Archive for July, 2017|Monthly archive page


In Uncategorized on 07/31/2017 at 16:18

On background, as those not wishing to have their personal peccadilloes and vendettas appear in the public print should specify, see my blogpost “Same Time, Next Year,” 3/3/17. Therein, that repository of endless wisdom, the American Bar Association Tax Section, to which august assemblage I do not belong, belittled my suggestion that specifying a place of trial that bore some connection, however faint and attenuated, to the location of the petitioners, taxpayers, witnesses, physical evidence, experts or counsel might be a valid consideration to be addressed by a Tax Court Rule.

The sages opined that many petitioners, pro se of course, get even the present minimal Form 5 wrong. They do; functional illiteracy is a greater threat to the Republic than most of the horribles appearing in the media.

But today that Obliging Jurist, Judge David Gustafson, has a bad case of indigestion from Good Eats Corporation, Docket No. 26638-15, filed 7/31/17, a designated hitter. Thanks, Judge.

Besides not providing any information to IRS to cause them to change their position, expressed in the SNOD from which the Good Eater was petitioning, the Good Eater struck out on Form 6, completing which is materially less difficult than any Form 1120 I’ve ever encountered.

Judge Gustafson: “Petitioner has failed to file the disclosure statement despite the requirement of Rule 20(c) and our orders of October 26, 2015, November 8, 2016, and December 21, 2016.” Order, at p. 2.

Note that the Ownership Disclosure Statement, Form 6 (rev. 05/2012) on the Tax Court website list of forms, poses but two (count ‘em, two) questions, to both of which I daresay 98% of the corporations, partnerships and limited liability companies filing petitions could answer decisively “NONE.”

Perhaps the American Bar Association Tax Section was right.



In Uncategorized on 07/28/2017 at 15:45

Or, IRS Blows a Remand

All y’all will recall Elizabeth M. Jacobson bailing from a whistleblower petition. OK, you don’t; it’s a Friday in summer time and all y’all want to head for a Gulf-and-Tango-with-a-twist. So check out my blogpost “A Hotly-Burning Question What Has Swept The Continent – Part Deux,” 2/8/17.

So one can bail. But what about a remand in a blower case? Even though ex-Chief Whistler Steven Whitlock has gone off to OPR, the Ogden Sunseteers are still fumbling in the backfield.

Here’s the story of Stanley H. (“Stan the Man”) Epstein, Docket No. 28731-15W, filed 7/28/17, as told by Judge Lauber, who loves conundra like these.

To begin with the obvious, Stan the Man dropped a Form 211 on the Ogden Sunseteers and got bounced. So Stan the Man petitions.

Take it away, Judge Lauber!

“…the parties filed a joint Motion to Remand in which they represented that respondent’s Whistleblower Office (Office) had reconsidered its determination as to whether petitioner is entitled to an award. In light of that development, the parties submitted that ‘[j]ustice would be served by reopening petitioner’s claim.’ … the Court continued the case; held the Motion to Remand in abeyance; and directed the parties to work toward possible resolution of the case.

“… respondent filed a Status Report in which he indicates that the Office is prepared to make a revised determination regarding petitioner’s claim and is prepared to issue a new final determination letter. Respondent asked that the Court grant the Motion to Remand as a prelude to the Office’s taking that step. …petitioner advised the Court of his position that a remand is unnecessary; that it would needlessly delay the case; and that the Court should simply direct respondent to issue a new determination letter. On this point we agree with petitioner.” Order, at p. 1.

The usual story is where there’s a trial de novo there’s no reason to remand; it’ll all come out in the Glasshouse wash. But where there’s a question of abuse of discretion, there can be a remand if the administrative record is ratty or circumstances have drastically changed. I’ve blogged those cases.

Besides, once Tax Court gets jurisdiction, they keep it, even when the Ogden Sunseteers admit their first shootdown was a miscue. Remember Mica Ringo and the Incomparable Comparinis, whose set-tos with the Ogden Sunseteers have been exhaustively chronicled in this my blog.

