Archive for January, 2016|Monthly archive page


In Uncategorized on 01/19/2016 at 17:03

Once again the divorce lawyers mess up, and the clients take the hit. The pain comes to Richard W. Leavitt, a chiropractor, but all his skills cannot cure the pain Judge Dawson gives him in Family Chiropractic Sports Injury & Rehab Clinic, Inc., 2016 T. C. Memo. 10, filed 1/19/16, a very special day in our family.

When Rich and Heidi, his loved-once and fellow participant in the Family Chiropractic ESOP, divorced, the decree spoke of their shareholdings in Family Chiropractic, and split those fifty-fifty, but said nothing about the shares credited to her in the ESOP (and shares in Family Chiropractic, a C Corp, was all the ESOP held).

Then Heidi gave away her shares in the ESOP to Rich, “in accordance with the divorce decree.”

ERISA experts will see that this breaches the anti-alienation provisions of Section 401(a)(13)(A). Like life, liberty and the pursuit of happiness, you can’t give away your vested qualified ESOP benefits.

Judge Dawson waxes lyrical about protecting the poor workers from losing their vested, presumably hard-earned, benefits, but I’ll spare you.

Of course, once you’ve breached, you (or rather, your ESOP) is out, permanently. “In general, a qualification failure pursuant to section 401(a) is a continuing failure because allowing a plan to requalify in subsequent years would be to allow a plan ‘to rise phoenix-like from the ashes of such disqualification and become qualified for that year.’ Pulver Roofing Co. v. Commissioner, 70 T.C. 1001, 1015 (1978); see also Martin Fireproofing Profit-Sharing Plan & Tr. v. Commissioner, 92 T.C. at 1184-1189.” 2016 T. C. Memo. 10, at p. 12.

Now we know that Section 414(p) provides that a qualified domestic relations order (QDRO, pronounced “Quadro”) trumps the anti-alienation provisions. But the divorce decree (made under Iowa law) never cites to Section 414(p) and makes no attempt to comply; it doesn’t even mention the ESOP shares.

So Judge Dawson blows it off in a footnote. “Family Chiropractic admits that the divorce decree did not address Heidi’s benefits under the ESOP. Accordingly, we need not discuss sec. 414(p) qualified domestic relations orders, which are an exception to the antialienation provisions. See sec. 401(a)(13)(B).” 2016 T. C. Memo. 10, at p. 15, footnote 10.

Two sentences in the decree would have saved the ESOP’s qualification from the divorce year going forward.

I’ve blogged the family lawyers’ errors too many times, I know. And it sounds like I’m picking on them. And I know, believe me I know, that there but for the grace of you-know-Whom go I or any of us.

But guys, when there’s a business involved, or children, or dependents, or retirement plans, or anything beyond furniture-and-household-pets, get the tax guys on the horn. Please.


In Uncategorized on 01/15/2016 at 15:48

Remember Rule 91(f)? If you’re a regular follower of this my blog (a poor thing but mine own), sure you do.

It’s Tax Court’s equivalent of what we here in The Empire State call a Rule 3120, referring to our Civil Practice Law and Rules, a Notice to Admit.

I’m a great fan thereof, as I’ve noted elsewhere. Cf, e.g., my blogpost “Got Gas?”, 10/21/15.

But, as I criticized Judge Laro and the IRS in that case for pulling a fast one by way of a Rule 91(f) OSC, today I criticize Big Julie, more formally known as His Honor Big Julie Judge Julian I Jacobs, hereinafter referred to as HHBJJJIJ, for adding a word to the Rule in accepting IRS’s story in toto, in a designated hitter Kevin D. Tebedo, Docket No. 3694-15, filed 1/15/16.

First, the text of the Rule, in relevant part, from Tax Court’s own website. “If no response is filed within the period specified with respect to any matter or portion thereof, or if the response is evasive or not fairly directed to the proposed stipulation or portion thereof, that matter or portion thereof will be deemed stipulated for purposes of the pending case, and an order will be issued accordingly.” Rule 91(f)(3).

HHBJJJIJ deems the entire IRS proposal admitted under Rule 91(f)(3). OK, was Kevin frivolous, or cute?

Not according to the order. “Petitioner’s response was not fairly directed to all matters in the proposed Stipulation of Facts.” Order, at p. 1.

