Archive for December, 2015|Monthly archive page


In Uncategorized on 12/21/2015 at 16:07

No, Tax Court doesn’t specialize in tear-jerkers, but Judge Gerber has a moving tale for us nonetheless. It’s the story of Matthew Thomas Parmeter, 2015 T. C. Sum. Op. 75, filed 12/21/15, as I prepare for the holiday jaunt to the Magnolia City to visit the kinfolks.

Matt is an Army information technology engineer, civilian type, who gets what we who once wore green called at that time a PCS (Permanent Change of Station). Unlike us, Matt’s moving costs were not picked up by Our Uncle in Washington. His fellow civilian schleppers, if I may so denominate the moving companies, wanted between $22K and $30K to haul Matt’s lares et penates the 182 miles from old home to new.

Echoing the famous 1962 commercial for a pain pill, Matt said he’d rather do it himself, and he did. He fired up his trusty pickup truck, hitched up a U-Haul or equivalent, and made 20 roundtrips between old and new, stashing goods in rented storage over two months. Matt also rented a hotel room for two nights, waiting for his new home to be ready.

Matt claimed a Section 217 deduction of $29,527, but claimed on the trial his software did it and he had no idea how that number wound up on his 1040. IRS, technophobic or not, disallowed the whole shebang.

IRS claims Matt gets one trip to bring over his goods, citing Reg. 1.217-(2)(b)(4): “The deduction for traveling expenses from the former residence to the new place of residence is allowable for only one trip made by the taxpayer and members of his household; however, it is not necessary that the taxpayer and all members of his household travel together or at the same time.” 2015 T. C. Sum. Op 75, at p. 5.

Matt can use the standard mileage rate for moving expenses, but Matt wants 20 round-trips and IRS only wants to give him one.

Judge Gerber gives Matt 19.

“Respondent [IRS] cited no cases for his interpretation that the one-trip limitation of paragraph (b)(4) applies to travel to transport personal property to a new residence. Petitioner, confronted with a $22,000 to $30,000 cost to have a moving company move his personal property, transported the property to the new location in anticipation of moving to that residence. The property was stored near the new residence in anticipation of the final move to the new residence.

“Respondent’s interpretation would ignore the actual cost incurred by individuals who move their own personal property and would effectively limit the purpose of section 1.217-2(b)(3), Income Tax Regs., to instances where taxpayers paid to have their personal property commercially moved or moved by someone not a member of the family.” 2015 T. C. Sum. Op. 75, at pp. 5-6.

But to make IRS happy, Judge Gerber says the last of the 20 trips doesn’t count, to preserve the majesty and terror of the one-trip rule of Reg. 1.217-2(b)(4). So Matt gets docked $41.82.

Matt gets trailer rental,  30 days of storage expense (30-day limit on storage expense deduction per Reg. 1.217-(2)(b)(3)), and his round-trip standard-rate mileage minus the one trip.

His hotel bill is out, as Section 217 and its pendant regs do not provide for interim lodging expenses.

And Judge Gerber gives Matt and IRS a holiday present: a Rule 155 bean-count.


In Uncategorized on 12/21/2015 at 11:43

When Children Play With Matters of Importance

I am obliged to a Director in a Big Four accounting firm for bringing to my attention a series of delightful conjectures from no less than the University of Chicago Law School, alma mater of Judge Mark V. Holmes.

Assistant professor Daniel Hemel speculates on a legislative shoe-drop embedded at page 231 of the 233-page tax bill, a/k/a Revenue Act of 2015. Here’s the text: “Clarification Relating to United States Tax Court,” amends the Internal Revenue Code to add the following language: “The Tax Court is not an agency of, and shall be independent of, the executive branch of the Government.”

Great. This coruscation from the desk of Sen. Hatch (R-UT) is intended to assure the public (or so much thereof as pays taxes) that the Tax Court is in fact independent.

