Archive for May, 2017|Monthly archive page


In Uncategorized on 05/12/2017 at 14:08

Sexual harassment cases have been much in the news. High-profile individuals in the broadcast media, whether entertainers, or others before the cameras or behind them, have been mulcted in big ticket damages.

Chanelle S. Coleman, Docket No. 11752-16, filed 5/12/17, received a settlement in such a case, which apparently made no headlines but points a useful lesson both to the headliners and those whose cases never reach the public eye. And their legal advisers would do well to read and heed.

Judge Kerrigan deals with this case in an off-the-bencher.

Half of what Chanelle got was designated as separation pay and future wages. The other half was designated in the confidential settlement agreement with her former employer as “compensatory damages, including emotional distress.” Transcript, at p. 4.

And Chanelle got a Form 1099-MISC for that half, but didn’t include it on her 1040.

Judge Kerrigan: “Damages (other than punitive damages) received on account of personal injuries or physical sickness may generally be excluded from income. Sec. 104(a)(2). For damages to be excluded under this provision, the underlying cause of action must be based in tort or tort-type rights, and the proceeds must be damages received on account of personal injury or sickness When damages are received pursuant to a settlement agreement, the nature of the claim that was the actual basis for settlement controls whether those damages are excludable pursuant to section 104(a) (2).” Transcript, at p. 5 (Citations omitted).

I’ve blogged enough of this sort of case for the rest to come as no surprise, either to my readers or myself.

“Petitioner contends that the sexual harassment caused physical ailments. She further contends that the settlement proceeds should not be taxable because of the physical effects of the harassment. Petitioner did not provide any evidence to show that any portion of the settlement proceeds were used for amounts paid for medical care attributable to emotional distress.

”Pursuant to the settlement agreement, the lump sum that petitioner received was for compensatory damages, including emotional distress. Accordingly, the lump sum payment of $35,675 that petitioner received in 2013 is not excludable from her gross income pursuant to section 104(a) (2).” Transcript, at p. 6.

The warning here applies as well to practitioners who advise victims of sexual harassment, both in structuring and documenting settlements, and advising their clients of the consequences.

Channeling Chanelle can be detrimental to happy client-attorney relationships.


In Uncategorized on 05/11/2017 at 16:20

These might get you into Tax Court, but once you’re there, you’d better have paper as well.

Who better to prove the truth of the foregoing than Barry Leonard Bulakites, 2017 T. C. Memo. 79, filed 5/11/17?

You must remember Barry. How could you not remember the man who outfoxed IRS’ crafty but sleazy maneuver in seeking dismissal of Barry’s timely served petition and substituting in its place and stead that which was delivered by an unblessed PDS, and thus ripe for dismissal?

Well, if you insist, see my blogpost “Another Taishoff ‘Oh Please’,” 9/24/14.

So Barry got in the door, but the result hardly justifies the effort. Here’s The Great Dissenter, a/k/a The Judge Who Writes Like a Human being, s/a/k/a The Foe of the Partitive Genitive, Old China Hand and Ace Silt Stirrer, Judge Mark V. Holmes, to tell the story.

Barry was an expert in life insurance and annuities, but got slugged for $500K when the outfit he worked for blew a 401(k) and the beneficiaries thereof sued. Barry borrowed against his home, hoping to sell and pay off within the year, but came the meltdown of 2008 and torpedoed that. Then he got divorced, and was going to pay his loved-once out of the same proceeds. That having tanked, he paid an override on the alimony that was less than the required post-sale amount, but more than the decree required.

Problem in both instances: No paper.

As for the loan, Judge Holmes: “The evidence does show Bulakites made payments to his lender, but the amounts do not match those that he claimed on his tax returns, and he did not explain this discrepancy at trial.  Bulakites also did not provide us with any business records regarding the loan, any loan statements, or any loan-repayment schedules.  Without this type of documentation we are unable to tell whether these payments were made on the original 2007 loan.  Remember that the note for that loan says it should have been paid in full by October 2008.  We understand that it might have been his plan to pay the note with proceeds from the sale of his home, and that that sale didn’t happen.  The problem is that we can’t figure out what happened to the note–was it refinanced?  Was it extended?  Without any paperwork (in a situation where there should have been lots of paperwork) we are left only with his testimony about the total amounts of the payments and the allocation of those payments between principal and interest.  We do not find his testimony credible on this issue, and so sustain the Commissioner’s determination.” 2017 T. C. Memo. 79, at pp. 6-7.