So was Kev’s response fairly directed to some matters? Must a response be directed to all matters? What if a party responds to some matters directly, but not to some others? Is there no partially deemed admitted matter? Or did HHBJJJIJ mean that Kev’s response wasn’t fairly directed to any matters, rather than not directed to all matters? The Rule says “the proposed stipulation or portion thereof will be deemed admitted….”, not all matters.

It does matter.


In Uncategorized on 01/14/2016 at 15:48

Muhammad R. Siddiqui & Sadaf Rashid, Docket No. 27469-14, filed 1/14/16, don’t get to find out the answer, because Mu isn’t ignorant and Sad isn’t involved, in this designated off-the-bencher from that Obliging Jurist, Judge David Gustafson.

Mu has a bushelbasketful of unsubstantiated Sched As, including unreimbursed business expenses in amounts and years he can’t establish, medical payments for admittedly dependent parents ditto, and mileage for carrying friends’ kids along with his own to various events from his masjid (admittedly a 501(c)(3)).

Easy enough for IRS’ counsel to blow up Mu. And Sadaf apparently was at home with their four minor children, earning no money but working hard.

So why blog this one? Well, because Mu has a bunch of degrees, and that gets him the penalty chops.

“Admittedly, Mr. Siddiqui is not a tax expert, but he is an intelligent and educated man. Even apart from his inability or failure to substantiate his deductions at the time of trial in 2016, the errors on his [late filed] tax return… claiming deductions for medical expenses incurred in a prior year, claiming charitable contribution deductions for the cost of driving himself and his family to religious and recreational activities, and claiming deductions for employee expenses incurred four years earlier…were errors that should not have been committed by a person of above-average intelligence, with twelve years’ prior experience in filing tax returns. If… Mr. Siddiqui did not know the basic rule that one deducts in a given year the expenses that he paid or incurred in that year, then one cannot say that he exerted appropriate ‘effort to assess [his] proper tax liability’.” Order, at pp. 15-16 of transcript.

Mu’s education? “In Pakistan he had completed a bachelor’s degree in physics, chemistry, and mathematics; a second bachelor’s degree in electrical engineering; and a master’s degree in applied physics. In the U.S. he earned a master’s degree in computer science at Roosevelt University in Chicago, Illinois.” Order, at p. 4 of transcript.

Practitioner, do you really want your client’s resume on the record? Might it not be well to tell your client to hold off on bragging about his degrees?


In Uncategorized on 01/13/2016 at 17:40

What have Belize, Benin, Burundi, Lesotho, Chad, Sudan, Iran, Afghanistan, Mongolia, Libya, Yemen, Bolivia and Rwanda in common? Nobody in any of those countries has read so much as one of my blogposts.

Come on, folks, they’re non-toxic, alcohol-free and easy on the digestion. Gib’ a kook, as Grandma would have said. Or ‘ave a dekko, if you prefer.

I’d like to say, as a much more exalted writer than I put it, “their sound is gone out into all lands, and their words unto the ends of the earth.”


In Uncategorized on 01/13/2016 at 17:12

Judge Tamara W. Ashford is not as obliging as her colleague Judge David Gustafson. She won’t visit you in the Stony Lonesome, especially when you’re doing 55 years hard in the State of Illinois Correctional System. And that’s sure a lot of correcting.

This is the story of Don Wang, Petitioner and Misook N. Wang, Intervenor, Docket No. 10434-14, filed 1/13/16, but it’s really Misook’s story.

“…Misook N. Wang filed with the Court a document titled ‘Motion for Writ of Habeas Corpus Ad Testificandum.’ The document is actually a Cook County, Illinois petition for writ of habeas corpus ad testificandum, wherein intervenor requests this Court to issue a writ for her appearance before the Court at the Court’s March 14, 2016, Chicago, Illinois Trial Session.” Order, at p. 1.

It seems that, back some years ago, Misook murdered her mother-in-law. And Don, not surprisingly, wants a divorce.

Tough luck, Misook.

“This Court is without authority to direct the United States Marshals Service to transport a state prisoner to and from this federal court’s courtroom. See Pennsylvania Bureau of Correction v. United States Marshals Service, 474 U.S. 34, 39 (1985). In addition, in her motion, intervenor does not state that appropriate arrangements for payment of the costs associated with her appearance at petitioner Don Wang’s trial currently calendared for the Court’s… Chicago, Illinois Trial Session have been made.” Order, at p.1.

