Archive for February, 2017|Monthly archive page


In Uncategorized on 02/21/2017 at 16:27

That’s Judge Nega’s comeback to Martin S. Azarian P.A., Docket No. 28957-15, filed 2/21/17.

P.A. is Marty’s law firm sub S, of which Marty was sole owner. He was also an officer and director, and always treated himself as an employee.

I’m inferring here, but it sounds like Marty was playing the sub S dodge. That’s where the Sub S employs its owner, pays him some wages (with W-2 and withholding to match), and treats the rest of the earnings as profit (dividend to owner, but no W-2 and no withholding).

IRS stomps these moves by treating the profits as wages and claiming unpaid FICA-FUTA.

But all Judge Nega has to tell us is “… respondent sent petitioner Forms 4668, Employment Tax Examination Changes Report, which (1) concluded that petitioner failed to report reasonable wage compensation paid to Mr. Azarian…, (2) proposed that petitioner should have reported $125,000 in annual wages to Mr. Azarian…, and (3) concluded that petitioner was therefore liable for proposed employment tax increases and additions to tax…. Respondent did not issue petitioner a Letter 3523, Notice of Determination of Worker Classification, with respect to the taxable periods at issue.” Order, at p. 2.

P.A. petitions. IRS says no jurisdiction, because this isn’t a reclassification case. Marty was always an employee, and neither he nor P.A. ever said otherwise.

Section 7436 gives Tax Court jurisdiction when there’s a dispute over IC-vs-EE status in connection with an audit. OK, here there was an audit. And both sides agree that the relief for habitual erroneous EE classifications in Section 530(a) of the 1978 Revenue Act isn’t in play here.

For more about that, see my blogpost “Classified,” 4/3/13.

But there’s no classification issue here.

“Petitioner consistently treated Mr. Azarian as an employee for the taxable periods at issue. Therefore respondent did not make a determination that Mr. Azarian was an employee of petitioner, but rather concluded that petitioner failed to report reasonable wage compensation paid to Mr. Azarian…. Section 7436(a)(1) only confers jurisdiction upon this Court to determine the ‘correct and the proper amount of employment tax’ when respondent makes a worker classification determination, not when respondent concludes that petitioner underreported reasonable wage compensation, as is the case here.” Order, at pp. 2-3 (Footnote omitted, but read it; it discusses the case that was the subject of my blogpost hereinabove referred to).

This one was a loss for Eric William Johnson, Esq., even though as usual he provided “Honest tax representation at reasonable rates.” See my blogpost thus entitled, 8/28/14.



In Uncategorized on 02/20/2017 at 10:54

This is the day whereon two former Presidents of these United States are born again on a Monday. Wherefore, as Tax Court, and indeed the entire government, is closed, my keyboard is dumb.

See y’all tomorrow.


In Uncategorized on 02/17/2017 at 16:03

Sandy Freund, Esq., top gun from Rutgers Law School Federal Tax Clinic, like the Lennon-McCartney 1965 titlist, gets a ticket to ride to Tax Court even though her client was too late with his petition from the SNOD, and too late with his Form 12153 in response to the NFTL that followed.

It’s Estate of Daniel J. Sager, Deceased, Steven Sager, Executor, Docket No. 3057-16L, filed 2/17/17, a designated hitter from that modest jurist, CSTJ Panuthos, still hiding his light under the cliché and signing as STJ tout court.

And the Rutgers clinicians aren’t in it only for the small-claimers, because here the amounts at issue were in six figures before IRS conceded the interest down to $30K after Ex’r Steve ponied up the tax.

Appeals gave Ex’r Steve an equivalency hearing, the one-year consolation prize for the dilatory, and bounces his pleas thereat, issuing a determination letter and not a NOD. Steve’s petition falls on deaf statutes as CSTJ Panuthos explains.