Apparently what got Sen. Hatch’s UnderArmours in a running bowline was the Court of Appeals’ decision in Kuretski v. Com’r, 755 F.3d. 929 (DC Cir., 2014). That affirmed Judge Wherry’s reconsideration of the Tax Court decision, which I blogged in my blogpost “Not Even a ‘Good Try’,” 3/5/13.

But I have to give credit to The Gang From Hackensack. They made IRS and DC Circuit throw pitches, even though they were called out on strikes at the close of play.

So what is Tax Court, Sen. Hatch?

Well, Prof. Hemel has some possibilities in his blogpost “Tinkering With the Tax Court,” 12/18/15. And I’m sure my inventive readers can come up with some variations on this theme.

For myself, I will let others try to unscramble this ill-made omelet. I eschew political comment…at least in this venue.

But if Mark Twain was right, that no one’s life, liberty or property is safe while the Legislature is in session, that goes double for Tax Court.


In Uncategorized on 12/18/2015 at 17:48

So the Standard Mileage Rate, for those who can successfully navigate the Section 274 giant slalom in this snowless non-winter, is down to 54 cents for business, 19 cents for medical and moving, and 14 cents for charitable, commencing 1/1/16.

So business down 3.5 cents, and the others down 4 cents.

For as much about this penguin as you want to know, check out


In Uncategorized on 12/18/2015 at 17:30

Again a sort-of follow-on to the 1976 Woody Allen – Zero Mostel movie that should have been a cult classic but wasn’t. Perhaps two exceptional comedians should have stuck to comedy, and left serious stuff alone; “‘twas caviare to the general,” as a much better writer than I observed long ago.

Howbeit, here the story of Benyamin Avrahami & Orna Avrahami, et al., Docket No. 17594-13, filed 12/18/15. This case also involves an outfit called Feedback Insurance Company, Ltd., which has engendered many an order, none of which I deemed worthy of my wordprocessor.

But this apparently pedestrian set-to involves matters of “great pith and moment,” in the words of that same much better writer. So much so that another outfit called the Self-Insurance Institute of America wants to file a brief amicus after the trial and while the parties are gearing up for their post-trial briefing.

As they used to say on the red clay at Fort Jackson, “What ya gonna do, company commander?” No, they never said it to me; I was just rabble.

But here’s The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Indefatigable, Incontrovertible, Incomparable and Illustrious Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes, who sorts it out.

“…the Court received a motion to file an amicus brief from the Self-Insurance Institute of America. This is either a trade association of those involved in captive insurance, especially smaller captive insurers; or, if respondent [IRS] is to be believed, a front for those promoting micro-captive insurers as a tax-saving scheme. This is a lead, if not quite a test, case; the Court would benefit from hearing all views on the subject and those with an interest in the industry are most likely to have an incentive to produce a useful brief. This amicus brief, however, comes at the end of the Court’s established briefing schedule for the parties. In the interest of fairness, we will give respondent a chance to reply to it — but only to answer what’s in the new brief, not to surreply to petitioners’ forthcoming reply brief.” Order, at p. 1.

So the front, if it is a front, is front-and-center.


In Uncategorized on 12/17/2015 at 15:38

Striking a jarring note in this season of peace and goodwill, both Judge Chiechi and the IRS unload on petitioners’ counsel.

Judge Chiechi first. IRS wants summary J against Neil S. Schuster, Docket No. 28217-14L, filed 12/17/15, and asks for it December 7, reply due 12/16/15. Neil gets two attorneys on board on December 15, and they ask for 12/26/15 to reply. Judge Chiechi gives them 12/21/15 in a same-day order.

When the lawyers ask for reconsideration, and more time, they get a judicial tongue-lashing.

“Any time-related burden on newly-retained counsel that is attributable to petitioner’s decision to retain counsel one week after December 7, 2015, the date on which respondent filed a motion for summary judgment and the date on which the Court ordered a response to that motion, is a burden for which petitioner is responsible and for which he shall bear the consequences. In this connection, although petitioner represented in petitioner’s motion for extension of time that he did not receive respondent’s motion until December 14, 2015, the Court sent by Federal Express overnight delivery a courtesy copy of its Order dated December 7, 2015, in which it ordered petitioner to file a response to respondent’s motion on or before December 16, 2015. Petitioner was thus aware on December 8, 2015, that respondent had filed a motion for summary judgment and should have taken the appropriate steps to obtain a copy of it, rather than waiting until December 14, 2015.

