Archive for November, 2016|Monthly archive page


In Uncategorized on 11/21/2016 at 13:59

Since the hard-laboring intake clerks, the flailing date-stampers, the STJs, the Judges both Senior and ordinary… and even Ch J L Paige (“Iron Fist”) Marvel… are deserting the Glasshouse at 400 Second Street, NW, this Friday, November 25,  and probably camping out in front of Walmart for That Magic Moment when the sales begin, the Tax Court website bears the following legend (in red ink, yet): “The United States Tax Court will be closed and paper documents will not be accepted for filing on Friday, November 25, 2016.”

So what about non-electrics that must be paper-filed by the magic day?

Will Judge Lauber reprise his full-dress T. C., more particularly bounded and described in my blogpost “Neither Equity Nor Designation,” 6/2/16?

The suspense is killing me.


In Uncategorized on 11/18/2016 at 16:48

We can all recite in unison, even on a Friday afternoon, Judge Lauber’s mantra: FBAR penalties are Title 31s, whistleblowing payoffs are Article 26, and never the twain shall meet.

And if you can’t so recite, read my blogpost “FBAR or FUBAR? – Part Deux,” 3/14/16.

OK, but is there between Title 31 FBARing and Title 26 collection alternatives (such as Section 7122 OICs) “…a great gulf fixed: so that they which would pass from hence to you cannot; neither can they pass to us, that would come from thence,” as a far greater authority put it?

Remember IRS often settles FBAR infractions with Title 26 type penalties, rather than going for the eviscerating 31 USC §5321s, as Judge Lauber points out in the subject of the aforementioned blogpost.

But again, he was talking about Section 7623 whistleblowing.

On this Friday afternoon, with not a lot cooking at 400 Second Street, NW, we speed cross-country to the City of the Angels, where this conundrum is being unpacked by The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Ineluctable, Ineffable, Incontrovertible, Indefatigable and Indomitable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Homes.

We have Jean Louis Rubin & Marie F. Charrier, a.k.a. Marie F. Rubin, a.k.a. Marie Rubin, Docket No. 26604-14, filed 11/18/16.

Lou (“Too Bad About the Spelling”) & Marie were facing an FBAR penalty, and wanted a doubt-about–collectibility OIC. But between their April trial date and their most recent teleconference, there fell the shadow of an assessment of FBAR penalty.

So now what?

Time to punt.

“Respondent [IRS] doesn’t think this’ll make an OIC processable; petitioners disagree. All agreed to see if petitioners are right. The Court is willing to keep the case on a status-report track….” Order, at p. 1.

Stay tuned.

Update 7/9/17, from your indefatigable “Quick Draw McGraw of Tax Court,” as Mr Peter Reilly of styled me. Seems back on 6/30/17, Judge Holmes asked for another status report in a couple months, in his inimitable style, “…stating whether Ms. Charrier has in fact requested innocent-spouse relief, any their success in submitting an offer in compromise, and any other progress in settling the case.” Order, at p. 1. The OIC is dragging, and Ms Charrier is allegedly kicking poor Lou to the curb.

As Hank Longfellow put it, I’m “hanging breathless on her fate.”



In Uncategorized on 11/17/2016 at 16:07

No, not the much-contemned Section 1234A straddle, nor yet BOSS, Son-of-Boss, nor any other mix-and-match phony partnerships with foreign currency digital options. We have two Tax Court opinions today, one long and one short.

Judge Laro leads with Pizza Pro Equipment Leasing, Inc., 147 T. C. 14, filed 11/17/16. While the thought of pizza always delights me (and many thanks to an old friend, former boss and client for the delicious Italian buffet lunch he afforded us in honor of his birthday), this opinion is yet another reason why I avoided the college course in statistics.

The issue is whether the sole beneficiary and trustee of the Pizza Pro retirement plan overfunded same with deductible contributions, which turn out not to be deductible.

I’ll give you one sample, taken immediately before my eyes glazed over.

“Essentially, respondent applied a tripartite method to calculate the required reduction in the section 415 dollar limitation with respect to a retirement age earlier than 62.

“(1) Determine the actuarial equivalent value of each year’s respective limit payable at age 62 for life by converting that annual limit into a lump-sum value, assuming 5% interest and the probability of living each year to receive this annual benefit, and multiplying the limit by the appropriate APR.  In the table above, this requires multiplying [1] by [3].

