Howard Bruce Coates echoes Meredith Willson’s 1957 Best Broadway Musical words in Howard Bruce Coates and Tandi A. Coates, 2016 T. C. Memo. 197, filed 10/31/16, that send Judge Morrison into algebraic contortions.

Howard and Tandi are fighting over their casualty loss when “the wind came sweeping down the plain” in Seminole County, Oklahoma, leveling homestead, standing timber and happy hunting grounds. It was a tornado, and a bad one.

Howard has a problem with basis in one parcel, and gets a zero, as the deed stamps show no consideration, intrafamily, presumably gift. I never knew OK has a transfer tax of 1.5%; makes our Empire State 0.4% look cheap (but wait until you see the NYC taxes).

But his numbers trump his appraiser’s numbers. And IRS’s skepticism. Judge Morrison buys Howard’s numbers on Parcel A.

“As the IRS recognizes, it is permissible for the Court to consider the opinion of the landowner as to the value of land.  Harmon v. Commissioner, 13 T.C. 373, 385 (1949).  The owner has unique knowledge of the land.  Id.  Although the relevant fair market values before and after a casualty must generally be ascertained by a competent appraisal, sec. 1.165-7(a)(2)(i), Income Tax Regs., this does not mean that the appraisal must be done by a professional appraiser.  It is therefore permissible for the before-and-after values in a casualty-loss situation to be determined by a court on the basis of the landowner’s opinion of these values.

“Here we give Coates’s views special weight.  He owned property A before and after the tornado.  Furthermore, he has substantial experience working with timberland, farmland, and pastureland.  For 30 years, Coates has been handling various tasks on the ranch.  Coates has also bought and sold various properties in Seminole County.  Some of the land Coates bought had been damaged by fire or was overgrown.  In those instances, he had to restore the land to workable farmland or grazing land before reselling it.  In our view, Coates was credible and knowledgeable about the before-and-after values of property A.” 2016 T. C. Memo. 197, at p. 15. (Footnote omitted).

And Howard’s numbers work for Parcel B.

“As for the value of property B after the tornado, we find that the evidence supports Coates’s claim that the value was $440,000.  First, Coates testified that the best use of property B after the tornado was to convert it to grazing land.  His views are credible because he is experienced in converting land from one use to another to make it more valuable.  Furthermore, he has already partially converted property B to grazing land, thus proving by expenditure of his own money the genuineness of his view that property B is most valuable as grazing land.” 2016 T. C. Memo. 197, at p. 23.

Even better, here’s Judge Morrison’s ascent to “such rarefied heights of pure mathematics that it is said that there was no man in the scientific press capable of criticizing it,” as the “best and wisest man” John H. Watson ever knew put it.

“Let V be the value of the land after the tornado.  Let V_g be the value of the land after conversion to grazing land.  Let C be the cost of converting the land from tornado-damaged land to grazing land.  The three propositions can be expressed as: (1)  V_t = V_g – C  (2 ) V_g < 528,000 (3) C >88,000 Rearranging the first proposition (V_t = V_g = C) yields V_g = V_t + C. Combining this with the second proposition (V < 528,000), it follows that V_t + C < 528,000. This equation becomes 528,000 – V_t > C.  Combining this equation with the third proposition (C >88,000), it follows that:  528,000 – V_t > C.  And 528,000 – V_t > 88,000. Rearranged, this equation is 440,000 >  V_t. So the value of property B after the tornado is $440,000 or less.” 2016 T. C. Memo. 197, at p. 25, footnote 9.

Judge, I’ll take your word for it. I could’a had a V8.

I’m totally, utterly and completely confused. Ch J L. Paige (“Iron Fist”) Marvel has struck again. Today it’s Charles L. Kiefer, Docket No. 6782-16, filed 10/31/16.

And this is no Halloween trick-or-treat.

Chas gets his petition bounced for no SNOD, so he petitions to vacate or revise (Rule 162).

“The Court dismissed this case for jurisdiction because petitioner failed to identify or provide any specific notice upon which jurisdiction in this case could be based. Because this case is closed, the Court lacks jurisdiction to hold a hearing. Filing fees are the cost of filing a case with the Tax Court and are not refundable.” Order, at p. 1.

Leaving aside the grammatical quibble that the case was dismissed for want or lack of jurisdiction, and not “for jurisdiction”, see my blogpost “Worth A Try,” 10/21/16, wherein I cite to two other cases where there were refunds, notwithstanding that the petitioners filed something with Tax Court that at least generated an order.

And I’ve blogged cases where a letter, or even one page of a SNOD (see my blogpost “Now I’m Really Confused,” 9/27/16), or a money order (see my blogpost “Show Me The Money,” 11/13/13), is deemed an imperfect petition and commences a proceeding. And in the “Now I’m Really Confused” blogpost, op. cit., the petitioner never filed a proper petition, but got her money back.