“The Court also notes that it does not appreciate the attempt at gamesmanship by petitioner’s counsel in asking for what at first blush appeared to be a request for an extension of time of 10 days, until December 26, 2015, which that counsel knows is a Saturday, when in fact the request is for 12 days because of the operation of Rule 25(a) (2) (B), Tax Court Rules of Practice and Procedure.” Order, at p. 2.

It’s one thing if Schuster and counsel are wiseguys. But a quick docket search discloses no obvious gamesmanship, and Judge Chiechi doesn’t mention frivolity. So how many ordinary people enmeshed in a Tax Court fight for the first time (and another quick docket search shows Neil S. is a first-timer) carry a roster of battle-hardened Tax Court admittees in their Smartphones (or anywhere else)?

And how long does it take an attorney to do a face-to-face intake interview after having reviewed pleadings and papers, and maybe even talked to potential witnesses, and prepare and have client and attorney both sign a detailed retainer agreement (without all of which I won’t take a client)?

A week is fast, even when there are no holidays, religious and otherwise.

May I point out that IRS served its answer on January 16, 2015? IRS had a year to move. There are no discovery motions showing on the docket search, so IRS had twelve months and Neil’s attorneys have seven days?

And no one at Tax Court ever got a date wrong? That Neil S.’s attorneys got the wrong date doesn’t mean they’re playing games, unless there’s some evidence aliunde, like they’ve tried little witticisms before now.

Judge, I understand “The Court wants to be able to decide respondent’s motion for summary judgment, if at all possible, before the parties spend time preparing the pretrial memoranda required by the Court’s standing pretrial order, which are required to be filed by no later than January 25, 2016. The Court also wants to be able to decide respondent’s motion for summary judgment, if at all possible, before the trial session in Baltimore, Maryland, begins on February 8, 2016. That is because if the Court were to decide to deny that motion and a trial were necessary, that trial could take place at that trial session. Any delay, especially given the time of year, will affect the Court’s ability to do so. In this connection, the Court is officially closed on December 24, 2015.”” Order, at pp. 2-3.

OK, Tax Court is closed 12/24/15. But maybe some attorneys will be working that day, even if their offices are officially closed. You can ask my wife and daughters about the days I worked when my office was officially closed.

Judge Chiechi gives counsel until 12/23/15. But unless I’m missing a lot, the suggestion of gameplaying is over the top.

Now for IRS’s little gameplaying, which Judge Wells is too douce to rebuke.

Keith P. Taylor, Docket No. 1641-15, filed 12/17/15. IRS wants to toss Keith’s counsel, hereinafter “Bird,” based on an alleged conflict of interest.

“[Bird] is petitioner’s counsel in the instant case as well as counsel for the Modest Needs Foundation, a tax-exempt organization. Respondent contends that [Bird] is preventing counsel from interviewing the organization’s board members and is placing the organization’s tax-exempt status at risk.” Order, at p. 1.

Judge Wells: “In the instant case, there is no conflict of interest because the Modest Needs Foundation is not a party in any case currently docketed before the Court. Additionally, [Bird] provided the Court with a Conflict of Interest Waiver. Moreover, future loss of tax-exempt status is a mere possibility of subsequent harm which cannot justify disqualifying petitioner’s counsel in this case.

“Regarding respondent’s contention that [Bird] is obstructing discovery, if petitioner has failed to properly respond to discovery requested by respondent, then respondent should file an appropriate motion to compel such response.” Order, at p. 1.

‘Tis the season for cheap shots? I hope not.



In Uncategorized on 12/16/2015 at 18:47

Though I never saw him play (I was only four years old when he died, and he had long since left baseball), he was a legend. Babe Ruth called him the greatest pitcher he ever faced. The Babe also said he lost a heartbreaking number of games by one or two runs, because he played on a mediocre team for most of his twenty-one years as a pitcher.

