usual counter-gambit. Second mailings don’t count. First in the mail is it, and there’s caselaw that says so.

Right, says STJ Lew, but in those cases no one claimed that the first mailing went to the wrong address. Here it’s not so clear that the first mailing went to the right address, namely, the “last known address.”

Anyway, why waste time?

“As noted above, resolving the dispute between the parties as to petitioner’s last known address would require the dismissal of this case on one ground or another only to have the case, in effect, resurface in a different case before us, or in a different Federal court. With that likelihood consequence in mind, proceeding in that manner makes little sense to us. Instead, we proceed, without finding, as though the notice was not sent to petitioner’s last known address, but acquire jurisdiction over the deficiency placed in dispute in the petition because the petition was timely filed in response to the remailed notice.” Order, at p. 7.

Judge, I think you meant “With that likely consequence.”

Anyway, “In closing we think it appropriate to note that proceeding in the manner we have is consistent with a liberal construction of section 6213(a) as applied in other circumstances by other Federal courts in order to preserve this Court’s jurisdiction in a case commenced under that section. See e.g. Tenzer v. Commissioner, 285 F.2d 956, 958 (9th Cir., 1960) ; Eppler v. Commissioner, 188 F.2d 95, 98 (7th Cir. 1951).” Order, at pp. 7-8.

So IRS, you lose. Wilf’s petition is timely.

Wilf gets a Taishoff “good going”, first class.

STJ Lewis (“The Name That Resounds”) Carluzzo reprises his 7/20/13 performance (“Yes, We Have No Jurisdiction”) in Charles R. Barrett, Docket No. 21310-14SL, filed 5/13/15.

Charlie paid (via levy and some cash he kicked in) what IRS claims is his outstanding debt to the Nation With Liberty and Justice For All. So STJ Lew has an off-the-bencher small-claimer to send Charlie on his way.

IRS dinged Charlie with a SNOD for one year, Charlie never petitioned, so IRS levied on his Social Security, but Charlie never petitioned that either.

So IRS dinged Charlie for the next year. Same story, but Charlie claims the NITL wasn’t sent to his last known address, though IRS stoutly maintains they mailed it there.

STJ Lew doesn’t have to go there.

Charlie went to Collection Appeals, which we all know is CDP ultra-light, because you can’t get to Tax Court from there. If not sure of this proposition, see my blogpost “An Appeal Is Not Due Process,” 9/16/13.

But Charlie got a closing letter, anyway, claims that’s a NOD, and petitions from that.

It’s not a NOD, says STJ Lew, wearily.

“As we have noted in countless opinions and orders too numerous to count, the Court is a court of limited jurisdiction, and we may exercise judgment only to the extent authorized by Congress. See Naftel v. Commissioner, 85 T.C. 527, 529 (1985).

“We are satisfied that the closing letter is not a sufficient determination to establish the Court’s jurisdiction over petitioner’s …liabilities under Section 6330(d), and in the absence of such a determination we are without jurisdiction in this case, which apparently was commenced under that section….. According to respondent, respondent has made no other determinations, or failed to take any action, that would otherwise support the Court’s jurisdiction over the matters contained in the petition. Because petitioner is not able to establish otherwise, we are further satisfied that we have no jurisdiction in this matter under any provision of the Internal Revenue Code.” Order, at pp. 6-7. (Citations omitted).

Now STJ Lew can toss the petition because there is no NOD, or he can toss it because IRS never sent the NITL to Charlie’s last known address.

And it does matter, because if not sent to last known address, as we have heard again and again, the NITL is a nullity and the levy is improper, so Charlie walks.

But Charlie, by virtue of the levy and some bucks he kicked in along the way, doesn’t owe IRS.

“Under the circumstances of this case, however, it matters not upon which ground the dismissal is based because the …liability has been paid. Even if the forced collection of petitioner’s … liability was inconsistent with the procedures contemplated in Sections 6320 and/or 6330, and we make no finding on the point, we would be powerless to provide petitioner with a remedy or the refund that he seeks. After all, if we have no authority to order a refund in a Section 6330(d) case over which we properly have jurisdiction, see Green-Thapedi v. Commissioner, 126 T.C. 1 (2006), then we most certainly have no such refund authority in a case such as this where we are without jurisdiction. Our lack of jurisdiction also renders moot petitioner’s request for injunctive relief. Our authority to enjoin the collection of a federal tax in a Section 6330(d) case arises only if the Court properly has jurisdiction in that case.” Order, at p. 8.