So what’s the story?

But That Won’t Save The Petition

We’re all fully familiar with the dog in the night-time. That dog was the star of Broadway and Hollywood, with or without the World’s Greatest Consulting Detective.

But in the sad tale of Joyce G. Springfield, Docket No. 8172-16L, filed 10/28/16, the dog’s misdoings led to Joyce being unhorsed in Tax Court.

Joyce is a wee bit late with her petition from the NOD. Tax Court gets it on Day 61, when “generally” (I love “generally,” the mother of exceptions) the petition has to show up by Day Thirty. And all it takes is for IRS to send the NOD to last-known-address; whether Joyce got it or not is irrelevant.

Joyce claims she told USPS she was bailing four (count ‘em, four) days before the NOD was mailed.

“…petitioner filed a Letter …stating that her family was forced to move when their family dog bit the manager of their apartment building…. She states that she changed her address with the United States Post Office (USPS) when she found a new home close to her prior address…. Petitioner stated in the petition that she moved to her new residence and changed her address with the USPS… four days before respondent mailed the notice of determination.” Order, at p. 2.

It’s the “United States Postal Service,” Ch. J L. Paige (“Iron Fist”) Marvel.

Whatever, the four-day notice doesn’t cut it. “In section 301.62122(b)(3) Example (2), Proced. & Admin. Regs., the taxpayer changed his address with the USPS six days before the notice was mailed. In the Example, the taxpayer’s last known address was the address on his most recently filed tax return because the taxpayer did not inform the USPS of his change of address in sufficient time for the IRS to process and post the new address before the notice was mailed. Id.; see also Graham v. Commissioner, T.C. Memo. 2008-129. Similarly, the four days between petitioner’s notification to the USPS of her change of address and issuance of the notice in this case was not sufficient time for the IRS to process and post the new address before the notice of determination was mailed to her. Accordingly, the notice of determination was mailed to petitioner’s last known address.” Order, at p. 3.

Whatever your dog did, day or night, won’t help.

Note to those who object to having their Tax Court cases discussed, from Judge Nega: “It is the goal of this Court to provide a public record and an open court, and to serve the legitimate interests of the public….” Kenneth William Kasper, Docket No. 6748-13W, filed 10/28/16, at p. 1..

Moreover, “Section 7458 provides that ‘[h]earings before the Tax Court and its divisions shall be open to the public’. Section 7461(a) similarly provides that ‘all evidence received by the Tax Court and its divisions, including a transcript of the stenographic report of the hearings, shall be public records open to the inspection of the public.’” Order, at p. 1.

If you want it sealed, better ask the Judge from the getgo. And have a good reason.

Justice must be seen to be done.

Unless you absolutely have to, that is.

Judge Nega’s order in Ellen F. Campbell, Docket No. 10290-13, filed 10/27/16, makes me doubt whether this is such a circumstance.

Ellen moved for partial summary J, IRS responded, whereupon Ellen moved for all-in summary J. While all this was happening, Judge Nega wanted Ellen and IRS to discuss Ellen filing a joint return with her spouse and the negligence penalty.

IRS agreed to stip to the joint return, but Ellen wanted IRS to agree about all items of income and deduction before filing the joint return.

Judge Nega is not amused.

“We find that petitioner’s failure to work cooperatively with respondent in the stipulation process has delayed the resolution of this case. Petitioner is demanding by her refusal to stipulate that respondent and the Court address a matter that is moot in view of respondent’s willingness to accept a joint return from petitioner and her spouse. Neither the Court nor respondent is required to engage in academic exercises that serve no purpose in the case before us.” Order, at p. 1.

Then Judge Nega berates Ellen’s attorneys, brandishing the Section 6673 delay-of-game chop. And bounces both of Ellen’s motions.

I understand the desire to take an extra base if you can. Just choose your spots carefully.

Yes, but he really needs to petition the SNOD if he wants to contest liability.

Here’s The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indefatigable, Ineluctable, Ineffable, Incontrovertible, Illustrious and Insuperable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes, with a prescription for Brent W. Sherwood & Janet K.  Sherwood, Docket No. 18946-15L, filed 10/26/16, a designated hitter.

Oh, and that’s Dr. Brent W. Sherwood, M.D., traveling emergency-room doctor.

IRS hit the moving target with a SNOD. Neither Dr Brent nor Janet K. petitioned same, but when they got the NITL, Dr Brent and Janet K. stepped up.

All they wanted to do was contest liability, but Appeals said sorry, you should’a done that when you got the SNOD.