Should’a been a ton of paper. Most home mortgages seem to be graded on the weight (in kilograms) of the paper generated.

Now as for the increased alimony. Barry didn’t read my blog, or maybe he missed my blogpost “The Magic Paper Saves the Deduction,” 4/7/11, when Tim Micek saved his deduction in a small-claimer by producing a spousal support affidavit sufficient to satisfy Section 71(b)(2). All that’s needed is a written separation agreement, and, like a SNOD, there’s no standard or required form therefor.

So, alas and alack, even though Barry did the right thing, he doesn’t get the deduction.

“Bulakites’ oral modification of his written separation agreement doesn’t work–it’s well settled that an oral modification of a written instrument does not meet section 71’s requirements.  Sec. 71(b)(2); Gordon v. Commissioner, 70 T.C. 525, 529-30 (1978); Larievy v. Commissioner, T.C. Memo. 2012-247; Ellis v. Commissioner, T.C. Memo. 1990-456; sec. 1.71-1(c), Income Tax Regs. We do find his motivation sincere, and he did prove that he paid his ex well over the $2,000 a month required by his separation agreement, but we have to hold that the law does not allow him to deduct those excess amounts as alimony.  We therefore find for the Commissioner on this issue.” 2017 T. C. Memo. 79, at pp. 5-6.

Barry claims a big NOL, but loses, again because of want of substantiation. See Section 172(a), and Section 172(b)(2).

“A taxpayer substantiates his claim to such a deduction by filing with his return ‘a concise statement setting forth the amount of the net operating loss deduction claimed and all material and pertinent facts relative thereto, including a detailed schedule showing the computation of the net operating loss deduction.’  Sec. 1.172-1(c), Income Tax Regs.  Bulakites filed no such documentation.  During trial he did turn in a tax return for a previous year (though not the one that generated the net operating loss), but even with his testimony, that is not enough to substantiate his entitlement to a loss carryforward.” 2017 T. C. Memo. 79, at p. 8. (Citations and footnote omitted, but the footnote says though IRS consumed an idle hour trying to figure out how Barry got the NOL, Judge Holmes need not go there).

Barry gets the understatement chop, because his trial testimony gave the game away, which often disadvantages the honest litigant.



In Uncategorized on 05/10/2017 at 16:51

Today’s designated hitter marks the end of a source of blogfodder I could really use, now that Big Banging has become de rigueur at The Glasshouse at 400 Second Street, NW. And it’s The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Inveterate, Ineluctable. Indefatigable, Illustrious, Ineffable, Imperturbable, Insurmountable, and Incontrovertible Foe of the Partitive Genitive, Old China Hand and Ace Silt Stirrer, Judge Mark V. Holmes.

Here’s the end of the road for Eugenio Espinoza Martinez, Docket No. 29472-12, filed 5/10/17. Remember Eugenio, a former contestant in the Taishoff no-prize “best excuse” competition? Well,, in case it slipped your mind, here’s some light refreshment for your recollection.

“Hitting the Superfecta,” 3/26/15; “Hitting the Superfecta – Part Deux,” 3/16/16; and “The Prisoner’s Friend,” 8/18/16.

With refreshed recollections, you now recall that Eugenio was hanging ten in a correctional facility in The Lone Star State, and unlikely to emerge therefrom any time soon.

Helpful Judge Holmes tries “to develop and resolve” Eugenio’s tax beeves, rather than wait until Eugenio returns from the Stony Lonesome.

But it’s no go.

“After slowly working through the stipulation and summary-judgment process, the Court ordered Mr. Martinez to file written testimony stating why he disagrees with the notice of deficiency as to his 2009 tax year. We gave him a deadline of March 13, 2017. A check of the docket shows that he has not filed such testimony….” Order, at p. 2.

