See my blogpost “Assigned Counsel? – Part Deux,” 1/28/16. Not to be outdone by ex-Ch J Michael B (“Iron Mike”) Thornton, who assigned IRS’ counsel to give legal advice to an unrepresented petitioner in a litigated matter (Rule 4.3 of the Rules of Professional Conduct, anyone?), Judge James S. (“Big Jim”) Halpern orders the attorney for the deceased petitioner, who only wants to bail, to “confer as to the status of this case.”

The case is Carl H. Freyer, Docket No. 25869-15, filed 9/15/16. And it’s a designated hitter.

Thanks, Judge, it’s been a long day.

Carl is gone, but spouse and adult son survive. Carl’s attorney, whom I’ll call Bill B, just wants out. Although Bill B thinks there may be a will naming spouse as executor, he thinks it hasn’t been offered for probate.

Judge Halpern says to Bill B, confer with IRS, spouse and son: “…at a reasonable date and time but no later than October 14, 2016, [spouse], [son], [Bill B], and respondent [IRS] shall confer at to the status of this case, including (1) whether decedent Carl H. Freyer’s estate has been or will be probated, (2) if decedent’s estate is being probated, whether an executor, administrator, or other duly appointed fiduciary has been appointed for decedent’s estate by a court of competent jurisdiction, (3) if so, the name and address of such duly appointed executor, administrator or other fiduciary for decedent’s estate, and (4) if decedent’s estate has not been or will not be probated, the names and addresses of decedent’s heirs at law.” Order, at p. 2.

And Bill B and IRS’ counsel to make report (preferably joint).

Now who is advising spouse and son? Because you know the first question spouse or son will ask is “Should we probate the will?” And the next is “Should we fight this case?”

Who answers these questions, thereby providing legal advice to wife or son or both?

Bill B? I suggest he can’t, as his deceased client’s interests may not be congruent with those of spouse or son or both of them. And Bill B may have client confidences he can’t reveal, and as to which his deceased client can no longer waive privilege. Moreover, neither spouse nor son has retained Bill B. Even if he could represent either, he cannot represent both.

IRS’ counsel? S/he has a worse conflict, as IRS, spouse and son are in an actually adversarial position.

And Judge Big Jim has nothing to say about letting Bill B out.

Takeaway—Counsel, my condolences if your client dies post-petition. For several reasons.

And this is what sinks the Barnhart guys when they claim they’re running the business just like they used to when they got a couple “no change” audits (hi, Judge Holmes).

This is Judge Cohen’s roundup, Barnhart Ranch, Co., et al., 2016 T. C. Memo. 170, filed 9/14/16.

Co was a C Corp that the Barnharts claimed was just an agent of theirs. So therefore there was no double taxation of their cattle-dealing profits. And they also claimed they kept on using their joint-interest accounting that carried over from their oil-drilling days.

Joint-interest billing is a method used on oil and gas exploration and production, but the Barnharts took Co out of everything but cattle.

Co ran the whole cattle operation, buying, selling, paying wages and payroll taxes. Co     “… bought and sold cattle under its own name during the years in issue. It also, in its own name and carrying out cattle operation business, held a bank account, purchased and held titles to vehicles, leased ranch property, and held ranch and workers’ compensation and employer’s liability insurance policies. [Co] paid for the services of a ranch manager and ranch hands, and it handled their employment tax and income tax documents.  Any control over these employees by the Barnhart brothers would presumably have been exercised by them not as individuals but in their roles as officers of [Co], and the record does not show otherwise.” 2016 T. C. Memo. 170, at p. 16.

And the Barnharts held out Co as an owner, despite claiming that everyone knew they were dealing with the Barnharts. OK, but if you choose an entity to conduct your business, you’re stuck with it.