So what’s the big question? “In deciding whether remand would be appropriate in whistleblower cases, one relevant question would be the appropriate standard of review, that is, whether the matter we are asked to address is subject to de novo review or review for abuse of discretion. This Court has not yet decided the appropriate standard of review of a final IRS determination in a whistleblower case.” Order, at p. 2.

I make abuse of discretion 8 to 5 in the morning line. But Judge Lauber gets shifty.

“Because we believe that a remand of this case would serve no useful purpose, we deem it unnecessary to decide these questions of first impression here.” Order, at p. 2.

The Ogden Sunseteers say they’ll issue a new letter. Stan the Man, like the famous sneaker, says “Just Do It.” Judge Lauber has jurisdiction to review any “determination” the Sunseteers disgorge.

So why remand? Or decide if this is a case for remand? Or determine the standard of review that would permit a remand?

Go send the new final determination letter (hopefully appropriately labeled as such). If it solves everybody’s problems, great, send in a stipulated decision; if not, Judge Lauber is holding short of takeoff and can rev up the judicial engines.

Of course, nothing herein contained precludes a remand in the right case.


In Uncategorized on 07/27/2017 at 16:42

Crestek , Inc. & Subsidiaries, 149 T. C. 5, filed 7/27/17, sounds off a lot, but not so’s you’d hear it. Crestek makes and sells ultrasound equipment and semiconductors. And though they’re a DE C Corp with HQ in OH, they echo Rudy Kipling’s 1899 school song: “Each degree of Latitude/Strung about Creation/Seeth one or more of us… Keen in his vocation.” That is, they have a bunch of CFCs in Malaysia, The Netherlands, Denmark and Germany.

Well, Crestek got intercompany cash advances that might be loans from their CFCs. And they also got a loan from the Bank of Islam, which apparently is a Malaysian lender, who gets a guarantee from one of the local CFCs.

And the CFCs also had a bunch of trade receivables for stuff they sold to their US shareholder, Crestek. IRS claims those are in excess of the Section 956(c)(2)(C) cutoff “…the amount which would be ordinary and necessary to carry on the trade or business of both the other party to the sale or processing transaction and the United States person had the sale or processing transaction been made between unrelated persons * *.” 149 T. C. 5, at p. 14. IRS wants summary J, but it’s pretty obvious that’s a facts-and-circumstances gig.

All these goodies, except maybe some of the trade receivables, are US property, per Section 956, says IRS.

No doubt the offshoreniks are all CFCs. Crestek and its Stateside wholly-owneds own 100%, directly or indirectly, of all the voting and other stock of the offshoreniks.

First hurdle, SOL. Well here’s substantial omission because Crestek didn’t pay tax on millions, so 6SOL, and IRS beats the clock.

Next batter. “…petitioner observes that most of the proposed section 956 inclusions are attributable to investments in United States property that the CFCs had made in tax periods before FYE 2008.  In petitioner’s view, the IRS was obligated to make any adjustments under section 956 for the year in which the CFCs first acquired the United States property in question, not for any later period.  Petitioner cites no authority for this submission, and it has no merit.” 149 T. C. 5, at p. 17.

Section 956 inclusion is year-by-year. If IRS missed a year, well, that’s baseball, but nothing stops IRS from hitting another year. If they do, IRS must credit the onshore with any tax previously paid on the same money. Well, since Crestek didn’t pay tax on most of the alleged omitted income, it’s fair game.

Third, Crestek claims Section 6214 requires IRS to look at the onshores’ previous years. No, says Judge Lauber, this is about the CFCs’ tax attributes, not the parents’. And since Crestek and IRS stipulated the CFCs’ previously taxed (and thus not taxable again) income, there’s nothing else to look at.

