Archive for January, 2016|Monthly archive page


In Uncategorized on 01/29/2016 at 15:33

Lemme tell ya, as we say here in The Apple, it’s no bed of clichés.

First Judge Boasberg unloads on us (see my blogpost “Modified Loving,” 2/4/13). Then Judge Buch kicks us to the curb, as told in my blogpost “Internet Experts,” 5/8/14.

On top of it all, now, on a Friday when there are never any opinions out of Tax Court, there’s not even a designated hitter.

I guess I’m supposed to sift through 125 undesignated orders, digging for blogfodder. But then I get this red-letter message on Tax Court’s homepage: “The Court’s Web site, including the eAccess system, will be intermittently unavailable while system maintenance is performed between 6:00 p.m. and 7:00 p.m. Eastern time on Friday, January 29, 2016. No documents may be eFiled through Petitioner Access or Practitioner Access during this time.”

Have a nice weekend.




In Uncategorized on 01/29/2016 at 14:55

I’ve often quoted the immortal words of the late great Charles Dillon Stengel, and I get to do so again today in Constantine Gus Christo, Docket No. 2161-12, filed 1/29/16. While the substance of Judge Paris’ order may be old news to seasoned Tax Court practitioners (the peppery kind, with a salty sense of humor; sorry, guys), non-practitioners may want to lay hold of some back-issue transcripts for background.

So here’s the skinny: “…petitioner filed a Motion for the Court to Pay the Expenses of a Transcript and specifically requested the transcript from the May 14, 2013, partial trial. The Court, on occasion, does pay the cost of a transcript for pro se taxpayers. However, it is not necessary in this case. Petitioner registered for the Court’s electronic filing system, eAccess, which allows him to access the documents filed in his case and file documents electronically. On page 16 of the ‘Petitioners’ Guide to Electronic Case Access and Filing’, located on the Tax Court’s website, it is noted that transcripts are not electronically viewable until one year after the proceeding. The partial trial was held in 2013 and, therefore, is now viewable electronically and petitioner can access it at any time.” Order, at p. 1.

Con, you could look it up.

However, this doesn’t help Randy Jenkins and others similarly situated. See my blogpost “Psst – Y’ Wanna Buy a Transcript Cheap?” 1/14/15.


In Uncategorized on 01/28/2016 at 23:09

James W. Blackbourn, II and Angel M. Blackbourn, 2016 T. C. Sum. Op. 5, filed 1/28/16, get the bad news from STJ Lewis (“His Name is My Name”) Carluzzo, and it’s bad on two levels.

First, Jim’s and Angie’s home in Canton, GA, isn’t their first home for the First-Time Homebuyer Credit, First Edition (FTHBCFE). Even though the house Jim owned was labeled his “second home,” he couldn’t rent it out (per the terms of the mortgage he took out to buy it), and he did live there, claimed the GA homestead exemption for that house, and worse, filed his tax returns from there, all during the three-year lockout before he bought the Canton cantonment (sorry, guys). And Jim’s trial testimony that he wanted to rent out second home founders on his homesteading and the mortgage prohibition.


Nothing new so far.

But this was the payback model of the FTHBC. It wasn’t really a credit, but an interest-free loan, repayable in annual $500 installments over 15 years. And because of the time lag between Jim’s claimed FTHBCFE and the SNOD, Jim and Angie had paid the Feds $2K of the $7500 loan, for which they got no credit in the SNOD.

STJ Lewis: “Separate and apart from the main issue, we note that the deficiency here in dispute does not take into account the repayments that petitioners made with their 2010 through 2014 Federal income tax returns with respect to the FTHBC claimed on their 2008 return. Because the definition of a deficiency as found in section 6211 does not take into account the increases in a taxpayer’s Federal income tax liability for subsequent periods required by section 36(f)(1), we cannot address this apparent inequity other than to point out that petitioners’ remedy may lie in filing claims for refund on account of the overpayment of Federal income tax resulting from the application of section 36(f)(1). We expect that in response to any such claims, respondent will take the necessary action to ensure that petitioners’ claims for refund, if made, will be processed consistent with the disallowance of the FTHBC here in dispute.” 2016 T. C. Sum. Op. 5, at p. 10.

So if it was payback time for Jim and Angie, now it’s payback time for IRS.

Oh yes, STJ Lewis lets Jim and Angie off the accuracy chops.


In Uncategorized on 01/28/2016 at 00:02

You’ll no doubt remember my recent discussion about assigned counsel in Tax Court, which Judge Kerrigan assured us does not exist, but which assurance Judge Julian I Jacobs seemed to contradict. See my blogpost “Assigned Counsel?” 1/6/16.

To resolve this apparent contradiction, I attempted to reach Olena Ruth, Esq., who seemed to stand in as assigned counsel in the blogpost aforesaid, and who incidentally seems to be a follower of this my blog. I have to date received no reply, so my perplexity continues.