“(2) Reduce the value derived in the first step from age 62 to age 45 by discounting it for interest only for 17 years.  In the table above, this entails multiplying [[1] × [3]] by [2].

“(3) Convert the value derived in the second step to a life annuity payable at age 45.  In the table above, this requires dividing [[1] × [2] × [3]] by [4], to arrive at the final number in [5].” 147 T. C. 14, at pp. 14-15.

The IRS won, based upon the regs at the time, which have since been completely superseded, so this full-dress T. C. is of historical interest only. Except maybe for Judge Laro holding that filing only a Form 5500 does not suffice when filing a Form 5330 is also required, as one is not a substitute for the other, and IRS couldn’t tell that the plan was overfunded with nondeductible cash until audit time. So no SOL.

And it takes Judge Laro 58 (count ’em, 58) pages to get there.

The short. A three-pager, Barry R. Skog, 2016 T. C. Memo. 210, filed 11/17/16, and you can guess who the Judge was on this one.

“Barry Skog claims that out of fear for his daughter’s financial future he withdrew money from his wife’s IRA during their divorce.  He also claims that he rolled it over into an account for the daughter’s benefit in some way that qualified as tax-free.  The Commissioner disagrees because the money seems to have disappeared.” 2016 T. C. Memo. 210, at pp. 1-2. (Footnote omitted).

So let’s look at the record.

“The stipulation shows that Skog made withdrawals from his wife’s IRA …that totaled nearly $45,000.  Skog claims that he moved this money into the Norvin A. Skog Irrevocable Trust (Trust), and that his daughter is the Trust’s beneficiary.  The Trust’s paperwork, however, does not name her as a beneficiary.  The Commissioner also subpoenaed the Trust’s investment account records.  They show some fluctuation in value and some withdrawals, but no deposits during [year at issue].  We don’t know where the money went, but these records show that it didn’t go to the Trust.” 2016 T. C. Memo. 210, at p. 2.

“Skog did not show where the money went.  If, contrary to the subpoenaed records, it did go into the Trust’s account, there is no evidence that it went there within 60 days of any of the distributions or that the Trust’s account was a qualifying retirement account.  And by Skog’s own admission, the Trust account was for the benefit of his daughter and not his soon-to-be ex-wife.” 2016 T. C. Memo. 210, at p. 3.

IRS wins.


In Uncategorized on 11/16/2016 at 22:11

I have said it so often that my readers must be bored: this is a non-political blog. While tax law and tax policy ignite virulent denunciations, philippics and polemics, I steer clear. I mean I steer clear here.

So I was of two minds whether or not to blog Patricia M. Rodriguez, Docket No. 6261-16S, filed 11/16/16. It might be that the fact pattern would indicate my political position, making me seem two-faced.

But the issues raised in this designated off-the-bencher from Judge Holmes need careful thought, not philippics. And I leave off my usual light-hearted honorifics for that reason. The matters raised, or implicated, in this case, are too important for levity.

Petitioner claims Schedule C waitress income of $13,000, exactly. And a bushelbasketful of child-based credits, that “swamp” (Judge Holmes’ word) the trifling SE tax she has to pay.

Judge Holmes: “Ms. Rodriguez didn’t know the full name of her employer. The business that she worked at was a bar that has closed; there were absolutely no written records of her employment there. There was no report by her employer of any wages paid, there was no report of tip income, and that caused her to use the wrong part of the form which she reported her self-employment tax.

“Even the amount of income, in exact amount of $13,000, suggests credibility problems. Few people have wages that end with three zeros.” Transcript, at p. 4.

So Judge Holmes blows off the claimed earned income. Petitioner is not credible.

And this gambit is played so often I’m surprised none of those who play have figured out that Sched C income doesn’t end with three zeros, or engender no deductions.

But the opinion has another side. Yes, there are minor children, but they aren’t petitioner’s, by blood, marriage or adoption.

“I find as a matter of fact, more likely than not, that MB and LPB were both small children during the [year at issue]. They were both birthright-citizen children. Their biological mother, who testified, Ms. Karina Rodriguez, is their mom. Their biological father, Mr. Efrain Bustamante, is their father. Neither of them are here in the country legally, and their unlawful presence might have affected the ability of the Rodriguezes to claim these children and some of the tax advantages that caring for small children have.” Transcript, at pp. 5-6.

Bustamante may have had a common-law marriage with Petitioner. Texas, where this case takes place, recognizes these, but Bustamante had enough of those, both in Texas and elsewhere, to befuddle Judge Holmes completely. It’s unclear from which, if any, of his several common-law wives he was divorced, or which of them died, if any.