“Mr. Sager requests that the decision letter be treated as a determination letter for purposes of conferring jurisdiction under section 6320 and section 6330. Mr. Sager concedes that he cannot cite existing precedent for this unique set of facts (where the lien notice was not sent to the last known address, where the request for the CDP hearing was not timely, and where the lien has already been discharged). Thus, he has not met the burden of proving that we have jurisdiction under section 6320 or section 6330. See Fehrs v. Commissioner, 65 T.C. 346, 348 (1975); Wheeler’s Peachtree Pharmacy, Inc. v. Commissioner, 35 T.C.177, 180 (1960).” Order, at p. 5, footnote 6.

So Ex’r Steve is out?

Negatory, good buddy, as they say on the Left Bank of the Lordly Hudson, not while Sandy is on the case. She also asked for abatement of interest. And IRS concedes she may have a chance to duke that one out.

“In a case involving an abatement of interest request under section 6404(e), under the law in effect at the time the petition in this case was filed, the Court has jurisdiction if the petition is filed ‘at any time the earlier of’ (1) the date the Secretary mails a final determination not to abate interest or (2) 180 days after the taxpayer files a claim for abatement of interest with the Secretary. Secs. 6040(h)(1)(A)(i) and (ii). The petition cannot be filed later than 180 days after the Secretary mails the final determination not to abate interest. E subpara. (B). The Court has jurisdiction to determine overpayments pursuant to section 6404(h). See Goettee v. Commissioner, T.C. Memo. 2003-43, 2003 WL 464862, at *19.” Order, at p. 6. (Footnote omitted.)

The determination letter bouncing Ex’r Steve’s equivalency hearing said he couldn’t have interest abated, and that was final enough; IRS never claimed it wasn’t. A statement denying abatement is as much a ticket to Tax Court as a SNOD or NOD.

And this time the petition is timely. So Sandy can duke it out with IRS about dropping the remaining interest.

Good job for Sandy and her student attorney Charlie Rioux.


In Uncategorized on 02/17/2017 at 14:43

Another wannabe immunologist, Edward Francis Bachner, IV, comes before Judge Morrison with at least sixteen (count ‘em, sixteen) reasons why he won’t sign off on the Rule 91(f) stip that IRS wants.

And leading the pack is the Fifth Amendment to the Constitution. Ed claims IRS wants him to incriminate himself, as to two of the three years he committed tax fraud.

Like the dude in Sam T. Coleridge’s classic, the IRS did “stoppeth one of three.” The Federales managed to nail Ed for one year, and he pled to a count of 18USC§287 for falsely claiming withholding and getting a six figure refund.

He also claims the government defrauded him, but Judge Morrison doesn’t go there.

The case is Edward Francis Bachner, IV & Rebecca Gay Bachner, Docket No. 23219-15, filed 2/17/17, but Becca is out of the fraud penalties on Section 6015 innocent spousery.

Leaving aside Ed’s attempt to frustrate the fisc with jivetalk, Judge Morrison cuts to the cliché.

“However, we find that addressing the proposed stipulation of facts would not expose the Bachners to a real danger of prosecution. Mr. Bachner has already been indicted for, and has pled guilty to, filing a false claim for the 2005 tax year. U.S. Const. amend. V; United States ex. rel. Stevens v. Circuit Ct. of Milwaukee County, Wis., Branch VIII, 675 F.2d 946, 948 (7th Cir. 1982). The question becomes whether he faces a real danger of being prosecuted for the other two years, 2006 and 2007. In his agreement to plead guilty for the 2005 year, Mr. Bachner admitted that he filed false claims against the government for the 2006 and 2007 years. Despite this admission, the government did not prosecute Mr. Bachner for the 2006 and 2007 years. We find the possibility remote that the government will later prosecute Mr. Bachner for the 2006 and 2007 years based upon his statements regarding the proposed stipulation of facts. We therefore hold that the Bachners may not claim privilege in this Rule 91(f) matter.” Order, at pp. 5-6. (Footnote omitted, but read it.)

Remember, immunologist, “(I)t is for the Court to determine whether the privilege justifies a refusal to answer questions. Hoffman v. United States, 341 U.S. at 487. In making the determination the trial judge ‘must be governed as much by his personal perception of the peculiarities of the case as by the facts actually in evidence.’ Id.” Order, at p. 5.

