In Uncategorized on 09/17/2015 at 17:38

The three-hour deadline appears to be the new flavor du jour in governmental operations. Back on August 24, our State’s Attorney General’s office give me a three-hour deadline, by e-mail, to file a non-substantive document where there was no particular urgency that I file it, and threatened to reject a major registration statement I’d been working on for months if I didn’t.

I did, of course, but when I remonstrated with the Chief of the Division, I got this reply: “I know this is tough, but we had to do something about the large number of incomplete submissions made to the office, and [the individual involved] is simply following office procedure.  Technically, [the individual] is not even supposed to give you an opportunity to cure.”

Why precisely this technical requirement is so exigent is a mystery to me, as the State agency charged with maintaining the record of these documents has until the fifteenth of the next month following each quarter to report the filing thereof, by law. In my case, they had more than thirty (30) days to go.

I wish I could have gone before Judge Gustafson with this one.

Philip Baumgarten & Esther Gomez Baumgarten, Docket No. 17205-14L, filed 9/17/15, had the benefit of that Obliging Jurist’s magnanimity in a like situation in this designated hitter.

Judge Gustafson allowed a bushelbasketful of deemed admissions from Phil & Esther, but found the NOD lacking in critical respects: it didn’t address the additions to tax (misnamed “penalties”), and the three-hour deadline Appeals gave Esther to file her Form 8857 by fax seems a bit rough (although maybe not per se arbitrary and capricious).

Judge Gustafson: “A taxpayer who, like the Baumgartens, does not check the ‘innocent spouse’ box on Form 12153, is nonetheless entitled to raise that issue at the CDP hearing (and respondent does not contend otherwise). The Baumgartens did raise this issue at their CDP hearing and were told, in a telephone conference that began at 2:00 p.m., that they must download Form 8857 from the Internet, fill it out, and submit it ‘today’. It therefore seems that they were given three hours to make this submission. (Other than the mention on Form 12153, our record does not show any prior reference to Form 8857 nor any request for it; and contrary to respondent’s motion at 6, para. 28, our record does not show any prior mention by Appeals of ‘spousal defenses.)” Order, at p. 6.

But it seems IRS thought that Phil was a sophisticate, and that excused their peremptory behavior.

“We have previously held that imposing a 2-week deadline may be a reasonable exercise of discretion by Appeals, see Shanley v. Commissioner, T.C. Memo. 2009-17; but a 3-hour deadline is very surprising. Perhaps anticipating this reaction, respondent argues (at 24, para. 84, 86):

‘Further, Petitioner Philip Baumgarten is a C.P.A. and tax attorney, specializing in tax for over 30 years. He is a sophisticated taxpayer who could have asked for more time to complete the necessary paperwork…. Petitioners did not request more time ….’

“Perhaps respondent is arguing that, if in a CDP hearing Appeals imposes an unreasonable 3-hour deadline, then the unreasonableness is cured (at least in the case of a sophisticated taxpayer) by Appeals’s supposed willingness to entertain the taxpayer’s request for more time. But respondent does not suggest that Appeals invited such a request; and on this record, we have to assume the apparent fact that, by imposing a 3-hour deadline, Appeals communicated to the taxpayer that the deadline was firm. We think an imminent deadline of this sort is normally used to communicate utter seriousness and to put fear in the heart of the hearer. One cannot make such a dramatic demand and then expect the hearer to suppose that the same stern authority who imposed that deadline will become a benign and flexible person. One settlement officer cannot serve both as Appeals’s bad cop and as its good cop.” Order, at pp. 6-7.

But IRS’ counsel sticks to whatever guns they have left.

“Respondent also argues that ‘Petitioners gave no indication that they intended to proceed with the innocent spouse claim.’ However, given the settlement officer’s treatment of the issue, one cannot read much into the fact that the Baumgartens did not then repeat ‘that they intended to proceed with the innocent spouse claim’. That claim had been batted down pretty flatly. The SO’s case record states, ‘I explained that I will issue the determination letter which gives him the right to petition the Court.’ On this record, we have to assume that the Baumgartens took the SO at her word and concluded that their only recourse was to bring this up with the Court (as they have done).” Order, at p. 7.

So batting down Esther’s claim with a three-hour deadline might just could be an abuse of discretion. Or at least it raises enough doubt to torpedo any summary judgment or deeming anything admitted on that account.

“For purposes of Rule 121 [the “pick the facts” rule], construing the facts in the Baumgartens’ favor, we hold that a genuine dispute of material fact exists on the question whether imposing a 3-hour deadline constituted an abuse of discretion. We do not hold that it necessarily was, but it seems highly possible that it was.” Order, at p. 7.

And while IRS’ account of Esther’s claim doesn’t make it look too hot, Esther gets trial de novo with the burden of proof.

And if anybody has a problem with that, let them move pre-trial and argue about it.

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