Petitioner is legally in this country.

But Petitioner loses on all counts.

I leave it to my readers to draw what conclusions they want, if any, after reading this brief resume and after reading Judge Holmes’ opinion.


In Uncategorized on 11/16/2016 at 17:07

A colleague’s firm may have been tangentially involved in this one, so although the colleague just e-mailed an argument why Section 1031 wasn’t just a dodge for billionaires, this one turns out to be a dodge for non-billionaires.

At least Judge Gale says so, in The Malulani Group, Limited and Subsidiary, 2016 T. C. Memo. 209, filed 11/16/16.

The Malus owned real estate in Hawaii and Maryland. They had a couple subsidiaries (hi, Judge Holmes), but a hostile stockholder got a 30% stake in one of them out of bankruptcy court, so they set up separate boards, and The Malus made loans to the subs as they saw fit.

An unrelated entity offered to buy a Maryland parcel from a Malu sub for heavy cash, fifty percent above basis.

The Malus go for a 1031, get the appropriate QI, and gear up for the 45-180 day squaredance. That means find replacement property, identify same within 45 days of closing sale of relinquished, and close within 180 days (or end of tax year, as extended, whichever shorter).

Relinquished property closes, but no replacement on horizon except a Hawaiian parcel owned by related sub, which has a heavy-duty NOL. Related sub exchanges its parcel, and sells off acquired parcel, burying much gain with its NOL.

QI buys replacement as ordered. I am sure QI didn’t give the Malus, or anyone else, tax advice.

IRS blows up deal.

While 1031(f)((1) only bars non-recognition of direct transfers between related entities, and this wasn’t direct as the Malus used a third-party independent QI, 1031(f)(4) bars deals structured to avoid tax.

But there’s an exception (why not?). 1031(f)(2)(C) requires a look-see if there’s any non-tax avoidance part of the deal.

The Malus claim there was no tax avoidance, as they tried to find a replacement, but all they came up with was what their sub had. And IRS’ lead case involved structuring in advance, whereas The Malus only did the deal when they were running out of 45-day runway; no advance planning.

No good. “…the presence or absence of a prearranged plan to use property from a related person to complete a like-kind exchange is not dispositive of a violation of section 1031(f)(4).” 2016 T. C. Memo. 209, at p. 12.

“Instead, the inquiry into whether a transaction has been structured to avoid the purposes of section 1031(f) has focused on the actual tax consequences of the transaction to the taxpayer and the related party, considered in the aggregate, as compared to the hypothetical tax consequences of a direct sale of the relinquished property by the taxpayer.  Those actual consequences form the basis for an inference concerning whether the transaction was structured in violation of section 1031(f)(4).” 2016 T. C. Memo. 209, at pp. 12-13.

At close of play, it’s all about the numbers.

“Petitioner would have had to recognize a $1,888,040 gain had [relinquishing sub] directly sold the Maryland property to an unrelated third party.  Although petitioner’s NOLs would have offset a portion of this gain, it would have paid an additional $387,494 in tax for 2007 as a result of the direct sale.  Petitioner would have also owed an additional $264,171 of tax… because of the loss of that NOL carryback.  However, because the transaction was structured as a like-kind exchange, only [acquiring sub] was required to recognize gain–and that $3,127,004 of gain was almost entirely offset by its NOLs.  The substantial economic benefits to petitioner and [relinquishing sub] as a result of structuring the transaction as a deferred exchange are thus clear:  Malulani Group and [relinquishing sub] were able to cash out of the investment in the Maryland property almost tax free.  We thus infer that [relinquishing sub] structured the transaction with a tax-avoidance purpose.” 2016 T. C. Memo. 209, at pp. 14-15. (Footnotes omitted, but read them; though The Malus’ CEO claimed he didn’t know what was going on, he was on the committee that oversaw intercompany loans and got all the data).

And while there was no basis-shifting (swapping high-basis property for low-basis property between related entities), because the acquiring sub had more tax to pay when it unloaded the acquired parcel, acquiring sub had NOLs, and no evidence that using them would have unsheltered income for carryback years.

The idea behind 1031 is that the relinquisher is carrying on the investment program via the acquired like-kind property. Here, the relinquisher cashed out, and the acquirer enabled the deal by ducking behind its NOLs.

I give The Malus a Taishoff “good try, second class.”


