A memorable line from a time when political debates were jocular, rather than toxic, gives me my headline for this blogpost.

The order is Nicholas O. Blechman & Luise Stauss Blechman, Docket No. 26252-16S, filed 4/18/17.

And perhaps I’m just a wee bit testy today, having just posted off my Federal, State and City income tax returns. And a check, of course, for less than 10% of total tax due, having of course made sufficient estimated payments.

But Ch J L Paige (“Iron Fist”) Marvel has done it again, getting two of my pet peeves in one order.

Nich & Lu are innocent bystanders here. Their “…power of attorney Steven P. Goldglit, CPA, filed an Opposition to Motion To Dismiss for Lack of Jurisdiction on behalf of petitioners. In it, he states that petitioners were confused about the due date for filing the petition and they did not seek professional advice until after they filed the petition because they are have been under financial hardship.” Order, at p. 2.

Must I repeat yet again that a “power of attorney” is not a person, but a piece of paper (or perhaps, if faxed to the CAF, an aggregation of electrons)? The “power of attorney” empowers a “Representative” to represent the “Taxpayer.”

So Mr Goldglit, CPA, is a Representative.

But is he admitted to practice before the United States Tax Court?

If he is, he hasn’t filed an Entry of Appearance, at least according to the Tax Court’s Docket Inquiry website.

If he isn’t, is he awaiting admission per Rule 24(a)(3)?

Or are we again seeing CPAs admitted to practice before the United States Tax Court, on the strength of a Form 2848 (a form which Tax Court has repeatedly said it does not recognize), with no admissions examination, no payment of a fee, no admission to the Bar of any State, Commonwealth or Territory, and no Entry of Appearance?

Why not just amend Rule 200, and have done?

I fancy myself a punster. But a trilingual pun is a summit I rarely achieve. Today, however, the enduring nature of the Second Circuit’s decision in Chai v. Com’r, 851 F.3d 190 (2 Cir., 2017), is my springboard to gold in the punster’s Olympics, claiming a pun in Chinese, Hebrew and English.

You remember Jason Chai, of course, A. Beer’s cousin-in-law and frontman. No? How fleeting is fame. OK, dig my blogpost “The Jersey Bounce – Part Deux,” 3/22/17, and accelerate from the “on” ramp to the fast lane.

Well, Jason had his day in court while cousin-in-law A. Beer and cohorts were getting slammed for their shelter-flogging. But Jason’s Second Circuit score off the failure of the Section 6751(b) Boss Hoss signoff to justify the chops inflicted upon him came after cousin-in-law and cohorts finished their trial, with chops hanging over their collective heads, and not a mention of the Section 6751(b) to meliorate their plight.

And no decision has yet issued from the week-long trial two years ago.

Judge Lauber deals with inventive counsel in Endeavor Partners Fund, LLC, Delta Currency Trading, LLC, Tax Matters Partner, et al., Docket No. 8698-12, filed 4/18/17.

The boom about to fall, counsel files a status report, reminding Judge Lauber of Second Circuit’s blow-off of ex-Ch J Michael B (“Iron Mike”) Thornton’s dictionary-tear.

“In their status report, however, petitioners do not simply bring this supplemental authority to the Court’s attention. In addition, they advance a new argument–that the accuracy-related penalty determined by respondent in these cases should not be sustained because respondent did not meet his burden of production to show written supervisory approval for the penalty, as the Second Circuit in Chai interpreted section 6571(b)(1) to require. But regardless of which party bears the burden of demonstrating compliance with section 6751(b)(1), petitioners ‘had the responsibility of arguing in the Tax Court that the Commissioner had not complied with the statute in order to put the Commissioner on notice that the issue was in dispute.’ Kaufman v. Commissioner, 784 F.3d 56, 71 (1st Cir. 2015) (emphasis in original). As far as the Court has been able to determine, petitioners did not make this argument in their pleadings, during trial, or in their post-trial briefs.” Order, at p. 1.

Irrespective of the outcome of this ploy, I give counsel a Taishoff “good try, first class.”

And I note counsel is a fellow member of the ABA/NYSBA Tax Subcommittee on the Taxation of Cooperatives and Condominiums, s/a/k/a Charlie’s Pizza Party. Really good job, EZ.

Now of course one doesn’t make motions by means of status reports. EZ came in through the window immortalized by Sir Paul McCartney in 1969. Judge Lauber wants him to enter through the front door, so he must move to amend his pleadings.