The Barnharts want to avoid the chops by claiming they relied in good faith on the “no changes” of prior years. “A failure by the Commissioner to disallow similar deductions in a prior year’s audit of a taxpayer’s return may be a factor to be considered with respect to the imposition of the accuracy-related penalty.  See Stewart v. Commissioner, T.C. Memo. 2002-199, slip op. at 10; Sheehy v. Commissioner, T.C. Memo. 1996-334, slip op. at 6.  The 1995 audit of [Co’s] 1994 return, however, was conducted with respect to a taxpayer other than petitioners and included other businesses along with the cattle operation.  While the evidence suggests that the cattle operation was more or less run in a traditional manner over the years, they do not show that [Co’s predecessor]. and [Co] performed tax reporting in the same way.” 2016 T. C. Memo. 170, at p. 35.

Anyway, their accountant said she just took over the existing system. And the Barnharts are savvy businessmen, who could well have figured out that a Sub S would serve their turn better than a C Corp, or could have gone to competent professionals who would have told them so.

So Co is stuck with no hat and all cattle.

If You Have Equity in Assets, You Must Pay Your Taxes

Judge Nega is sustaining IRS’s NFTL on the home in the sylvan wilderness of Maine in Harry Keller Heyl, Jr., Docket No. 5280-15L, filed 9/13/16.

And this notwithstanding HKH’s plea that he wants “…to utilize the Maine property as a home in retirement and asserts that maintaining and keeping the property free from encumbrances will be ‘the difference between misery and subsistence’ in retirement.” Order, at p. 4.

So HKH wants a partial payment installment agreement (PPIA). But he doesn’t get it from Appeals, and Judge Nega isn’t giving it up either.

“The SO examined petitioner’s PPIA proposal in light of these concerns. The SO noted petitioner’s self-reported ownership of an asset–real property–with a fair market value sufficient to satisfy the liabilities at issue. The SO observed that petitioner lives in Minnesota, but the real property is an unoccupied home located in Maine that does not serve as petitioner’s primary residence. As a result, the IRM guided the SO to decline petitioner’s proposed PPIA, absent a showing of economic hardship. While petitioner presents a legitimate view of his possible future needs, he has failed to allege any fact indicative of economic hardship. See Dostal v. Commissioner, T.C. Memo. 2005-264 at 28 (a delay in retirement plans does not amount to economic hardship); McClanahan v. Commissioner, T.C. Memo. 2008-161 (surrender of life insurance policy for cash value did not amount to imposition of economic hardship upon petitioners ‘in their older years’).” Order, at pp. 7-8.

And HKH wasn’t telling a particularly compelling tale. “Petitioner failed to allege any specific fact suggesting the sale or leveraging of the unoccupied Maine home will alter his income expense estimates and render him unable to meet his current necessary living expenses. Instead petitioner solely expresses concern with his financial status upon entering retirement. Petitioner argued that his future retirement will bring a meager social security check, and that living rent or mortgage free upon retirement may make the difference between ‘misery and subsistence.’ We also note that petitioner’s filing status is single and he has no dependents. Petitioner is in his early sixties and operates a sole proprietorship. In addition, he does not allege any disability or extraordinary circumstance prevents him from working, or continuing to operate his business. Petitioner argued that the economic downturn impeded his earning potential, but expresses a belief that his ‘piece of the economy won’t be weak forever.’

“Petitioner has not set forth any specific fact, alerted the Court to any fact in the administrative record, nor advanced any argument that would allow us to conclude that the Appeals Office deviated from published guidelines or otherwise erred in its determination.” Order, at p. 8.

BTW, HKH has a string of seven (count ‘em, seven) years of unpaid taxes. Tax Court has many a time and oft rejected OIC’s from habitual nonpayers.

So the NOD is sustained, and “between misery and subsistence falls the shadow”.

Well, answering Scotland’s Greatest, Judge Paris says it’s not honest poverty, when confronting Ronald W. White, 2016 T. C. Memo 167, filed 9/12/16.

Rev Ron is founder and pastor of the World Evangelical Outreach Church (WEOC) in Defuniak Springs, FL, and has been these past thirty years. Rev Ron “…ministered from the pulpit and at nursing homes, helped build churches on foreign soil, established a feeding program for children, and supported widows and orphanages.” 2016 T. C. Memo. 167, at p. 3.