I said today would blog a case lost by a colleague. He’s a good lawyer, and a good guy, who has lost some tough cases.

So here’s Jeremiah J. O’Connor and Mary K. O’Connor, 2015 T. C. Memo. 244, filed 12/16/15.

It’s a SDLIA (a Split-Dollar Life Insurance Arrangement, where an employer makes insurance premium payments on behalf of an employee, who seeks deferred income; see my blogpost “The Split,” 8/29/12 ) that comes unglued when they all come unglued in 2002.

Jere was a hardware dealer with a Sub S, and parked some cash with a trustee of what purported to be a 419 Plan. Except IRS issued proposed regs blowing up same, so word went out to the splitters to bail and pay tax on the accumulated cash values of the blown-up, rolled-out insurance policies.

Jere tried bailing in 2002 by shifting policy from one trust (blown up) to another (presumably not blown up) and calling it a Section 1035 policy swap. And also claiming he never got his hands on the policy, so he never had incidents of ownership sufficient to render the accumulated cash taxable to him. Or if he did, he argues, it was in another (now closed) year and not the year stated in the deficiency.

A good three-deep defense.

Doesn’t work. Judge Halpern: “Pursuant to section 402(b)(1), employer contributions to a nonexempt employee trust are included in the employee’s gross income to the extent that the employee’s interest in such contributions is substantially vested (within the meaning of section 1.83-3(b), Income Tax Regs.) at the time the contributions are made. See sec. 1.402(b)-1(a)(1), Income Tax Regs. If an employee’s rights under a nonexempt employee trust become substantially vested during a taxable year of the employee, and the taxable year of the trust ends with or within such year, the value of the employee’s interest in the trust on the date of such vesting is included in the employee’s gross income for that taxable year.” 2015 T. C. Memo. 244, at p. 21.

So it’s our old friend “substantial risk of forfeiture,” and here there isn’t, because at the roll-out Jere gets to choose where the policy is to go, including but not limited to himself, (via change-of-ownership forms in blank), and more than that, can change the beneficiary. Jere doesn’t need a duplicate original of the policy.

And the transfer didn’t take place in the closed year (which immediately preceded the year at issue), because the incoming trustee refused to indemnify the outgoing trustee for past shenanigans, and therefore didn’t accept the policy, until the year at issue. Jere twice had to try to get the policy moved to his chosen trustee.

Finally, there was no exchange of policies, so Section 1035 is out. There was no old policy and no new policy, it was the same old, same old. “Rather, the same policy was merely transferred from one owner to another, the only issue being whether Mr. O’Connor, who had a right to keep the policy instead of opting to have it transferred to the … Plan, had income arising out of that right. The foregoing transaction simply is not covered by section 1035, as there must be an actual or, at least, a constructive exchange of one policy for another.” 2015 T. C. Memo. 244, at p. 28. (Citation omitted).

Jere never told his CPA about the warnings he got from the roller-out trustee, so even though his CPA said do a trustee-to-trustee, there’s no evidence his CPA knew about the Section 83 or the Section 402(b)(1) implications. 20% chop, although IRS bases its chop on a lower number than the stipulated deficiency.

I can only suggest that my colleague may have been called into this mess long after the damage was done, and was down two runs in the top of the ninth. A scenario with which Walter Johnson must have been very familiar.


In Uncategorized on 12/16/2015 at 17:36

No, not a reproach, just an echo of my blogpost yesterday, anent the obliging nature of Judge David Gustafson. See my blogpost “I’ll Help You Try Your Case,” 12/15/15.

In that blogpost, I quoted my earlier blogpost “Beyond Obliging,” 1/31/14, wherein I said “He’ll tell you what you meant to allege, but didn’t, and let the other parties know as well. Can’t do more than that.”

Well today, Judge Gustafson is at it again, and designating to boot. What a pleasure, especially as I am saddened after reading an account of one of my colleagues going down in flames in what looks like a SDLIA case today, which I’ll blog presently.