“The Sherwoods admit with admirable honesty that Dr. Brent Sherwood received the notice of deficiency, but didn’t pay close attention to it because he was studying for his board certification — and we assume with some confidence that this is an exam even harder than the bar or CPA licensing exams. But his perhaps understandable focus on his profession and his simultaneous life-saving employment as a traveling emergency-room doctor doesn’t mean that the settlement officer made either an error of fact or one of law in concluding that the Sherwoods can’t challenge their underlying liability. See IRC § 6330(c)(2)(B).” Order, at p. 2.

And at Appeals Dr Brent and Janet K didn’t ask for an IA, or an OIC.

No matter how hard the exam, petition the SNOD. Or else you fail in Tax Court.

Well, no old-time theatre buff has ever corrected my assertion that the title hereof derives from George Kelly’ s 1924 comedy The Show-Off, whose lead character Aubrey Piper solemnly intones those words with a flourish of an ebony walking-stick.

But those words should mean a lot to Clyde A. Arashiro, 2016 T. C. Sum Op. 70, filed 10/26/16. And Judge Gale goes to some lengths to tell him why.

Clyde got lassoed by the cattle sheltering of Walter J. Hoyt III. Hoyt III was quite a promoter, eventually getting nailed for “fraud, mail fraud, bankruptcy fraud, and money laundering.” 2016 T. C. Sum. Op. 70, at p. 4, footnote 2.

Clyde kept taking the phony deductions thrown off by Hoyt III even after IRS fired a couple warning shots (hi, Judge Holmes), telling Clyde he was up for some chops.

Clyde got chopped, but is fighting about additions to tax and penalties.

And Judge Gale agrees that the only issue here is the chops.

Clyde puts in a Form 906, Closing Agreement on Final Determination Covering Specific Matters, saying he’ll get a loss for the money he gave Hoyt III, and is off the hook for additions to tax and penalties arising from the Hoyt inflicted upon him (sorry, guys).

Problem: “The copy of the closing agreement in the record is not signed by petitioner or a representative of respondent.” 2016 T. C. Sum. Op. 70, at p. 7.

So Clyde’s reliance on the unsigned copy of the closing agreement is out.

“We reject petitioner’s contention.  The only copy of the closing agreement petitioner produced is not signed by either petitioner or a representative of respondent.  Thus, accepting petitioner’s contention requires us to believe that he signed the closing agreement without making a copy of the signed version and instead–quite implausibly–made a copy of the agreement before signing it and retained that version.  We are unpersuaded by petitioner’s self-serving testimony in this regard… and find that he did not return a signed copy of the closing agreement to respondent.” 2016 T. C. Sum. Op. 70, at p. 13 (citations and footnote omitted, but see the following takeaway).

Takeaway—By Judge Gale in the omitted footnote: “See Rev. Proc. 68-16, sec. 6.07, 1968-1 C.B. 770, 780 (a closing agreement is always signed first by the taxpayer and ordinarily constitutes an offer to agree, while the signature for the Commissioner constitutes acceptance); see also Smith v. Commissioner, T.C. Memo. 1991-412.” 2016 T. C. Sum. Op. 70, at p. 13, footnote 8.

Make three copies, sign all three on the dotted line, keep one, send in the others to IRS, and make sure you get back a fully-signed duplicate original. Keep it in a safe place.

Often has a Tax Court Judge or STJ intoned the mantra “This is a court of limited jurisdiction. We can only do what Congress allowed.”

Alas the poor Article I judge, bereft of the extensive powers of her Article III colleagues. I remember the late Justice Antonin Scalia visiting haughty disdain on this “inferior court” established under the authority of Article I, Section 8, from his armchair at the post-cenam chat at Duke University, during the last Tax Court Judicial Conference. BTW, when will we be having the next one?

But sometimes even lowly STJ’s, worthily lamenting their inferiority, take that field marshal’s baton from their knapsacks and look longingly at it, before restoring it to the field pack on their weary shoulders.

Today it’s the turn of STJ Lewis (“footsoldier of Tax Court justice”) Carluzzo.

And it’s the next installment of Faith Lynn Brashear & Hendel N. Thistletop, Docket No. 13189-13, filed 10/26/16, a designated hitter. You remember Faith & Hen, no? What, no? Well, try my blogpost “Got To Be There – Part Deux,” 8/26/16. There, now.

Faith & Hen are still battling with their erstwhile attorney, whom I’ll call DJ. Faith & Hen refuse to pay, DJ wants out, Faith & Hen claim DJ is overcharging them. STJ Lew has an urge to sort it out, but forbears.