Well, says Crestek, the intercompany loans were all paid off. Prove it, says IRS. Judge Lauber says to defeat summary J on this point, allege some facts. Can’t rest on denials, y’know. Crestek has only the Michael Corleone gambit on this one.

As for the guarantee, IRS claims that the Malaysian guarantor also pledged some of its US parents’ stock, as well as guaranteeing payment. Crestek says the guarantee/pledge was window dressing, as the Malaysian’s stock was worthless.

Judge Lauber doesn’t care. “At the outset we have difficulty seeing the relevance of this argument.  Section 956(d) provides that a CFC shall be considered as holding an obligation of a United States person if the CFC ‘is a pledgor or guarantor of such obligation.’ Petitioner concedes that CUM was a ‘guarantor.’  Under the subpart F regime as enacted by Congress, that is the end of the inquiry.  Neither section 956(d) nor the regulations interpreting it inquire into the relative importance that the creditor attaches to the guarantee.” 149 T. C. 5, at pp. 25-26.

Besides, a Malaysian bank like Bank of Islam, when making an $11 million loan to a US Corp, might want a local on the hook as well, especially as local law might have strong sanctions for welshing. Anyway, no Islamic banker provided an affidavit.

And although Crestek claims the Malaysian sub was under water, (a) what relevance is that as the guarantee was in place, and (b) there’s no proof that the Malaysian sub was insolvent. And the IRC doesn’t require that the guarantor be likely to be called upon to perform.

As for what part of the trade receivables are over the line, one batch accrued to an out-of-business entity, so clearly that isn’t necessary to carry on a trade or business. The other batch, in the hands of an operating entity, remained a more or less constant amount, so maybe so it was excessive. But we need a trial for that.


In Uncategorized on 07/27/2017 at 15:26

This gets me annoyed. Seriously annoyed.

I don’t know what the CA laws might be, but I expect they have some enactment, promulgation or keep-off-the-grass as to UAPL.

Oh, for the civilians amongst you, UAPL is unauthorized practice of law. Here in the Empire State, we have both civil and criminal penalties for so doing.

But out in La-La Land, whatsoever their enactments, promulgations etc., may be, we have Timothy F. Debevec & Janette Debevec, Docket No. 10141-17, filed 7/27/17. Except it isn’t at all about Tim & Jan; they petitioned, for sure, but they didn’t sign the petition their own selves.

Ch J L. Paige (“Iron Fist”) Marvel tells the story.

“That petition seeks review of a purported February 2017 notice of deficiency allegedly issued to Vincente Rosas for taxable year [X]. That petition was captioned: ‘Timothy F. Debevec & Janette Debevec, Petitioners v. Commissioner of Internal Revenue, Respondent’. That petition was not signed by Mr. and Mrs. Debevec. Rather, that petition was signed only by Vicente Rosas. … respondent filed a Motion To Dismiss for Lack of Jurisdiction, at docket No. 10141-17, on the ground no notice of deficiency or other notice of determination was issued to Mr. and Mrs. Debevec for taxable year [X] …that would permit them to invoke the Court’s jurisdiction in this case. Among other things, in his motion to dismiss respondent states/indicates that: (1) Vincente Rosas apparently filed the petition at docket No. 10141-17 using the petition that Mr. and Mrs. Debevec filed at docket No. 8771-17S… challenging the notice of deficiency… issued to Mr. and Mrs. Debevec for taxable year [Y]…; and (2) however, Mr. Rosas in the petition at docket No. 10141-17 incorrectly captioned that petition in the names of Mr. and Mrs. Debevec, instead of in Mr. Rosas’ own name. In our Order To Show Cause… we directed Mr. and Mrs. Debevec and respondent each… to show cause, in writing, why the Court, on its own motion, should not dismiss so much of this case at docket No. 10141-17 relating to Timothy F. Debevec and Janette Debevec for lack of jurisdiction on the ground the petition was not properly executed by or on behalf of Mr. and Mrs. Debevec.” Order, at p. 1.

