John Milton’s famous line is the caption to Judge Wherry’s discussion of e-filing (which is never available for petitions or amended petitions) in Dan E. Butts & Patricia J. Butts, et al., Docket No. 20656-11, filed 8/7/15.

The opinion itself spends a lot of time on the proposition that an SFR is not a return that starts the three-year lookback for filing for a refund. I dealt with that in my blogpost “Lookback in Anger,” 12/12/11.

Dan & Pat want a Rule 161 reconsideration of their losing attempt at a refund. I blogged that one, too, in my blogpost “Lookback in Anger – Part Deux,” 4/15/15, so I won’t rehash what I said then, and what Judge Wherry says now.

Dan & Pat’s e-filing hit May 16, but as the opinion hit April 15, they were a day late on the thirty-day cutoff.

But Judge Wherry gives Dan & Pat a break on their late-filed reconsideration motion, because Tax Court’s web instructions are less than perfect.

“‘Documents filed after January 17, 2014, are entered on the record automatically as they are transmitted to the Court. They are eFiled and eServed as the Court receives them’ (using Eastern time). The Court appreciates that its narrative on the web site may have been confusing to petitioners and that they transmitted the motion, presumably from their state of residence, Nevada, at 11:08 p.m. Pacific coast time May 15, 2015, therefore the Court shall permit the late filing of petitioners’ Motion for Reconsideration of Findings or Opinion Pursuant to Rule 161, as supplemented.” Order, at p. 1, Footnote 1.

Now the thirty-day cutoff arises under Rule 161, and not Title 26 USC, so maybe Tax Court has discretion for a reconsideration where they do not for a petition from a SNOD or NOD.

Takeaway—Practitioner, maybe so a late Rule 161 motion might be worth a try, with a sufficient tale of woe attached.

I didn’t want to end today’s blogfest without another Barbara Kupersmit coruscation.

Y’all will remember Barb. No? Well, Barb ran the giant slalom of Judge Gustafson’s conundrums (see my blogpost so entitled, 6/2/15), and came out a winner (see my blogpost “Repentance Can’t Cure Fraud,” 7/1/15).

She didn’t do so well with hubby Hal, as Judge Gustafson wouldn’t let Barb join up with Hal for this hoedown back in June, as more particularly described in my latter abovementioned blogpost.

But Barb is in there pitching. And Judge Morrison is on the receiving end, in Harold P. Kupersmit, Docket No. 22350-14, filed 8/7/15.

“This case is calendared for trial during the Court’s September 14, 2015 Trial Session in Philadelphia, Pennsylvania. On July 6, 2015, the Court filed a motion by petitioner titled:

“The Triple Power of Quo Warranto; Scire Facais; Error Coram Nobis

The Pennsylvania Internal Court System

A Cancer On The Land

If You Can’t Trust Your Court System,

Who Can You Trust?

“The motion appears to make multiple requests of the Court, including: (1) a motion for damages purportedly on behalf of Barbara Kupersmith, (2) a motion to expand the lawsuit to include relief under 5 U.S.C. sec. 702, (3) a motion to enforce subpoenas, (4) a motion for judicial notice, (5) a motion for partial summary judgment, (6) a motion for costs under 26 U.S.C. sec. 6673, and (7) a motion to shift the burden of proof.” Order, at p. 1.

Judge, her surname is Kupersmit. But I will pardon the error.

It does, however, strain my native hue of resolution, but I will resist the temptation to expatiate on Barb’s latest, except to say you gotta love a litigant who won’t quit.

Judge Morrison apparently finds Barb less than amusing: “…petitioner’s July 6, 2015 motion is denied because it impermissibly joins motions together in violation of Tax Court Rule of Practice and Procedure 54(b).” Order, at p. 1.

Must have been a long day in Judge Morrison’s division.

Cracking up once more is Steven T. Waltner, joined by Ms. Sarah V. Waltner, in 2015 T. C. Memo. 146, filed 8/6/15. I say “cracking up,” as that was the title of my first account of Steve’s maneuverings; see my blogpost “Cracking Up,” 2/27/14.

Ms. Sarah V. Waltner featured in my blogpost “A Tale of Three Lawyers,” 7/3/14.