Judge Holmes laments that subpoenas ad testificandum from Federal Courts directed to State correctional institutions present procedural, and more to the point, financial, difficulties. And the amounts at issue are small. The two years at issue here involve little more than $5K.

So Eugenio is done, and IRS gets a Rule 123(a) default for the deficiencies.

And I get to find some more blogfodder. This is one tough gig, let me tell you.


In Uncategorized on 05/09/2017 at 20:50

Today’s designated hitter from STJ Daniel A. (“Yuda”) Guy revives the old cliché. In the case of Steven Schwartz & Wendy Schwartz, Docket No. 4354-16L, filed 5/9/17, it really pours.

First, Steve & Wendy late-filed their return for the year at issue, reported hefty tax due but didn’t pay, either with the return or after notice and demand from IRS. And IRS threw in late-filing, nonpayment, and no estimateds chops.

Steve & Wendy don’t pay, the NITL follows, and Steve & Wendy drop a 12153 into the Appeals hopper. They give Appeals a Form 433-A but with no back-ups, and a Form 656. Appeals bounces their CDP, but during all the back-and-forthing, IRS gives Steve & Wendy a SNOD.

IRS claims their self-reported tax was $7K low. But they can have a further late filing  and negligence chops.

Steve & Wendy don’t petition the SNOD.

To begin with STJ Yuda says the $7K is off the table, along with the chops thereto appurtenant. No petition from SNOD, no jurisdiction.

As for the chops arising from the unpaid self-reported tax, while Steve & Wendy said they wanted to dispute those in their 12153, they had a chance to dispute those at Appeals, but didn’t.

“Petitioners stated in their petition that they wish to dispute penalties for the [year at issue]. The record shows, however, that petitioners failed to place those penalties in dispute during the administrative hearing. Consequently, they are precluded from disputing their liability for penalties in this proceeding. See Thompson v. Commissioner, 140 T.C. 173, 178 (2013) (‘A taxpayer is precluded from disputing the underlying liability if it was not properly raised in the CDP hearing.’); sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.” Order, at p. 4.

As for the OIC, by not producing back-ups for their Form 433-A, that’s off the table.

IRS can levy, but only for the self-reported and chops.



In Uncategorized on 05/08/2017 at 16:13

Apparently New Jersey’s real estate tax assessors fall short of the mark in Tax Court, but Los Angeles’ valuations are right on the money.

Compare and contrast Judge Ruwe laying a blast on the Garden State’s valuers in my blogpost “Quanto? Il Prezzo,” 7/24/12, with STJ Lewis (“That Fine Name”) Carluzzo’s encomium to the Los Angeles County Office of the Assessor in Sharon M. Nielsen and Steve L. Nielsen, 2017 T. C. Sum. Op. 31, filed 5/8/17.

S&S were claiming depreciation on some LA rental properties, and apparently they got some of their depreciation deductions allowed. They started with a rookie error, taking depreciation based upon their basis in both land and building. Land is not depreciable because it does not wear out.

So once S&S concede the rookie error, the question is what portion of the total value of each property is the land (non-depreciable) and the improvements (buildings and fixtures, which are)?

IRS goes with the LA County appraisers, but S&S claim the LA guys go high on land and low on improvements. S&S put in an October 4, 2012 billet doux from the chief deputy assessor to the County exec, talking about upgrades to the assessment system.

STJ Lew: “Petitioners assert, among other things, that the Los Angeles County Office of the Assessor’s data ‘is extraordinarily inaccurate’ and internally inconsistent.

“We have carefully reviewed the record, including the October 4, 2012, letter and a document titled ‘Parcel Detail–Los Angeles County Assessor Portal’ on which petitioners rely, and do not share their concerns with respect to the reliability or unreliability of the Los Angeles County Office of the Assessor’s assessments.

“Nor do we give much weight to the after-the-fact allocations that petitioners advance in this proceeding.  Although we acknowledge that the owner of property is qualified by his ownership alone to testify as to its value, see Dehmer Distributors, Inc., v. Temple, 826 F.2d 1463, 1466 (5th Cir. 1987); United States v. Laughlin, 804 F.2d 1336, 1340 (5th Cir. 1986); Dietz v. Consolidated Oil & Gas, Inc., 643 F.2d 1088, 1094 (5th Cir. 1981); Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690, 698 (5th Cir. 1975), modified on other grounds en banc, 575 F.2d 564 (5th Cir. 1978), we are aware of no authority that suggests that the qualification extends to an allocation of the value of property between land and improvements.” 2107 T. C. Sum. Op. 31, at p. 8.