Josue Guerra, Docket No. 342-15, filed 12/16/15, is fighting about three (count ‘em, three) tax years, but doesn’t bother attaching the deficiency notice to his voluminous petition. And in the text of his petition (self-represented, of course) he mentions only one of the years, three separate times.

IRS says OK, you waived two of those years, and moves to dismiss those years.

Judge Gustafson, never one to shrink from his duty as protector of the pro se, digs deep.

“The motion accurately describes the first page of the 279-page petition, which does refer to ‘Tax Year: 2013’. It is followed by a Form 886-A for 2013 and receipts dated 2013. However, the petition is evidently in three parts, and page 1 introduces only the first part.

“Part 2 of the petition begins at page 104. It is similar to page 1, but it refers to ‘Tax Year: 2012’ and is followed (at page 106) by a Form 886-A for 2012 and (beginning at page 109) receipts dated 2012.

Part 3 of the petition begins at page 173 and is followed (at page 175) by a Form 4549 for 2011 and (beginning at page 179) receipts dated 2011. Page 173 refers to ‘Tax Year: 2012’, but it is evident that this is a typo and that 2011 was intended, since the amounts on page 173 relate to the 2011 documents that follow.

“We thus conclude that the petition intended to put at issue all three years 2011, 2012, and 2013.” Order, at p. 2.

Now that’s meta-obliging.


In Uncategorized on 12/15/2015 at 16:29

I’ve said he’s obliging. I’ve told how he’ll visit you in the Stony Lonesome to hear your case, if need be. He designates his orders, making light the task of the hard-laboring blogger racing a deadline. He does everything but bring coffee and Krispy Kremes to calendar call, to help out hapless petitioners. As I said before, “He’ll tell you what you meant to allege, but didn’t, and let the other parties know as well.” And he’ll let petitioners know that ex parte communications with the Court don’t cut it.

That’s Judge David Gustafson, Jurist and mensch (if I may use an obscure vernacular term). And you can check out my multitudinous demonstrations of all the foregoing by reviewing the archives on my website.

Today Judge Gustafson again shows his sterling good nature in Stewart Bradley Scott, Docket No. 5403-15, filed 12/15/15.

Stew double-faulted, but claims unequal protection of the laws and the software did him in, respectively. Fault One: writing off his son’s tuition as a charitable deduction; claims the software put the right info on the wrong lines in each of the two years at issue.

Fault Two: Trying to claim at examination that he was entitled to take the educational expense deduction even though he filed MFS. But Section 222(d)(4) disallowed the deduction for MFS. PS- The deduction itself sunsetted at the end of 2014.

As to Fault Two, Judge Gustafson tells Stew to take it up with Congress. Check out my blogpost “Playing Favorites,” 4/18/13, where Ch J Michael B (“Iron Mike”) Thornton bestows the hammer on Nancy Louise Field’s attempt to play the Fifth Amendment gambit, Due Process variation.

But as to Fault One, Judge Gustafson says that while the numbers stand on the deficiency, paraphrasing Scotland’s greatest, “gude faith, he maunna fa’ that.” So IRS gets summary J on tax, but not penalties. Let Stew prove the software played him false. And here’s how to play it, Stew.

“Without prejudging the issue, we point out to Mr. Scott that defenses premised on allegedly faulty software are generally unsuccessful, and that if he intends to assert this defense, he should prepare to corroborate his testimony on the point by additional evidence of the actual operation of the software. That is, he should, if possible, be able to demonstrate at trial that the software yielded a charitable contribution when he entered an educational expense. If he is unable to bring to trial a computer on which the software is running, then he should consider obtaining screen shots or other evidence to show the facts that he alleges about the software. We also draw Mr. Scott’s attention to our standing pretrial order…, which requires him to share with the IRS in advance of trial …all the evidence he intends to offer at trial. If a pretrial telephone conference with the Court would facilitate the parties’ trial preparation, then either or both of them may initiate a telephone call to chambers… for the purpose of scheduling such a conference.” Order, at p. 3.