Could be the typical pro se, trying a cut-and-paste from a form he got from the Glasshouse files. Public info, and all that.

But it isn’t, hence the title of this rant.

“…respondent filed a Response to Order…. Among other things, in his Response respondent states/indicates that: (1)… respondent’s counsel received a telephone call from Raul Armendariz, an unenrolled tax return preparer who purported to represent both Mr. and Mrs. Debevec, and Vincente Rosas; (2) Mr. Armendariz informed respondent’s counsel that he (Mr. Armendariz) prepared the petition filed in this case at docket No. 10141-17 using the same petition that Mr. Armendariz prepared for Mr. and Mrs. Debevec at docket No. 8771-17S; (3) however, Mr. Armendariz incorrectly captioned the petition filed at docket No. 10141-17 in the names of Mr. and Mrs. Debevec, rather than in the name of Vincente Rosas; and (4) respondent agrees that the Court should dismiss so much of this case at docket No. 10141-17 relating to Mr. and Mrs. Debevec for lack of jurisdiction on the ground the petition in that case was not properly executed by or on their behalf. … Mr. and Mrs. Debevec filed a Response to Order….. …Vincente Rosas-De Jesus filed a Motion To Change or Correct Caption. Among other things, in his motion Mr. Vincente Rosas-De Jesus states that the petition at docket No. 10141-17 was incorrectly captioned in Mr. and Mrs. Debevec’s names, instead of in Mr. Vincente-De Jesus’ name.” Order, at p. 2.

OK, so we had CPAs, not USTCPs or attorneys, making motions in Tax Court, until I blew the whistle on that little game. Not to be outdone, we have unenrolled tax return preparers, whose credentials, experience, competence and integrity are unknown and unexamined, to say nothing of their being admitted either to any Bar or to the US Tax Court, preparing petitions in Tax Court, and purporting to represent taxpayers in litigation, but doing it under the radar. I must assume Mr Armendariz and others of his ilk are not doing any of this for free or through any LITC. Nor have they any credential beyond unenrolled status.

So what does Ch J L Paige (“Iron Fist”) Marvel do?

She plays the clerk, and orders as follows: “Mr. Vincente-De Jesus’s Motion To Change or Correct Caption, filed at docket No. 10141-17 on July 24, 2017, is granted and the caption of this case is amended to read: ‘Vincente Rosas-De Jesus, Petitioner v. Commissioner of Internal Revenue, Respondent.” Order, at p. 2.

How about maybe so a referral to the CA authorities for UAPL for Mr. Armendariz, the founder of this particular feast? Here’s a link.


In Uncategorized on 07/26/2017 at 17:17

The end of a long trail, with sixteen (count ‘em, sixteen) lawyers for Eaton Corporation and Subsidiaries, 2017 T.C. Memo. 147, filed 7/25/17, versus nine for IRS. Spoiler alert- Eaton’s advance pricing agreements shouldn’t have been canceled by IRS.

Judge Kerrigan has a lot more about circuit breakers than most of us want to know. Eaton also has a bushelbasketful of offshore subsidiaries in the Cayman Islands and Switzerland, with branches in the Dominican Republic and Puerto Rico, the latter fueled by the old Section 936 incentives to go to Puerto Rico.

In addition to breaking circuits, Eaton and the gang were base eroding and profit shifting to beat the cliché, so Eaton entered into advance pricing agreements with IRS, pursuant to a couple Rev. Procs. (hi, Judge Holmes).

Well, the unguided Congressional largesse to Puerto Rico evaporated (along with Puerto Rico’s economy), so Eaton shifted hardware and IP to the Dom Rep via a batch of Section 351 tax-frees.

IRS wanted to hit the whole shebang with a Section 482 unscramble, so IRS and Eaton negotiated the advance pricing agreements (APAs).

