A further innocent spousery wrinkle for you Defenders of the Innocent today, straight from the Capitol Reporting Company’s archive (and the transcript is missing pages 1 and 2, although the opinion seems complete without them), as spoken by The Great Dissenter, a/k/a The Judge Who Writes (and Talks) Like a Human Being, s/a/k/a You Know What, and Old China Hand, Judge Mark V. Holmes.

Judge Holmes turned a sympathetic ear to Rosanna G. Viray, Docket No. 21479-13, filed 4/5/16, an off-the-bencher.

IRS and Rosanna agree that the Sched C of loved-once Angel Pascua is his and only his. The dubious disallowed deductions and their consequences are his.

But the fight is over the Sched A, plus a couple credits (hi, Judge Holmes) as to which, according to IRS, Angel continued in his somewhat casual ways.

IRS claims Rosanna is pari passù, as a former law partner of mine liked to say, with Angel. Wherefore, she gets hit for the five (count ‘em, five) phonies, three on the Sched A and two education tax credits, to all of which Rosanna and IRS agree she isn’t entitled.

It’s our old chums the Section 6015 innocents.

“Under section 15(d) (sic) for purposes of allocating a deficiency, erroneous items are generally allocated to the spouses as if separate returns were filed. Ms. Viray did, in fact, file her request for relief within two years of the IRS’s collection action against her, and indicated that she had been divorced….” Order, at p. 5.

But she wants apportioned relief, and apportionment isn’t defined in the IRC, only in the Regs.

There are pages and pages of Regs on how to divvy up the hits.

“However, under 26 CFR section 1.6015-3(d)(2) (iv), ‘Deduction items unrelated to a business or investment are also generally allocated 50 percent to each spouse unless the evidence shows that a different allocation is appropriate.’

“So the presumption is that Ms. Viray would be responsible for the proportion of the overall deficiency not already allocated to Mr. Pascua, determined by the total amount of the deficiency multiplied by a fraction, the numerator of which is the net amount of erroneous items allocable to her, over the denominator of which is the net amount of all erroneous items. The algebra is more conveniently shown in section 26 CFR 1.6015-3(d)(4) (i) (A), and I refer the Commissioner to that for the inevitable math in this exercise.” Order, at p. 6.

More like arithmetic than either algebra or mathematics, Judge, but that’s OK. IRS will understand.

But Rosanna is linguistically challenged, and Judge Holmes is sympathetic.

Joint liability is a presumption, and that can be overcome. Just because the phony deductions appear on a joint return doesn’t mean both spouses are pari passù. (That’s such a cool phrase, isn’t it?). IRS must show Rosanna had actual knowledge to stick her with the whole megilla. Rosanna’s English is poor, she’s a medical tech who makes $25K a year, and IRS neither pleaded nor proved that Rosanna had a clue what games Angel was playing. And it’s actual knowledge here, not that she should have known (constructive knowledge).

So it’s 50-50 on the contested items in the deficiency.

But there’s more.

Accuracy chops (and fraud chops, even though not in play here) don’t get allocated. “…the reason for that is found in 26 CFR section 1.6015-3(d) (4)(iv)(B) that tells me that the accuracy-related penalty under section 6662 should be allocated to the spouse’s item that generated the penalty.

“That’s a long, long way of saying that since the accuracy-related penalty is attributed to all of the inaccurate items, both Mr. Pascua’s business inaccurate items and the contested Schedule A items and the unjustified credits, that the accuracy-related penalty applies to Ms. Viray’s portion of the proportionate allocation of the  overall deficiency for which I am finding her responsible.” Order, at pp. 9-10.

So what does that mean in English?

“My conclusion, in other words, is that one half of these contested erroneous items are allocable to Ms. Viray, together with half of the accuracy-related penalty. The remaining half of those contested items, as well as all those already conceded by the IRS to be allocable to Mr. Pascua, are allocable to Mr. Pascua.” Order, at p. 11.

Judge Holmes finds this to be a math problem, so he send the parties off to a Rule 155.

Please pardon the Latin pun. Though it looks like I’m showing off my attendance at a high-priced law school, the pun is relevant, as Judge Morrison forces IRS, over much objection, to fork over a bunch of documents and tax returns in Gary A. Wolens, Docket No. 10853-15, filed 4/4/16.

It’s the usual property-settlement-vs-alimony pitchers’ duel. Gary paid his loved-once Roberta in excess of £1,250K over three tax years, causing IRS to head for the exchange rate button on their i-phones and sock Gary with a $650K deficiency for the year in question.

Gary wants IRS to unload a bunch of documents from those three years, during each of which Gary was losing pounds. Some of the docs are from Gary, but the rest are from Roberta for those years.

IRS says only one year is at issue, therefore the past years are irrelevant.