In Uncategorized on 11/16/2016 at 15:41

Among the materials for tomorrow night’s meeting of the ABA/NYSBA Subcommittee on Taxation of Cooperatives and Condominiums that just hit my inbox, there comes Eighth Circuit giving IRS a heavy-duty mulligan in Estate of James Stuart, Jr., et al., 15-3319, filed 11/14/16.

While once again affirming that State voidable transfer law controls (and IRS doesn’t bother to fight this on appeal, as they’re 0-for-5 on the Circuits), Eighth Circuit gives Tax Court Judge James S. (“Big Jim”) Halpern the right-about-face.

For background, see my blogpost “State Law – With A Little Salt,” 4/1/15.

Judge Big Jim didn’t hit the Little Salties with the full tax that they would have paid if they’d played straight and not gone in with MidCoast. He only gave them the benefit they actually got, ex-MidCoast’s vigorish for putting this dodge together. He cites Nebraska law for this, while IRS argued liquidating distribution, as usual.

“Although the Tax Court concluded that the question of substantive liability under § 6901 is a question of state law, the court failed to consider the IRS argument that under Nebraska law the stock sale should be recharacterized as a liquidating distribution to the shareholders. The Tax Court instead respected the form of the transaction and concluded that the former shareholders were liable for a portion of Little Salt’s tax deficiency as beneficiaries of the transfer from Little Salt to MidCoast. On appeal the IRS argues that the Tax Court’s failure to consider whether the stock sale should be recharacterized under state law was error. We agree.”

State law is substance-over-form, equitable principles control, creditors must be protected from debtors’ chicanery, etc.

But Eighth Circuit declines to give IRS judgment for the whole nine yards.

“Although we agree with the IRS that the Tax Court should have considered whether the stock sale should be recharacterized as a liquidating distribution to the shareholders under Nebraska law, we decline its invitation to resolve this question in the first instance. A remand will allow for ‘adequate vetting through the adversarial process and avoid having the appellate court ‘try the action de novo.’’” (Citations omitted).

Sorry, no page cites, but it’s a short decision.

Anyway, back go the Little Salties to Tax Court, to play the liquidating distribution game.

Thanks to Martin Miller, Esq., for the heads-up on this. When colleagues’ children are seasoned practitioners and giving us tips, it’s time for another chorus of “Sunrise, Sunset.”


In Uncategorized on 11/16/2016 at 00:18

Judge Holmes Does the Split

 No, this is not C. S. Lewis’ voyage to the Celestial Realm, nor has The Great Dissenter taken up acrobatic dancing.

Here is the story of Benjamin Cornell Bridges, Docket No. 228-15, filed 11/15/16, a designated hitter off-the-bench from The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Indefatigable, Illustrious, Incomparable, Ineffable, Ineluctable, Incontrovertible and Irrefutable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Ben Cornell is an honorable man. “He was very patient here. He was here all day and in the courthouse from beginning to end of the very long day, and he can tell his wife that, for sure.

“He volunteered to serve in the Army; he was discharged honorably. He served as a contract employee in our current wars, as a civilian where he was exposed to peril even in that capacity.” Transcript, at pp. 3-4.

But Ben Cornell was undone by ex-Mrs Ben Cornell, who, prior to being separated from Ben Cornell, had him sign with her the loan documents for her Ford Expedition. When they divorced, the decree gave her the vehicle and all benefits and obligations appurtenant thereto (as my expensive colleagues would say), including but not in any manner limited to, paying off said loan.

Ex-Mrs Ben Cornell didn’t, promptly defaulted, and after the said motor vehicle was repo’d, Ben Cornell got the 1099-C.

Ben Cornell never included the COD generated when the sale of the vehicle yielded less than the balance of the loan.

“So?” say you. “Joint and several on the paper means joint and several on the debt. And Tax Court isn’t bound by a State Court divorce decree. Both were relieved of indebtedness, therefore both are on the hook for the income thereby generated. All the divorce decree does is give Ben Cornell the right to sue ex-Mrs Ben Cornell for the tax, interest and additions to tax that Ben Cornell has to pay Uncle Sam.”

But in the words of the father of the Original Great Dissenter “ah, but stay,
I’ll tell you what happened without delay.”

Things get complicated. “Section 6050P of the Internal Revenue Code requires certain entities to report discharges of indebtedness. Under the regs for that section, 26 CFR Section 1.6050P-1(e)(1)(I), ‘In the case indebtedness incurred prior to January 1, 1995, and indebtedness of less than $10,000 incurred on or after January 1, 1995, involving multiple debtors, reporting under this section is required only with respect to the primary or first-named debtor.