If you want to have your head spun real good, read about Eaton’s accounting and reporting methods, and how the comparable uncontrolled price (CUP) method for working out the intercompany hand-offs was derived. I cannot figure this stuff out, but I tipped off a certain blood relative who probably can.

Briefly, “Before its proposal to use a CUP method, petitioner used the cost-plus method.  The cost-plus method evaluates whether the amount charged in an intercompany sale is arm’s length by reference to the gross profit markup realized in comparable uncontrolled transactions.  See sec. 1.482-3(d)(1), Income Tax Regs.  The CUP method evaluates whether the amount charged in a controlled transaction is arm’s length by reference to the amount charged in a comparable uncontrolled transaction.  See id. para. (b).” 2017 T. C. Memo. 147, at p. 35.

But when it came to negotiating the APAs, each side assembled a team, and the resulting negotiations were slightly, but only slightly, less convoluted than certain peace talks of recent memory.

And of course there was “trust, but verify,” built in.

And also, of course, there was a second round of negotiations, with the same mind-numbing complexity, which resulted in APA Number Two.

Next, as we would expect, it turned out that some ratty data got into the mix and the APA numbers were off. When lawyers, accountants and economists work out these wonderful formulations, no one talks to the in-the-trenches grunts who have to make all this applesauce work. So there were more “error” lights at Eaton than at a Brooklyn Cyclones game.

IRS lost patience, claiming “…failure of a critical assumption, misrepresentation, mistake as to a material fact, failure to state a material fact, failure to file a timely annual report, or lack of good faith compliance with the terms and conditions of the APA.” 2017 T. C. Memo. 147, at p. 112.

IRS dumps the APAs, and nine-figure SNODs rain on Eaton.

Meanwhile, Eaton buys out a DE C Corp that makes some kind of gizmo it needs, which said gizmo-maker has a sub in the Emerald Isle, home of leprechauns and tax dodges. And some of the sub’s high-priced execs have stock options out of which they have to be bought.

But the buying-out didn’t take place simultaneously with the buying-out of the rest of the DE C Corp, so Eaton tried to amend its return for the year in question, but IRS said the buying-out bonuses had to be capitalized under Section 263, not as payment of compensation and thus expensed.

As for the bogus APA reports, Eaton claims “whoops, so sorry.” IRS claims “dirty pool.”

APAs are like PLRs, a deal between taxpayer and IRS to prevent an annual argy-bargy about comparables, software and arcana well beyond the scope of mortal intelligence. There are six (count ‘em, six) methods to work out whether intercompany give-and-goes are truly comparable to arms’-length, love-with-the-proper-stranger deals. Judge Kerrigan lists them all at p. 129-131, to which I refer any among you still reading this and suffering from terminal insomnia.

The test here is what the now-defrocked Judge Kroupa decided back in 2013: abuse of discretion. See my blogpost “Advance and Retreat,” 6/26/13.

So Judge Kerrigan trudges through all the negotiations, who said what, what numbers were real and what was “constructed” (mach gresser, mach veiniger, as we say). And IRS got whatever it asked for. If IRS was unhappy, it should have asked for more. Eaton didn’t sandbag.

Yeah, Eaton blew it. But.

“All of petitioner’s seven errors were computational or related to inadvertence, and all were corrected in the amended APA annual reports.  These errors were not deliberate.  The errors were discovered only because petitioner did a comprehensive review after determining that its first error was not an anomaly caused by interim calculations.  Without petitioner’s reporting its errors, they would not have been discovered.

“We do not agree with petitioner’s interpretation that the revenue procedures provide a dividing line regarding the type of error and what type of action should be taken.  Each error needs to be analyzed to determine whether it is material.  The revenue procedures require, upon examination, that the taxpayer may be required to show supporting data and computations; and if this does not occur, the Associate Chief Counsel (International) may decide to enforce, revise, cancel, or revoke the APA consistent with the revenue procedures.  See Rev. Proc. 96-53, sec. 11.03(2) and (3); Rev. Proc. 2004-40, sec. 10.03(2) and (3).  Respondent’s cancellation letter stated: ‘The material deficiencies in APA compliance include numerous examples of noncompliance with the terms and conditions of APA I and APA II, errors in the supporting data and computations used in the transfer pricing methodologies (“TPMs”) specified in APA I and APA II’.” 2017 T. C. Memo. 147, at pp. 175-176.