Wrong, says Judge Morrison. “Tax returns for successive years often involve the same or similar tax issues. Naturally, the IRS’s files for one year may contain information that is relevant to another year. This overlap is especially possible in this case, in which the petitioner made similar annual payments in the years [X, Y and Z, Z being the year at issue]. We therefore reject respondent’s categorical relevancy argument. Respondent made no other arguments regarding this request. Therefore we will order production of these documents.” Order, at p. 2.

Next at bat is the classic Section 6103 “tax return info” riposte. Roberta isn’t a party, and the docs at issue are clearly tax return info, thus confidential and privileged accordingly.

And Gary and Roberta are long since splitsville, so no “transactional” relationship. Generally (love that word!), if taxpayers are in some kind of give-and-take or back-and-forth, the return info of a nonparty might come in, if needed to establish a defense, thus “transactional”.

Judge Morrison is too polite to do what I will now do, namely, viz., and to wit, give IRS a Taishoff “Oh Please!”

Gary claims “…the documents are permitted to be disclosed under the § 6103(h)(4)(C) exception, which permits the IRS to disclose return or return information in a tax-related judicial proceeding “if such return or return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding”. Respondent’s [IRS’s] sole argument for why this exception is not applicable is that petitioner and Roberta did not have a ‘transactional relationship’. We disagree with respondent’s argument. Petitioner and Roberta were married and divorced. There were financial aspects to this relationship. We therefore consider the relationship ‘transactional’. See Whittington v. United States, 2014 U.S. Dist. LEXIS 133163, 2014-2 U.S. Tax Cas. (CCH) ¶ 50,455, 114 A.F.T.R.2d (RIA) 6092 (W.D. Wash. 2014); Tavery v. United States, 32 F.3d 1423 (10th Cir. 1994); Christoph v. United States, 1995 U.S. Dist. LEXIS 19977, 77 A.F.T.R.2d (RIA) 809 (S.D. Ga. 1995). Respondent made no other arguments against the application of the § 6103(h)(4)(C) exception. For example, respondent did not argue that the requested documents do not ‘directly relate’ to petitioner and Roberta’s marriage and divorce. Therefore we will order production of these documents.” Order, at pp. 2-3.

The citations are there for your next brief, but watch out for the “directly relates” gambit. Try for an in camera if IRS claims that the docs do not “directly relate.” Uncle Sam can make the pants too tight as well as too long.

Judge Morrison notes in passing an interesting coincidence.  “(We note that the [X] tax-year documents are in the possession of the Department of Justice. The Department of Justice is defending a Court of Federal Claims case brought by petitioner regarding his [X] tax year. The Department of Justice’s lawyer in that case is out of the country and will not return to work until April 4, 2016.).” Order, at p. 2.

Also out of the country but returning today, April 4, 2016, from her birthday present trip to Paris is the most wonderful four-year-old Texan, accompanied by her mother, Director at a Big Four accounting firm, who is also returning to work. Welcome home, ladies!

 Off-Topic

Despite the definitive headline statement from a much more exalted source, dear old wordpress.com, the publisher of this my blog (a poor thing, but mine own), confidently tells me that the “most popular day and hour” for viewing my blog is Wednesday at 5 p.m. (local time, I suppose).

I cannot imagine why viewers flock together on Wednesday at 5 p.m. (local time), much less why they do so here. I certainly put forth no extra effort to make Wednesday a special treat, or to scintillate more than usual. It is far beyond my powers to make Tax Court, the Internal Revenue Code, or the regulations promulgated thereunder, scintillate.

This must be the ultimate special-interest blog, with a minuscule readership of hyperspecialists. Hardly a venue for those seeking amusement.

But there it is. No prize for the correct answer.

I used this phrase about IRS’ counsel before now, in my blogpost “Another Taishoff ‘Oh Please’,” 9/24/14. But instead of the truly clever and novel gambit explicated in my aforementioned blogpost, IRS’ counsel is playing a familiar variation in KSB LP, f.k.a The Harbinder S. Brar FLP VIII, LP., BPMI, Tax Matters Partner, Docket No. 24480-14, filed 4/1/16. And it’s not an April Fools’ joke.

Y’all will remember the 25 interrogatories rule, embedded in Rule 71(a).

Well, IRS’ counsel tries to submarine Br’er Brar by subparting their Branerton wishlist.

And who better to depthcharge IRS’s submarining than The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Illustrious, Industrious, Indefatigable, Incomparable, Incontrovertible, Ineluctable and Ineffable (but never Incomprehensible and always Intelligible), and Old China Hand, Judge Mark V. Holmes? And  Judge Holmes even designates this order, making life easy for your reporter.

Br’er Brar claims IRS is trying for formal discovery before informal, but that’s a nonstarter. IRS sent Br’er Brar “…a letter that looks pretty close to formal discovery to the untrained eye, but that serves as a guide to what the IRS is looking for and makes IRS counsel available for a discovery conference.” Order, at p. 1.

So obeisance has been paid to Branerton.