Rev Ron convinced his board of advisors to restructure the church as a corporation sole under the name and style of “The Office of Presiding Head Apostle, of Ronald Wayne White,” which claimed to be a domestic Nevada corporation, although all its operations were based in Florida.

And Rev Ron signed a Vow of Poverty. And didn’t file returns or pay tax on better than $300K he got over a four-year stretch.

If this sounds like a mail-order dodge from fifteen years ago, see my blogposts “Not Reasonable But Not Negligent,” 8/1/13, where Judge Paris dealt with the same scenario, and “The End of An Affair,” 8/26/15.

Same story here. “Petitioner acknowledges that WEOC or its related entities made payments on his behalf for his personal expenses. Petitioner’s primary contention is that his vow of poverty insulates him from being taxed on the compensation he received for his services to WEOC.” 2016 T. C. Memo. 167, at p. 6.

And even though all payments went through the church bank account, Rev Ron was sole signatory thereon.

But Rev Ron claims he got the money from the church, not from third parties, unlike all the cases that theretofore nailed these dodges.

Judge Paris: “Petitioner’s argument, however, is misguided. The Court has previously noted that cases in which a taxpayer receives money from a third party (a party other than the religious order) and remits that money to the religious order in accordance with his vow of poverty are factually distinguishable from cases in which a taxpayer executes a vow of poverty to a religious order and receives money directly from the religious order.” 2016 T. C. Memo. 167, at p. 8. (Emphasis by the Court) (Citations omitted).

Rev Ron wants to rely on a 1919 Treasury pronouncement, but that was superseded in 1977. The rule is that whatever the impoverished gets must be given back to the church, leaving the impoverished only the minimum necessary to survive.

Rev Ron kept it all.

And Rev Ron didn’t file a Section 1402(e)(3) exemption certificate, so he owes SE. The rule is strict; the clergyperson must file timely.

Looks like Scotland’s Greatest has the last word.

The first Friday after Labor Day appears to be a new Tax Court festival, as we have appearances by Alvin Sheldon Kanofsky (see my blogposts “Two Old Rounders,” 7/31/14, “Ten’ll Get Ya Twenty,” 2/26/15, and “Footnotes,” 6/10/16); Alfred Joe Izen, Jr., (see my blogposts “The $2000 Misunderstanding,” 6/12/12, and  “Try, Try Again,” 1/16/13);  and Carol Diane Gray (see my blogposts “Too Late But Still Timely,” 3/28/12, “Too Late and Not Timely,” 4/25/13, and “Fan Mail? – Not Exactly,” 6/27/14).

But here’s that Obliging Jurist, Judge David Gustafson, who watches, like Keats’s astronomer, new rounders swim into his (and my) ken.

Stand by for some “somber reasoning and copious citation of precedent” as Frances M. Scott and Galen L. Amerson, Docket No. 26717-14, filed 9/9/16, debut in a designated hitter.

Fran and Galen want a jury trial in Tax Court. Wrong, the US Constitution says only at common law, and suits against the sovereign, i.e., the U.S. of A., were barred at common law, and the Supremes so held in 1855. Nobody told you to sue in Tax Court, guys. If you want a jury trial, you can get a jury trial in USDC if you pay up, apply for a refund, don’t get it and sue timely.

Fran and Galen claim all judges have a conflict of interest, because the US pays them. Well, then, the Rule of Necessity says Judge Gustafson keeps the case.  Otherwise, both parties would have no place to try their case.

Next is the old Bill Benson number that Sixteenth Amendment wasn’t ratified.

Judge Gustafson: “Petitioners must have noticed that in the intervening 30 years, income tax returns have continued to be required and filed, and income taxes have continued to be paid by taxpayers, collected by the IRS, and enforced by the courts. In fact, litigation involving Mr. Benson himself has shown his theory to be without merit.” Order, at pp. 2-3.

Seventh Circuit bounced Bill’s criminal appeal, when he argued this one, back in 1991.

Fran and Galen aren’t done yet. They want their petition dismissed.