Except that when you do the numbers, none of the seven make a material difference.

And IRS can’t identify any Section 367(f) outbound intangibles Eaton and the subs were throwing around in their multifaceted 351s.

Oh yes, the Emerald Islanders were employees, entitled to be paid. That was salary and wages, not acquisition costs.

And now an old friend is going to buy me a drink. I need it.


In Uncategorized on 07/26/2017 at 15:49

All y’all (as my Texas dear ones would say) remember John Rogers, the architect of the great DADS debacle, where he matched Brazilian bad debts with big-ticket US capital gains, and got blasted. No? See my blogpost “There Goes the Neighborhood,” 9/3/13, which has links to certain of the accounts of Mr. Rogers’ delictions.

Today we’re back with another of Mr. Rogers’ little dodges, Derringer Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al, Docket No. 20872-07, filed 7/26/17. That’s right, this doozy is ten years old. The interest must be more than any eventual deficiency.

Judge Wherry, he who was slapped by Judge Posner for lame humor four years ago as in my hereinabove-cited blogpost set forth (as my wealthier colleagues on the beach in the Hamptons would say), forswears witticisms today, sustaining the FPAAs against the pistol-packing Momma from Massachusetts, who opposes same. The deals are the same; it’s the same Brazilians, the same phony partnership, the same tax game.

But this case blips my transponder because of the chops: IRS wants either 40% overvaluation or 20% accuracy.

So what? Should be a slam dunk, no? As my canty readers have already cottoned on, there’s a Graev in Mr. Rogers’ neighborhood.

Here’s Judge Wherry to tell you all about it.

“As noted above, the FPAAs also determine accuracy-related penalties under section 6662, which include the 40% gross valuation misstatement penalty under section 6662(h). If we were to find that Warwick [another Rogers phony] and Derringer acted with reasonable cause and in good faith, we would not sustain an accuracy-related penalty. Sec. 6664(c)(1). We make this determination at the partnership level, taking into account the state of mind of the general partner. Therefore, Mr. Roger’s subjective intent is the focus here, since he was the sole ultimate owner and the only director of Jetstream, which was the managing member of both Warwick and Derringer.” Order, at p. 8. (Citations omitted).

Well, Tax Court decided long ago that Mr. Rogers was a prankster of low degree, with state of mind to match, so chop away, IRS.


“But since we decided Superior Trading, the Court has issued its opinion in Graev v. Commissioner, 147 T.C. __, _ (slip op. at 12) (Nov. 30, 2016), interpreting section 6751(b)(1), which requires, as a prerequisite for sustaining the assessment of an accuracy-related penalty, the personal written approval of the immediate supervisor of the individual who had made ‘the initial determination of assessment.’ Graev is appealable to the Court of Appeals for the Second Circuit, which has held that the Graev dissent rather than the majority ‘got it right.’ Chai v. Commissioner, 851 F.3d 190, 216 (2d Cir. 2017), aff’g in part, rev’g in part T.C. Memo. 2015-42. The Graev dissent, which the Second Circuit endorsed, would require in this case that written supervisory approval of the penalties determined in the FPAAs should have been obtained “prior to the initiation of Tax Court proceedings.” Chai v. Commissioner, 851 F.3d at 216; see also Graev v. Commissioner, 147 T.C. at slip op. at 29.” Order, at p. 8.

Note that Judge Wherry was out to lunch when the Graev Boss Hoss kerfuffle went down in Tax Court last November. Back then I praised Judge Gustafson’s dissent and said that if ever a full-dress T. C. needed to be appealed, that one should have been. It was, and Judge Gustafson and I were right.

