As background, see my blogpost “Slow Down, You Move Too Fast,” 9/24/13. The case of Tom Szekely, upon which I expatiated in the blogpost aforesaid, is the basis for Judge Buch bouncing IRS on summary J even when petitioner doesn’t respond to the motion.

The designated hitter is Yves Alexander Bergquist, Docket No. 20041-15L, filed 8/31/16.

But show up for trial, YA, the game isn’t over yet.

YA was trying for collection alternatives to an undisputed liability, but papers are going astray, there’s a mismatch in years under consideration, and the SO ignores the 4340 that says YA filed an extension when she claims that YA never filed.

And she gives YA three days to come up with an updated Form 433-A.

Even without YA on the field, it wasn’t going well for IRS.

“…Mr. Bergquist provided SO S a copy of the Form 4868 he filed for 2014. SO S rejected this document the same day Mr. Berquist submitted it and stated that ‘there was no valid extension to file’ in place. The question for SO S is not the quality of Mr. Berquist’s recordkeeping of his extension request or whether it is typewritten or handwritten. The question is whether there was an extension in place. SO S’s conclusion that no extension was in place is directly contradicted by the Commissioner’s own records.” Order, at p. 8. (Name omitted).

Judge Buch might have said “RYFF,” which means “Read Your File.” The “F” is for emphasis.

It gets worse for IRS.

“SO S made an initial request for an updated Form 433-A on June 16, 2015. Reviewing the evidence in a light most favorable to the nonmoving party, it wasn’t until ten days later, on June 26, 2015, that SO S explained the specific financial information she sought. She gave Mr. Bergquist only three days to submit it. Even if using the date of the initial request for an updated Form 433-A, SO S allowed only thirteen days to provide the financial information.” Order, at p. 8.

Judge Buch notes IRS’ manual. “The Commissioner’s own guidance instructs its employees to consider the circumstances of the taxpayer and the complexity and volume of information needed when setting deadlines to submit information. One such guideline states: ‘Allow at least 14 calendar days for a taxpayer to collect and provide information necessary for considering collection alternatives or issues of dispute.’ IRM pt. 8.22.5.8.1(2) (Nov. 8, 2013) (emphasis added).” Order, at p. 7.

So no summary J. Go to trial.

My takeaway- If Congress starves IRS of resources, it doesn’t hurt IRS. It hurts the taxpayers. This case should have been disposed of at Appeals.

The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Incomparable, Incontrovertible, Illustrious, Irrefragable, Ineluctable, Ineffable, Indefatigable and Implacable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes, can choose between Dorothy L. Sayers and an even more exalted author for a title for today’s essay in Estate of Michael J. Jackson,  Deceased, John G. Branca, Co- Executor And John McClain, Co- Executor,  Docket No. 17152-13, filed 8/31/16.

This is the estate of that Michael Jackson, and this is the case anent which a certain self-styled maevin expatiated under the fetching title “Jackson Estate Says ‘Beat It, IRS.’” I suggested the maevin aforesaid spoke too soon; see my blogpost “Letter to the Editor,” 11/19/13.

Well, not only didn’t IRS “beat it,” as the maevin aforesaid so elegantly put it, but they’re trying to clamp down on the Jackson’s attempt at a full-court press.

A great fan of phone-a-thons, Judge Holmes gets ‘em on the blower.

“…the Court spoke with the parties on various questions of pretrial preparation. Respondent was concerned about the potential number of petitioner’s expert witnesses. His concerns about the contents of these reports can be dealt with through motions in limine, but after discussion we agreed to require petitioner to briefly summarize the subject matter each of its experts will testify about.” Order, at p. 1.

The old trick of lining up a bunch of people outside the courtroom to look like witnesses used to work in tort trials long ago, but doesn’t play today.

But IRS, too, is playing an old game.

“Petitioner was concerned that respondent has issued subpoenas duces tecum without notice. As this division of the Court has observed in the past, this is acceptable under an unintentional divergence between our Rules and the Federal Rules of Civil Procedure. As this division of the Court has also done in the past, it will exercise its discretion to eliminate this divergence and require both parties to notify the other of any such subpoenas.” Order, at p. 1.

Judge, why should playing fair be limited to “this division of the court”? Is everywhere else in Tax Court a free-fire zone? As you yourself pointed out in another context, this can be fixed by changing the Tax Court rule to comport with FRCP. There’s no reason why the rule should be different in Tax Court than in any other Federal Court.