And of course The Jersey Boys, who litigated Chai, raised the Boss Hoss issue in their initial post-trial brief, whereas EZ came somewhat tardily to the feast. So IRS gets a chance to bewail the same.

“If petitioners do file a motion for leave as described above, we will give respondent an opportunity to respond to that motion. Together with any such forthcoming response, respondent may file, if he deems it appropriate, a motion to reopen the record for the purpose of including any documentary or other evidence relevant to the question of whether supervisory approval within the meaning of section 6751(b)(1) was secured for the penalties at issue in these cases. If we do grant one or both of these motions, we will then order supplemental briefing on the requirements that section 6751(b)(1) imposed on respondent and whether he satisfied them.” Order, at p. 2.

So move, EZ, and best of luck.

I’ve often commended Judge David Gustafson. He’ll try your case in the slammer where you are; he’ll help you draft your brief, and do everything but bring coffee and doughnuts to your trial.

But don’t ignore him. He will get more than a trifle testy when he suspects counsel of straying from the paths of righteousness.

There are six (count ‘em, six) designated hitters, all of equal tenor, of which I have chosen Kenneth Bailey, Docket No. 21003-16L, filed 4/17/17, as my case-in-point.

Ken and his fellow petitioners are all facing NITLs for some TFRPs, IRS moved for summary J in all cases, Ken and his fellows said nothing, and Judge David Gustafson awards IRS summary J.

No biggie, right? Ordinary grist that comes to the Tax Court mill every day.

But the difference is that all six have the same attorney, whom I will call Mac.

“We will grant the Commissioner’s motion for summary judgment, but we will not yet enter decision. Instead, we will order petitioner’s counsel to appear at the calendar call on June 12, 2017, and show cause why sanctions should not be entered under section 6672(a)(2) and why counsel should not be referred to the Court’s Committee on Admissions, Ethics, and Discipline.” Order, at pp. 1-2.

“Counsel’s non-responses have required the Commissioner to file status reports and have required the Court to determine in each case without petitioners’ counsel’s input whether a grant of summary judgment is ‘appropriate’, Rule 121(d). We cannot tell whether this indicates that counsel is unaware of or is ignoring the Court’s orders. We cannot tell whether counsel knew the cases had no merit but filed petitions to collude in an attempt to use the CDP proceedings to delay collection. We cannot tell whether counsel determined after filing the petition that the cases have no merit and therefore did not bother to comply with the Court’ s order. We cannot tell the extent to which counsel’s non-compliance with the Court’s orders prejudices his own clients and/or the Commissioner.” Order, at p. 2.

I’m not judging which, if any, of these possibilities is correct, or even is close to correct. I firmly support our State Bar’s Lawyer Assistance Program for lawyers overwhelmed by the enormous stresses of the profession I love. If Mac is in such case, I hope his State’s Bar Association, or local association, has a similar program. If so, he should avail himself thereof.

But if not, he did not do well to peeve Judge David Gustafson. Obliging as that jurist is, there is a limit.

Whistleblower 16158-14W, 148 T. C. 12, filed 4/17/17, falls short. Even though his/her target, a gameplayer with FICA/FUTA, changed his/hers/its/their evil ways thereafter, to the enlargement of the fisc, ol’ 16158-14W gets nothing, because IRS didn’t even audit subsequent years, much less start proceedings.

Judge Buch: “The explanation attached to the Form 11369 [the whistleblower blow-off form] stated that the whistleblower was correct that the taxpayer had made errors but the cause of the errors was an ‘honest mistake’ made while updating its reporting systems. The explanation went on to say that ‘[i]t appears the * * * [taxpayer] has been convinced by its close call to become fully compliant with its withholding tax responsibilities and further examination is not warranted.’’ 148 T. C. 12, at p. 4.

Yeah, roger that. Like the dude would have straightened up and flown right if ol’ 16158-14W hadn’t tipped IRS off while IRS was auditing an unrelated matter.

Anyway, the changed compliance of the blown didn’t generate any ”collected proceeds,” at least according to Judge Buch’s view of Section 7623.

“We have described section 7623(b)(1) as ‘straightforward’ and ‘written in expansive terms’. Whistleblower 21276-13W v. Commissioner, 147 T.C. __ , __ (slip op. at 10-11) (Aug. 3, 2016).”

Yes, but.