Besides, when S&S bought one of the properties, they got a professional appraisal that showed the ratio of land to building not out of line with what the County gang were doing. I will comment that the appraisal was done nine years before the year at issue.

Howbeit, apparently LA does it better than NJ. In Tax Court, anyway.


In Uncategorized on 05/08/2017 at 13:50

“My Well of English Seems To Be Permanently Defiled”

Last week I filled in a blogpost with seventy-year-old British slang. Today I can only say “Whassup wit’ that?” This remark has to be completely obsolete by now, but I am without alternative.

Here’s that Obliging Jurist Judge David Gustafson being obliging as usual.

An example. Woodie H. Powell, Docket No. 22250-16L, filed 5/8/17. And there are two orders here with the same docket number.

In the first, Woodie wants a Wagner toss of his CDP petition, IRS gives anihil obstat and Judge Gustafson obliges.

But within ten days, IRS is back with a Rule 162 vacation, and it’s Woodie’s turn to consent, so the toss is out and Woodie’s petition (and case) is back in.

OK, might be a mere “whoops!”


See Precision Plumbing of Mississippi, Docket No. 5881-16L, filed 5/8/17; see also Charles E. Patton & Linda D. Patton, Index No. 30250-15L, filed 5/8/17; see also Franklin Dyche & Elizabeth Dyche, Docket No. 13555-26L, filed 5/8/17; see also Gregory Courtney, Docket No. 8895-16L, filed 5/8/17; see also Ronald T. Atkinson, Docket No. 25512-15 L., filed 5/8/17; see also Cook & Riley, Inc., Docket No. 32051-15L, filed 5/8/17; see also Arthur Jenkins, Docket No. 1058-16L, filed 5/8/17; see also Jeff Jones, Docket No. 30460-15 L, 5/8/17. No links; you can check this out for yourselves.

Nine (count ‘em, nine) cases, all Wagnerized by motion made the same date and order issued same date, and all unWagnerized by motion made the same date and order issued same date.

Was Wagner overruled, and did I miss it somehow? Did IRS claim a bunch of deficiencies or non-assessables were paid, when they weren’t? Was there a Rev. Proc., Rev. Rul., Notice, statutory enactment or executive order that slipped by while I wasn’t looking?

I crave enlightenment.


In Uncategorized on 05/05/2017 at 14:36

Or, Jersey Bounced

I need not complete the cliché. And I’m sure I need not add “There but for the grace of you know Whom.”

I won’t summarize, paraphrase, nor will I comment further on Clark J. Gebman & Rebecca Gebman, Docket No. 15941-12, filed 5/5/17, than to say that there is no such thing as casual advice from an attorney; that even when no client-attorney relationship was created or intended, an attorney is chargeable with the full force of the Rules of Professional Responsibility (with or without one’s own State’s variations thereon); that judges are protective of non-attorneys, going to helicopter-like extremes to prevent any imposition upon the layperson; and that, reader, this could happen to you.

The “bounce” to which I refer is RAF slang from seventy-plus years ago, meaning an attack, usually from out of the sun, by enemy fighters, unseen until they strike, usually with bad results to the targets of the bounce.

Remain vigilant. Especially when trying to do a good deed.


In Uncategorized on 05/05/2017 at 14:15

The Big Bangers at 400 Second Street NW really were working overtime yesterday, 5/4/17. Not one single order of 125 (count ‘em, 125) issued that date was worthy of a blogpost.

So I did what I have often been encouraged or directed to do: I said (and wrote) nothing.

But today there appears an item that at least satisfies the criterion that General Galieni set so long ago as the Taxis of the Marne brought up reinforcements: “Eh bien, voila au moins ce qui n’est pas banal!”

It’s Estate of James P. Keeter, Deceased, Garry L. Holton, Jr., and Thomas W. Schaefer, Co-Executors and Julie L. Keeter, Docket No. 6771-16, filed 5/5/17.