Short of lugging his trusty laptop over to Stew’s study, downloading Stew’s software, and hauling it over to the Quaker City (where trial is to take place), what more could Judge Gustafson do?



In Uncategorized on 12/14/2015 at 17:12

Happily, Tax Court blogging can be amusing as well as instructive. Blogging the 400 Second Street gang, and their colleagues at 1111 Constitution Ave, is more than plowing through pages of “long-winded arguments on law.” Though it’s often that, too.

But here’s a happy tale of a Mississippi lawyer who finds fulfillment and Section 469 deduction allowances, Clarence McDonald Leland, Jr., and Myna Green Leland, 2015 T. C. Memo. 240, filed 12/14/15.

I don’t know if Clarence McDonald is particularly old, but he does own a farm, in Turkey, Texas, wherever that is;  it’s many miles of hard travellin’ from Mac’s Jackson, MS law office. And Mac has to drive to and fro on the earth between farm and office.

Now for the years at issue, Mac had a tenant farmer on the place, Mr. Pigg. Mr. Pigg wasn’t the problem, although he lacked a certain work ethic when it came to plantin’ cotton. What the problem was, the problem was the hogs.

Mac had to drive the Bush Hog a lot. No, that’s neither a mammal nor a person (this is not a political blog). I’ll let Judge Nega explain.

“Petitioner visits the farm several times each year in order to perform necessary tasks, commuting approximately 13-16 hours each way, including the time it takes to load equipment onto his trailer. The farm has approximately 6-8 miles of perimeter roads and 18-20 miles of interior roads that must be bush hogged and disced regularly in order to remain passable. A Bush Hog is a device that is pulled behind a tractor to cut vegetation and clear land. Discing involves churning and plowing soil to uproot any existing vegetation. Trees and brush that grow near the roads must be controlled through spraying and chopping down limbs that protrude onto the roadways. Because high winds can erode soil on the roads, wheat must be planted each fall to prevent erosion on the roads and on acreage that is not part of the 130 acres planted and harvested by Mr. Pigg.” 2015 T. C. Memo. 240, at pp. 3-4.

But that’s not all. Although Mac has his son (unnamed) and his friend Mr. Coke to help out, he does most of the work. And a significant part of the work has Mac doing what I haven’t done for nearly fifty years, and earnestly pray no one ever has to do again, namely and to wit, hide out with a semiautomatic rifle.

“Wild hogs are a continuing problem at the farm. They dig underneath fences to get to edible crops and have dug up and broken water lines on the farm. In a year before the tax years 2009 and 2010, wild hogs ate 250,000 pounds of peanuts that petitioner and Mr. Pigg had grown on the farm. As a result, petitioner has to spend significant time controlling the wild hog population, which he accomplishes through hunting and trapping. Petitioner usually hunts hogs for three hours each morning and afternoon while at the farm, for a total of six hours per day. In addition, he spends time building traps and baiting them with corn millet and Kool-Aid to lure hogs to a specific area, where he waits in a tripod stand with semiautomatic weapons in order to eradicate them.” 2015 T. C. Memo. 240-, at p. 4.

It’s a break from practicing law, waiting in the tree for the makin’s of wildschweinbraten to drink the Kool-Aid and get blasted with a couple rounds of 7.62 ball. But the net result, with a couple steins Rude Pitter, (hi, Judge Holmes), is a bit of all right. Don’t forget the red cabbage. Oh, to be back at Frueh am Dom!

Anyway, the case goes off on Mac’s credit card receipts, reconstructed time slips (despite IRS’s unavailing objection that they’re not contemporaneous), farm invoices, and credible testimony. At close of play, Mac has 100 hours (more than) and no one else has more; apparently Mr. Pigg is not from the schwer arbeiters, to use a technical phrase.

See, Tax Court blogging can be fun. But legal research and the cost of publishing one’s results are certainly a necessary part of a lawyer’s profession, and therefore deductible. No one said one has to suffer to make money.





In Uncategorized on 12/14/2015 at 16:26

To a very special lady.