But Charlie, don’t lose hope. There might be another way.

“Lastly, we think it also appropriate to note that nothing in this bench opinion, or the order to be entered as a result, should be taken as a comment on whether petitioner is entitled to the relief he seeks here in proceedings, administrative or otherwise, available to him under other provisions of the Internal Revenue Code.” Order, at p. 9.

Go for it, Charlie.

I can hear the voice of the late great James Doohan calling out those fateful words in my memory, as Engineer Commander Montgomery Scott faces yet another crisis in the warp drive and thrusters of the Starship Enterprise (which will always be in my heart and Still On Patrol).

But today those words come from The Glasshouse at 400 Second Street, NW.

“The Court’s Web site is down due to a power issue affecting its main server room. A follow-up message will be posted once access has been restored.

“No documents may be eFiled until access has been restored. Petitions and Notices of Appeal must be filed in paper form; therefore, the outage does not affect filing of Petitions and Notices of Appeal.

No opinions will be released on May 12, 2015.”

Red alert! Red alert!

No, this is not a political discourse about proposed immigration legislation. I restrict myself to tax law, and here’s a good one, the story of a hotshot international M&A tax accountant partner in a Big Four firm (in which no relative of mine is employed, by the way) whose non-resident alien wife cannot afford him the tax goal he seeks.

Here now is the tale of Ian D. Hughes and Vanessa S. Hughes, as recounted by Judge Wherry, in 2015 T. C. Memo. 89, filed 5/11/15, the Day of the Palindrome.

Ian’s high-priced firm doubled-down on its consulting arm, spun it off and handed Ian some lovely shares in the spun-off for nothing. Ian, resident in the UK and recently divorced at substantial cost from Alleged Golddigger Brenda (AGB), was afeared that AGB would try to seize the shares, as they were earned while they were married but issued after.

Having some lunchtime gabfests with local UK tax folk, and talking to his UK lawyer (none of whom knew much about US tax or the treaty that separates these two countries with a common language), Ian deeds the shares to current wife Vanessa, abovementioned, she being a UK national and resident, and therefore NRA (non-resident alien).

Ian (or Vanessa) unloads the stock for big numbers, but reports nothing, neither gift, nor income.

Ian and Vanessa bounce from country to country in pursuit of the ultimate tax dodges for multinational corporations; Ian knows little of individual income or gift tax.

Finally returning to the Land of the Free, Vanessa achieves US residency.

Ian gets involved in one of the 2004 blown-up tax dodges. So he files a 1040 and a 709 three years late.

But when IRS issues a notice blowing up the dodge, he files a 1040-X, claiming the gift of the shares to Vanessa was taxable per Section 1041(a), as she was then a NRA and gifts to NRAs are taxable as transfers at FMV. So he owes tax on the sale, but Vanessa has basis in the shares.

The only issue is the 40% chop for substantial overvaluation. IRS claims basis zero, Ian claims then-FMV of shares.

IRS wins.

1041(d) says no recognition of gain or loss on interspousals, or upon divorce, unless another provision requires recognition. It has nothing to do with realization. You can have (realize) income; but must you recognize it?

And though other Code provisions keep transferors from sending assets overseas to escape US taxation, Section 1041(d) can’t be stretched that far.

The one case that talks about it involves a property transfer in settlement of an ongoing property obligation. Transferor husband got something of value from transferee wife: relinquishment of inchoate rights in husband’s property that were not liens but personal obligations. He bought his property out of her clutches.

Ian bought nothing from Vanessa, and Vanessa gave Ian nothing. True, Vanessa’s wealth increased, but Section 102 says a gift, though income, isn’t taxable.

Note Judge Wherry doesn’t talk about gift tax on the gift to Vanessa. IRS isn’t pressing it, and Ian is laying low.