But Misook doesn’t have to contemplate taxation without representation in addition to her other woes. “Intervenor is advised that, in lieu of personally appearing at trial, she may choose to hire a practitioner admitted to practice before the Court to represent her or she may submit a written statement pursuant to Rule 50(c) of the Tax Court Rules of Practice and Procedure.” Order, at pp. 1-2.

So if you or a client are doing hard time, there’s an alternative to a trip to Tax Court.


In Uncategorized on 01/12/2016 at 16:37

In the days of my youth, the old Saturday Evening Post ran an ad for something called Hastings Piston Rings that read “Tough, but oh so gentle.”

I’d like to apply that epithet to Judge Laro. Surely Judge Laro maintains a no-nonsense persona on the bench, and is no friend of dodgers, protesters, stallers or assorted wiseacres.

But when mercy is called for, Judge Laro is the man.

For an instance where mercy asked for is denied, see my blogpost “Asperged and Disabled,” 10/19/15. But when the Good Guy needs to shine from the bench, Judge Laro comes through. For a lawyer, yet.

In witness whereof, check out John A. Tomassetti & Cathy C. Tomassetti, Docket No. 12746-11, filed 1/12/16.

John and Cathy were collateral damage in the blowing up of the Sterling Benefit Plan, which certainly wasn’t sterling, nor did it benefit anyone but the promoters of that dodge. For more about this penguin, see my blogpost “Splitsville,” 7/14/15.

But John and Cathy weren’t alone. They and their fellows amongst the blown-up were invited to a Rule 155 beancount. Now unscrambling this particular omelet took more than the usual unsubstantiated Sched A or Sched C, and John and Cathy’s counsel had a squad of blown-up scramblers to unravel.

Apparently counsel moved for more time to submit computations for some, but not all, of the blown-up scramblers. And got it. I told you Judge Laro was a decent guy.

But counsel left John and Cathy twisting slowly in the cliché. So IRS moves to enter their undisputed numbers, and Judge Laro does.

Finding out that IRS’ numbers went in without a fight, John and Cathy ask for a Rule 162 vacate or revise. IRS claims they showed no grounds why the decision should be vacated, revised or anything else.

“Rule 162 does not provide a standard by which to evaluate a motion to vacate a decision. See Rule 162; Brewer v. Commissioner, T.C. Memo. 2005-10. Accordingly, this Court refers to the Federal Rules of Civil Procedure for guidance in this matter, specifically, to Rule 60 of the Federal Rules of Civil Procedure. Rule 1(b); Cinema ’84 v. Commissioner, 122 T.C. 264, 267-268 (2004), afd, 412 F.3d 366 (2d Cir. 2005); Seiffert v. Commissioner, T.C. Memo. 2014-61, at *7. Motions to vacate or revise our decision are generally not granted absent a showing of unusual circumstance or substantial error, such as mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, or other reasons justifying relief. See Fed. R. Civ. P. 60(b); Seiffert v. Commissioner, T.C. Memo. 2014-61, at *7.

“In this case, petitioners’ counsel handled several cases consolidated for the purpose of briefing and opinion. In some of these cases, the counsel filed a motion to extend the time to submit computations under Rule 155, but in others, including this case, failed to do the same. After reviewing the parties’ filings, we attribute petitioners’ counsel failure to comply with the deadline for submitting computations under Rule 155 to inadvertent mistake or excusable neglect. These reasons are sufficient to support petitioners’ motion to vacate the decision entered in this case. See Fed. R. Civ. P. 60(b); Seiffert v. Commissioner, T.C. Memo. 2014-61, at *7. Doing so would better serve the interests of justice.” Order, at pp. 1-2.

I left in the citations so y’all could drag and drop the language for your next Rule 162. And hopefully you get before Judge Laro.

Now for another goodie for lawyers, but this one is a cautionary tale. I direct this one to you calendar callers, for whose diligent pro bono efforts I have high praise. But beware lest your good nature be abused.

Cast an eyeball on Brent Edward Crummey and Cheryl Battista Crummey, 2016 T. C. Memo. 9, filed 1/12/16. Brent is a bad dude, having gone down on six (count ‘em, six) counts of filing false claims for tax refunds based on his convoluted but frivolous trust scheme.

Now for the trial on the 75% fraud chops, IRS lets Cheryl Battista off the fraud hook, but they want heavy chops on Brent, a Symantec software engineer who should know better.