I was going to title this blogpost with a pun from a much more exalted source than Tax Court, but “conscience doth make cowards of us all,” as a much better writer than I put it. So y’all will have to go without what Judge Posner of Seventh Circuit termed in another context “the loquacity of, and lame attempts of humor in,” this blogpost.

So, unembellished, here is Estate of Minnie Lynn Sower, Deceased, Frank W. Sower, Jr. and John R. Sower, Co-Executors, Docket No. 32361-15, filed 8/30/16, a designated hitter from Judge Buch.

Frankie and Johnny (you could write a song…enough already!) want a Rule 91(f) stip-in of a billet doux from an AO to their attorney.

IRS says it’s “’…merely the irrelevant legal opinions, conclusions, and analysis of the Appeals Officer’ and that ‘the content of such letter represents the items actually in dispute between the parties.’” Order, at p. 1.

Who cares what the AO thought or said?

Judge Buch agrees.  “Citing Greenberg’s Express v. Commissioner, 62 T.C. 324, 327 (1974), respondent correctly observes that ‘[t]he Court does not look behind the notice of deficiency’. ” Order, at p. 1.

The past ain’t even prologue. All that counts is the SNOD, the whole SNOD and nothing but the SNOD.

OK, but the time to toss the AO’s epistolary irrelevancies is not on a Rule 91(f).

Judge Buch: “All of this distills down to an argument about relevance.

“Relevance is not an appropriate objection to a stipulation. Rule 91 is explicit in this regard: ‘Where the truth or authenticity of facts or evidence claimed to be relevant by one party is not disputed, an objection on the ground of materiality or relevance may be noted by any other party but is not to be regarded as just cause for refusal to stipulate.’ So the proper course would be to admit to the paragraph and the document and reserve a relevance objection.” Order, at pp. 1-2.

A lot of things are real and true, but may have zero probative value as to matters in dispute. If it’s agreed to be real and true, and if one side says it’s relevant but the other says “no,” it goes in, but the objectant reserves all rights to challenge on relevance.

Tax Court is on the road in Atlanta, GA, and Sam Kilpatrick, 2016 T. C. Memo. 166, filed 8/29/16, wants to deduct as ordinary-and-necessary some antiques he claims he bought for his home office, wherein he practices as a CPA.

Even if they were for home office purposes only, Sam’s antique paintings, oak chair and desk, old school clock, Minton soup tureens and crystal chandelier weren’t deducted per Section 179 and weren’t depreciated.

“…Kilpatrick claimed on his returns that the full costs of the home-office furnishings should be deducted for the years in which he paid for them.  He did not elect on his returns to treat the costs of the furnishings under section 179, which permits a taxpayer to elect to deduct the cost of certain types of tangible property as an expense for the year in which the property is first used, up to specified dollar limits.  See sec. 179(b).  Nor did Kilpatrick claim depreciation deductions on the returns for the furnishings in any amounts.  Consistent with his return position, Kilpatrick’s brief contends he is entitled to a business-expense deduction for the full costs of the furnishings.  His brief does not assert entitlement to depreciation deductions.  The IRS contends that the costs of the furnishings are personal expenses and that even if they are not, they can be deducted only through depreciation.” 2016 T. C. Memo. 166, at p. 21 (Footnote omitted, but it says if you want Section 179 largesse, you have to claim it on your return; use it or lose it).

But even if Sam now wants depreciation for his Section 155 beancount, he’s out of luck.

“Prior versions of the Internal Revenue Code had been interpreted to preclude a depreciation deduction for an asset the value of which is not reduced by the passage of time or by use.  See, e.g., Hawkins v. Commissioner, 713 F.2d 347 (8th Cir. 1983), aff’g T.C. Memo. 1982-451. This interpretation appears to us to be equally valid under the provisions of the Internal Revenue Code in effect for the years at issue.  Thus, we put the furnishings in Kilpatrick’s home office to the test of whether they would be adversely affected by the passage of time or Kilpatrick’s use of them.” 2016 T. C. Memo. 166, at pp. 22-23. (Footnote omitted, but Judge Morrison quotes Bittker & Lokken that “…the property’s value will not be affected by the taxpayer’s use and is likely to equal or exceed the taxpayer’s original cost or basis.” 2016 T. C. Memo. 166, at p 23, footnote 8).

So for tax purposes antiques keep their value, notwithstanding Antiques Roadshow’s “Vintage” series that shows the often-substantial fluctuations in the prices of antiques with the passage of time.