The problem with that, of course, is Section 7459(d) says OK, then you owe IRS whatever they demanded. Obliging Judge Gustafson isn’t that obliging. But he has some good advice for Fran and Galen.

“Petitioners are urged to forego the frivolous arguments advanced in their motion to dismiss and, instead, to prepare to litigate valid issues at the trial of this case.” Order, at p. 3.

Go try the case, guys.

Oh yes, don’t forget the Section 6673 $25K frivolity chop.

Judge Gustafson isn’t through for the day. He still has Rodney W. Gattie, Docket No. 7077-15, filed 9/9/16, which isn’t designated but still fits today’s bill. Rod did answer IRS’ Rule 91(f) motion, and Judge Gustafson lets Rod off the hook. “We use Rule 91(f) procedures not to adjudicate the reasonableness of the parties’ positions nor to prejudge their competing contentions, so we will discharge our order to show cause.” Order, at p. 1. Asked and answered, as I said in my blogpost of that name back on 12/24/13.

But Rod may be gameplaying. “However, we observe that Mr. Gattie seems to be contending that amounts he received as reported on Forms 1099 are not income to him because they were not received by him in connection with ‘the function of a public office’. His contention appears to rely on section 7701(a)(6) (providing that ‘[t]he term “trade or business” includes the performance of the functions of a public office’), and appears to assume that ‘includes’ means ‘includes only’–an assumption flatly contradicted by section 7701(c) (‘The terms “includes” and ”including” when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined’). This contention is frivolous. If Mr. Gattie makes such a contention at trial in this case, he should not expect to receive from the Court a lengthy opinion refuting it.” Order, at pp. 2-3.

Expressio unius exclusio alterius, as those of us who attended high-priced law schools say, is off the table here.

Rod, Judge Morrison warned you a year ago in an off-the-bencher not to try this stuff.

Judge James S. (“Big Jim”) Halpern takes as his text for today’s designated hitter the words of Bert Bacharach’s 1964 hit, but Judge Big Jim leaves me puzzled. Let’s see if you’re the same.

Rhonda T. Jones, Docket No. 14933-15, filed 9/8/16, looks like a routine summary J for IRS, as Rhonda didn’t respond to the motion, despite being given thirty days to do so.

But IRS’ counsel throws a curveball in her declaration in support.

“We recognize that the notice of deficiency reflects a deficiency of $2,043.00…. Please note that this amount does not take into account the withholding $1,530.00 that will be treated as a payment toward the balance due…. Accordingly, the balance due…is actually $513.00, plus interest.” Order, at p. 1.

OK, so the SNOD was wrong on the numbers. And IRS counsel admits it was. That’s a concession, no? Or did I miss something?

Now what does Judge Big Jim do?

He orders and decides a deficiency of $2,043.00.

And he adds a pious hope. “We assume that the facts stated in that paragraph will be taken into account in any collection action.” Order, at p. 1.

How the collections people are supposed to understand this, and take it into account, when the decision says $2,043.00, is nowhere stated. Telepathy?

And why burden collections with this?

Didn’t IRS concede that the actual tax due was $513.00, plus interest? So why not state that amount in the decision directly?

I’m confused.

I cannot, in a blog meant for family reading, repeat the old joke about those who forfeit the earnest money, contract deposit or downpayment (known to the trade as “the down”) in a real estate transaction and do not sue for its return.

Judge Laro has some discouraging words for the fortunate parties who get to keep a dropped down in CRI-Leslie, LLC, Donald W. Wallace, Tax Matters Partner, 147 T. C. 8, filed 9/7/16.

It was Florida in 2008, and CRI was selling a hotel for $39.2 million, with $9.7 down. That’s all you need to know.

So $9.7 million wound up with CRI, and they claimed capital gain, as the property as to which the down was dropped was a hotel and restaurant. Using Section 1234(a), CRI argues that, as the hotel and restaurant are clearly Section 1231 depreciable property used in a trade or business, and as such property gets capital gains on sale at a gain pursuant to Section 1231(b)(1), what’s the beef?