“Collected proceeds do not include self-reported amounts collected when a taxpayer changes its reporting for years that are not part of the action. The Commissioner argues, and we agree, that because of the significant costs and heavy administrative burden, collected proceeds cannot include amounts collected for years after examination years on account of a taxpayer’s changing its reporting. Petitioner takes the definition of ‘collected proceeds’ as ‘all proceeds collected by the Government from the taxpayer’, Whistleblower 21276-13W v. Commissioner, 147 T.C. at __ (slip op. at 32), to an irrational extreme to argue that self-assessed amounts collected for future years are proceeds collected by the Government. Indeed, many, if not all, of the Commissioner’s examinations will have some influence on a taxpayer’s reporting. However, any determination of an award based on additional amounts collected for years following examination years would be based on speculation.” 148 T. C. 12, at pp. 13-14.

Straightforward, expansive, useless.

I said “Wow!” when I read that clause in Hurford Investments No. 2, Ltd., Hurford Management No. 2, LLC, Tax Matters Partner, Docket No. 23017-11, filed 4/17/17. And read the opinion before commenting on what is “as clear as anything in the Code.”

Now if anyone objects that I blog a lot of Judge Holmes’ opinions, with or without honorifics, I can only reply that he gets some really good cases. So fans of other judges can complain to Ch J L. Paige (“Iron Fist”) Marvel or to the Office of the Clerk.

This tangled trail starts back in 2008 with Estate of Thelma G. Hurford, Deceased, Donor, G. Michael Hurford, Independent Executor, 2008 T. C. Memo.278, filed 12/11/08. I won’t digest this, except to say what Judge Holmes said: “This plan did not go well in design or execution….” Order, at p. 1.

So today’s episode moves from the late Thelma’s botched estate to the FLP set up by her attorney. The FLP wound up with the late Thelma’s late husband Gary’s phantom stock.

Gary worked for the legendary Hunt Brothers, who were what my daughter the Texan would call “awl kings.” Gary was the first non-Hunt president of Hunt Oil Corp. But he got no stock as compensation, and couldn’t buy any.

What he did get was a book entry in a notional amount, equivalent to the FMV of a number of Hunt Oil shares. This amount increased or decreased as the value of an equivalent number of shares as at 12/31 annually. When an employee reached qualified termination (which Gary did by dying), a five-year clock started ticking, at the end of which the non-stock was redeemed at book value. This non-stock is called “phantom stock.”

Well, Thelma got the phantom stock, but she died before the five-year clock ran out. She could have redeemed sooner, but didn’t. And she transferred the stock to the FLP while still alive.

Thelma never reported the phantom stock on her 1040, but the FLP did on its 1065, as a short-term capital gain, by which logic both Judge Holmes and I are confused.

Howbeit, in the case above-cited, relating to Thelma’s estate’s tax, the Court held that the phantom stock was includable in Thelma’s estate. Then the five-year clock ran, Hunt Oil gave the FLP much money, and IRS audited the FLP.

IRS and FLP made a closing agreement, whereby they agreed that the phantom stock proceeds were income in respect of a decedent, agreed on the amount, and that FLP got basis in the same amount.

IRS wants summary J. So does the FLP.

No issue preclusion or claim preclusion. The 2008 case only involved Thelma’s estate; nothing to do with the FLP.

Well the phantom stock was surely income in respect of a decedent (IRD). Gary was dead before he got it. Now Thelma, as the person who inherited the phantom stock from Gary, should have paid tax at ordinary rates, except she transferred the phantom stock to FLP before she died. And it’s too late to change that.

Now for the clear language.

“There’s another sentence in section 691 that deals with this possibility: ‘If a right . . . to receive an amount is transferred by . . . a person who received such right by reason of the death of the decedent . . . there shall be included in the gross income of. . . such person . . . for the taxable period in which the transfer occurs, the fair market value of such right at the time of such transfer . . . .’ I.R.C. § 691(a)(2).

“This is another good reason for Thelma’s not doing what the estate planner who advised her back in 2000 told her to do: He seems to have been unaware of this section (as was, to be sure, the Commissioner and the Court during the estate tax case). But the language is, as [FLP] now emphasizes, as clear as anything in the Code. Thelma got the phantom stock by reason of her husband’s death. She transferred it to [FLP]. This means that she should have reported the phantom stock’s value at the time of the transfer. And section 691(a)(3) says that she should have reported it as ordinary income.

“Except that she didn’t report it at all, much less as ordinary income, and now too much time has passed to fix this mistake. And there’s the added complication that [FLP] did report it on its own 2000 tax return, albeit as short-term capital gain. (How it came up with that characterization is another mystery.).” Order, at pp. 5-6.