You remember the sad tale that even in death the claws of TEFRA still grip the late James P. See my blogpost “Inside, Outside – Redivivus,” 4/3/17.

Well, Ch J L Paige (“Iron Fist”) Marvel wanted the Co-ex’rs and Julie to join IRS in briefing whether the various penalties are computational, in light of Woods, therefore not subject to deficiency jurisdiction as nonassessable.

The Co-ex’rs and Julie respond.

“…petitioners filed a Motion for Leave To File a Short Brief which the Court will recharacterize as petitioner’s letter. In that letter petitioner state they wish to be given leave to file a short brief as to why their pending motion to restrain the tax assessment made against them… should be sustained even if the Court finds that it lacks jurisdiction in this matter.” Order, at p. 1.

I give counsel for the Co-ex’rs and Julie a Taishoff “Best of luck with that one,” second class.


In Uncategorized on 05/03/2017 at 16:31

This is a very rare occurrence in Tax Court. I can remember only one prior instance, as to which see my blogpost “The Carousel Is Closed,” 10/10/14, anent the mystery fact witness in the great Amazon case. In fact, Tax Court even issued a press release on that occasion.

So when I was scrolling and scraping through today’s post-Big Bang flotsam, in search of blogfodder when neither opinion nor designated hitter swam into my ken, I was surprised to find Charlotte Dow Manning, Docket No. 3393-16, filed 5/3/17.

Charlotte gave Judge Chiechi a most unusual motion.

“…this case was called from the calendar for the Trial Session of the Court at Boston, Massachusetts. There was no appearance by or on behalf of petitioner. Counsel for respondent appeared and filed with the Court a motion to dismiss for lack of prosecution…. The Court orally indicated that respondent’s motion would be granted.

“…this case was recalled. Petitioner and counsel for respondent appeared and were heard. Petitioner then orally moved to seal the record and to vacate the courtroom….” Order, at p. 1.

Not even the great Jeff Bezos asked for the whole record to be sealed. And he asked for an empty courtroom in advance.

Judge Chiechi was not amused.

After Charlotte refused to sign the Rule 91(f) stip of agreed facts, to which three exhibits were attached (and Judge Chiechi made special mention of the three exhibits), Judge Chiechi tosses Charlotte’s petition for want of prosecution.

And Judge Chiechi doesn’t vacate the courtroom.


In Uncategorized on 05/02/2017 at 21:08

I was lamenting the shortage of blogfodder earlier today, 5/2/17, as the order clerks at The Glasshouse at 400 Second Street, NW, seem to have gone in for the Big Bang Theory, an explosion of opinions, decisions and meaty orders one day, and nothing but banalities for days thereafter.

But as I settled into my easy chair after back-to-back meetings of my American Legion Post (9/11 Memorial, NY Post 2001), which we hold on board a retired warship, moored to this Minor Outlying Island off the coast of North America, a piece of nautical apocrypha was brought to mind by the venue and Louis J. Baumgartner, Docket No. 6708-17, filed 5/2/17.

You remember Lou (“Too Bad About The Spelling”) J., of course. You do not? Sad. But take heart and see my blogpost “Oh, Ch J Iron Fist, You Crafty Devil,” 11/10/16.

In that tale, Lou (“TBATS”) J. was joined by Beth A. in this protester rap, and got tossed by Ch J L Paige (“Iron Fist”) Marvel.

Well, in today’s installment, Lou (“TBATS”) J., tout seul, tries it on again with the identical rap and the same result.

The nautical apocrypha?

First, the facts. During the epic Battle of Flamborough Head in 1779, Admiral John Paul Jones, USN, commanding USS Bon Homme Richard (ex-French Duc De Duras), his ship on fire, sinking, half his crew dead or wounded, made his immortal reply to the demand for surrender by the captain of HMS Serapis: “Sir, I have not yet begin to fight!”

The apocrypha? As Jones’ words rang out into the pages of history, a mortally-wounded sailor, black with gunpowder and gushing blood, yelled from the scuppers “Man, you ain’t got the word yet!”

Ch J Iron Fist echoes his words today.