Sitting in Copenhagen Lufthavn on my way to Berlin, with another hour’s layover, I peruse a fine example of Judge Halpern’s inventiveness, as he finds jurisdiction to review a CDP where taxpayer only received the Section 6303 notice years after the nonpayment of payroll withholdings, deftly avoiding the taxpayer’s SOL defense, finds the AO blew it on additional taxes, but sustains colleciton for most of the rest.

After a night upright and cramped on a Boeing 787 Dreamliner (no dreams for me), I may misstate some of Judge Halpern’s finer points, but you can read all about it in Scott Labor, LLC. 2015 T. C. Memo. 194, filed 9/29/15.

Scott was out of business for the last year at issue, but still owes for the previous years because its managing members, Scott Borre and Mrs. Borre (apparently she has no other name) overstated advance earned income credits.

This even though the Borres were personally audited for one of those years with no change, and even though Scott Labor is a disregarded entity, and even though the NITL was sent to the disregarded entity at the wrong address.

The previous audit doesn’t estop IRS. And if a previous notice went to the wrong address, the Borres got the later notice and timely petitioned before IRS started collection proceedings.

And as to the nature and requirements of the Section 6303 notice, see my blogpost “Jet Lag?” 12/19/11. How appropriate that Judge Halpern cites the Nakano case.

The AO got confused and confounded by the separate IRS service centers and their dubious records, so the Borres duck most of the penalties and additions to tax.

But they do owe some tax, so it’s off to a Section 155 beancount.

Judge Pugh takes and modifies a line from Paul Simon’s 1967 chart-buster to admonish Jerry L. Cypress & Diane T. Cypress, Docket No. 7939-=12L, filed 9/29/15.

Jerry & Diane stipulated with IRS to depose the above-referred-to Mr Robinson, a non-party witness, per Rule 74(b).

Apparently miffed that no one asked him, Mr Robinson sat right down and wrote a letter to Judge Pugh, seeking a protective order and claiming “accountant’s privilege.” This, it seems, is a subset of the Section 7525 bubblewrap.

Judge Pugh is no fan of love letters, especially when Court rules tell the parties, and non-parties, what to do.

“The parties and Mr. Robinson are advised that, pursuant to Rule 74(b)(3), Tax Court Rules of Practice and Procedure, objections by third party witnesses are to be served on the party or parties seeking the deposition only. The party seeking the deposition then has the burden of moving for an order with respect to the objection(s). If such a motion is made, the moving party must attach the notice of deposition and any objections to the notice. The Court has received no such motion.” Order, at p. 1.

So Judge Pugh, somewhat paradoxically, orders the Clerk of the Court to “…place the correspondence received from Mr. Robinson in the correspondence file, unfiled.” Order at p. 1.

Rather than try to decipher the meaning of “filed but unfiled,” I offer the preceding as a practice tip.

Every ex-Little Leaguer, or even sandlot unorganized type, knows the old hidden ball trick. Usually pulled on a pick-off, the infielder fakes a throw back to the pitcher, the runner steps off the bag and is tagged out by the crafty infielder.

Well, Judge Gustafson refuses to play ball.

Parenthetically, sorry Judge, missed calendar call this morning, trying to get everything done before getting on the redeye to Berlin tomorrow night.

Here’s the story, explaining Estate of Blanche L. Howard Deceased, Mary L. Howard,  Executor, Docket No. 30306-13, filed 9/28/15.

If this seems familiar, see my blogpost “Game Over,” 9/23/15. Mary L., hereinafter “Ex’r,” is a real humorist.

Judge Gustafson got annoyed at the 31-days-before trial continuance game, trying to duck the Rule 133 30-day cutoff, and the shuttling in of lawyers.

Well, Ex’r’s gameplaying gets even better.

Judge Gustafson called a teleconference: “The Court invited the parties to correct and amplify the facts stated in the Court’s order. The date given in the third bulleted paragraph on page 2 should be September 11, 2015; petitioner’s counsel in the fourth paragraph is not Mr. Kaye but his partner Mr. Silverman; and as to the last bulleted paragraph, it appears that CLA signaled its coming withdrawal in late August 2015 but did not explicitly withdraw until September 8, 2015. Petitioners’ counsel stresses that the speed of their actions was affected by the fact that, to at least some of the attorneys as they responded to CLA’s withdrawal, this case and CLA’s giving of expert testimony in this proceeding was not the most conspicuous aspect of CLA’s representation of Nu-Way and Ms. Howard.” Order, at p. 1.