And woe betide Sam if he polishes the desk or refinishes the chairs; how often have I seen Leigh and Leslie Keno and their PBS colleagues destroy the dreams of antique owners whose grandmother, or, even worse, they themselves, polished away three-quarters of the value of their 1760 Rhode Island highboy or 1905 Tiffany & Co. desk lamp?

No, this is not the old chicken-vs-egg puzzle. This is the case of Ramiro A. Garcia, Docket No. 17006-16, filed 8/29/16, although there are two docket no’s, and thereby hangs the cliché.

RAG got a SNOD, so he sends in an unsigned petition and pays the sixty bucks.

Ch J L. Paige (“Iron Fist”) Marvel pounces thereon, ordering RAG to sign a ratification of said petition.

RAG sends in a new petition, disputing the same SNOD as in the one he didn’t sign, minus the sixty bucks.

Oh yes, RAG is timely with both unsigned and signed. So there’s no gameplaying by IRS when they move to dismiss the second petition (whose docket no is hereinabove set forth, as my still-in-the-Hamptons colleagues would say), unlike the case of Barry Leonard Bulakites (see my blogpost “Another Taishoff ‘Oh Please,’” 9/24/14).

But Ch J Iron Fist doesn’t go for it.

“A review of the records in the cases at docket Nos. 16937-16S and 17006-16S discloses that those two cases are duplicative in that they involve the same… deficiency notice issued to petitioner…. Accordingly, we shall deny respondent’s Motion To Close on Ground of Duplication, filed at docket No. 17006-16S…. We, however, on our own motion, will close the case at docket No. 16937-16S on the ground it is duplicative of the case at docket No. 17006-16S.” Order, at p. 1.

Looks like the properly-signed petition comes first, before the filing fee, even though the filing fee came first. Unless there’s no properly-signed petition within the magic ninety days, in which case the filing fee is enough. See my blogpost “Show Me the Money,” 11/13/13.

Clear? Thought not.

STJ Lewis (“What a Splendid Name!”) Carluzzo reprises the Michael Jackson 1971 hit heretofore sung by the now-disgraced Judge Kroupa (see my blogpost “Got to Be There,” 5/30/14), only this time the object thereof is petitioners’ lawyer, not IRS’ lawyer.

It’s Friday in August, so you know there’ll be no opinions today from the 400 Second Street, NW, Glasshouse. The hard-laboring blogger has go through about 150 (count ‘em, 150) orders to get you, my trusty and well-beloved readers, the latest hot flashes therefrom.

So here’s STJ Lew’s designated hitter, Faith Lynn Brashear & Hendel N. Thistletop, Docket No. 13189-13, filed 8/26/16.

Faith & Hen are having a tussle with their lawyer (surprise, surprise). Their trial had been twice continued before the arrival of their attorney, whom I’ll call DJ. Now both sides (IRS and Faith & Hen) want another continuance, and DJ is asking, apparently for the second time, to be relieved.

And his reason should hardly shock any of us. “According to [DJ], petitioners have not paid his fees; according to petitioners, they have, and they are now being charged additional amounts by [DJ]. The factual disputes between [DJ] and petitioners cannot be resolved upon the submissions of the parties.” Order, at pp. 1-2.

Without seeing the engagement letter (or retainer agreement, or both, if such there be), one cannot comment. For DJ’s sake, I hope he has one, signed and in a safe place. DJ isn’t a NY lawyer, so our Rule 1215 would not apply.

But the engagement (or retainer) letter is today what steel pot and flak jacket were many years ago.

End of sermon.

STJ Lew wants all parties standing tall in his courtroom in LA, so he can take evidence and sort out whether to let DJ bail. Faith & Hen designated LA as place of trial when they petitioned three years ago. But DJ’s homeport is in Stillwater, MN.

“In his various submissions, [DJ] suggests that it would be unfair to require him to travel from Minnesota to Los Angeles for the hearing at what might turn out to be his own expense. We appreciate [DJ’s] concerns, however, he must have been aware that the place of trial in this case was in Los Angeles when he entered his appearance. Furthermore, we assume that his decision to do so was informed by the procedural history of the case as of that date, and that history strongly indicated that travel to Los Angeles was likely for a hearing or trial.” Order, at p. 2.

There has to be witnesses, evidence, confrontation and cross-examination if an evidentiary hearing is to be held. STJ Lew needs evidence beyond what DJ and Lynn & Hen have provided.

No use trying for a phonecon.

“Resolution of their factual dispute, and the pending motion, must be resolved by evidentiary hearing. That being so, to the extent that [DJ’s] supplement to his second motion requests a telephonic hearing, that request is denied.” Order, at p. 2.