Even more interesting is whether the phantom stock is a capital asset. It’s not on the Section 1221 exclusion list. But the right to receive future income doesn’t make that right a capital asset. However, the right can change character with transfer. The original right was Gary’s. He died before he could get it. Thelma got it, but transferred it and at that point owed ordinary income tax. But the FLP reported and paid tax, not Thelma.

Most importantly, the phantom stock could go up or down in value, just like real stock. All the FLP could do was sit and suffer, or sit and gloat.

OK, so it’s a capital asset. But was there a sale or exchange by FLP?

Not in the traditional sense, bur remember Pilgrim’s Pride. What, you don’t? Well, see my blogpost “Just Walk Away – Part Deux,” 3/10/14, especially the reversal by 5th Cir.

“Remember that both parties to the phantom-stock arrangement had the right to liquidate the account at any time. When Hunt Oil liquidated the phantom stock and distributed the proceeds, it ended [FLP]’s right to sell the phantom stock when it chose. We think that means there was a termination of a right to buy or sell a capital asset, and not an abandonment of property, under the Fifth Circuit’s interpretation of 1234A(1). [FLP] still owned the rights to the phantom stock or, after the liquidation, to the cash proceeds. We therefore conclude that the transaction was a sale or exchange of a right to sell a capital asset under section 1234A(1) and [FLP] is entitled to capital-gains treatment.” Order, at p. 11.

OK, capital gain. But what basis? IRS said basis was stipulated on the closing agreement. No, says FLP, we get step-up in basis to FMV at DOD.

Hold on. The FLP didn’t die, and Thelma didn’t own the phantom stock when she died.

Judge Holmes to the rescue. “Yet section 1014(b)(9) tells us to consider property ‘to have been acquired from or to have passed from the decedent . . . if by reason thereof the property is required to be included in determining the value of the decedent’s gross estate.’ That’s what happened here — in the estate-tax case we included the value of the phantom stock in Thelma’s gross estate.” Order, at p. 12.

So what? Section 1014(c) expressly excludes “property which constitutes a right to receive an item of income in respect of a decedent under section 691.”

But Judge Holmes already concluded that the phantom stock changed character when it went from Thelma to the FLP. So it was a capital asset in the FLP’s hands and not IRD.

A Taishoff “good job, first class” to J. L. Kennedy, Jr., Esq., and his team.

No, not literally. And the Roesler of this story is Mark Roesler, expert witness and extractor of value from dead poets and celebrities, by means of exploiting the public interest therein.

And of course Mr Roesler is a featured player in the ongoing saga of the late Michael Jackson, as told by The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Inveterate, Ineluctable, Indefatigable, Illustrious, Incontrovertible, Ineffable and Indomitable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Mr Roesler reports and testifies about the worth of the late King of Pop’s pictures, descriptions and account in Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co- Executor, Docket No., 17152-13, filed 4/17/17.

But Mr Roesler wants a large part of his report and testimony sealed, because it contains trade secrets, namely, details of what he got for the relicts of the deceased greats he’s represented over the years.

But remember Section 7461(a), says IRS. The public has a right to know.

Judge Holmes sets the ground rules. We’re not dealing with national security, law enforcement, endangered individuals, or scandalous information. This is about patents, customer lists, pricing and trade secrets.

“Asserting annoyance isn’t enough — there must be some demonstration of harm that disclosure will cause. Our focus on harm means that the presumption of public access trumps any private interest in nondisclosure when otherwise confidential business information is stale. When information becomes stale is a factbound determination. “ Order, at p. 2. (Citations omitted).

Well, Mr Roesler’s pricing arrangements are clearly trade secrets.

“Roesler’s report also reveals the commission he charges (or attempts to charge) for his representation of estates to help them exploit their right of publicity. This is very much an ongoing feature of his business strategy. The Commissioner makes the reasonable point that these charges might be important in estimating a value of Jackson’s image and likeness to the Estate. It seems unlikely, however, that the Court would use only a single source to estimate such costs; whereas their revelation to a wider public could definitely place Roesler at a competitive disadvantage to his peers in this industry.

“The Estate wins on this one — and the Court noticed as well that Roesler’s commissions show up on pages 28 and 29. Although the Court is not granting the Estate’s request to seal these pages in their entirety, we will allow a redaction of this information.” Order, at p.3.

