No, today’s offering involves neither LeMaître nor Hubble, and definitely not the long-running sitcom to which my nearest and dearest is addicted. Rather, it’s the story of the hard-working order clerks at 400 Second Street, NW, who unload a mass of opinions and decisions on one day, and leave the poor blogger to scrounge and scrabble for copy for days after.

Yesterday I saw a plethora of post-worthy material. Today I have only the odd eccentric and the protest du jour among the file-status-reports and pay-the-sixty-bucks run of the mill orders.

I’ll spare you.

But dear order clerks, please cut me some slack. Stop adhering to the Big Bang Theory.

A refund is when you get back something you paid. Sounds simple, right?

Well, not so simple for Panagiota Pam Sotiropoulos, 2016 T. C. Memo. 75, filed 5/1/17. Remember Pam? No? Well, check out my blogpost “Do We Have Jurisdiction, Or What?” 5/5/14. All Judge Lauber decided two years ago was that the Court did have jurisdiction, leaving resolution of Pam’s UK tax refund for another day.

That day has come.

Pam paid withholding tax in the UK for the years at issue. Over there it’s called PAYE, but the idea is the same. Pam claimed overpayments due to some write-offs from a UK movie deal that HMRC (that’s the UK’s revenooers) claim is sketchy. Pam got the withholding back, but HMRC is still not convinced.

We know that when a US taxpayer takes the foreign tax credit but gets a refund, Section 905(c) says, “tell IRS and we’ll decide what you owe.” No SNOD necessary, just notice and demand from IRS.

“Petitioner contended that these sums had not been ‘refunded’ because her ultimate entitlement to refunds remained under investigation in the United Kingdom.  She accordingly did not notify the Secretary (by filing amended returns or otherwise) pursuant to section 905(c)(1).” 2017 T. C. Memo. 75, at p. 2.

IRS had given Pam a SNOD and a Section 6662(a) chop, but now they want to take back the SNOD, claim Section 905(c) controls, and oust Tax Court of jurisdiction.

Moreover, IRS is willing to drop the chops if it gets summary J tossing the case on Section 905(c) grounds, except maybe the amount of the tax due from Pam can be decided, along with penalties, in a Rule 155 beancount.

Judge Lauber isn’t so sure. “It is not clear that we have jurisdiction to determine the precise amounts of the refunded taxes–section 905(c)(1) provides that ‘the Secretary * * * shall redetermine the amount of the tax’–or of the asserted penalties.  But we need not address these issues in ruling on respondent’s motion for partial summary judgment.  Petitioner’s liability (if any) for penalties will be resolved in further proceedings after disposition of respondent’s motion for partial summary judgment.”  2017 T. C. Memo. 75, at p. 9, footnote 5.

Maybe IRS would have done better to stick with the SNOD. Without getting the numbers done, Pam may have a shot on a CDP, claiming she had no chance to dispute the numbers or the penalty.

Howbeit, ordinary language prevails. Pam got the cash in hand from HMRC, and if HMRC later determines that the movie deal was a prohibited shelter, well, them’s the breaks, Pam.

Or more elegantly, Judge Lauber: “Petitioner contends that rejection of her argument may result in ‘double taxation,’ contrary to the policies underlying the foreign tax credit and the U.S. U.K. income tax treaty.  She bases this contention on the assertion that, if she is required ‘to repay refunds previously received from H.M.R.C. * * * , and such repayments are considered creditable foreign taxes * * * in the year of payment, [her] personal circumstances are such that [she] would obtain no U.S. tax benefit from such credits.’

“Petitioner offers no explanation or factual support for this vague assertion, but it is unpersuasive in any event.  It often happens that taxpayers, because of individual circumstances or passage of time, are unable to derive full benefit from contingent tax assets they have booked or expect to receive, such as carryforwards of foreign tax credits, net operating losses, passive losses, or investment interest. This does not demonstrate any structural defect in the Code and does not give rise to double taxation.’  It ‘simply reflects the facts that the future is unpredictable and that taxable income must be determined on an annual basis.’” 2017 T. C. Memo. 75, at p. 18 (Footnote omitted, but it says that the Section 6689(a) penalty for not telling IRS about the refund is nothing to do with whether there was a refund; IRS hasn’t moved for summary J on the Section 6689(a) chop, and anyway, that chop is nonassessable and thus Tax Court has no jurisdiction to deal with it).

So Tax Court says Pam got a refund.

Do we have jurisdiction, or what?

No, I’m not misquoting the Sage of Concord, rather I’m addressing the difficulties of Bernard P. Malone and Mary Ellen Malone, 148 T. C. 16, filed 5/1/17, as explained by Judge Buch.

Bernie and Mary Ellen are in a jurisdictional joust over the Section 6662(a) chops IRS handed out for Bernie’s and Mary Ellen’s inconsistent reporting of gain from a partnership. And they never bothered to file Form 8082 or otherwise tell IRS they were deviating from the K-1 they got.

Well, the income and the tax got taken care of five years ago; no partnership-level redetermination needed, just go straight to Bernie’s and Mary Ellen’s return and plug in the right numbers. Section 6222(a) says “be consistent,” and Section 6222(c) says “no SNOD necessary.”

OK for tax, but what about the chop? IRS gave Bernie and Mary Ellen a SNOD.