The roadshow must go on. DJ, got to be there.

Maybe the Indians are not taxed, but those who gamble on their reservations certainly are.  Judge Kerrigan wastes no words in hitting Amas Canzoni, 2016 T. C. Memo. 165, filed 8/25/16.

The only reason I’m blogging Amas is that the rest of today’s output from 400 Second St., NW, is comprised of two thoroughly fact-bound innocent spouseries and a no-abuse finding in a small-claimer NOD from a CDP.

Amas files the usual protester returns, to which IRS responds with SFRs. Amas had a W-2G he never gave IRS showing gambling winnings from a casino, and those show up on the SFR.

Amas claims, in addition to the usual  “State residents not subject to Federal income tax” blather, that  …the gambling winnings from the Red Wind Casino should not be included in his income because he had losses and because they came from an Indian reservation which is not part of the United States.” 2016 T. C. Memo. 165, at p. 5.

Judge Kerrigan misses an opportunity to declare that, whether or not the Indians are “Indians not taxed,” Amas is.

She expends no electrons on that subject. His claimed losses are unsubstantiated, anyway.

When the sole shareholder of a Sub S pumps in cash to run the business, and claims it’s a loan and not a (non-deductible) capital contribution, whereof repayment is return of principal and not wages or a distribution, IRS looks for the Big 13 (count ‘em, 13) indicia that a loan was intended: (1) the names given to the documents that would be evidence of the purported loans; (2) the presence or absence of a fixed maturity date; (3) the likely source of repayment; (4) the right to enforce payments; (5) participation in management as a result of the advances; (6) subordination of the purported loans to the loans of the corporation’s creditors; (7) the intent of the parties; (8) identity of interest between creditor and stockholder; (9) the ability of the corporation to obtain financing from outside sources; (10) thinness of capital structure in relation to debt; (11) use to which the funds were put; (12) the failure of the corporation to repay; and (13) the risk involved in making the transfers.

You’ll find this list, and some cases applying the factors, at page 9 of Scott Singer Installations, Inc., 2016 T. C. Memo. 161, filed 8/24/16.

Scott made loans to his wholly-owned Sub S, of which he was the only director and officer and called all the shots. And there were no notes, maturity dates or stated rates of interest.

But Scott booked all the loans as loans, and when things were good paid some of them back. Scott sold kitchen cabinets and repaired, serviced and fitted out RVs, but the 2008 meltdown seriously cramped his cashflow, and he borrowed from friends and family and used his personal credit card to run the business.

The Sub S paid for some of Scott’s personal expenses, which he claimed were repayments of the loans.

You were expecting income tax here, weren’t you? But this is a FICA-FUTA case. Was what Scott got from the Sub S wages subject to FICA-FUTA, or repayment of loans?

Judge Vasquez doesn’t go out on a limb here. “Petitioner does not object to respondent’s determination that Mr. Singer was its employee for the years at issue, and the evidence clearly supports such a finding.  As president of the company, Mr. Singer was petitioner’s only officer.  Furthermore, he performed substantial services for petitioner.  Accordingly, we find that Mr. Singer was an employee of petitioner for the years at issue.” 2016 T. C. Memo. 161, at p. 8.

So Scott is up for the FICA-FUTA, right? Just run the checklist.

Not quite.

“Rather than analyze every factor on the debt-equity checklists, we confine our discussion to those points we find most pertinent.  In our analysis we look at the relative financial status of petitioner at the time the advances were made; the financial status of petitioner at the time the advances were repaid; the relationship between Mr. Singer and petitioner; the method by which the advances were repaid; the consistency with which the advances were repaid; and the way the advances were accounted for on petitioner’s financial statements and tax returns.  After looking at all these criteria in the light of the other factors traditionally distinguishing debt from equity, particularly the intent factor, we believe Mr. Singer intended his advances to be loans and we find that his intention was reasonable for a substantial portion of the advances.  Consequently, we also find that petitioner’s repayments of those loans are valid as such and should not be characterized as wages subject to employment taxes.” 2016 T. C. Memo. 161, at pp. 10-11.

Scott always booked the loans as such, the Sub S paid back by paying Scott’s personal expenses consistently and timely, and, most importantly, the Sub S was paying Scott’s expenses even when it was running at a loss.

A creditor gets paid – win, lose or draw.  One making a capital contribution, as IRS claims Scott did, only gets paid if the operation makes money.