At this juncture, lest I be accused of piling on after the whistle, I must quote from the latter blogpost. “I do not indulge in schadenfreude; I find such stuff unworthy of discussion in a high-minded blog like mine. So today’s blogpost is not a gloat over others’ difficulties, but to point the way for my readers, or their respective counsel, to avoid the pitfalls hereinbelow set forth, as my already-on-their-second-bottle-of-2003-Château-Léoville-Poyferré colleagues say.”

Steve and Ms. Sarah V. Waltner are senior-league rounders. Judge Haines catalogues their previous delicitons, and orders their now-or-former attorney, whom I’ll call Donny, to show cause why he should not be mulcted for the cost of the extra trouble and grief he caused the crew at 1111 Constitution Avenue, NW.

And Steve and Ms. Sarah V. Waltner climb another step in the Stairway to the $25K Section 6673 Chop.

“The only issue in Waltner v. Commissioner, T.C. Memo. 2014-35, was whether Mr. Waltner should be subject to a section 6673 sanction because he paid the section 6702 penalty. After a detailed discussion, which we will not reiterate here, we determined the answer was ‘yes’ and imposed a section 6673 penalty of $2,500. Petitioners did not heed our warning in that case and refused to withdraw their frivolous positions in Waltner v. Commissioner, T.C. Memo. 2014-133. As a result, we imposed yet another section 6673 penalty of $5,000 on each petitioner, for a total of $10,000, in that case.

“In this case respondent seeks the maximum section 6673 penalty of $25,000. Despite our repeated warnings that we will not tolerate petitioners’ frivolous positions and our imposition of substantial monetary penalties, we have been unable to dissuade petitioners. Petitioners continued to advance positions in this case which they had already been warned were frivolous. We find a section 6673(a)(1) sanction is warranted and impose a $15,000 penalty in total on petitioners.” 2015 T. C. Memo. 146, at pp. 16-17.

See my blogpost “Wilf,” 3/30/15. The story has an unhappy ending. You can read all about it, with “somber reasoning and copious citation of precedent,” as they say at 400 Second Street, NW, in The City L’Enfant Built, from the desk of Ch J Michael B. (“Iron Mike”) Thornton.

Ch J Iron Mike was clearly not amused by Wilf’s somewhat casual approach to Tax Court litigation.

Here’s the link. http://www.ustaxcourt.gov/press/080615.pdf

Hermine Dinger claims ADD isn’t a US government agency, and even settled a deficiency case with IRS (for different years) while getting paid by ADD, but that doesn’t help, in 2015 T. C. Memo. 145, filed 8/6/15.

ADD is nothing to do with attention deficits here; it’s the Aufsichts und Dienstleistungsdirektion. And that should evoke a first-class “Mein! Was ist das?”

Well, I’ll enlighten you, even as I was enlightened by Judge Dawson. The Aufsichts und Dienstleistungsdirektion translates to Pay Office Foreign Forces, and “‘is a German authority of the Ministry of Internal Affairs and Sports’ that administered the payroll relating to civilian employees of the U.S. Army under The Agreement Between the Parties to the North Atlantic Treaty Organization Regarding the Status of Their Forces (NATO SOFA), June 19, 1951, 4 U.S.T. 1792.” 2015 T. C. Memo. 145, at p. 4.

Hermine worked as a receptionist at the U. S. Army Dental Clinic at Friedberg, Germany, of which country she was a citizen, although, being married to a U. S. citizen, she made the Section 6013(g)(1) election to be treated as a U. S. resident.

Judge Dawson explains: “The ADD disbursed wages to petitioner. The U.S. Army provided the funds ADD disbursed to petitioner in a salary statement that stated: ‘This is not an activity of the German civil service. Payment will be made by the home country and subject to recovery’.” 2015 T. C. Memo. 145, at p. 4.

Hermine claimed the foreign earned income exclusion. IRS said she got paid by the U. S. Army Dental Clinic, and therefore Section 911(b)(1)(B)(ii) says she can’t exclude that income.

Judge Dawson spends some computer time establishing that the U. S. Army Dental Clinic is an agency of the United States. Tough call, Judge.