Well, says IRS, Section 1234(a) doesn’t apply to Section 1231 property. The relevant law is Section 1234A. Section 1234A certainly takes in capital assets (see Section 1221(a)), but Section 1221(a)(2) expressly excludes Section 1231 property.

Everyone agrees that if CRI had sold the property itself, that would have been taxed as a capital gain per Section 1231. So why different treatment to the dropped down? CRI claims that when 1234A was enacted, Congress was concerned that some transactions were taxed differently from others. So the statute may be ambiguous, but Congressional intent is not. All capital gains are the same.

IRS’ counter? “Capital asset” means capital asset. Plain meaning. Section 1221 defines capital asset, which excludes Section 1231 property, and, although gains on the sales of Section 1231 property are taxed as capital gains, Section 1231 property isn’t a capital asset.

Judge Laro: “Since section 1234A expressly refers to property that is ‘a capital asset in the hands of the taxpayer’ and no other type of property, and since property described in section 1231 is excluded explicitly from the definition of ‘capital asset’ in section 1221, we must conclude that the plain meaning of ‘capital asset’ as used in section 1234A does not extend to section 1231 property.  We therefore are not convinced by petitioner’s argument that the statute is inherently ambiguous.” 147 T. C. 8, at pp. 16-17.

Now I guess you’re expecting a reference to Pilgrim’s Pride, more particularly as bounded and described in my blogpost “Just Walk Away? – Part Deux,” 3/10/14, as amended.

Judge Laro canvasses the Pilgrims, as well as a bunch of other cases, but finds nothing to change the result.

“Although in Pilgrim’s Pride we dealt with an issue different from that with which we deal here, our analysis of the statute’s purpose remains unchanged:  Congress originally enacted section 1234A to combat ‘straddles and other transactions exploited by tax shelter promoters’ and in 1997 extended the statute’s application “to all types of property that are (or on acquisition would be) capital assets in the hands of the taxpayer.” The Court of Appeals for the Fifth Circuit reversed our ultimate decision in Pilgrim’s Pride and held that section 1234A applies to the abandonment of rights or obligations with respect to capital assets but not to the abandonment of the assets themselves.  However, the Court of Appeals did not dispute our interpretation of the legislative purpose underlying the enactment of section 1234A.  The Court of Appeals further reiterated the understanding, underlying the entire body of section 1234A jurisprudence, that ‘[b]y its plain terms, § 1234A(1) applies to the termination of rights or obligations with respect to capital assets (e.g. derivative or contractual rights to buy or sell capital assets).’”  147 T. C. 8, at p. 21. (Citations omitted).

The Virgin Islands, that is, as we come to what seems to be the end of the wannabe Virgins, the daughters of la famille Vento, in Renee Vento, et al, 147 T. C. 7, filed 9/7/16, with Judge James S. (“Big Jim”) Halpern bidding a none-too-fond farewell to the Vento daughters (Renee, Nicolle and Gail). Mom and Dad slid under the IRS tag and got VI residency for the year at issue, courtesy of the USCA Third Cir. and the loosey-goosey rules then in effect.

You’ll remember la famille Vento, surely? No? See my blogposts “The Non-Virgin Islanders,” 3/13/11, “Catching Up,” 9/30/13, and “Competent Authority,” 6/15/15.

Now that you’re caught up, the Ventos, having been stripped of their VI residency, want a foreign tax credit for the money they gave the VIBIR (Virgin Island Bureau of Internal Revenue), wherewith to apply against their US hits. I’m going to give their attorneys a Taishoff “Good Try, Second Class,” for that move.

The Ventos paid US estimateds, but these were sent to the VI when the Ventos claimed VI residency for the year at issue.

Then, when their claims to VI residency unraveled,  one of them filed a 1040X with the VIBIR, asking for her money back, but the VIBIR marked the file “closed” and gave her nothing.

The principle here is the “equality principle.” The idea is to treat VI tax as equivalent to US tax, but for the mirror image rule, which makes VI tax treatment equal to US tax treatment. Thus, a tax paid to VI is equivalent to a tax paid to a US State, so it could get Section 164 deductibility, but not Section 901 credit.