And jivetalking may give an unpleasant personal perception.



In Uncategorized on 02/17/2017 at 03:37

No, I’m not showing off my Italian; I know very little. But the title of this blogpost is a pun. The old saying “Chi si ferma è perduto” (he who hesitates is lost) mutated to “Chi se firma è perduto” (he who signs his name is lost) in the upheavals between 1943 and 1945, when Italy was divided by war, and signing one’s name to anything might not end well for the signer.

Well, Charles D. Shaffran, Sr., 2017 T. C. Memo. 35, filed 2/16/17, avoided that fate, even though he signed a couple checks (hi, Judge Holmes) for the soon-to-be-defunct Sunset Charlie’s restaurant, courtesy of Judge Vasquez.

Charlie’s son Carlos was a partner in the restaurant. Charlie was not, although their signatures were remarkably similar. Charlie, retired from the assembly line at Ford, hung around the place with his disabled wife to look at the FL sunset.

Charlie did sign two checks when suppliers showed up and nobody was around. He signed his own name, even though he was not a signatory on the account. The bank paid anyway. And he signed two more with the authority of Mr. Roberts, the managing member of the LLC that owned the place.

As Sunset Charlie’s was sunsetting and the SOL running on the TFRPs for the $85K in unpaid FICA-FUTA, Revenue Officer K (name omitted) gets dud info from the manager of the building from which Sunset Charlie’s was evicted for nonpayment, and hits Charlie with a Letter 1153, telling him to pony up. But Charlie’s address was a PO box he shared with Carlos, who intercepted the letter.

Sound familiar? See my blogpost “You Didn’t Get It – Part Deux,” 5/31/13, another filial interception.

So Charlie only gets the NFTL. Appeals confirms despite Charlie’s non-receipt beef. So Charlie gets de novo review, as he had no chance to contest the 1153 because of the interception. Judge Vasquez notes the signature on the receipt for the 1153 is Carlos’, not Charlie’s.

RO K didn’t do a thorough checkout of bank records because of the short SOL. Anyway, “RO K did not provide similar relief to petitioner because she confused petitioner’s signature with Carlos’ and was therefore under the mistaken impression that petitioner regularly signed Restaurant Group’s checks.” 2017 T. C. Memo. 35, at p. 7. (Name omitted).

Charlie didn’t file a post-trial brief, which generally (love that word) would mean he conceded the case, but Judge Vasquez gives him a bye in the interests of justice.

Judge Vasquez buys Charlie’s testimony, despite a couple of minor inconsistencies.

The test for responsible personhood, and thus TFRP, is command-and-control. Charlie wasn’t an officer, wasn’t authorized to sign the business accounts, had no hire-fire powers, had no command responsibilities, didn’t have the right to see the books, bank statements, tax returns or anything else.

Charlie just sat around with Mrs Charlie and looked at the sunset. Sort of like those dudes in Ogden, UT.

“We are not persuaded by respondent’s argument that petitioner is a responsible person because he signed and/or wrote out a small number of Restaurant Group’s checks. The four checks bearing petitioner’s signature were all signed in the span of two weeks…when Mr. Roberts was out of town (and before four of the five tax periods in question). Of these four checks… two were written and signed only after Mr. Roberts had told petitioner to do so. The other two were signed in unusual circumstances where petitioner was the only person available to take delivery of vendor orders. Such limited check signing activity does not support a finding that petitioner had sufficient control over Restaurant Group’s affairs to avert the nonpayment of its employment taxes.” 2017 T. C. Memo. 35, at pp. 16-17. (Footnote omitted, but I’ll get back to it).

And RO K did her best under great time pressure. There were only three weeks to go before the SOL ran on the unpaid trust funds.