And all ADD did was act as payroll administrator. Hermine was directed by, hired by, and could be fired by, the U. S. Army.

Hermine claims the earlier settlement estops IRS from challenging her exclusion. But there was no finding of facts or stipulation of facts, and no briefing or trial.

“The decision document… only effected a settlement of that case. There was no stipulation of facts in support of the settlement. There was no trial or briefing on the merits of the foreign earned income issue, and there was no decision on the merits.” 2015 T. C. Memo. 145, at p. 11.

You need all that for collateral estoppel. The issue must be litigated and decided. And for Hermine’s settlement, it wasn’t.

Yet another cautionary tale for the tax criminal defense bar today, from Judge Lauber, the Old Cantabrigian classicist. It’s Del-Co Western, a Utah Corporation, 2015 T. C. Memo. 142, filed 8/5/15.

JaNean Del’Andrae, CFO of Del-Co, copped to 7201 nastiness for Del-Co and for herself and spouse.

“In connection with her plea, Del’Andrae agreed to pay restitution of $88,152.50 to the Internal Revenue Service (IRS) on account of Del-Co’s 2004 and 2005 tax liabilities. Of this sum she agreed that $49,845.37 was payable on account of Del-Co’s 2004 tax liability and that $38,307.13 was payable on account of Del-Co’s 2005 tax liability. She also agreed to pay additional restitution, to be determined at sentencing, on account of her 2005 joint income tax liability.” 2015 T. C. Memo. 142, at pp. 2-3.

JaNean coughed up $136,509.50. Of this, $88,152.50 was for Del-Co for 2004 and 2005, and $48,357.00 was for JaNean and spouse (who apparently shall be nameless, as spouse’s name never appears in the memo).

Then Del-Co and IRS stipulated to a decision. Del-Co claimed IRS never properly credited the $136,950.50 payment. When IRS hit Del-Co with a NITL, Del-Co asked for a CDP, but couldn’t prove the payment. IRS did concede that portion of the payment allocable to 2004 for Del-Co, which was all Del-Co petitioned. So IRS claimed no further controversy, and moved to toss Del-Co.

Clear? Thought not.

Del-Co argues that the 2005 portion of the payment JaNean made should also be credited to 2004, because the SOL has run for 2005, even though Section 6501(c) allows IRS to assess tax “at any time” when fraud is involved. But Del-Co claims it isn’t responsible for JaNean’s fraud.

Judge Lauber says that’s a controversy, so he’ll decide. And treat this as summary J, because there are no questions of fact.

“In appropriate circumstances, we may determine in a CDP case whether a credit available from another tax year should be applied to the taxpayer’s liability for the year before the Court (here, 2004). But we can do this only when a credit from another tax year indisputably exists; we do not have jurisdiction under section 6330 to ‘determine an overpayment of an unrelated liability.’ Weber v. Commissioner, 138 T.C. 348, 366 (2012).” 2015 T. C. Memo. 142, at pp. 6-7.

You remember the Weber case, right? Wrong? Then you didn’t read my blogpost “Can’t Fight the Penalty,” 5/7/12.

“Neither the IRS nor any court has determined that Del-Co overpaid its tax for 2005. Indeed, the propositions upon which petitioner relies for its contention that the statute of limitations bars assessment of additional tax against it for 2005 seem highly debatable. In any event, Del-Co does not now have an ‘available credit’ for 2005 that can be taken into account in determining the extent to which its tax liability for 2004 remains unpaid.” 2015 T. C. Memo. 142, at p. 7. (Footnote omitted, but it says that the magic Section 6201(c) “at any time” might apply if Tax Court had jurisdiction to redetermine the 2005 tax liability, which it doesn’t).

So Del-Co has a claim for a credit, but not an available credit. And there’s no obligation for IRS to sort out Del-Co’s claim before levying. And interest abatement isn’t before the Court, because Del-Co didn’t raise that at the CDP.

So IRS can levy.

Takeaway—Defense counsel, when you settle, make sure that IRS is in the loop and acknowledges what each component of the forkover from your client covers. It beats getting a Taishoff “good try, second class,” which I hereby award Del-Co’s attorneys.