But if Ian had paid gift tax, might the result have been different? Doesn’t the donee get basis based on gift tax donor paid?

Now Ian’s good faith arguments fall flat. He never asked the experts in his firm for a formal review, with all cards on the table. He checked the Master Tax Guide, and had some more gabfests and hallway consultations. But he relied on the wrong tax treaty (it took effect after his transaction), and in any event missed the standard we-tax-our-citizens-how-we-want clause.

Not so great.

40% chop.

Harold C. Johnston, Jr. and Lana S. Johnston don’t have COD on an old debt, even though they started paying after the audit began. So holds Judge Vasquez in 2015 T. C. Memo. 91, filed 5/11/15. And Happy Palindrome Day to all.

Hal got a loan from his boss and fellow kama‘āina Al Hee, to the tune of $450K, which Hal plowed into his telecom corp, while going to work in Al’s telecom corp. But if Hal wandered from Al’s fold, or was expelled therefrom, the loan would be due. The loan was made to Hal, not his telecom.

Though Hal bailed with Al’s consent, neither Al nor his telecom pressed Hal for the cash.

Hal’s telecom ultimately cratered, leaving Hal insolvent, so he re-entered Al’s telecom fold.

IRS audits Hal for another loan he never repaid, and Hal agreed he owed some tax for that loan’s cancellation.

Years later, back in Al’s fold, Al told Hal he was still on the hook for the remainder of the $450K, so Hal agreed to various payroll deductions to pay back Al’s telecom.

IRS then claimed Hal had COD in the audited year. Hal petitions.

IRS claims cancellation took place when Al and his telecom never pursued Hal for the money.

Hal says no, he’s still paying Al.

Formalities do not determine cancellation, facts and circumstances do. The issue is when is it clear the debt will not be repaid.

Hal and Al both testify, believably says Judge Vasquez. Al told Hal he wanted his telecom to be paid, and Hal agreed and did take payroll deductions to pay it. Moreover, it would be to Al’s advantage to treat the loan as a business bad debt and take the write-off.

IRS says the SOL has run, therefore the debt is discharged. No, says Judge Vasquez, all that means is that there is no remedy at law, assuming the debtor raises SOL as the affirmative defense which it is. If not pled and proven, no SOL.

IRS claims the payroll deal is a dodge, to enable Hal to avoid tax.

Judge Vasquez: “…a reasonable person in this case would not agree to pay an unenforceable debt to save a fraction of that debt on taxes. Repayment, in other words, is against Mr. Johnston’s economic interests. Furthermore, the testimony also suggests that respondent’s [IRS’s] examination merely prompted [Al’s telecom] and Mr. Johnston to address an overlooked matter. Mr. Johnston testified that he believed either that the… loan had been wiped out in [Hal’s telecom’s] bankruptcy or that repayment had been extended. However… after Respondent’s agent notified Mr. Johnston of the examination, Mr. Johnston met with [Al] and they agreed that the terms of the … loan were still in effect.” 2015 T. C. Memo. 91, at p. 11.

And any tax from the cancellation of that other loan, that Hal conceded in the earlier audit, is off the table, because Hal was insolvent that year, and no evidence was introduced to show the amount forgiven exceeded the amount by which Hal was under water.

So Hal gets no COD and no 20% chop.

Now I do have a comment (and I can hear my readers saying “must you? It’s such a pretty story”).

Hal is taking a $1K per month hit on his paycheck. Now I don’t know, and Judge Vasquez hasn’t told us, the outstanding loan balance, nor what concessions the parties made pre-trial. All we know is that the deficiency is $251,320 and the 20% chop is $50,264, 2015 T. C. Memo. 91, at pp. 1-2.

Now Hal had some argy-bargy about whether the $450K loan became worthless when his telecom cratered, but his evidence had to do with a year not under examination and involved a refund for that year. Thus, Tax Court has no jurisdiction. See Section 6214(b).

So I can’t tell what that bad debt number has to do with the $251K deficiency.

Howbeit, if Hal is paying back a couple hundred grand (hi, Judge Holmes) at the rate of a grand a month, by the grace of his good friend and fellow kama‘āina Al, which repayment could extend over decades, thereby saving himself a $301K immediate hit, and giving friend Al no negative tax hit (repayment of a loan isn’t income), that’s pretty good.