When the business was doing well (and it did do well before 2008), Scott had a reasonable expectation of repayment, so the loans for those years are loans. And the loan balances outstanding in the good years were greater than the amounts repaid, so no distribution.

But the post-2008 loans weren’t: Scott had little to no chance of repayment.

Scott wins.

And once again acknowledgement to James R. Monroe, Esq.  See my blogpost “When You’re Down and Out – Part Deux,” 6/28/16.

Not big dollars here, so maybe no appeal, but if I were IRS I’d go for it.

I’m sure I’d not be the only listener applauding Judge Mark V. Holmes if he joined Petula Clark, Astrud Gilberto, Frank Sinatra and Frankie Valli on youtube.com and began singing the eponymous tune above-captioned.

In default thereof, The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Illustrious, Incontrovertible, Indefatigable, Imperturbable, Ineluctable and Ineffable Foe of the Partitive Genitive, and Old China Hand, addresses his request in writing to Rosie Lawler, Docket No. 16712-13, filed 8/24/16.

Rosie wants innocent spousery, and IRS is willing to give her some, but Rosie wants the whole enchilada.

Rosie thinks Judge Holmes gave her that, but she’s confused by Tax Court’s docket squad’s somewhat arcane legal phraseology.

“The IRS reported by the end of last year that a settlement was near, because it was willing to grant her partial relief. Ms. Lawler then refused to sign a decision document, because she claimed that a previous order of the Court…somehow granted her full relief. The Court will concede that its prior order is confusing — it granted what the Docket Section titled Ms. Lawler’s ‘Motion for Leave to File Amendment to Amended Petition, as Amended Embodying the Amendment to Amended Petition, as Amended.’ But, to a trained eye, this just means that the Court was allowing Ms. Lawlor to amend her petition to ask for innocent-spouse relief. It does not mean that the Court had decided to grant her full relief.” Order, at p. 1. (Emphasis by the Court).

I’ll confess that title confused me.

OK, so does Rosie want to take the partial win, or continue to go for the gold?

Judge Holmes attempts to put that question to Rosie, but as the old chewing gum commercial put it, “she ain’t talkin’ while the flavor lasts.”

“Since earlier this year, this division has tried to set up a telephone call with Ms. Lawler to try to explain this. She has steadfastly refused to do so. The Court will therefore add her case to its next calendar in Birmingham for a status conference. If she refuses to appear to discuss her case then, the Court will invite the IRS to move to dismiss it for her failure to properly prosecute.” Order, at p. 2.

Rosie, ya should’a called the Judge. Judges, like IRS, get peevish when ignored.

As my longer-term readers know, I have a love-hate thing with continuing ed. We certainly need refreshers, especially as we have reverted to the pre-1939 annual Revenue Acts, where laws sunrise and sunset like the Bock and Harnick tune of that name.

But there’s a lot of junk CLE and CPE out there. And the overseers of the process sometimes get taken as well as the eductaees.

I understand AICPA and NASBA have enacted the following restriction on self-study CPE courses: “S9-06. Program or course expiration date. Course documentation must include an expiration date (the time by which the participant must complete the qualified assessment). For individual courses, the expiration date is no longer than one year from the date of purchase or enrollment.” The Statement on Standards for Continuing Professional Educational (CPE) Programs Revised August 2016, at p.13.

That’s all very well for CPAs. My CPE provider, which does CPE for EAs like me as well as for CPAs, dropped two of the courses for which I’d paid thirteen months ago or so, but hadn’t completed. I reminded them that the AICPA/NASBA rules don’t apply to EAs who aren’t CPAs, and neither OPR nor RPO has similar rules.

And both courses had the PATH 2015 updates in them.

Given that EAs need 72 hours’ CPE triennially, with at least 16 hours each year in the triennium, it makes sense to buy courses on sale when the area isn’t likely to change for one year (e.g., divorce, education). I hope neither OPR nor RPO blindly follows the AICPA lead.

This trend looks like the old textbook scam. Every year the authors “update” the textbook by adding a paragraph here and there, and charging a couple hundred bucks (hi Judge Holmes) for the new edition. Students who of necessity must buy or sell “used” textbooks are out of luck. And the authors, as my UK clients say, are “quids in.”

I’m not denigrating all CPE. I find that I learn every day, and a good course is well worth the time, effort and money. My provider’s AMT course was worth the price. To repeat something I said a long time ago, I agree that snoring through an in-person class, or taking an on-line test, will not of itself rid our fields of endeavor of every bad actor; but it is at least a start.

Only, while trying to improve all CPE, let’s not make it a racket.