“’Additionally, only one return of information is required under this section if the reporting entity knows or has reason to know to know that co-obligors were husband and wife living at the same address when an indebtedness was incurred and does not know or have reason to know that such circumstances have changed at the date of the discharge of the indebtedness.’” Transcript, at pp. 7-8.

But the lender knew they weren’t living at the same address, because the lender sent the shortfall calculation, which generated the COD, to ex-Mrs Ben Cornell at a different address than the 1099-C they sent to Ben Cornell.

Hang on, there’s more. Judge Holmes is just winding up.

Ordinarily, the right to sue for contribution when one co-obligor pays the entire indebtedness depends upon which of them got the debt proceeds, who had the benefit of any property purchased therewith, who had the basis in the property, and who got the interest deductions to the extent debt service was paid.

“In other words, property rights matter. Who owned the car after the divorce?” Transcript, at p. 11. And to determine this, Judge Holmes says we must look to State law. And Judge Holmes tried this case in Texas, wherein Ben Cornell resides.

Now the relieved indebtedness income must be apportioned among the co-obligors, and IRS agrees it can’t collect tax on the entire amount relieved from both co-obligors.

Judge Holmes looks to a non-binding, but useful, IRS Chief Counsel Advice, Memo 200023001.

And here we have the Texas twist, because Texas is a community property state. So one-half the car belonged to ex-Mrs Ben Cornell, and one-half to Ben Cornell. And the canceled debt was likewise split fifty-fifty.

So does Ben Cornell owe tax on half of the COD?

Negatory, good buddy. Judge Holmes performs a judicial double back flip jackknife, and Ben Cornell walks away scot free.

“What happened to that debt after the divorce? Well, for that again I looked at state law, which in this case is the state court divorce decree, and it says quite clearly, as Mr. Bridges emphatically put it, that the debt was hers, the car was hers — I’m sorry — the vehicle was hers. If she had had the right to take interest deductions, they would have belonged to her. If somehow she had souped the Ford Expedition up and it had become more valuable rather than less valuable and she had sold it, she would have been entitled to the profits; she would have had to pay the capital gains tax on it. And so here the income that’s attributable to the Ford Expedition, as a matter of state law, I find is entirely the former Mrs. Bridges’, and Mr. Bridges owes no deficiency. Oddly enough, representing himself, he has won.” Transcript, at p. 14.

Who says tax law is dull? Not when The Great Dissenter is on the case.


In Uncategorized on 11/15/2016 at 15:20

Dear readers, I do not recommend trying that answer in the courtroom, or anywhere else.

But counsel for Taishan Investments, LLC, Bruce Elieff, Partner Other Than The Tax Matters Partner, Docket No. 8404-13, filed 11/15/16 does just that.

Now Judge Chiechi is not the most choleric of judges.  But counsel is pushing hard, and the result may be rather unpleasant.

Briefly to set the stage, IRS “…represents that respondent intends to send to petitioner on or before November 18, 2016, a final closing agreement. Respondent further represents in respondent’s supplement that ‘[p]etitioner’s counsel informed Respondent that she will be unable to review and/or have Petitioner Bruce Elieff sign the Closing Agreement until February 2017. Petitioner’s counsel informed Respondent that she is currently involved in significant litigation that she expects to last through January 2017.’” Order, at p. 1.

Judge Chiechi: “The Court is incredulous, and will not accept without further detailed, justifiable explanation, that the fact that petitioner’s counsel ‘is currently involved in significant litigation’ will preclude her from reviewing and/or petitioner from signing the closing agreement until February 2017.” Order, at p. 1.

If you tell a Judge that the case before him/her is not “significant” enough to merit your attention, your client may have to answer for your nonchalance. Until, of course, your client gets slammed and turns on you.

So, counsel, get on the keyboard with your “detailed, justifiable” reason why you can’t sign off on the final closing agreement until February, 2017.

And have it in Judge Chiechi’s extremely hot hands a week from today.


In Uncategorized on 11/14/2016 at 16:35

IRS’ counsel seems to have a limited grasp of how distributions from S Corps are taxed in Philip Joseph Franklin, 2016 T. C. Memo. 207, filed 11/14/16.

Phil’s various delictions take up 32 pages of Judge James S. (“Big Jim”) Halpern’s prose, but only one is of interest today.