Judge Vasquez: “We note that RO K, who was working under enormous time pressure because of the looming expiration of the period of limitations, erroneously concluded that petitioner had regularly signed Restaurant Group’s checks during the tax periods in question. We believe RO K would have withdrawn her recommendation to assess TFRPs against petitioner had she not confused Carlos’ signature with petitioner’s.” 2017 T. C. Memo. 35, at p. 17, Footnote 14. (Name omitted).

Still and all, don’t sign other peoples’ checks.


In Uncategorized on 02/17/2017 at 01:29

That obliging jurist Judge David Gustafson certainly can be a stickler. “Punctilious” barely describes the logical surgery Judge Gustafson performs in Dean Matthew Vigon, Docket No. 287880-14L, filed 2/16/17, a designated hitter.

Dean Matthew is fighting a lien-levy, and IRS folds on the eve of trial.

“IRS is conceding that petitioner Dean Matthew Vigon is not liable for the penalties at issue in this case; that the process of abating those liabilities is almost complete; that the process of releasing the liens at issue has been initiated; and that once those processes have been completed, the IRS intends to file a motion to dismiss the case on grounds of mootness.” Order, at p. 1.

Sounds pretty good if you’re in Dean Matthew’s position, no? So why is Judge Gustafson designating this order?

It’s not because he wants to commend IRS’s counsel for “prompt and efficient work on this case”, although he does that, too.

No, because dismissing a collection case for mootness, where petitioner challenges liability for the tax at issue, doesn’t do enough.

“We understand how collection issues under section 6330(c)(2)(A) become moot if collection activity ceases. It is less clear how a liability challenge under section 6330(c)(2)(B) becomes moot merely upon an announced concession, which would not seem to have any res judicata or collateral estoppel effect. Perhaps a CDP petitioner who makes a liability challenge that the IRS concedes is entitled to decision in his favor on the liability issues.” Order, at p. 1.

Prompt and efficient IRS counsel, take the hint.

It’s decision document time, and Judge Gustafson gives IRS counsel until March to do so.


In Uncategorized on 02/15/2017 at 17:48

If You Make Discounts

Those among my readers with exceptionally long memories may remember that Moneygram International, Incorporated and Subsidiaries were classed as unbanked back in 2015. If you don’t, see my blogpost “Don’t Bank On It,” 1/7/15.

This dogfight involved $82 million in deficiencies, since the capital-loss-against-ordinary-income largesse of Section 581 was the lynchpin of Moneygram’s case. Hence, the Fifth Circuit’s aid was invoked.

Well, back in November, a per cur. from the Fifth bounced the case back to Tax Court. Today the remand landed in Judge Lauber’s lap, to reconsider the full-dress T.C. It’s Moneygram International, Incorporated and Subsidiaries, Case No. 15-60527, decided 11/15/16.

In the first place, the Fifth said that Tax Court went outside the statute by defining deposits as those held for an extended period. Nope, said Fifth Circuit, the statute doesn’t say that. A deposit can be repayable on demand.

Likewise, Tax Court’s insistence that a bank make loans whose duration is an extended period of time stretches the common definition. A bank can make loans as short as it likes, provided that there is an advance and an intention that the sum advanced shall be repaid. Interest is an indicium of a loan, but is only one of seven common factors, to which I’ve referred in numerous blogposts.

“Additionally, we note that § 581 provides that a substantial part of the taxpayers business must consist of ‘making loans and discounts.’ 26 U.S.C. § 581 (emphasis added). The statute’s use of the conjunctive ‘and’ rather than the disjunctive ‘or’ in this phrase indicates that ‘discounts’ is a required element. See A. Scalia & B. Garner, Reading Law: The Interpretation of Legal Texts 116–17 (2012) (observing that the conjunctive use of the word ‘and’ indicates that each aspect must be satisfied). The Tax Court did not address whether MoneyGram makes ‘discounts,’ and neither party has presented argument regarding this requirement on appeal. On remand, the Tax Court is directed to consider whether MoneyGram satisfies this component of § 581.” Decision, at p. 12.

The dissent argues that Moneygram isn’t a bank by any stretch of the term, so making discounts is irrelevant.