Maybe they were worried about Ex’r’s indictment. Seems logical.

But they did pick up the typo I spotted in my blogpost abovecited.

Anyway, Ex’r was the one person with her hands on the relevant switches, and contrived to keep each of her two sets of attorneys in the dark about the acts of the other.

Now new attorney is trying it on, and Judge Gustafson is definitely not buying it.

“Petitioners’ new counsel stated on September 25, 2015, that they have spotted a possible conflict of interest that might prevent them from representing petitioner at the upcoming trial. If that is true, then it is one more indication that the real issue behind the motion for a continuance is ’employment of new counsel’ – a circumstance that Rule 133 explicitly states ‘ordinarily will not be regarded as ground for continuance.’ If they think the conflict issue serious, then current counsel should immediately identify successors who can take over the case on the current schedule.” Order, at p. 2.

But as IRS didn’t object, Ex’r can serve her expert’s report as late as October 9.

And go stipulate, so Ex’r needn’t testify and start spouting the Fifth Amendment.

I won’t discuss Donald Trump’s tax plans, as the trade press and the media generally have got that under control. Today’s blogpost is the story of the multiplex (or maybe not) FPAAs that rained upon David Jump, head honcho of American Milling LP, Un Limited Tax Matters Partner, in 2015 T. C. Memo. 192, filed 9/28/15.

This late post is due to my imminent departure for Europe tomorrow night, but, as my daughters shouted loudly years ago, fear not! I’ll be blogging from the Old World whenever I can.

Anyway, Jump played the old son-of-BOSS gambit, marrying some tugboats to a bunch of LPs making uncovered short sales of US Treasuries. They played the old exploded Section 752 gambit, using gains to build basis while not recognizing offsetting obligations to cover the shorts.

IRS descends.

Jump went to USDCSDIL, put up the Section 6226(e)(1) minimum deposit, and one of his LPs (the tugboat one) got hammered after a three-day bench trial, but got off on the 20% accuracy chop.

The point here is whether the hammering in District Court required IRS to assess Jump directly without a further FPAA. IRS did a further FPAA against Milling.

Jump claims that’s two FPAAs, and Section 6223(f) prevents two. Jump claims the Milling FPAA copies the tugboat FPAA, and cites the Wise Guys for that one.

Remember the Wise Guys? No? Well, see my blogpost “Wise Guys?” 4/22/13.

The Wise Guys’ second FPAA was a mistake, and not a duplicate of the first.

Same here, but no mistake, just not a duplicate.

Judge Marvel puts Jump wise. “Petitioner mischaracterizes our analysis in Wise Guys. We invalidated the second FPAA in Wise Guys because it was issued to the same partnership for the same taxable year and there was no showing of fraud, malfeasance, or misrepresentation of fact. The similarity of the content of the two FPAAs was not essential to our holding in Wise Guys. Instead, it simply aided our finding that the second FPAA was “more [likely] the result of a mistake or a lack of communication on the part of * * * [respondent] than of fraud, malfeasance, or a misrepresentation of a material fact.” Wise Guys Holdings, LLC v. Commissioner, 140 T.C. at 199-200. Here, by contrast, respondent issued the Milling FPAA to the TMP of American Milling–not to the TMP of American Boat [the tugboaters]–for years distinct from those at issue in the American Boat FPAA. Wise Guys is distinguishable because it involved a second FPAA issued to the same taxpayer for the same tax year.” 2015 T. C. Memo. 192, at p. 14.

Besides, the two FPAAs aren’t duplicates. They touch different items with different numbers for different entities. And some of the tax years were different.

And even if the partnerships were a sham, they filed 1065s, and that means FPAAs.

Good try for Jump’s lawyers.

Ch J Michael B. (“Iron Mike”) Thornton wants suggestions, pointers, hints and tips from the Tax Court cognoscenti concerning proposed rule changes.

Here’s the dinkum:

“As part of its ongoing efforts to improve and modernize its rules and procedures, the Court invites practitioners and the interested public to submit for consideration any comments, concerns and proposals regarding the Court’s Rules of Practice and Procedure. The Court would appreciate submissions in writing by November 1, 2015, addressed to Chief Judge Michael B. Thornton, United States Tax Court, 400 Second Street, NW, Washington, DC 20217.”

I’ll offer one I offered several times before. Require that the Request for Place of Trial (TC Form 5) state a substantial nexus between the place requested and one or more of the following: location of taxpayer, location of physical evidence, location of taxpayer’s counsel, location of witnesses or similar matters.”