I won’t go through Judge Cohen’s “somber reasoning and copious citation of precedent” to detoxify Brent’s arguments, which he drops at the last pre-trial minute, apparently realizing that the cliché is up.

No, here’s the point, calendar callers. “At the time of trial on October 26, 2015, petitioner abandoned his positions and testified that he had taken the positions in good faith. (He apparently did so after consulting with an attorney who volunteered to counsel unrepresented taxpayers without charge at the time of Tax Court calendar call and before trial.)” 2016 T. C. Memo. 9, at pp. 6-7.

Good job, volunteer, but beware. Some of these dodgers and protesters will try to hide behind your well-intentioned counsel to exculpate themselves from punishment for their well-planned and nefarious schemes. Don’t leave your skepticism at the courthouse door.


In Uncategorized on 01/12/2016 at 15:26

As Walt Whitman didn’t say, but Ch J Michael B. (“Iron Mike”) Thornton does. Ch J Iron Mike has good news for the computerly-enabled, as Tax Court proposes to amend the Rules to permit electronic filing of petitions and amendments thereto.

About time.

But don’t think that all you need is pdf and an internet connection, therewith to do as the late great (and Wicked) Wilson Pickett, and “wait till the midnight hour” to file.

Here’s the story.


In Uncategorized on 01/11/2016 at 18:08

Whether it’s taking a loss on your 1040, or getting your litigation costs, timing is everything.

Judge Morrison elucidates the first mistiming in Jeffrey J. Evans, 2016 T. C. Memo. 7, filed 1/11/16. Jeff claims the loss is ordinary, as the real estate he lost to a foreclosure sale was stuff he was meaning to fix up and sell. He fails to prove that he was in the business of buying, fixing up and selling, so he gets a capital loss.

But the point of Jeff’s sad story (his daughter was shot and killed by a police officer, an event that devastated him, as happens all too often) is that the foreclosure sale took place in one year, but Jeff didn’t get the surplus money from the foreclosure until the next year.

Surplus money is what’s left over after the lienholders get paid and all costs and fees of sale are recovered.

Jeff says he’s a cash-basis taxpayer, and so the loss follows the cash.

A foreclosure sale isn’t final if the foreclosed-upon owner has a right of redemption (Jeff didn’t under local law), or there’s an ongoing dispute about the foreclosure. For the latter, see my blopost “It Ain’t Over Till It’s Over,” 5/20/14.

Jeff argues that the trustee (the local equivalent of what we here in the Empire State call the referee) didn’t tell him about the surplus (although he admits he could have asked), and demanded a heavy-duty release and indemnification before he handed Jeff the loot.

But there was no fight with the lienholder about what was due, and Jeff testified nobody else made any claims. And local law required the trustee to unload the cash. “The mere fact that the trustee continued to hold those funds…and paid them after receiving a release from Evans does not show that there was any dispute about whether the proceeds were distributable to Evans or the amount of proceeds so distributable.” 2016 T. C. Memo. 7, at p. 20.

But what about the cash-basis taxpayer argument? Well, that may hold for cash items, but losses like depreciation and foreclosure have the Section 165(a) rules. And Jeff has no counter to that. He does have a loss, but not for the year at issue.

As for the trustee, he was right not to hand over money without a release and indemnity. I wouldn’t.

Now for the litigation costs. This is the story of Silvia L. Repetto, Docket No. 15570-14S, filed 1/11/16, a designated hitter from The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Imperturbable, Ineluctable, Irrefragable, Illustrious and Indefatigable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Silvia went down to Birmingham. But unlike The Wabash Cannonball it wasn’t “just the other day.” Judge Holmes gifted the parties with an off-the-bencher, they agreed on the numbers, and Silvia asks for litigation costs.

Well, actually she asked for “litigation or administrative costs,” but as she only asked for post-petition costs, that’s litigation costs per Reg. 301.7430-4(c)(3)(ii).

Silvia did have a loss on the $50K she put into an oil well. But she also has another problem.

“The problem for her is that the Court actually ruled against her on this issue for the year before the Court. As we explained in the opinion, we do think this is a timing issue, but 2010 wasn’t the right time. As the Commissioner points out, this means that he won on about 80% of the dollars at stake in the case. And we agree with him and Ms. Repetto that the $50,000 was the most significant issue in the case.” Order, at pp. 1-2. (Emphasis by the Court).

