Archive for February, 2016|Monthly archive page


In Uncategorized on 02/18/2016 at 15:18

That’s Ch J Michael B (“Iron Mike”) Thornton’s lesson for an attorney I’ll call JA, in Jacqueline L. Wingfield, Docket No. 21603-15, filed 2/18/16.

The case started when JA sent in the petition, which JA had signed, but didn’t send an entry of appearance. So Ch J Iron Mike ordered Jacky to sign a ratification (in blue ink, of course), deeming JA unauthorized to sign the petition without an entry of appearance.

JA sent in her entry of appearance, but Ch J Iron Mike is true to his moniker.

“Nonetheless, despite the foregoing efforts, a jurisdictional problem remains. Because this case was initially required to be considered as filed pro se, the signature of counsel on the entry of appearance is insufficient to ratify the original petition. Rather, in order for this Court to acquire jurisdiction to consider this case, it remains necessary to obtain a Ratification of Petition bearing petitioner’s original signature and ratifying the petition previously filed.” Order, at p. 1.

Jacky, dig up that old blue pen.

And practitioners, make sure you have a spare box of blue pens on hand.


In Uncategorized on 02/17/2016 at 16:30

Berkshire Resources, LLC, the TMP of Berkshire 2006-5, LLP, was dead, to begin with. The late Berkshire Resources was administratively dissolved by the State of Wisconsin and the SEC was suing it for fraud. IRS issued a FPAA disallowing deductions, but the late Berkshire Resources, LLC, being late, did nothing. So it’s time for the notice partners and the five-percenters to step up.

Carl F. Hattler, 2016 T. C. Memo. 25, filed 2/17/16, was a notice partner in Berkshire 2006-5, LLP, (see Section 6223 for more about how one gets to be a notice partner). He jumps in after Day 90, but after Day 150, so he’s out. His petition is a day late, and he’s more than a dollar short.

Carl F. says Berkshire 2006-5, LLP, had no address; it too was dead. IRS should have known this. IRS says, “So what?” IRS sent the FPAA to the address shown on last tax return. TEFRA doesn’t follow the “last known address” mailing-of-deficiency rules. I’ve blogged this before. There are specific requirements for the notice the partnership (or anyone acting on its behalf) must give to IRS, and where to give it. Nobody did.

Carl F. says the FPAA is invalid because the late Berkshire Resources was dead. Wrong, says Judge Buch. “Even assuming that Berkshire Resources was no longer the TMP because it had been administratively dissolved, the Commissioner satisfied the notice requirement under section 6223(a) because the generic FPAAs mailed to the ‘Tax Matters Partner’ at the partnerships’ addresses are valid.” 2016 T. C. Memo. 25, at p. 8.

Carl F. claims the FPAA is invalid because IRS didn’t choose a new TMP. Wrong again, Carl F. “The Commissioner’s authority to select a TMP is very limited. First, the partnership must not have designated a TMP or the TMP’s authority must have terminated. Then, the TMP is the general partner with the largest profits interest by operation of law. Only if that test is ‘impracticable to apply’ can the Commissioner select a TMP. And in any event, there is simply nothing in section 6231(a)(7) that requires the Commissioner to select a TMP.” 2016 T. C. Memo. 25, at pp. 8-9. (Footnotes omitted).

Anyway, Carl F. got the notice partner’s notices of the FPAA in time for him to petition timely. That he was a day late in filing is his problem.

And Rule 245(c) doesn’t help Carl F. That applies only to intervention once jurisdiction has been established by petitioner; it can’t create jurisdiction where there wasn’t any.

Footnote to the foregoing: Since the Revenue Act of 2015 (known to some who like cutesy acronyms as the Protecting Americans from Tax Hikes Act) has eliminated TEFRA, with its concomitant FPAAs, TMPs, notice partners and five-percenters, the foregoing appears as a matter of record.



In Uncategorized on 02/16/2016 at 15:43

Earlier today I blogged the failure of a transferee to win the SOL gambit. See my blogpost “SOL on SOL,” 2/16/16.

Here the IRS has the same problem.

It’s a designated hitter from The Judge With a Heart, STJ Armen, Craig Leyon Blocker, Docket No. 5794-15, filed 2/16/16.

Craig Leyon raises SOL in his petition for the two years at issue. IRS counters with motion for partial summary J, trying to KO Craig Leyon’s SOL defense.

I won’t name IRS’ counsel.

STJ Armen will address his defective pleadings.

“Notably, in his motion respondent does not address the taxable year 2012 even though the Petition appears to raise a limitations issue as to that year and even though respondent included affirmative allegations in his Answer expressly addressing such issue. Further, respondent did not attach as an exhibit to his motion proof of mailing of a notice of deficiency, notwithstanding the fact that petitioner raised an issue regarding the mailing of such notice in his Reply. Finally, respondent did not attach as exhibits to his motion copies of petitioner’s income tax returns for the years in issue or otherwise address whether petitioner may be a taxpayer who keeps his accounts and who files his returns on other than a calendar-year basis.” Order, at pp. 2-3.