Confusion worse confounded, Ch J Michael B (“Iron Mike”) Thornton seems prepared to appoint IRS counsel to give legal advice to the petitioner in Sacha E. Higham, Docket No. 22071-15L, filed 1/27/16, as Tax Court comes in from the snow, three hours late according to its website.

Apparently Sach wants to have the petition dismissed in this review of a NOD from a CDP. We know Sach can do that. And IRS says OK.

But something about the case gave Ch J Iron Mike pause, so he orders the parties to talk it over.

All right, so what is the problem?

This: “Respondent shall undertake to discuss fully with petitioner the consequences to petitioner if the Court were to dismiss this case.” Order, at p. 1.

How any attorney can discuss a legal conclusion (which in this case must include an element of legal advice) with an unrepresented adversary, or even communicate with such a one, otherwise than to tell them immediately to retain counsel, eludes me. Rule 4.3 of the Rules of Professional Conduct seems clear enough to me. “The lawyer shall not give legal advice to an unrepresented person other than the advice to secure counsel if the lawyer knows or reasonably should know that the interests of such person are or have a reasonable possibility of being in conflict with the interests of the client.”

So again I ask: does Tax Court provide assigned counsel?



In Uncategorized on 01/26/2016 at 13:41

I take my text from Francis Bret Harte’s short story. Once again 400 Second Street, NW is “snowed in.”

So I go back to the New York State Bar Association Tax Section’s afternoon session.


In Uncategorized on 01/25/2016 at 14:09

Up in Westbury

The “S”s have it, as Westbury reportedly kicked off its small-claimer calendar call today, 1/25/16, on schedule, while the Mother Ship at 400 Second Street, NW, remains behind closed doors and inoperative.

So nothing from me today. My readers’ time is valuable, so I won’t pad this blog with off-topic clickbait.


In Uncategorized on 01/22/2016 at 08:16

Tax Court’s website advises early closing today, January 22, at 12 Noon, because of massive snow job. So grab your Wellies and snowblowers, Capitolists. I’ll be back Monday.


In Uncategorized on 01/21/2016 at 17:37

IRS wanted a remand to fill out their case against Michael E. Lunnon, and Judge Marvel gave them one. For that part of our story, see my blogpost “Chenery and the Record,” 8/12/15.

But the supplemental NOD from the remand can’t cure the problem with the first NOD. That omitted one quarter of Mike’s 941 obligations.

Judge Marvel: “Respondent contends that the Court has jurisdiction to review the NFTL filing for the [omitted] Form 941 liability because its omission from the original notices of determination was an inadvertent clerical error, petitioner ‘substantively received a hearing with respect to’ the collection action, and the supplemental notice of determination ‘simply clarifies that the hearing and determination [with respect to the liability] were embedded in the original notices of determination and hearing’. We therefore consider whether the original notices of determination confer jurisdiction over the NFTL filing for petitioner’s [omitted] Form 941 liability, and if not, whether the supplemental notice of determination cures the jurisdictional defect.” 146 T. C. 2, at p. 18.

Yes, it’s a full-dress T. C., LG Kendrick, LLC, 146 T. C. 2, filed 1/21/16.

And the answers to the considered questions Judge Marvel raises is “no and no.”

While the old truism that all Tax Court needs for Sections 6230/6330 CDP review is “a written notice that embodies a determination to proceed with the collection of the taxes in issue, and a timely filed petition,” (146 T. C. 2, at pp. 18-19, citation omitted), and typos and finger-fehler don’t disqualify a NOD if petitioner wasn’t confused or misled, this is worse.

“…the instant case is distinguishable from cases where the jurisdictional notice contained a typographical or other minor error but still revealed on its face that the Commissioner had made a determination with respect to a particular period. The tables within the original notices of determination listed all periods and collection activities for which the Appeals Office had made determinations. They did not include the NFTL filing for petitioner’s [omitted] Form 941 liability. Nothing in the remainder of the notices hints that the Appeals Office made a determination with respect to the NFTL filing for that liability. The references to the taxable period…on the first pages of the original notices of determination do not provide clarification because the notices address other collection activities with respect to that period.” 146 T. C. 2, at p. 23 (Footnote omitted, but I’ll give it to you anyway.)

“Although sec. 6320 and sec. 6330 hearings are often held jointly when the Commissioner has proposed to levy and has filed an NFTL with respect to the same taxable period, a proposed levy and an NFTL filing are distinct collection activities for which the Commissioner must make separate determinations, even if those determinations are embodied in the same notice of determination. See secs. 6320, 6321, 6330, 6331.” 146 T. C. 2, at p. 23, footnote 16.

And though IRS tries to argue some permutation of “agreed to be tried,” and claims Mike and the AO talked about this at the hearing on remand, that’s not enough.