If I were IRS, I’d appeal.

Not quite like Leporello’s tally of Don Giovanni’s efforts in Espana, as more particularly bounded and described by Columbia Professor Lorenzo da Ponte, but for me, a more thrilling triumph.

In three and a half years of this blog’s short but merry life, today marks the fifty-thousand-third view on this blog. From viewers in more than 130 countries, states, provinces, trust territories, semi-autonomous regions. And I’ve picked up 142 followers on the way.

I’ve said before that the blogs of the prominent and famous get that many views in ten seconds every day, and have enough followers to form their own G20 country.

This blog, however, authored by an obscure lawyer, discusses hypertechnical issues in obscure corners of American tax law. Hardly compelling subject matter.

So I may be pardoned a wee gloat.

Now roll on 100,000!

It’s a new ballgame at 400 Second Street, NW, Glasshouse today. Or rather, on their website.

The Glasshouse Gang has gotten wider. No, Judge Holmes, they’re not stopping serving a slice pizza or a piece pie in the Judges’ cafeteria.

They’ve got more bandwidth. Since 2008, when the old “three strikes and yer out” rule went into effect, the Tax Court site has resolved that “wider still and wider, shall thy bounds be set,” as Artie Benson put it to Sir Eddie Elgar’s graduation march. At least on the internet, for e-files.

Clear? Thought not.

The old rule was that the electronically-enabled might view any given document in a Tax Court e-file not more than three (count ‘em, three) times, thereby preserving the then-limited bandwidth. Thus, parties and their attorneys or USTCPs might view any given document only three times, after which they would be locked out.

Effective today, the 70th anniversary of the Allied victory in Europe, viewings are unlimited, and they’re all free, as long as not sealed.

“There is no change in the types of documents which can be viewed electronically. For example, as before, parties may not view sealed documents electronically. Also as before, nonparties may continue to view orders, opinions, and decisions an unlimited number of times through the Docket Inquiry, Orders Search, or Opinions Search portions of the Court’s site.”

And those formerly locked out can return, and gaze once again upon that which was forbidden.

John (“Kosy”) Koskinen, the capo di tutti capi at 1111 Constitution Ave, NW, has once again released an oracular communication to a breathless audience of tax practitioners.

And this humble blogger is grateful, because Tax Court is positively somnolent today; not one decent bloggable order.

Howbeit, here’s the skinny. Y’all will recall that back in August, 2011, IRS issued the list of Private Delivery Services (PDS) that provide prima facie proof of mailing to Tax Court and IRS, to satisfy the Section 7502(f) “mailed is filed” rule. I, even I, noted this in my blogpost “Mail Call,” 9/16/11.

But though FedEx and UPS provide services that satisfy, as someone much more exalted remarked, “not all of you are clean.”

And there are a number of cases where the wrong checkmark on the FedEx or UPS label doomed the petition, irrespective of its merits.

Well, Kosy has added a few of the laundry list of services FedEx and UPS provide to his Hit Parade. Read all about it in IRS Notice 2015-38, 5/8/15.

Here’s the revised standard version of the “blest communion, fellowship divine”:

Effective May 6, 2015, the list of designated PDSs is as follows:

FedEx:

1. FedEx First Overnight

2. FedEx Priority Overnight

3. FedEx Standard Overnight

4. FedEx 2 Day

5. FedEx International Next Flight Out

6. FedEx International Priority

7. FedEx International First

8. FedEx International Economy

UPS:

1. UPS Next Day Air Early AM

2. UPS Next Day Air

3. UPS Next Day Air Saver

4. UPS 2nd Day Air

5. UPS 2nd Day Air A.M.

6. UPS Worldwide Express Plus

7. UPS Worldwide Express.

So, “if it’s not in here, it’s not out there.” No other FedEx or UPS service will suffice.

Takeaway- Practitioner, print the list from the IRS website, paste the list over every desk in your office, with a warning that use of any other PDS service is punishable by death, or such lesser penalty as the courtmartial may direct.