After an epistolary exchange with my opposite number at Forbes.com, Peter Reilly CPA, which I thought about blogging but decided to leave in my inbox and “sent” folder, I was idly traversing today’s post-Papal Tax Court orders, when I spied a familiar name.

Any of y’all remember Barbara Jane Knudsen? No? Maybe you might remember her battling but unpaid attorney, Jan Pierce? Still no takers? Well, check out my blogpost “Concession Equals Settlement,” 4/1/13.

Now you’re on board? Cool. Well Barbara Jean and battling husband Kurt H. are back before Ch J Michael B. (“Iron Mike”) Thornton, because the Left Coasters at Ninth Circuit gave Ch J Iron Mike R&R. No, that’s not rest and recreation, that’s reversed and remanded.

Iron Mike asks IRS and Barbara Jean “whatever shall we do,” now that the Coasters have tossed him back the bundle.

I’ll bet Jan Pierce, Esq., echoes the words indited by Lydia Parrish in 1942 from the stevedores of the Georgia Sea Islands: “Pay me, pay me, pay me my money down.”

Turns out the concession by IRS, sparked by a Chief Counsel backdown memo, wasn’t a settlement after all.

You can read all about it in Barbara Jane Knudsen v Com’r., No. 13–72077, decided: July 15, 2015.

Here’s Senior District Judge Don (“The Donald”) Walter, a designated sitter: “A settlement is a contract, and its enforceability is governed by familiar principles of contract law. The formation of a contract generally requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. Here, there was no exchange, and it is undisputed that there were no negotiations regarding settlement. Instead, Knudsen made a qualified offer to settle her tax liability for $50 per year for each of the four years at issue, which expired after ninety days when the IRS failed to respond. See 26 U.S.C. § 7430(g)(1)(D). Much later, and only after the case had been submitted to the Tax Court fully stipulated, did the IRS unilaterally concede the case. Even then, the parties never entered into a supplemental stipulation of settled issues, despite the fact that Knudsen had then succeeded on both the merits and the timeliness of her claim for equitable relief.

“Knudsen’s position is most similar to that of the taxpayer in Estate of Lippitz v. CIR, 94 T.C.M. (CCH) 330 (2007). In Lippitz, the IRS denied the taxpayer’s right to section 6015 innocent spouse relief, despite the CCISO having previously determined the taxpayer’s entitlement thereto. After the IRS refused the taxpayer’s qualified offer, the taxpayer moved for partial summary judgment, prompting the IRS to concede that the taxpayer was entitled to the requested relief. The Lippitz court held that the IRS’s concession was not a ‘settlement’ under section 7430. Because the IRS waited to concede the case until after the taxpayer had actively litigated to the point of filing a dispositive motion, the Lippitz court found this akin to a concession after trial. The court explained that it did ‘not believe Congress intended to grant [the IRS] the latitude to wait until just before the resolution of a dispositive motion, or the end of a trial to concede a matter and still benefit from the settlement exclusion of section 7430(c)(4)(E).’ Decision, at p. 2. (Some citations omitted).

So Ch J Iron Mike orders the parties to send him a joint report on what to do. It’s all in Barbara Jane Knudsen, Petitioner, and Kurt H. Knudsen, Intervenor, Docket No. 18048-09, filed 9/25/15.

Maybe yes, maybe no (I vote “yes”), but today is definitely a day without Tax Court, as Pope Francis’ visit to Our Nation’s Capital has interdicted the opinion and order posters and flailing datestampers at 400 Second Street, NW.

See my blogpost “Habemus Papa!” 9/21/15.

So all I can do is lament a wasted blogday.

He likes to propound conundrums, but is no fan of dilatory fiddling; he’s always ready to help or oblige, however, with timely hints and practical suggestions.

And he designates his guidance freely.

He’s that Obliging Jurist, the open-handed and many-handed, the blogger’s friend, the pride of Bob Jones University–(drumroll)– Judge David Gustafson.

And Judge Gustafson has one for the books in Estate of Blanche L. Howard, Deceased, Mary L. Howard, Executor, Docket No. 30306-13, filed 9/23/15.

Mary L. (hereinafter “Ex’r”) wants a continuance. She’s shedding one lawyer and picking up another. Oh yes, and her expert witnesses all work for the ex-lawyer, so she needs time to get a replacement.

And she’s asking thirty-one (count ‘em, thirty-one) days prior to trial.

Judge Gustafson, patient and obliging as always, is not amused.

He entitles his disquisition a “tentative discussion.” State Court judges of my acquaintance would not be so douce.