But IRS isn’t finished. “There are only 18 numbered interrogatories in respondent’s set, but the system is wise to the ploy of multiplying the subparts of an interrogatory to evade the limit.” Order, at pp. 1-2.

Judge Holmes cites the FRCP Rule 33 Advisory Committee report. “Parties cannot evade this presumptive limitation through the device of joining as ‘subparts’ questions that seek information about discrete separate subjects. However, a question asking about communications of a particular type should be treated as a single interrogatory even though it requests that the time, place, persons present, and contents be stated separately for each such communication.” Order, at p. 2.

Rule 71(d) saves the interrogs aimed at expert witnesses. And the FRCP Advisers seem to allow IRS to get another multiplex interrog through the door.

But Judge Holmes slams the door on one manifold interrog, and even invokes The Donald in the process.

“The real problem is number 17, a common form of interrogatory, which asks for ‘the true facts,’ identification of potential witnesses, and any relevant documents for each of the 21 requests for admission that respondent also served shortly before the discovery deadline. For the reasons that are comprehensively explained in Safeco of America v. Rawstron, 181 F.R.D. 441, 443-44 (C.D. Calif. 1998), see also Makaeff v. Trump University, LLC, 2014 WL 3490356 at *4 – *6 (S.D. Calif. 2014), this is an interrogatory that causes respondent’s total to exceed 25 by a considerable margin.” Order, at p. 2.

So the protective order Br’er Brar seeks is denied, except for the invidious Number 17, which is out.

Takeaway–Practitioner, watch out for those multifarious multiplex interrogatories. And tell IRS Judge Holmes sent you.

It’s been a lot of years since I shouted that word into the wind-blown sand. I have a lot more fat and a lot more wrinkles now. Those green fatigues with the 33 waist wouldn’t fit within a mile. And I know I couldn’t carry an M-60 and two boxes of 7.62 FMJ one-handed up a twenty-foot ladder in 90 degree heat any more.

But I remember striking out the days on the flimsy calendar. And the gleeful cry of “Short!” on those summer nights, when I got within range of those magic letters “ETS.”

At the end of eternity, when the mimeograph finally spewed forth the sacred papers that “reflect the star that guides us toward salvation,” I had another phrase, “FIGMO!” upon which I cannot enlarge in a blog meant for reading around the family dinner table.

But I’m sure Ch J Michael B (“Iron Mike”) Thornton knows just how I, and some half-million or more of my brothers and sisters, felt, when he saw the press release back on 2/29/2016.

If you forgot already, see my blogpost “My Condolences,” 2/29/16.

Ch J Iron Mike is short; he also qualifies for the “FIGMO” t-shirt.

So let us all be patient and understanding if he gets a wee bit testy with those who ignore Tax Court Rules of Practice and Procedure, and abbreviates his usual terse style even further, to the point of snapping.

First is Angela Lynn Goodwin, Docket No. 17516-15, filed 4/1/16. Angie wants Ch J Iron Mike “…’to use an optional filing method and * * * [place] my personal information under seal.’ Order, at p. 1.

Obviously, having seen Ch J Iron Mike toiling away recharacterizing, advising, directing, changing addresses, telling clerks to mail out forms, and generally cleaning up the Tax Court docket, Angie reckoned this was no biggie, right?

Ch J Iron Mike is short.  “Contrary to petitioner’s suggestion, the responsibility to redact a filing rests with the party making the filing. See Tax Court Rule 60(g).” Order, at p. 1.

But as the wee-small-hours TV pitchpeople say, “Wait! There’s more!”

Nikita V. Toulinov, Docket No. 23403-15, filed 4/1/16. Nik wants spouse Anna B. on board for this throwdown, and files a Second Amended Petition and a further Amendment thereto in aid thereof.

Nik files electronically. Now ordinarily, Ch J Iron Mike just gives someone like Nik the “blue ink” order, and sends them on their way.

Not today. Ch J Iron Mike unloads: “Anna B. Efimenko shall lodge with the Court a PAPER [sic] Ratification of Second Amended Petition, bearing Anna B. Efimenko’s original signature (preferably in blue ink), in which she states, if such be the case, that she has read the Seconded Amended Petition filed March 15, 2016, and ratifies and affirms the filing of said document. Petitioner and Anna B. Efimenko should note that the Ratification of Second Amended Petition may NOT [sic] be filed electronically.” Order, at p. 1.

Tough, huh? Notwithstanding, Ch J Iron Mike is looking forward to The Magic Day, and what it will bring.

Last but not least, Foundation for Harmony and Happiness, Inc., Docket No. 17664-15X, filed 4/1/16. Back on 2/1/16, before he got his orders, Ch J Iron Mike tossed the foundation for want of jurisdiction. Now they’re back on a Rule 162 vacate or revise, and Ch J Iron Mike tells IRS to respond.

After all, Tax Court, and especially Ch J Iron Mike after his years of unrequited toil, definitely needs some peace and harmony.