Anyway, what the Ventos paid VIBIR wasn’t a tax, because they weren’t obligated by law to pay VIBIR; they admit they had no VI-sourced income for the year at issue. And whatever their states of mind as regards the uncertainty of the law at that time (pre-2004, when residence rules clamped down on phony Virgins), the USDCVI and Third Cir. had no problem blowing off their claims.

“Petitioners claim that, because ‘there was no clear authority on determining residency in the Virgin Islands for [year at issue]’, the position that they were bona fide residents of the Virgin Islands and thus required to pay Virgin Islands income tax for that year was a ‘reasonable interpretation’ of applicable law.  The absence of clear authority in regard to an issue, however, does not establish the reasonableness of all possible means of resolving it.  The record includes no evidence that petitioners relied on the advice of competent advisers in taking the position that they were bona fide residents of the Virgin Islands….  Neither the U.S. District Court for the District of the Virgin Islands nor the Court of Appeals for the Third Circuit had any apparent difficulty concluding that petitioners were not bona fide residents of the Virgin Islands for [year at issue].  Of course, the courts’ decisions against petitioners do not, by themselves, establish that petitioners’ claims to bona fide Virgin Islands residence for 2001 were not based on reasonable interpretations of the applicable law.  But, as we read their opinions, the courts did not seem to find the decision a close one.” 147 T. C. 7, at 18. (Citations omitted).

And before the SOL ran on the Ventos’ chance to get back the payments they made to VIBIR, the 2004 rules were moving along, giving them a chance to beat the clock. But they didn’t. And Mom and Dad had much better cases than the Ventos, so Mom and Dad getting by proves nothing.

There’s no need to take a foreign tax credit, as whatever is paid to VIBIR for VI-sourced income is applied to the VI tax, and the remainder applied to US tax, so the VI-sourced income is taxed only once.

“A section 932(a) taxpayer (non-Virgin Islands resident) similarly has no need to credit Virgin Islands taxes paid under section 901 to reduce her U.S. tax liability.  Section 932(a) taxpayers, again, compute a single U.S. tax and allocate part of that tax to the Virgin Islands.  Sec. 932(a) and (b).  As a result of the required allocation, a section 932(a) taxpayer effectively pays tax to the Virgin Islands on her Virgin Islands income and pays tax to the United States on her remaining income.  In short, the coordination scheme implemented by section 932 provides sufficient means to prevent the same income from being subject to both U.S. and Virgin Islands tax.” 147 T. C. 7, at pp. 24-25.

Here’s how the Ventos’ lawyers earned their “good try, second class.”

“Petitioners’ rather unusual situation might have given them an opportunity to slip through a crack in the statutory framework.  The literal terms of section 932(a)(3) do not deny petitioners the credits in issue because no petitioner earned as much as a dollar of Virgin Islands income.  We cannot imagine, however, that, while Congress did not intend to allow a foreign tax credit for Virgin Islands taxes paid by bona fide residents of the Virgin Islands or by non-Virgin Islands residents with Virgin Islands income, it nonetheless intended to allow a credit under section 901 for amounts paid as tax to the Virgin Islands by a taxpayer who is not a bona fide resident of the Virgin Islands, has no Virgin Islands income for the year in question, and thus did not actually owe tax to the Virgin Islands for that year.” 147 T. C. 7, at p. 28.

VIBIR should have disgorged, but didn’t. So, while Judge Big Jim has some sympathies that the Ventos are paying twice, their purported move to the VI would have saved them $9 million in taxes if it worked.

Many years ago that phrase was used to describe a Super Bowl loss, but Judge Gerber is stuck with the result in Eric L. Cox, 2016 T. C. Sum. Op. 53, filed 9/6/16. Though I remember a colleague claiming Judge Gerber was pro-IRS, he wasn’t so here.

He was confronted with “…(1) an anomalous circumstance where petitioner might have been able to successfully contest the underlying liabilities and (2) the resulting question of whether it was an abuse of respondent’s discretion not to permit him to attempt to do so.” 2016 T. C. Sum. Op. 53, at p. 5.