“The September 18 motion for a continuance was filed 31 days before our October 19 calendar call. Such a motion filed 30 days ahead would be presumptively dilatory, since Rule 133 provides–

“A motion for continuance, filed 30 days or less prior to the date to which it is directed, … ordinarily will be deemed dilatory and will be denied unless the ground therefor arose during that period or there was good reason for not making the motion sooner.

“–but of course it does not follow that a motion filed at least 31 days prior will necessarily be deemed not dilatory. We do not yet perceive here any ’good reason for [petitioner’s] not making the motion sooner’ than September 18.” Order, at p. 3.

Ya know, I forgot to mention that Ex’r is the target of a grand jury investigation, along with an outfit called Nu-Way, the valuation of whose promissory note is the main issue in this case.

Now while it is difficult for the same party to bear the burden of proof in civil litigation with one branch of government while defending herself in a criminal proceeding against another, nonetheless that unhappy circumstance cannot be manipulated to delay the scales of justice.

Ever since last December, Ex’r was dawdling, ignoring discovery and causing the usually punctilious Judge Gustafson to get a date wrong. No, Judge, Ex’r couldn’t have ignored a motion made in December, 2011, in a case with a 2013 docket number. See Order, p. 2, bullet point 3.

Ex’r knew in March of this year about the grand jury, never told the Court until last week, and while Counsel One was on the way out, Counsel One held a teleconference with IRS and Judge Gustafson and assured everyone that the expert’s report would be filed timely. It was filed, but late.

Three days after said teleconference, Counsel Two shows up and moves to continue.

I love it! Takes me back down memory lane, to what we called in the days of our youth “Court Street tactics.” This referred to certain attorneys and counsellors at law who inhabited offices on Court Street in Brooklyn. They made litigation gameplaying into an art form.

By the way, the “employed” expert witness sounds like a Kovel ploy, to give the witness Section 7525 cover as an employee of Ex’r’s counsel.

IRS says mox nix, we’re concerned with Nu-Way’s financial health and the worth of the promissory note back when the late Blanche laid hold of it. Ex’r’s subsequent shenanigans are nothing to the point, even though Ex’r, as an officer of Nu-Way, tried to cookie jar some earnings to make the note look less good and thus confer a gift upon the late Blanche. That part of the story is for the criminal case.

And most of the valuation will be based upon documentary evidence, says IRS.

Great, says Judge Gustafson, but lest IRS figure they might play Perry Mason and call Ex’r, “…if respondent were to attempt to call the executor (or any other grand jury target) as witness at the trial, the Court would not expect to draw any negative inferences from an invocation of the Fifth Amendment unless respondent had first given to petitioner a detailed statement of the facts that respondent expects to elicit during testimony. This either would make it possible for the parties to stipulate those facts (rendering testimony unnecessary) or would disclose the subjects (if any) as to which it is not true that (as respondent has asserted) the facts ‘will necessarily be reflected in transactional documentation’. To the extent the executor’s testimony might be helpful simply ‘to give context to documents’ (Obj. at 14), the Court would expect respondent to be especially cooperative in the stipulation process in order to enter those contextual facts into the record without testimony, wherever that is possible.” Order, at pp. 4-5.

But just to keep everybody on their clichés, everybody has until Friday to read, mark, learn and inwardly digest Judge Gustafson’s lucubrations, get hold of the Chambers Administrator, and get on the horn on Friday. And e-file their motions and supplements on Friday, too.

Who says taxes are dull?

Ya gotta feel for Bill and Liz Foote. They got their legals and admins denied by Judge Wherry (not a bit whimsical that time); see my blogpost “Ask Early, Ask Often,” 12/9/13.

Then they try for Section 6404(e)(1)(A) interest abatement, but Judge Goeke tells them that none of IRS’ delictions are “ministerial” (the magic word; means “mechanical,” not requiring discretion or judgment). While IRS didn’t cover itself with glory, the RA who gave the Footes such grief was misinterpreting statutes, which by definition isn’t ministerial.

The Footes’ claim that the RA acted in bad faith doesn’t cut it, either.

It’s all in 2015 T. C. Memo. 187, filed 9/22/15.

Judge Goeke lays out the ground rules: “…for petitioners’ tax years 1992, 1993, and 1996 abatement of interest is available only if a ministerial error occurred, while for tax years 1999 and 2000 relief is available if an unreasonable ministerial or managerial error is shown.