“In support of his motion, [DJ] submitted his time sheet/billing statement, which we have carefully reviewed. While we question the amount of time charged for some of the seemingly routine activities, there is insufficient evidence in that statement, or otherwise in the record, to support a finding that excess billings operate to violate the fiduciary duty owed to petitioners to such an extent so as to allow for an order of disgorgement. See Restatement (Third), Law Governing Lawyers, sec. 37. The fee dispute between petitioners and [DJ], should either party continue to pursue it, will have to be resolved in a different forum.” Order, at p. 1.

STJ Lew, how do you have jursidication (thanks, Judge Ashford), to decide the billing issue on papers, much less try the issue or order a disgorgement? If the review is to decide whether to let JP out of the case, what he charges or doesn’t charge is nothing to the point. If he claims Faith & Hen owe, and they don’t pay, unless there’s collusion with intent to stall, toss JP, and let Faith & Hen work out their salvation. The billing issue is nothing to do with the main deficiency, unless the legals are a claimed deduction, and even then you can only allow or disallow them.

The fee dispute should go to State court, where it belongs.

High on the list of Robert Gover’s (he of the cult novel The Hundred Dollar Misunderstanding) offspring is the Section 72(t) misunderstanding.

Case in point: Candace Elaine, Docket No. 26078-14S, filed 10/25/16, an off-the-bencher by STJ Lewis (“Oh, that name makes me want to sing”) Carluzzo.

The usual sad tale: Candace gets canned in 2009, as the economy melted down. Like many others, she used her retirement plan (type not stated) to feed and house her family. She declares the income therefrom but pays not the 10% chop thereon. Candace is in the under-59-1/2 set at the time.

Note that even STJ Lew gets messed up, as he states, at p. 5 of the order (page 4 of the transcript) that Candace was under 55; even if she was over 55, she was up for the chop if under 59-1/2.

Candace’s plea that economic distress and hardship should exempt her from the 10% chop avails her naught.

STJ Lew catalogues five (count ‘em, five) cases that say that economic hardship doesn’t help. If you take too young, you’re hung.

“The long list of cases cited above, as well as many others decided by this Court to the same effect, strongly suggests there is a common misunderstanding among taxpayers that financial hardship is an exception to the imposition of an otherwise applicable Section 72(t) additional tax. Petitioner apparently proceeded under that misunderstanding not only with respect to the year here in dispute, but to several previous years as well. Given her explanation at trial, we are satisfied that petitioner had reasonable cause and acted in good faith with respect to the portion of the underpayment of tax resulting from her failure to include Section 72(t) additional tax in the tax liability shown on her 2012 return.” Order, at pp. 6 -7.

So Candace gets a bye on the negligence chop, and her actual deficiency, after STJ Lew gives her credit for some medicals she paid with the distribution (and medicals are OK), is under the five-and-ten radar.

STJ Lew is a judge with a heart, like his colleague, STJ Armen.

But Candace still owes the 10%.

I am using that term in more than one sense. Samuel D. Kelker, Docket No. 15061-14L, filed 10/24/16, claims Tax Court should act like an appellate court when it reviews CDPs from Appeals, and therefore should follow Fifth Circuit rules (Sam apparently is Golsenized to Fifth Circuit).

So we get this designated hitter from The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Ineluctable, Indefatigable, Impeccable, Illustrious, and Incontrovertible Foe of the Partitive Genitive, and Old China Hand, Judge Mark. V. Holmes.

Sam’s Fifth Circuitry is short-circuited.

“This is just wrong. Section 6330(d)(1) gives us jurisdiction to review the IRS’s notices of determination that sustain its decisions to collect tax debts like Kelker’s through levies. Section 7453 gives us the authority to conduct cases in accord with rules of our own devising, and we have chosen to do so with our Rules of Practice and Procedure.” Order, at p. 1.

But Sam isn’t entirely wrong.

“Kelker is a little bit right that our function in CDP cases is largely an appellate one. Our job is to review the record that the IRS compiled in reaching its decision to try to collect Kelker’s taxes by levy. Sometimes a trial is necessary to figure out whether that record is complete or defective in some way, but in this case neither Kelker nor the IRS has identified any issue that needs to be tried. To get the record before us, the IRS usually (as it did here) attaches it to an affidavit of the IRS employee who conducted the CDP hearing. The IRS and the taxpayer can then move for summary judgment — and much like arguing in briefs to a circuit court — can argue in the form of motion papers that the IRS’s conclusion was correct or incorrect on that record.” Order, at p. 2.

There’s some argy-bargy about whether Sam got the SNOD when he didn’t pay the SFR, but Sam caved at the CDP, didn’t propose an collection alternatives, and just groused about underlying liability.

So Sam’s demand for a face-to-face and a trial are short-circuited by summary J.

I post this order to show the inventiveness of petitioners. Never a dull moment at 400 Second Street, NW.