Plenty, if It Looks Like It Has Authority

This is about tax mutterers, not roses, but the punchline is the same. The name is material if people could think that the name carries authority.

And Judge Goeke thinks Eric Gjelde, man of many roles, has all the authority needed to extend the SOL in Summit Vineyard Holdings, LLC, Summit SV Holdings, LLC, Tax Matters Partner, 2015 T. C. Memo. 140, filed 8/4/15.

Eric was managing member of Summit, tax matterer in the year at issue, and managing member of Meridian, tax matterer when the Form 872-P was filed extending the TEFRA FPAA SOL.

Meridian replaced Summit between year at issue and year when SOL was extended. Eric signed the Form 872-P as managing member of Meridian, although for the year in question Summit was the tax matterer.

Vineyard now claims SOL has run, as wrong party signed the Form 872-P. But SOL against the government is strictly construed in favor of the government.

Judge Goeke starts with Sec. 301.6231(a)(7)-1(a), Proced. & Admin. Regs. Change of tax matterer can only take place as therein specified, and the incumbent remains until the appropriate event occurs.

So Vineyard argues that Meridian, even though tax matterer-designate, had no authority to act for Vineyard because only Summit could do so for the year at issue, even though Eric only signed the Form 872-P in the name of Meridian because his secretary typed in Meridian’s name.

IRS argues “apparent authority,” and that carries the day. Vineyard is headquartered in Washington State, and a canvass of that State’s law says if one could reasonably believe an individual had authority to bind an entity, the individual binds the entity.

Eric was managing member of both Summit and Meridian. Eric signed a POA to his CPA, who in turn dealt with IRS. The CPA sent the Form 872-P to Eric to sign, and he did. IRS was justified in believing Eric had authority to sign the Form 872-P.

Takeaway—If you look like the boss and act like the boss, you are the boss.

No one denies that Henry J. Haff and Diane M. Lis Haff wuz robbed. The only question Judge Pugh has to answer is “how much”? And the answer, “Not as much as you claimed,” is found in 2015 T. C. Memo. 138, filed 8/3/15.

Henry J. got involved in a real estate deal that turned out to be another descendant of the 1920 pyramid scheme of the late Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi.

Henry J. and Diane M. Lis claimed the benefit of Rev. Proc. 2009-20, 2009-14 I.R.B. 749, to deduct services Henry J. rendered to the Ponzists, over and above the actual cash he handed over. IRS allowed Henry J. and Diane M. Lis theft loss treatment for all the cash, but denied the $730K in services Henry J. claimed, because he never reported any of these services as income, and thus had no basis in the phony partnership above the actual cash he put in.

Judge Pugh sorts it out: “Petitioners do not argue that the additional $730,786 should be deductible under the plain text of section 165. Rather, petitioners assert that Rev. Proc. 2009-20, supra, allows a loss deduction for amounts not previously included in income under a safe harbor and that the safe harbor applies to the amounts that [the phony] owed them. Even if the revenue procedure applies, it would not permit petitioners to deduct the additional $730,786 on their 2009 tax return. The safe harbor provision of Rev. Proc. 2009-20, supra, permits deductions only to the extent of a ‘qualified investment’. A qualified investment is defined as the taxpayer’s total amount of cash, or the basis of property, invested plus ‘[t]he total amount of net income with respect to the specified fraudulent arrangement that, consistent with information received from the specified fraudulent arrangement, the qualified investor included in income for federal tax purposes for all taxable years prior to the discovery year, including taxable years for which a refund is barred by the statute of limitations’, minus the total cash or property that the taxpayer withdrew in all years. Rev. Proc. 2009-20, sec. 4.06(1)(a) and (b), 2009-14 I.R.B. at 750 (emphasis added).

“Petitioners did not include the $730,786, or any portion thereof, as income for prior years. To constitute basis, for purposes of section 165 or Rev. Proc. 2009-20, supra, the amounts owed must have been included in income for tax purposes previously.” 2015 T. C. Memo. 138, at pp. 6-7.

The bad guys stiffed Henry J. for fees he said were owing him for development, sales, marketing and construction.

Welcome to the International Confraternity of the Stiffed, Brother Henry J. I know the feeling well.