$50K is pretty significant to me too, Judge.




In Uncategorized on 01/11/2016 at 14:11

I certainly wasn’t mentioned in dispatches in those long-ago days, when my wardrobe largely consisted of green fatigues (into which I could not now fit). But’s ace tax blogger, Peter Reilly, CPA, has lately undertaken to redress that omission by soliciting an extensive quote from me.

You can read it at

I omitted to blog the Gemperle opinion (2016 T. C. Memo. 1, filed 1/4/16), because it really said nothing new. Mr. Reilly seemed upset that the Gemperles were barred from offering into evidence their appraisal, which document apparently never got attached to their return. And of course the appraiser who authored that document wasn’t around to be cross-examined on the trial.

Well, what price Joseph Mohamed, Jr. and Shirley Mohamed, 2012 T. C. Memo. 152, blogged by me under the caption “Pay Me Now or Pay Me Later,” 5/29/12. Joe’s and Shirl’s $20 million charitable land donation got bounced because no appraisal was attached to their return. Why not? Joe and Shirl were following the misleading instructions in that year’s iteration of Form 8283, that’s why not. And this, notwithstanding the land was clearly worth at least what Joe and Shirl claimed on the trial it was worth.

Of course, Joe and Shirl prepared their own return. One can only wonder, with that much moolah on the cliché, why Joe and Shirl didn’t have a brigade of CPAs and an armored division of appraisers on the deal.

Granted, the Gemperles were small stuff. And maybe the CPA who prepared their return was dead when the trial came on.

For my rant about the landmarkers leading property owners down the proverbial by promising tax breaks to pay off the property owners, so that the landmarkers don’t have to pay, see Mr. Reilly’s blogpost abovecited.

This is a steadfastly non-political blog.



In Uncategorized on 01/08/2016 at 17:32

I was never a Boy Scout, so I cannot state of my own knowledge that the title of this blogpost is, or was at any time, the motto of that organization. I can state, however, that Professor Tom Lehrer wrote what was, long ago, a raunchy but humorous song by that name.

But STJ Armen, The Judge With a Heart, finds no humor in IRS’ motion for summary J in James J. Lewis, Docket No. 10742-15L, filed 1/8/16, a designated hitter. I presume STJ Armen designated this opinion so practitioners on both sides of the counsel table would read and heed.

I will not name IRS’ counsel here, as is my custom. Having the light of publicity shone upon one’s train wrecks is bad enough without a picture of the engineer.

STJ Armen: “…in the absence of a Form 4340 or an equivalent certified transcript of account, respondent has failed to demonstrate that there is any outstanding liability that would justify the issuance of a levy. But assuming that there is a liability, then in the absence of any transcript respondent has failed to demonstrate what that liability relates to. Thus, respondent’s reliance on I.R.C. section 6330(c)(2)(B) to preclude any challenge to the existence or amount of the underlying liability is not supported.” Order, at p. 1.

Remember the old first-year law school mantra. For summary judgment, marshal and lay bare your proofs.

It gets worse. “…petitioner expressed a desire for, inter alia, a collection alternative based on inability to pay. In support of such collection alternative petitioner submitted Form 433-A, Collection Information Statement. The Form 433-A was considered by a settlement officer to be sufficient to entitle petitioner to a face-to-face hearing rather than a correspondence hearing (and a face-to-face hearing was in fact conducted). Notably the Form 433-A, as completed and certified by petitioner under penalties of perjury, shows monthly living expenses in excess of monthly income. The settlement officer concluded, however, that ‘info shows taxpayer’s ability to meet necessary living expenses and make payment towards past due amount(s)’, yet the record reveals no reasoned analysis to support such conclusion.” Order, at pp. 1-2.

If a petitioner gets a face-to-face after putting in a facially compliant 433-A, it might be well for trial counsel to review the file a wee bit and possibly have a word with the SO about how she did the numbers. Maybe even editing or expanding the declaration by the SO, elaborating on her lucubrations might not have been amiss.

STJ Armen is as kind and gentle as can be, however. “Under these circumstances it cannot be said that respondent has demonstrated that no genuine issue or dispute as to material fact exists in this case and that a decision may be rendered as a matter of law.” Order, at p. 2.

But still he states that the motion is denied. Emphasis by the Court.

Lucky that James J. is pro se.