“The fundamental purpose of a notice of determination, i.e., to notify the taxpayer of the Appeals Office’s determination to sustain a collection action for a particular taxable period, was not fulfilled. We also do not look behind the notice, as respondent urges us to do, to determine whether petitioner ‘substantively received a hearing with respect to the [omitted] Form 941 liability’. It is the Appeals Office’s written determination, not the fact that a section 6320/6330 hearing occurred, that is the basis for our jurisdiction.” 146 T. C. 2, at p. 24 (Citation omitted).

And the supplemental hearing at Appeals is just that—supplemental. It can’t put back what wasn’t there to begin with. The supplemental NOD can only deal with the original notices. Mike gets no new right of review from the supplemental NOD.

So the omitted quarter is omitted. The supplemental NOD gives Tax Court no jurisdiction over the omitted quarter. So Mike can’t contest the liability or the NFTL or the NITL therefor.

For the rest, Mike produced no evidence disputing what periods were properly in review, the AO had new evidence about those periods that Mike got to see, so Mike gets no chance to contest those now.

Once again, the same takeaway. Be careful when you ask for a remand.


In Uncategorized on 01/20/2016 at 17:53

Hand Out a Taishoff “Good Try”

Especially do I wish, because the recipient would be a colleague who has enlivened discussions at the meetings of an American Bar Association – New York State Bar Association Joint Subcommittee of which I am a member.

But I can’t. My colleague really went for the green off the tee, and it would have been great if he made the shot, but it lands in a bunker.

Here’s the story, featuring Andy Beer, last seen in my blogpost “The Front,” 3/12/15. Andy, Harvard BA and MBA, was a monger of dubious (to be polite) tax dodges.

IRS wants to slug Andy with the Section 6707 dodger chops. My colleague and his firm, summoned to represent a brigade of Andy’s dodge ‘em cars, in this case Endeavor Partners Fund, LLC, Delta Currency Trading, LLC, Tax Matters Partner, et al., 2016 T. C. Memo. 12, filed 1/20/16, gets the short end of the stick from Judge Lauber.

My colleague and firm (hereinafter “the guys”) want IRS to hold off on Andy while they duke it out on the LLCs, because the TMPs for the LLCs might win on their accuracy chops fight with IRS. If IRS nails Andy, they claim, the LLCs are deprived of their chance of winning thereon.

IRS says “same facts, but different statutory provisions, and Tax Court can’t interfere on a Section 6707 chop.”

Oh yes we can, says Judge Lauber, but only in a CDP where petitioner didn’t get a chance to contest liability. And we’re nowhere near there yet with Andy.

“Congress has provided this Court with jurisdiction to review assessable penalties in a collection due process (CDP) context. See Gardner v. Commissioner, 145 T.C. __, __ (slip op. at 21) (Aug. 26, 2015) (‘[S]ection 6330(d)(1) provides this Court with jurisdiction to review an appeal from the Commissioner’s determination to proceed with collection activity regardless of the type of underlying tax involved.’). If Mr. Beer receives a notice of determination with respect to the section 6707 penalties and the IRS seeks to collect those liabilities by lien or levy, he may challenge that collection action under section 6330(d). If he has not had a prior opportunity to contest the penalties and properly raises them at the CDP hearing, he may seek review in this Court under section 6330(d)(1) of his underlying liability for the penalties.” 2016 T. C. Memo. 12, at pp. 7-8, Footnote 4.

As for Gardner, see my blogpost “The End of an Affair,” 8/26/15.

The 6707 dodge-monger chop is an assessable penalty. No need for a SNOD; IRS need only demand.

Once again claiming that the “small court” has only microscopic jurisdiction, Judge Lauber can’t get into a Section 6707 dust-up at this stage.

The guys claim Tax Court needs to protect its jurisdiction to rule on the accuracy chops for the LLCs. But they have no authority for their position, and the Anti-Injunction Act, Section 7421, stymies their attempt to stop IRS. Tax Court can enjoin certain IRS actions as respects partnerships, but this isn’t one of them.

The guys claim there are common questions of law and fact in Andy’s chops and the FPAAs that the LLCs have to deal with.

Judge Lauber says, that isn’t my problem.

“There may well be issues of fact or law that are common to these cases and to the ongoing IRS investigation of Mr. Beer. But if that is true, it has absolutely no effect on this Court’s ability to ‘make a binding ruling’ in the cases over which it has jurisdiction. Indeed, it often happens that a factual or legal issue raised in a case before us is also involved in a pending IRS proceeding, e.g., in an audit of the same taxpayer or a related taxpayer for a different tax period. The remedy in such circumstances is not to have this Court enjoin the pending IRS proceeding. Rather, if the outcome of the Tax Court proceeding is inconsistent with the outcome of the pending IRS proceeding, the taxpayer’s remedy is to appeal and bring the relevant facts and law to the attention of the reviewing court(s).” 2016 T. C. Memo. 12, at pp. 10-11.