“A ‘ministerial act’ is a procedural or mechanical act that does not involve the exercise of judgment or discretion and occurs during the processing of a taxpayer’s case after all the prerequisites to the act, such as conferences and review by supervisors, have taken place. In contrast, a decision concerning the proper application of Federal tax law, or other applicable Federal or State law, is not a ministerial act. The mere passage of time does not establish error or delay in performing a ministerial act.” 2015 T. C. Memo. 187, at pp. 13-14 (Citations and footnote omitted).

As to “managerial” acts, here’s the story.

“A ‘managerial’ act is an administrative act that occurs during the processing of a taxpayer’s case and that involves the temporary or permanent loss of records or the exercise of judgment or discretion relating to personnel management.” 2015 T. C. Memo. 187, at pp. 14-15. (Citaitons omitted).

In any event, “(T)o qualify for abatement of interest under section 6404(e), the taxpayer must: (1) identify an error or delay by the IRS in performing a ministerial or managerial act; (2) establish a correlation between the error or delay by the IRS and a specific period for which interest should be abated; (3) show that the taxpayer would have paid his or her tax liability earlier but for such error or delay.” 2015 T. C. Memo. 187, at p. 15.

Tax Court reviews for abuse of discretion after IRS issues a NOD denying abatement. But for four (count ‘em, four) years of the Footes’ beef, there never was a NOD, so no jurisdiction.

As for the rest, that the RA allegedly failed to follow the plain meaning of the statute, that’s obviously discretion. Then, while IRS caved on a ton of deficiencies, they did that when the Footes came up with substantiation. It didn’t help that the Footes had to change CPAs when their first one got busted for some unrelated miscues.

The Footes fall back on the “widely perceived as grossly unfair” language in Section 6404(e), but that doesn’t offer plenary indulgence. There still has to be ministerial or managerial act, and here there isn’t.

“Petitioners argue that ‘[w]ithout question, this is such a case’ where failure to abate interest would be widely perceived as grossly unfair. However, we must abide by the fundamental tenets of statutory construction, and, in addition, the facts of the case at hand fall short of supporting an argument for a ‘grossly unfair’ exception. As is evidenced by the record, petitioners significantly contributed to any error or delay that occurred by failing to adequately maintain and supply records as requested.” 2015 T. C. Memo. 187, at p. 22.

Finally, the Footes claim the RA was a rogue agent who thought she was uncovering a massive tax cheat. But the Footes had a multiplex chain of entities and incomplete records. They were at least in part responsible for the mess that followed.

And while it took five years for the case to wind its way through Tax Court, all that was discretion and not ministerial.

So is Section 6404(e) a toothless tiger? Maybe so, but only Congress can fix it.

Best of luck with that one.

I had to take a nap before dealing with Tax Court’s opinions today, as there was a lot to mark, read and digest, but Estate of John D. DiMarco, Deceased, Laurence Agnes, Executor, 2015 T. C. Memo. 184, filed 9/21/15, troubled me.

I don’t like second-guessing. Everybody’s wise after the fact. But here goes, anyway.

This is a busted-charitable, Section 642 “so remote as to be negligible” case. If the foregoing sounds like gibberish, see my blogpost “Back From The Graev,”, 2/19/15, the sad story of the late but generous Eileen S. Belmont and her obstreperous brother.

In fact, Judge Laro cites Eileen’s case in torpedoing John D.’s charitable inclinations.

John D.’s will gets a going-over from a platoon of heirs-at-law and their high-priced counsel, with our State’s diligent Attorney General protecting the charity (and incidentally protecting the charity out of everything its owns).

I won’t go over the facts, as they’re pretty much the usual: no separate stash for the charitable cash, prospect of heavy-duty litigation (having high-test counsel seems to blow away remote negligibility), and the cash getting spent on settlements, with the balance going to IRS.

As for surcharging the executor, that might be looming over the horizon, but that’s not my point here.

John D.’s will was executed in 1983, and John D. didn’t leave this vale of tears until 2008. The Form 1041 for the year at issue was filed late, but I mention that just to let you know that one good way to get audited is to file late.

No, my point (and I can hear my readers saying, “Is there one?”) is why not a self-settled trust. True, it’s disregarded for income tax purposes, and it’s by no means a cure-all, but it does do what Norm Dacey’s 1960s best-seller suggested: avoid probate.

And the probate proceedings really sank John D.’s charitable intentions. Here, they took on a certain Jarndyce aspect.

Hint for trusts and estates practitioners–When it comes to income in respect of a decedent, mandate separate accounts for the charitables. Whether or not there’s a trust.