In Uncategorized on 12/20/2016 at 16:05

And move to reconsider if you blew it.

Judge David Gustafson outdoes even himself today in a designated off-the-bencher. Renee Sunyoung Lim, Docket No. 15130-15, filed 12/20/16.

Doc Renee is a dentist with unreported income from her Sub S (conceded), and a dubious capital loss on her rental condominium.  The sales price exceeds the purchase price, but Doc Renee claims a lot of improvements, which maybe she paid for when she mortgaged out a couple times (hi, Judge Holmes), but she isn’t sure on the stand and produces no paper.

Worse, her long-time preparer filed late for her and other clients of his during the year before the year at issue, claiming he got divorced.

However, he had some excuses (please do not try these on your clients).

“He mitigated his fault to Dr. Lim and minimized the value of filing returns on time, explaining to her that if you file your return late, the IRS is less likely to audit you–a rumor she said she had also heard from some of her acquaintances.” Order, at p. 5.

Apparently the other clients canned the dude, but Doc Renee stuck with him.

She handed over her financial info and told preparer to do his thing.

“He told her he would file it electronically. Mr. A did not file a [year at issue] return for Dr. Lim, and Dr. Lim then began to get letters from the IRS inquiring about her [year at issue] return. Dr. Lim  testified that she asked Mr. A what was going on. We accept that she did contact Mr. A, but her testimony as to the details of their conversation–i.e., that he assured her that the return had been filed, that he told her that the IRS often loses returns, and that when she asked him for a copy of her return, he said he could not give it to her because it had been filed electronically–are not credible to us, and we are unable to find the precise facts of that conversation.” Order, at p. 6. (Name omitted).

Definitely don’t try these excuses on your clients.

However, 25 months late, what purports to be a return, filed on paper and not electronically, bearing the paid preparer signature of a colleague of Mr A’s, and maybe the signature of Doc Renee (or maybe not), gets to IRS.

Doc Renee is fighting the disallowance of the Schedule E loss shown on that return. Doc Renee did a stip with IRS, and never contended the return wasn’t hers.

Doc Renee stalls around, but finally Judge Gustafson has had enough and Doc Renee’s testimony is insufficient.

But she might have papers. She relegated the entire pre-trial prep to Mr. A, claiming she only found him unreliable after months of ignoring IRS’ counsel’s communications and passing them on to Mr A unread.

OK, says Judge Gustafson, here’s a hint.

“It is also true that we denied petitioner’s counsel’s motion during closing argument to reopen the record to admit additional evidence. However, the additional evidence was not in the courtroom but was anticipated testimony of Mr. A. This motion was in effect simply another request for a continuance. We denied that motion. (However, we did so without prejudice to a timely motion (see Rule 161) to reconsider this opinion, reopen the record, and allow into evidence actual documents proffered with the motion. We do not say we would grant such a motion; instead, we would consider its merits at the time; but if Dr. Lim’s position is that with a little more time she could have carried her burden of proof, then she has one last chance to demonstrate that with a presentation of the actual proof.)” Order, at pp. 12-13.

Y’wanna draft the motion papers for them, Judge?

But as the dawn patrolling telepitchers say, “Wait! There’s more.”

If there’s a Rule 161 motion to reconsider, IRS gets a bonus.

“Here the parties seem to agree that petitioner acquired her condo for about $368,000 and that she sold it for $490,000. Without more, those figures yield not a loss of $205,053 (as Dr. Lim’s return reported) but a gain of at least $122,000. Of course, that result could be affected by proving that one could add, to the cost of initially acquiring the condo, subsequent capital costs for improvements. But Dr. Lim failed to so prove. Respondent did not plead the greater deficiency that would result from determining gain on the sale, but rather simply defended the NOD’s disallowance of the loss. We sustain that disallowance.” Order, at p. 13. (Emphasis by the Court.)

If there’s reconsideration, shouldn’t IRS get to put in the greater deficiency (with burden of proof)?

Finally, there’s the dubious tax return. Doc Renee has none of the Section 6664 ducks for the chops. But Judge Gustafson has one…definitely maybe.

“During closing argument after trial, we raised with respondent the question whether, if Dr. Lim did not sign the return, then perhaps it might not have been her return; and section 6664(b) provides that the accuracy-related penalty applies ‘only in cases where a return of tax is filed’. However, neither Dr. Lim nor her counsel initiated argument on that issue nor took it up after the Court raised it. Moreover, while it is true that a return not signed by the taxpayer is not valid, see Mohamed v. Commissioner, T.C. Memo. 2013-255, it is also true that in some circumstances (such as a joint return) a taxpayer may file a return by ‘tacit consent’, see Reifler v. Commissioner, T.C. Memo. 2015-199, part II.C, or may ratify an unsigned return, see Harris v. Commissioner, T.C. Memo. 2009-26, n.3; and it is also true that a taxpayer like Dr. Lim might be equitably estopped from making a contention, see Reifler v. Commissioner, T.C. Memo. 2013-258, that contradicted her prior behavior and the positions she took.“ Order, at p. 16.

Fascinating, but it avails Doc Renee not.

“In any event, respondent was genuinely surprised by the Court’s raising this issue; and if after trial petitioner had moved for leave to amend her petition to state as a defense to penalty that she had not signed the return, then the motion would have been denied as unfairly prejudicial to respondent. We therefore do not consider that issue now.”  Order, at pp. 16-17.

Surprised? I wouldn’t have been surprised if counsel said “Whiskey Tango Foxtrot! She was fighting a disallowed loss on the return. If it wasn’t her return, why was she fighting the disallowance?”

And Judge, please oblige me by calling a Statutory Notice of Deficiency a “SNOD,” and a Notice of Determination (whether CDP, 501(c)(3), SS-8, or whistleblower) a “NOD.” Makes it clearer. Thanks.


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