Roesler loses the tussle with IRS on his aggregated numbers. Individual deals aren’t mentioned, and the identities of the heirs is not revealed. And some material is more than five years old, and to Judge Holmes, that means they’re stale.

“The Court agrees with the Commissioner that the terms of deals that Jackson himself entered between 7 and 37 years ago are quite stale — the Estate has not shown how their revelation would affect any similar and more recent deal. This information and analysis is, moreover, likely to be quite relevant in the Court’s analysis for what it might show about the effects on the Estate of the public-relations troubles Jackson had during the last 15 years of his life.” Order, at p. 3.

So Roesler wins only one out of three falls.

Edited to add, 9/30/21: Note that because only a few pages of one expert report were sealed, the Genius Baristas who inflicted the DAWSON schemozzle upon us have sealed the entire file, including but without in any way limiting the gener5ality of the foregoing (as my expensive colleagues say), millions of documents in this litigation that were formerly public and readily available on the inernet. This assault on Section 7461 and the people’s right to know has gone far enough. Whether sheer incompetence or malice aforethought impels this is irrelevant. It has to end.

No, not literally. And the Roesler of this story is Mark Roesler, expert witness and extractor of value from dead poets and celebrities, by means of exploiting the public interest therein.

And of course Mr Roesler is a featured player in the ongoing saga of the late Michael Jackson, as told by The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Inveterate, Ineluctable, Indefatigable, Illustrious, Incontrovertible, Ineffable and Indomitable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Mr Roesler reports and testifies about the worth of the late King of Pop’s pictures, descriptions and account in Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co- Executor, Docket No., 17152-13, filed 4/17/17.

But Mr Roesler wants a large part of his report and testimony sealed, because it contains trade secrets, namely, details of what he got for the relicts of the deceased greats he’s represented over the years.

But remember Section 7461(a), says IRS. The public has a right to know.

Judge Holmes sets the ground rules. We’re not dealing with national security, law enforcement, endangered individuals, or scandalous information. This is about patents, customer lists, pricing and trade secrets.

“Asserting annoyance isn’t enough — there must be some demonstration of harm that disclosure will cause. Our focus on harm means that the presumption of public access trumps any private interest in nondisclosure when otherwise confidential business information is stale. When information becomes stale is a factbound determination. “ Order, at p. 2. (Citations omitted).

Well, Mr Roesler’s pricing arrangements are clearly trade secrets.

“Roesler’s report also reveals the commission he charges (or attempts to charge) for his representation of estates to help them exploit their right of publicity. This is very much an ongoing feature of his business strategy. The Commissioner makes the reasonable point that these charges might be important in estimating a value of Jackson’s image and likeness to the Estate. It seems unlikely, however, that the Court would use only a single source to estimate such costs; whereas their revelation to a wider public could definitely place Roesler at a competitive disadvantage to his peers in this industry.

“The Estate wins on this one — and the Court noticed as well that Roesler’s commissions show up on pages 28 and 29. Although the Court is not granting the Estate’s request to seal these pages in their entirety, we will allow a redaction of this information.” Order, at p.3.

Roesler loses the tussle with IRS on his aggregated numbers. Individual deals aren’t mentioned, and the identities of the heirs is not revealed. And some material is more than five years old, and to Judge Holmes, that means they’re stale.

“The Court agrees with the Commissioner that the terms of deals that Jackson himself entered between 7 and 37 years ago are quite stale — the Estate has not shown how their revelation would affect any similar and more recent deal. This information and analysis is, moreover, likely to be quite relevant in the Court’s analysis for what it might show about the effects on the Estate of the public-relations troubles Jackson had during the last 15 years of his life.” Order, at p. 3.

So Roesler wins only one out of three falls.

Edited to add, 9/30/21: Note that because only a few pages of one expert report were sealed, the Genius Baristas who inflicted the DAWSON schemozzle upon us have sealed the entire file, including but without in any way limiting the generality of the foregoing (as my expensive colleagues say), millions of documents in this litigation that were formerly public and readily available on the internet. This assault on Section 7461 and the people’s right to know has gone far enough. Whether sheer incompetence or malice aforethought impels this is irrelevant. It has to end.

A designated hitter from that Obliging Jurist, Judge David Gustafson, channels Judge Lauber’s earlier rendition of this 1966 Paul Simon classic. See my blogpost “Slow Down, You Move Too Fast,” 9/24/13.