At the behest of a creditor and his accountant, the books of one of Phil’s sub S Corps shows a loan to shareholder of $218K at the start of one of the years at issue, and zero at the end thereof. IRS claims that the release of the debt was an ordinary dividend. Phil claims that the $218K was money gotten from the sub S in prior years upon which he paid tax, which was mischaracterized as a loan.

“Respondent’s [IRS’] argument on brief raises principally an issue of timing and not one of character (i.e., whether the distribution constituted a dividend).  We say that because, unless an S corporation has accumulated earnings and profits, no distribution of property (including money) by the corporation to a shareholder with respect to his stock will constitute a dividend within the meaning of section 316(a).  Sec. 1368(b) and (c).  Instead, distributions by an S corporation with no accumulated earnings and profits to a shareholder with respect to his stock are excluded from the shareholder’s gross income to the extent that the distribution does not exceed the adjusted basis of the shareholder’s stock.  See sec. 1368(b)(1). Any excess is treated as gain from the sale or exchange of property.  See sec. 1368(b)(2).” 2016 T. C. Memo. 207, at p. 14.

Well, as sub S Corps are pass-throughs, how can there be accumulated earnings and profits?

Judge Big Jim tells us. The main source is what was still held by a C Corp when it converted to S, which goes into the AAA. That’s not the guys with the tow truck and jumper cables, that’s the accumulated adjustment account, wherein is held those leftover earnings and profits.

But Phil’s C Corp went S three days after it was incorporated, so no chance to pick up that kind of earnings and profits. And there is no evidence of any reorganizations that would trigger Section 1371(c)(2) adjustments.

IRS has no evidence of what Phil’s basis might have been.  But Phil has a demand from the aforesaid creditor, and testifies that he had guaranteed the S Corp’s debt. And Phil swears the creditor grabbed and sold Phil’s own property in partial satisfaction of the debt.

We all know that payment by guarantor subrogated guarantor to creditor, making guarantor creditor of debtor instanter (as the Supremes and the high-priced lawyers say). Corporate debt to shareholder is part of shareholder basis in S Corp stock. But there must be payment; Phil’s claim he guaranteed more than what the creditor seized from him doesn’t cut it. Pay to play, Phil.

However, Judge Big Jim has a bonus for Phil.

“Indeed, it may be that, as indicated by [Sub S’] negative accumulated adjustments account, petitioner could…deduct an increased passthrough loss….  See sec. 1366(d)(2).  Petitioner, however, has made no such claim, and the issue is not before us to decide.” 2016 T. C. Memo. 207, at p. 22. (Footnote omitted, but read it. Phil could make a Rule 41(b) motion to conform pleadings to proof and claim a bigger loss than the $218K, based on how much the creditor took from Phil personally).

In short, it’s time for IRS’ counsel to reread Eustice, Kunz & Bogdanski’s tome on taxation of S Corps. The 2015 edition.


In Uncategorized on 11/11/2016 at 07:34

That well-known immunologist James Haber is back in the spotlight, as CCAFed blows away his partial payments of the Section 6707 unregistered shelter chop in Diversified Group Incorporated, James Haber, v. US, 2016-1014, decided 11/10/16.

Thanks to a long-time follower of this my blog for the heads-up. And thanks to Jim for some really good blogfodder.

Ya gotta give Jim credit, he goes down fighting. He claims by paying the chop for two of his customers, he gets to challenge the whole enchilada. So he pays $34K to challenge $42.1 million. Jim’s claim is that the penalty is divisible, as IRS toted his tab based on the 192 shelters he flogged.

Jim is using the test-case play I recently described in my blogpost “It’s My Party,” 11/10/16.

Nope, says Ch J Prost.

First, Section 6707 says you have to register before you offer. And the penalty is imposed on failure to register before offering, not selling.

So IRS’ footing up the bill is merely aggregating what the customers invested and taking one percent thereof, per Section 6707(a)(2)(A). They must have ponied up half a billion.

Second, the Supremes don’t allow part payment in a money claim against the US of A. It’s the so-called “full payment” rule; cough up or shut up.

And USCFC’s mistake on which version of Sections 6111 and 6707 to apply was a mere clerical error, and didn’t divest USCFC of jurisdiction to insert the right versions in an opinion subsequent to Jim’s notice of appeal.

I hope Jim doesn’t quit after this. I need good copy on a Friday, which is also a Federal holiday, and after which I’ll be too weary after having marched two miles in America’s parade.