And the guys’ final stop-loss, asking for a Section 7482 interlocutory appeal, is a complete non-starter.

“Because Mr. Beer’s potential liability for section 6707 penalties is not an issue in these cases, there is no ‘controlling question of law’ with respect to them. There is no reasonable ground, much less a ‘substantial ground,’ for difference of opinion concerning this Court’s lack of authority to enjoin an independent and ongoing IRS investigation of Mr. Beer. And an immediate appeal from our order denying the requested injunction would not advance in any way, much less ‘materially advance,’ the ultimate termination of this litigation. The trial for these consolidated cases has been completed; the record is closed; posttrial briefing is in process; and an opinion will be issued in due course.” 2016 T. C. Memo. 12, at pp. 12-13.

I don’t think the guys will be overjoyed when that opinion gets published. Sorry, guys.


In Uncategorized on 01/20/2016 at 17:07

I haven’t gone in for writing John LeCarre spy-counterspy stories. I take the title of Mr. Cornwell’s 1968 novel to discuss Gerd Topsnik, lead-off hitter in 146 T. C., and his peregrinations from Germany to the United States to the Philippines. In the meantime, IRS hits Gerd with a $139K deficiency when Gerd tried to bail on his US Green Card without jumping through the Section 877A hoops and disgorging appropriately.

There are actually three (count ‘em, three) towns in Germany (whether small or not I cannot tell) where Gerd claims his German passport, driver license and actual abode was situated, but the German Competent Authority couldn’t find hide nor hair of Gerd, so the tax treaty between US and Germany avails him not. Though Germany taxes its citizens on their world-wide income (I bet you didn’t know that either), Gerd never paid taxes there.

Gerd sold out of his CA gourmet food business after a feud with his partners, and got paid on the installment plan.

The issue was the value of the installment obligation in Gerd’s hand the day before he handed in his green card. That is, the day he filed Form I-407, the official notice to bail, and US Citizenship & Immigration Service accepted the form.

Gerd had a wee problem. “Since filing his Form I-407 petitioner has failed to file the required Form 8854, Initial and Annual Expatriation Statement, and has failed to certify, under penalties of perjury, that he has complied with all of his U.S. Federal tax obligations for the five taxable years preceding the taxable year that includes the expatriation date, including his obligations to file income tax returns and obligations to pay all relevant tax liabilities, interest, and penalties.” 146 T. C. 1, at p. 5.

Gerd couldn’t so certify, because he hadn’t.

You can see where this is going. IRS hit Gerd with a jeopardy assessment and levied on the monthly installment payments Gerd was getting from his former partners. Gerd sued in USDCCDCA, but got tossed because he claimed he resided in Germany, and had therefore to go to USCFC, which has jurisdiction over tax refund claims wherever the claimant may be. This Gerd did, while his appeal to Ninth Circuit over the District Court toss was pending. IRS objected, but Gerd’s case is still in USCFC.

Meanwhile, Gerd is fighting in Tax Court, and Judge Kerrigan gives IRS summary J.

Gerd claims he’s a German national and protected from the US tax regime by virtue of the tax treaty. But the magic language is in a protocol adopted after the treaty was signed, which reads as follows: “For the purposes of this Convention, the term ‘resident of a Contracting State’ means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. The term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or of profits attributable to a permanent establishment in that State or capital situated therein.” 146 T. C. 1, at p. 12.

Now intangible property (like an installment note from a US partnership) is taxed in country of residence, per the treaty. And Gerd had his green card until he handed it over. The German Competent Authority couldn’t find Gerd in “the German township of Oerlenbach, Freiburg City, or Bruchsal.” 146 T. C. 1, at p. 17. Occasional stopovers in the odd wirtschaft don’t cut it.

Question remaining: is Gerd a “covered expatriate” per Section 877(a)? In that case all his property is marked-to-market as of the day before the day he bails, and he owes tax on the ganze geschäft.

Judge Kerrigan: “Section 877A(i) provides that the Secretary shall prescribe regulations as may be necessary and appropriate to carry out the purposes of the section. Such regulations have not been yet been provided. Instead, the IRS has promulgated guidance regarding this section in Notice 2009-85, 2009-45 I.R.B. 598.   We are not bound by Notice 2009-85, supra…, but it is an official statement of the Commissioner’s position and we may let it persuade us….” 146 T. C. 1, at p. 20 (citations omitted).

Judge Kerrigan lets it persuade her.

The test is whether the property would be included in Gerd’s estate for estate tax purposes if he had died, rather than bailed. Of course it would.

And Gerd’s claim that he made the sale before Section 877A was enacted is nothing to the point. He still held the installment note, it was worth a bundle, and payments were still due.

What remains to be litigated in USCFC is a good question.