Once again, Appeals are in a red-hot rush during the holidays. Here’s the story of Keith Chambers Brown, Docket No. 4894-16SL, filed 4/14/17.

Keith Chambers’ construction business got hammered and nailed (sorry, guys) by the real estate meltdown commencing 2009, and he owed undisputed tax plus one unfiled year’s return. IRS gave him a NFTL.

He went to Appeals, claiming the NFTL put him out of business, as he could not borrow from banks with an NFTL. He wanted an OIC and a lien lift.

I’m throwing in the dates here, contrary to my usual practice, because they’re especially relevant.

On December 15, Appeals scheduled a hearing for January 13, less than a month later. The AO told Keith Chambers he’d need to have the missing return in her hands by that date. Keith Chambers said he’d need thirty days to generate the return.

The AO said “no return, no OIC, lien sustained.” So the AO generated the NOD sustaining the lien within 14 days after January 13.

Judge Gustafson, his usual genteel self, notes that between December 15 and January 13, “the holidays intervened.” Order, at p. 2.

“Appeals thus handled the case in a month and a half–commencing it on December 15, 2015, and concluding it on January 27, 2016–and its entire communication with the taxpayer apparently consisted of one letter and one telephone conversation.” Order, at p. 2.

Undaunted, Keith Chambers files the missing return on February 25 and sends off his petition the next day, beating the thirty-day clock.

Fast (or maybe not so fast) forward.

“More than a year after the petition was filed, the Commissioner moved for summary judgment on April 13, 2017 (i.e., 60 days before the trial calendar at which this case will be tried, which is the last day permitted by Rule 121(a) for filing a motion for summary judgment).” Order, at p. 2.

That’s perfectly cool, because they did beat the deadline. But the way they beat the deadline does not please Judge Gustafson. And there are State courtiers I have encountered who pull the same…well, let me not characterize, but those types get a similar response.

“Mr. Chambers elected this Court’s ‘small case’ procedures pursuant to 26 U.S.C. section 7463 and Tax Court Rules 170-174. Under those procedures, cases are handled ‘as informally as possible, consistent with orderly procedure.’ Rule174(c). A motion for summary judgment in a small case is not improper but is less common than in regular cases. If a motion for summary judgment is granted in a small case and decision is entered without trial, the taxpayer–who elected informal procedures–may feel that he did not get his day in court. We acknowledge that a motion for summary judgment could be helpful and appropriate in some small cases, but we think this is not such a case, for the reasons we now explain.” Order, at p. 3.

Some Judge ‘splainin’.

“The flaw in Mr. Brown’s CDP hearing on which Appeals based its determination was his failure to file his [missing] return. He was told by letter of December 15, 2015, to produce the overdue return in less than a month; and when he explained that he needed 30 more days, no additional time was given. We cannot say definitively whether this was an unreasonable deadline. If there was good reason for the denial of more time, then presumably we should sustain Appeals’ decision; but the record before us gives no reason that the Appeals officer denied Mr. Brown any additional time. There is no indication of Mr. Brown’s having been unresponsive, nor of prior incidents of delay on his part.” Order, at p. 3.

“‘[S]etting unreasonable deadlines can constitute an abuse of discretion’. In the admittedly anecdotal experience of the undersigned judge, the month-and-a-half duration of this CDP case seems very short (an impression that, if incorrect, the IRS could correct at trial). On the one hand,we must applaud the efficiency of an Appeals officer who processes her business so briskly; but on the other hand, it is possible, under the few facts we have, that this denial was not reasonable. The IRS’s motion for summary judgment that was filed more than a year after Appeals was finished with the case was timely, but its deliberate submission did not vindicate the pace of Appeals’ handling of the case.” Order, at p. 4. (Citaiton omitted).

So let’s see if Keith Chambers was a wiseguy, or the AO was arbitrary and capricious. And the best way to do that is to try the case.

IRS, I suggest you move to remand to Appeals for a lengthy supplemental hearing.

No, my practice does not include personal injury, whether plaintiffs’ or defendants’; rather, today we have a discussion of Scar, an opinion often cited.

For those tuning in late, Scar v Com’r, 814 F.2d 1363 (9th Cir. 1987), rev’g 81 T.C. 855 (1983) dealt with a SNOD that dinged the taxpayer as a member of an entity with which taxpayer had never dealt, and IRS had never examined the return in question. Moreover, the deficiency used the top marginal rate, rather than the graduated rate.

So the SNOD got tossed, along with the case.