Craig Leyon is pro se, and usually IRS summary J motions against self-representeds are walkovers.

Not today. Motion denied with prejudice. STJ Armen has no heart for sloppy papers.


In Uncategorized on 02/16/2016 at 14:49

Or, Maybe Somebody Actually Reads This Blog

Ch J Michael B (“Iron Mike”) Thornton has a thankless job. He has to deal with hundreds of soul-killing orders, keep the Glasshouse administrative wheels turning but not spinning, and clean up typos.

Well, I spotted a typo last week, and it was a real conversation-stopper, as The Girl of My Dreams (s/a/k/a Nana to two wonderful little girls) is wont to say.

See my blogpost “A Date,” 2/10/16, wherein I discussed the impact of a “conversation easement” [sic] on the New York Environmental Conservation Law.

Well, Ch J Iron Mike puts Judge Marvel right today in Ten Twenty Six Investors, Douglas Oliver, Tax Matters Partner, Docket No. 29483-14, filed 2/16/16.

“ORDERED that the last sentence beginning on page 2 of the Court’s Order, dated February 9, 2016, is amended to read, ‘We have previously held, pursuant to N.Y. Envtl. Conserv. Law sec. 49-0305(4), that a conservation easement is not valid in New York until the instrument creating the easement is recorded.’ In all other respects, the Court’s Order remains in full force and effect.” Order, at p. 1.

Well now, as a former copy editor, I’m glad somebody reads this blog.

And now we don’t have to worry about talking over one another.


In Uncategorized on 02/16/2016 at 14:18

And IRS Doesn’t Even Have To Try

Sounds like another Midco (Notice 2001-16, 2001-1 C.B. 730, as modified by Notice 2008-20, IRB 2008-6, 2/11/2008), and Judge Foley isn’t buying the SOL ploy. As for “chase the transferor,” that gets even less traction.

The case is Estate of Janina M. Bowey, Deceased, David Hinshaw and Douglas Mack, Co-Executors, Docket No. 1045-13, filed 2/16/16.

There’s a heavy paper trail, as Dave and Doug seek summary J and partial summary J on behalf of the late Janina, whose wholly-owned C Corp was holding $1.4 million in cash, a hefty promissory note from the late Janina, and $1040 in prepaid tax expenses (don’cha love that number?). Unhappily, the late Janina’s C Corp owed $468K in tax.

So the late Janina uploaded all her stock to an outfit called MNA Holdings, LLC, in exchange for $1.248 million in cash, payoff of the late Janina’s six-figure note, and a promise to pay the $468K in tax.

Sound familiar?

Dave and Doug argue that IRS blew the Illinois Fraudulent Transfer Act SOL.

Nonstarter. “The period of limitations for assessment relating to transferee liability is determined by section 6901 (i.e., generally ‘within 1 year after the expiration of the period of limitation for assessment against the transferor’), not state law. See sec. 6901(c); Bresson v. Commissioner, 111 T.C. 172, 190 (1998), aff’d, 213 F.3d 1173 (9th Cir. 2000).” Order, at p. 2.

And chase-the-transferor gets nowhere just as fast. “The procedural elements of transferee liability are determined pursuant to section 6901, while the substantive elements are determined by state law. See Commissioner v. Stern, 357 U.S. 39, 42-45 (1958). Whether petitioner’s liability is contingent on respondent attempting to collect the tax from any other person, is a substantive question determined by state law. See Hagaman v. Commissioner, 100 T.C. 180, 183-184 (1993). The Illinois Uniform Fraudulent Transfer Act does not require a reasonable collection effort from respondent before asserting transferee liability against petitioner. M 740 ILCS section 160/1 et seq. Accordingly, respondent was not required to attempt to collect [C Corp]’s tax liability from MNA Holdings.” Order, at p. 2.

So no summary J for Dave and Doug. And Judge Foley sends them back to general docket.

Probably that’s a long walk.


In Uncategorized on 02/15/2016 at 11:27

A fictional old-time lawyer complained about Congress making folks “be born again on a Monday.”

For my readers in “strondes afar remote,” today is such a Monday, a public holiday in these United States, when government offices and courts are closed.

Thus there is no enlightenment from this quarter today. Be back tomorrow.


In Uncategorized on 02/12/2016 at 16:50

The 1908 British music hall song echoes through Tax Court today, as Thomas F. Kelly, Esq., strives mightily to undo the tax lien filed against his client, Gregory P. McGuckin, Docket No. 8185-15L, filed 2/12/16. STJ Armen, The Judge With a Heart, may not have seen Mr Kelly, but he has heard from him. The result is not gratifying.