And no, “discounts” by a bank doesn’t mean there are special friends of Rick’s. A bank discounts commercial paper when it pays for the paper at less than face, the amount paid including upfront interest. If you buy US savings bonds, you pay less than face but collect face at maturity. You’ve made a discount.




In Uncategorized on 02/15/2017 at 16:49

Hopefully Tyree Woodley, Docket No. 15662-15S, filed 2/15/17 is listening, because His Honor Big Julie, more properly styled Judge Julian I Jacobs, hereinafter HHBJJJIJ, has put him in first place on the designated hitter list today.

Tyree is coming up for trial in fewer than two weeks, but apparently wants out. At least, IRS’ counsel claims Tyree told him fuggedaboutit, or words to that effect.

But HHBJJJIJ wants to hear it from Tyree himself in person. So he called Tyree, and even gives Tyree’s telephone number in today’s order; remember Tax Court wants the fullest disclosure possible, so litigants, be aware – your life and miracles are up for grabs.

But Tyree wasn’t around, so to make sure that Tyree wants out and is prepared for the deficiency hit to the fullest extent, HHBJJJIJ tells Tyree to show, or call chambers (and to be fair, HHBJJJIJ gives his chambers telephone number in the order).

Should Tyree fail to take the hint, HHBJJJIJ has a new warning.



In Uncategorized on 02/14/2017 at 18:31

Back around 1966, if my ancient memory is still functioning, the Surgeon General of the USA led the world, inaugurating the warning on cigarette packs that smoking was dangerous to one’s health.

This so impressed me that I kept smoking until September 15, 1994.

Hopefully, His Honor Big Julie, more properly His Honor Judge Julian I Jacobs, hereinafter HHBJJJIJ, has issued a warning that will energize rather than anesthetize petitioners who fail to show up for hearings, when dismissal for want of prosecution is on the agenda.

It may be Valentine’s Day, but HHBJJJIJ isn’t waxing sentimental.

Here’s his designated hitter, Barbara Brose Graybill & John I. Graybill, Docket No. 6545-16S, filed 2/14/17.

Barb & John are on for trial in Philly, but IRS claims they haven’t prosecuted.

So HHBJJJIJ tells Barb & John to show up, because if they don’t:



In Uncategorized on 02/13/2017 at 19:15

The rap on tax law is that it’s hypertechnical, dry-as-dust, and devoid of humanity. We tax lawyers are deemed to wander in this murky No-One’s-Land, gabbling unintelligibly to others similarly situated.

Well, today Mohammad M. Zarrinnegar and Mary M. Dini, 2017 T. C. Memo. 34, filed 2/13/17, bring some warmth on a cold afternoon, and even ex-Ch J Michael B (“Iron Mike”) Thornton has a grin to spare for Mo’s story.

Mo is a dentist, but he spends most of his logged hours running four (count ‘em, four) rental properties and real estate brokering. Mary is also a dentist, drilling and filling in the family tooth shop while Mo is brokering and managing.

Mo’s logs stand up for the 750 hours, even when most of his deductions crash on non-substantiation, inconsistent testimony, and illegible receipts.

So Mo’s a pro, and he gets his losses.

But the brokerage gig is what the jazz musicians of an earlier age called a “hame,” an unprofitable performance.

Mo is not a whit dismayed. And ex-Ch J Iron Mike is down wit’ that, as we say on this Minor Outlying US island off the Coast of North America.

“Petitioner husband testified that throughout the years at issue he had high hopes for the brokerage side of the business, despite the financial malaise burdening the housing market.  Undaunted despite earning only $8,500 in brokerage fees during the years at issue, petitioner-husband testified that he poured hundreds of hours each year into broker’s tours, listing searches, open houses, property viewings, client meetings, and other related activities, likening his efforts to the early labors of Bill Gates and Mark Zuckerberg, who toiled in obscurity and relative poverty before reaping fabulous profits.” 2017 T. C. Memo. 34, at p. 16, footnote 11.

Toiling in obscurity, that’s us, Mo.