But today, though he reviews Scar, His Honor Big Julie, Judge Julian I Jacobs, hereinafter HHBJJJIJ, refuses the benefit thereof to Lewis Teffeau, et al., Docket No. 27901-10, filed 4/14/17.

Not a good Friday for Lewis, even though he spells his name right.

Lewis claims he is a Virgin (Islander), but IRS says he’s a phony per Notice 2004-45 Meritless Position Based on Sections 932(c)(4) and 934(b), torpedoing various dodges to export US onshore income to our Insolvent Islands in the Sun.

I’ve blogged any number of these, so I won’t repeat myself.

Lewis claims IRS never “determined” a deficiency. But the SNOD did state Lewis never filed with IRS (so his IRS return is deemed to show zero), and the SNOD discussed the items in Lewis’ VIBIR return, which IRS got through the TIA (Tax Implementation Agreement between IRS and VIBIR; the master-snitch deal). The SNOD and the items therein clearly relate to Lewis.

I’ll spare you the FRCP argument. Section 6212 overrides FRCP. At best, a SNOD is the tax analogy to a complaint per FRCP. But FRCP is out as far as mandating the contents of a SNOD.

But there’s a further point HHBJJJIJ makes, although it’s truly boilerplate. But it expounds a rule that can be extremely mischievous. In fact, it’s the nearest analogy I can find to a well-contrived and expertly-placed IED.

“It is well settled that no particular form is required for the notice of deficiency to be valid. See Benzvi v.Commissioner, 787 F.2d1541,1542(11th Cir. 1986); Jarvis v. Commissioner, 78 T.C. 646, 655 (1982). The Court of Appeals for the Eleventh Circuit, the court to which this case is appealable barring a stipulation to the contrary, has held that the notice will be treated as valid if the Commissioner demonstrates that ‘the IRS has determined that a deficiency exists for a particular year and specify the amount of the deficiency.’ Stoecklin v. Commissioner, 865 F.2d 1221, 1224 (1 l th Cir. 1989) (quoting Benzvi v. Commissioner, 787 F.2d at 1542), aff’g. T.C. Memo. 1987-453.” Order, at p. 4.

OK, then how is a litigant or his/her/its/their counsel to know what the Commissioner will demonstrate when they get one of IRS’ multifarious billets doux?

I won’t rehash the number of cases I’ve blogged, which were tossed when a pro se who sends in the sixty bucks and Forms 2, 4 and 5 gets told that the billet doux in question wasn’t really a SNOD.

And this, even when the billet doux says that a deficiency was determined and a SNOD sent, even when it wasn’t. See my blogpost “Fake Out,” 12/16/14.

But see also my blogpost “Fake Out – Part Deux,” 6/23/15, where I proposed sending in a petition and immediately repetitioning when IRS claims “no jurisdiction.” And of course asking for the sixty bucks to be waived on petition number 2.

But rather than wasting time, effort, postage and carbon on this stupidity, why not mandate a form of SNOD?

Permit me to suggest that the top of that document, in 16-point type, there appear a legend: “THIS IS THE STATUTORY NOTICE OF DEFICIENCY. IF YOU WANT A COURT TO REVIEW YOUR CASE, FILE A PETITION NOW. THERE ARE NO EXTENSIONS OF TIME TO FILE. GO TO http://www.ustaxcourt.gov AND CLICK ON “NEED HELP?”

Today, that Obliging Jurist Judge David Gustafson has two designated off-the-benchers. The first is the usual small-claimer unsubstantiated deductions, charitable type. I only mention it because the court reporter got principals-principles wrong in both, but Judge Gustafson corrected the error in the second.

Here’s Dean Rodney Fulton, Docket No. 6840-16, filed 4/13/17. “Employing the principals of section 170(f), discussed below, we are unable to find that Mr. Fulton made any cash contributions to charitable organizations in 2011 or 2012.” Transcript, at p. 4.

A “principal” in this context is a person who takes a leading role. A “principle” is a generally-accepted rule.

BTW, Dean Rodney didn’t bother filing two years’ worth of returns until he found out what would happen with two other years in dispute. This was ”…a tactical misjudgment that, he admitted at trial, did not excuse his non-filing.” Transcript, at p. 14. Experiment may yield principles, but it is not recommended when taxes are concerned.