Greg McG filed an OIC, but got bounced. He didn’t petition for a CAP, but he did get an NFTL. Mr Kelly, denominated by STJ Armen as a “POA” (which is a piece of paper, Judge; the party who grants the POA is the “taxpayer,” and the party receiving powers thereunder is the “representative”; see Form 2848), claims he should have gotten the denial letter from OIC Unit, as his principal’s timely-filed POA said he should get correspondence. So he offers no alternatives, even though OIC Unit decided Greg McG could do an IA and pay in full thereby.

“Mr. Kelly claimed that in accordance with Form 2848, the IRS was required to send him a copy of the…OIC rejection letter but failed to do so. Mr. Kelly further claimed that if he had received it, he would have timely appealed the denial of the OIC, during which appeal, Mr. Kelly claimed, the IRS would have been prohibited under its Internal Revenue Manual (IRM) from filing the NFTL. Mr. Kelly did not dispute petitioner’s underlying liability or that petitioner received the OIC denial letter in time to file an appeal.” Order, at p. 2.

Well, the SO noted the record showed that a copy of the letter had been mailed to Mr Kelly at his office address. And the IRM did not prohibit filing a NFTL while an OIC was being reviewed. And while IRS can withdraw a NFTL, it doesn’t have to, and the four (count ‘em, four) magic criteria (premature, or otherwise not in accordance with established procedures, or will facilitate collection, or in best interests of taxpayer and the fisc) don’t apply here. And even if all four did, IRS doesn’t have to, and Tax Court can’t make them.

“A Federal tax lien arises automatically after notice and demand for an assessed tax liability is not paid. The record in this case shows that the tax liabilities for the years at issue were all assessed prior to August 26, 2013. Although the lien exists as a matter of law, to ensure its priority with relation to other creditors, respondent is authorized to file a NFTL. There is no legal authority that restrains respondent from filing an NFTL until after an OIC and appeal is concluded. Accordingly, respondent was within its authority to file a NFTL in this case well before it actually did so….” Order, at p. 3. (Citations omitted; but I can’t tell the significance of the August 26, 2013 date; the NFTL wasn’t sent until September 30, 2014. And Greg McG submitted his OIC on August 12, 2013. So what gives?).

Howbeit, the IRM isn’t law and gives taxpayers no rights. And the Regs give IRS the option of sending bounces of OIC either to taxpayer or representative; see Reg. 301.7122-1(f)(1). Greg McG got the bounce timely and could have filed a CAP. Neither he nor Mr Kelly had the right to stall a NFTL while he did so.

Summary J for IRS.


In Uncategorized on 02/12/2016 at 16:11

Even If It Didn’t Work

I can understand counsel getting really tired of a crafty adversary, and trying to torpedo the elusive foe. And, without naming IRS counsel, I want to reward her ingenuity with a Taishoff “nice move” (which is the only reward she will get, I fear, as Judge Wherry isn’t buying her inventive maneuver).

The case is Derringer Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al., Docket No. 20872-07, filed 2/12/16. And if the cast of characters seems familiar, yes, we’re back in Mr Rogers’ neighborhood. And this is yet another iteration (or reiteration) of the DADs deals Mr Rogers flogged far and wide, the blowing-up of which provided much copy for this blogger and much work for IRS.

So inventive IRS counsel filed a Motion for Order to Show Cause Why Judgment Should Not Be Entered Against Petitioner on the Basis of a Previously Decided Case, citing to one of the many blow-ups of the phony partnerships that married big gains to distressed Brazilian debt, to step up basis and create a loss. IRS counsel wants a finding that the partnership had no basis in the Brazilian junk, but they do have a 40% overvaluation chop.

Derringer and its adherents claim their case is different, but Judge Wherry is dubious about the alleged factual dissimilarities.

He isn’t dubious about IRS counsel’s ingenious but flawed attempt to sidestep Rule 121.

“…in Tax Court litigation, as so often under the tax law, form matters. Where no material fact is genuinely in dispute, this Court’s rules provide a mechanism by which a party that believes the governing law, when applied to those undisputed material facts, compels a decision in its favor, may seek judgment as a matter of law: a motion for summary judgment. See Rule 121. On a motion for summary judgment, the moving party has the burden of showing the absence of a genuine issue as to any material fact, and ‘all doubts as to the existence of an issue of material fact must be resolved against the movant[].’ Electronic Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002) (citing Adickes v. Kress & Co., 398 U.S. 144, 157 (1970), Dreher v. Sielaff, 636 F.2d 1141, 1143 n.4 (7th Cir. 1980), and Kroh v. Commissioner, 98 T.C. 383, 390 (1992)). By seeking a show-cause order, respondent effectively seeks to turn the tables. Rather than assume the burden of showing why judgment should be entered, respondent would impose on petitioner the burden of showing why it should not be entered.” Order, at pp. 2-3.