Judge Buch: “A partner who reports partnership items inconsistently with the partnership’s treatment of them may be subject to penalties.  Section 6222(d) refers to the applicable penalties for ‘disregard of the requirements of this section’.  The section 6662(a) and (b)(1) penalty for negligence is among those referenced.  Likewise, section 1.6662-3(b)(1), Income Tax Regs., states:  ‘Negligence is strongly indicated where–* * * (iii) A partner fails to comply with the requirements of section 6222, which requires that a partner treat partnership items on its return in a manner that is consistent with the treatment of such items on the partnership return (or notify the Secretary of the inconsistency)’. 148 T. C. 16, at p. 5 (Footnote omitted, but Judge Buch clarifies an apparent anomaly between additions to tax and penalties in Section 6222(d).)

We know that everything that isn’t a partnership item is a partner item, but some are computational and don’t require a SNOD, but others are factual and do.

A SNOD (and thus deficiency procedures) are needed where a partnership item is redetermined. But here there’s no need; the gains at issue were reported by the partnership and IRS didn’t touch them.

So the numbers from the partnership’s Form 1065 and the K-1 issued to Bernie and Mary Ellen go straight to Bernie and Mary Ellen’s Form 1040 for the year at issue.

“With respect to the facts at issue here, the Court must determine whether the deficiency procedures apply to a section 6662(a) accuracy-related penalty for negligence imposed solely because of a partner’s inconsistent reporting of partnership items.  We begin with an easy proposition that section 6662(a) penalties, such as the one asserted here, are found in subtitle F of title 26–not in subtitle A.  Because partnership items are limited to items arising under subtitle A, this penalty is not a partnership item; it is a nonpartnership item.  And unless it is a computational affected item, it is subject to deficiency proceedings.” 148 T. C. 16, at p. 11.

So Bernie and Mary Ellen win, because the issue is merely computational?

No.

“But in this case there are no adjustments to partnership items.  There is no dispute that the partnership items reported by MBJ were not adjusted—the Commissioner did not attempt to dispute the items as reported on MBJ’s Form 1065.  The Malones argue, however, that the inconsistently reported partnership items on their 2005 Form 1040 were ‘adjusted’ within the meaning of section 6230(a)(2)(A)(i).  We disagree.

“The adjustments made to the liability reported on the Malones’ … Form 1040 were computational adjustments to their tax liability to take into account the partnership items as originally reported by MBJ.  There were no adjustments to partnership items.  Accordingly, the section 6230(a)(2)(A)(i) exclusion from deficiency procedures is inapplicable to the section 6662(a) and (b)(1) negligence penalty before the Court in this case.” 148 T. C. 16, at p. 14.

Thus, whether computational or factual, deficiency procedures apply to the inconsistency chops, and Tax Court has jurisdiction.

Clear? Thought not.

We lawyers are a persnickety bunch. We insist upon things, sometimes even interrupting people making money. As this is a non-political blog, I’ll eschew comment on political figures. I’ve made plenty of those elsewhere.

But I’m surprised that Judge Cohen appears to have caught the unauthorized and unadmitted bug from Ch J L Paige (“Iron Fist”) Marvel.

To explain the headline, our State’s Bar Association gets a wee bit upset at those providing legal advice who are not admitted to the Bar. When it comes to holding oneself out as a lawyer when one is not so admitted, we get positively testy. But when such as they start appearing in Court, we are exceedingly vexed. We call it Unauthorized Practice of Law (“UAPL”).

So I very politely ask Judge Cohen to explain the following, from Legal Recovery Law Offices Inc., Docket No. 9057-16, filed 5/1/17.

“This case was called from the calendar for the Trial Session of the Court at San Diego, California on April 17, 2017. A ‘friend of the owner’, Travis Reed, on behalf of petitioner, and counsel for respondent appeared and the parties were heard. Respondent filed with the Court a motion to dismiss for lack of prosecution. This case was recalled on April 18, 2017. Petitioner appeared by Mark Walsh, counsel for respondent appeared, and the parties were heard. Petitioner was deemed in default by reason of its failure to comply with multiple Rules and Orders of the Court.” Order, at p. 1.

OK, I know that Ch J Iron Fist has admitted CPAs to practice before Tax Court to the extent of making motions and filing papers, without such dreary details as being admitted to practice law anywhere or passing the Tax Court Admissions Examination and getting two sponsors. I have commented thereon extensively.

But even Ch J Iron Fist stopped short of allowing them to appear and argue in Court.

Now we all know Rule 24(b) provides, in pertinent part (as my high-priced colleagues say) “A corporation or an unincorporated association may be represented by an authorized officer of the corporation or by an authorized member of the association.” Maybe Mr. Walsh is an officer of Legal Recovery Law Offices Inc.

In any case, a docket search on Tax Court’s website shows Legal Recovery Law Offices Inc. is pro se. Perhaps there are no lawyers in that organization. In any event, “a friend of the owner” certainly stretches matters. Mr Reed cannot claim to be a next friend, as that status is reserved for individual infants and incompetents per Rule 60(d).

So I am left with the conjecture that Mr Walsh is an officer of Legal Recovery Law Offices Inc.

But clarification is in order. And perhaps the CA authorities might take note of this perplexing matter.