Next we have an error by a bank when a depositor tried an IRA rollover. The depositor asked for an IRA account, was told she had one, but the bank’s employees made a mistake and opened a non-roller. The depositor thought she’d gotten a roller. What she got was a 1099-R, which she didn’t report, whereupon she got a SNOD with the 10% under 59-1/2 chop included at no extra charge. This woke her up, she went to the bank (never having touched the money), got an apology and the money moved to an IRA.

Judge Gustafson: “Section 408 and the regulations thereunder prescribe the rules generally applicable to IRAs, including how taxpayers may roll over amounts in their IRAs without the inclusion of those amounts in their taxable income. However, we have concluded in a prior rollover case that “a bookkeeping error does not alter the rights and responsibilities between the parties to a transaction”, and that there is not ‘any indication in the statute, legislative history, or case law that Congress intended to deny rollover benefits to taxpayers on the basis that a financial institution or other qualified IRA trustee made a mistake in recording a transaction.’ Wood v. Commissioner, 93 T.C. 114, 121-122 (1989).” Lifang Wang & Ke Zhong, Docket No. 8763-16, filed 4/13/17, at transcript, pp. 9-10.

While Section 408(d)(3)(I) allows a waiver, only the Secretary can waive. Rev. Proc. 2016-47 tells us how, and even includes trustee error as grounds for waiver. Although Li & Ke ask politely and in writing, Judge Gustafson regretfully can’t oblige them.

“Since we decide the case on other grounds, we do not need to resolve this issue. However, for petitioners’ information we note that it is the Secretary of the Treasury (acting through the IRS), and not this Court, to whom the statute gives discretion to determine whether to grant such a waiver. Assuming that the Tax Court has authority to review the Secretary’s exercise of that discretion, it seems we could do so only after the Secretary had considered and denied a taxpayer’s request for a waiver. The statute does not seem to grant us the authority to entertain in the first instance in litigation a request for a waiver.” Transcript, at p. 11.

Judge, I doubt IRS would agree you could review denial of a 408(d)(3)(I) waiver for abuse of discretion. Judge Halpern is still wrestling with the question whether non-exercise of discretion under any circumstances is an abuse of discretion in the collection-alternative context, where there is clear statutory jurisdiction to review denial of collection alternative. See my blogpost “Big Jim, Poor Jim,” 3/31/17.

But good catch at page 8 of the transcript.

I’m referring to the private delivery services (PDS), which received the benediction of John (“Kosy”) Koskinen and predecessors in the Commissionariat at 1111 Constitution Ave, NW.

As you know, Kosy doesn’t fan tutti. (Sorry, guys).

There may be some among my readers (fewer in number than Gideon had, but mighty nevertheless) who might care to know how a particular PDS product reaches the Delectable Mountains of Kosy’s approval. So I’ll let Ch J L Paige (“Iron Fist”) Marvel tell you.

“…as Notice 2016-30 indicates, the procedures by which a private delivery services applies for designation to the IRS are set forth in Rev. Proc. 97-19, 1997-1 C.B. 644. Among other things, a private delivery service must submit a written application to the IRS for each type of service for which designation is sought. Rev. Proc. 97-19, 1997-1 C.B. at 645 (sec. 5) -646. Further, for each type of delivery service for which designation is sought, certain criteria must be satisfied, including (1) either the private delivery service must record electronically to its data base (kept in the regular course of its business) the received date by the private delivery service, and enter into, and comply with, a written agreement with the IRS that addresses the period for which such data must be maintained and the terms and conditions under which the IRS will be provided with such data, or (2) indelibly mark the received date on the cover of the item so that it is readable by the human eye without mechanical assistance. Rev. Proc. 97-19, 1997-1 C.B. at 645 (sec. 4.03). A private delivery service is also required to provide prompt written notification to the IRS at one of the prescribed application addresses listed in Rev. Proc. 97-19 if any application information changes during the time that private delivery service is under consideration for designation or during the time it is a designated private delivery service. Rev. Proc. 97-19, 1997-1 C.B. at 646 (sec. 10.1).” OIH Inc., Docket No. 3141-17, filed 4/13/17.

I can see why FedEx, UPS and DHL have better things to do than negotiate with Kosy’s minions (if they can get the minions on the phone) “a written agreement with the IRS that addresses the period for which such data must be maintained and the terms and conditions under which the IRS will be provided with such data.” So what made the cut last May is it, at least for now.

Wherefore, get a copy of Notice 2016-30, copy the list, and pin it on every wall in your office. Then you can blow your trumpets, break your empty jars and send your petitions charging into Tax Court.