So make the motion, counselor. And may the Force be with you.



In Uncategorized on 02/12/2016 at 15:39

The Model Rules of Professional Conduct of the American Bar Association, that is, which Model Rules govern Tax Court practitioners. I wish to name the scrupulous IRS attorney who adheres to the Rules, Brian J. Bilheimer, Esq.

Mr Bilheimer is thwarted in his attempts to move along the case of Teodulo C. & Dolores Villarreal, et al., Docket No. 26030-10L, filed 2/12/16, because of the nonresponsiveness of Teo’s and Dolores’ counsel (whom I will not name). Mr Bilheimer correctly cites ABAMRPC 4.2, which provides that counsel for one side cannot communicate directly with parties represented by counsel absent that counsel’s permission.

Practice tip- Always get it in writing.

Teo’s and Dolores’ counsel so far failed to respond to a motion to amend caption, and to an order to file a status report.

Judge Ruwe tosses the unresponsive counsel, schedules a hearing on the motion to change the caption and a motion by IRS for a continuance, and sends Teo and Dolores all the papers that their counsel got.

Exactly what they’re to do with them at this point is a good question, but at least Judge Ruwe didn’t direct Mr Bilheimer to discuss it with them. See my blogpost “Assigned Counsel? – Part Deux.”


In Uncategorized on 02/11/2016 at 17:25

No, this is not about political endorsements. My political views are expressed elsewhere. This little excursus deals with receiving a NOD from a CDP, and when to petition therefrom.

This is the story of Isaiah Bongam, 146 T. C. 4, filed 2/11/16, and the gaps in the IRC that escalate Isaiah from humble petitioner to star of a full-dress T. C.

Isaiah’s last known address was always in Bowie, MD. It was there that the NFTL arrived, Isaiah asked for a CDP but put a DC address on his request. He got the CDP, but the NOD bounced him.

Then the NOD itself bounced, as the NOD sent to the DC address was returned as undeliverable. Back went the NOD to IRS in Memphis, which in turn remailed the NOD to Bowie, MD, where it arrived without prejudicial delay, and in time for Isaiah to petition timely, which he claims he did.

Isaiah claims he lived in DC at his daughter’s house, but for tax purposes he always used Bowie, MD.

Now Isaiah didn’t petition within the magic thirty (30) days from the date set forth in the NOD, but he did within the thirty (30) days he both received the remailed NOD and the date Memphis remailed it to him.

IRS claims that’s not good enough. The NOD wasn’t mailed to Isaiah’s last known address to begin with.

Now while the IRC provides specific means for sending a NFTL, all it says about what happens after a CDP is that Appeals must make a determination. The IRC says nothing about a written determination; perhaps a heliograph or smoke signal might work, but that’s not this case.

The caselaw says that the same means for sending a SNOD in a deficiency case should do for a NOD from a CDP. And the last-known-address rule is a safe harbor for IRS, whether or not the addressee actually receives the SNOD.

“However, a notice of deficiency need not be sent to the taxpayer’s last known address in order to be valid. Rather, the notice will be valid if it is actually received by the taxpayer ‘without prejudicial delay,’ that is, generally in time to file a timely petition in this Court. Actual notice from the IRS to a taxpayer, whether transmitted by certified mail, ordinary mail, or hand delivery, will suffice…

“Section 6330(d) does not require that the Commissioner send a notice of determination by certified mail to the taxpayer’s last known address or that he deliver it in any particular way. In this respect, section 6330(d)(1) stands in sharp contrast to sections 6320(a) and 6330(a), which specify three permissible modes of notifying the taxpayer of liens and levies, and other Code provisions that mandate mailing to the taxpayer’s ‘last known address. ‘  If Congress had intended that a similar restriction would govern our review of CDP cases, Congress could easily have so specified. Instead, section 6330(d)(1) provides that this Court shall have jurisdiction if a taxpayer files a petition ‘within 30 days of a determination.’ This language does not limit the manner in which the IRS may notify the taxpayer that a determination has been made.” 146 T. C. 4, at pp.8-9. (Citations omitted).

Yes, IRS, the first mailing was defective. But the remailing gave Isaiah enough time to send in a timely petition, both from the date of remailing and the date Isaiah received the remailed NOD.

The date on the NOD doesn’t control; the mailing date does. There’s no reason to stray from the SNOD rules, or the innocent spouse rules or the whistleblower rules.

So Isaiah is in.

And if you wonder why IRS wants to oust Tax Court of jurisdiction, so do I. Maybe it’s the $772K in TFRPs that Isaiah is fighting about.