IRS hit Eric with TFRPs for an outfit Eric claimed he’d sold before the quarters at issue, and he showed documentary proof thereof at the Tax Court trial, but his notice of appeal from the Letter 1153 was delivered and mailed one (count it one) day late.

Letters 1153 are notices sufficient to trigger the right of appeal, and sixty days means sixty days. Eric was a day late and a lot more than dollar short. Of course, Eric can pay one quarter and sue in USDC or USCFC.

Still, says Judge Gerber “It seems curious that respondent [IRS] would not consider petitioner’s evidence because it could have saved the Government and parties time, effort, and expense if petitioner had been able to easily show that he was not liable for the TFRP liabilities.  We understand that respondent was precluded from considering petitioner’s appeal of the proposed assessment because it was untimely, but respondent is not otherwise statutorily prohibited from considering petitioner’s arguments during the CDP hearing (after an assessment has already been made). Nevertheless, this Court’s role is to review what has transpired and to decide whether there has been an abuse of discretion.  Because respondent was not required to consider petitioner’s underlying liabilities as part of the CDP hearing, respondent’s failure to do was not an abuse of discretion.” 2016 T. C. Sum. Op. 53, at pp. 6-7.

And the SO filled in all the blanks on the checklist, so no abuse of discretion.

But Not Here

Ex-Ch J Michael B (“Iron Mike”) Thornton welcomes us back from the three-day end-of-summer layoff with Elliot Herskowitz, Docket No. 21233-15L, filed 9/6/16. And no, he didn’t designate it. Apparently ex-Ch J Iron Mike feels I should work harder.

IRS liened on Elliot for some back taxes. Elliot told Appeals “…he has a ‘history of making excessive estimated payments, the liability…should be reversed, or, at a minimum, the interest and penalties should be reversed.’” Order, at p. 1.

He had a phone-a-thon CDP, and the liens got sustained.

Then IRS grabbed the “excessive payment” Elliot made for a subsequent tax year, applied it to the liabilities that gave rise to the NFTLs plus penalties, and gave Elliot a NOD.

The NOD said, “nothing due, no further action.”

Elliot petitions. “The sole assignment of error in the petition was: ‘Due to exigent circumstances the penalties and interest should be waived.’” Order, at p. 2.

Of course waiving interest is a nonstarter.

IRS answers: “(1) this case is moot because there remains no unpaid Federal income tax liabilities for the years at issue and the liens underlying the NFTLs have been released; and (2) the Court lacks jurisdiction to determine an overpayment or to order a refund or credit of taxes.” Order, at p. 2.

Elliot comes to the point. IRS consented to jurisdiction when they issued the NOD, which says I should go to Tax Court timely, which I did. Oh, and check out my prior liabilities and the penalties.

Ex-Ch J Iron Mike: “The Tax Court is a court of limited jurisdiction; we may exercise jurisdiction only to the extent expressly provided by statute, see, e.g., Henry Randolph Consulting v. Commissioner, 112 T.C. 1, 4 (1999), and the parties’ consent does not confer on this Court’s [sic] jurisdiction not otherwise so provided. High Adventure Ministries, Inc. v. Commissioner, 80 T.C. 292, 297 (1983).” Order, at p 2.

Judge, didn’t you mean “the parties’ consent does not confer on this Court jurisdiction not otherwise so provided”?

Howbeit, from a CDP all Tax Court can do is sustain or deny the lien or levy. If there is neither lien nor levy, game over at 400 Second Street, NW. And all of IRS’ piety and wit don’t mean a thing.

“Whatever other advice or instructions respondent might have given petitioner does not make it otherwise. If petitioner seeks a refund or overpayment credit, then any legal remedy would lie in the United States District Court or the United States Court of Federal Claims rather than in this Court.” Order, at p. 3.

And the offset per Section 6402 is not a levy per Section 6330. See my blogpost “An Offset Isn’t a Levy,” 2/21/12.