Now maybe the summary J IRS wants here should be limited to the FPAAs; the Section 6751(b) Boss Hoss signoffs aren’t in the record, and anyway the chops haven’t been assessed (but do they need to be? Aren’t they computational, and don’t need partner-level proceedings?). Likewise, Derringer isn’t Golsenized to 2 Cir., so maybe Judge Posner and the 7 Cir. gang might want a whack at this one. So what’s the rush? Hey, it’s only been ten years; some of the Kersting cases are over 30 years old, and still undecided.

Judge Wherry wants to move this one.

“Regardless, to afford respondent an opportunity to establish that he can in fact satisfy the Graev dissent’s requirement for sustaining the penalties determined in the FPAAs, we will deny respondent’s motion for summary judgment with respect to those penalties. We encourage the parties to stipulate to the authenticity of whatever documents respondent may be able to produce in this regard, and submit the penalties issue to the Court under Rule 122.” Order, at p. 9.

Summary J on the FPAA, chops in abeyance.


In Uncategorized on 07/25/2017 at 16:56

I’ve made my political comments on today’s events elsewhere, so I’ll turn to a designated hitter off the bat of that Obliging Jurist and puzzlemaster Judge David Gustafson. Today Judge David Gustafson is confronting IRS looking for mootness in ASG Services, LLC, Docket No. 14945-16L, filed 7/25/17.

It’s a CDP, and ASG paid up, so why not just toss the petition?

Well, ASG wants to fight about liability. You remember it was only yesterday that Dean Matty Vigon sent that hare through the thicket; well, if you don’t remember, see my blogpost “Crafty – Akin to the Weasel,” 7/24/17.

But ASG isn’t quite in Dean Matty’s mukluks. So Judge Gustafson, always a man for a bargain, poses three questions, rather than the customary four.

First, IRS isn’t playing cagey when it comes to withdrawing a lien or forswearing future collection action. ASG just coughed up. So isn’t that like Greene-Thapedi, where, the liability being satisfied, Tax Court has nothing to adjudicate?

Second, “Without the existence of any possible prospect of future collection activity as to the liabilities at issue, this case would seem to become a mere suit for refund of the taxes alleged to have been overpaid. In further entertaining the case, we would be determining liability not incident to proposed or possible collection, as section 6330(c)(2)(B) contemplates, but solely for deciding whether ASG is entitled to a refund. Pursuant to section 6512(b), such a refund claim might be pursued in a deficiency case even after the IRS had conceded the deficiency that was the jurisdictional foundation of the case; but in the CDP context, no equivalent statute exists to permit the Tax Court to entertain a refund claim even where all collection issues have been conceded or have become moot.” Order, at p. 2. (Citation omitted) (Emphasis by the Court.). So how can Judge Gustafson keep this case alive?

Third, even supposing all we have here is a refund case, isn’t ASG wanting Judge Gustafson to assume facts not in evidence? “Section 7422(a) would seem to require the filing of a timely administrative claim for refund, and section 6532(a)(1) would seem to require the petitioner to await the IRS’s issuance of a notice of disallowance (or the passage of 6 months)-but ASG has not alleged compliance with either of these jurisdictional prerequisites. (And once ASG had met those prerequisites, it could presumably file a conventional refund suit in U.S. District court, pursuant to 28 U.S.C. sec. 1346(a)(1), or in the U.S. Court of Federal Claims, pursuant to 28 U.S.C. sec. 1491.)” Order, at p. 2.

So let ASG go file the refund claim and, if they don’t get it,  sue in USDC or USCFC, right?


ASG claims the payment wasn’t a payment, but a deposit to stop interest.

OK, says Judge Gustafson, go for it, ASG. But make it good.

“ASG shall file a supplemental response to the IRS’s motion, in which ASG shall state whether it persists in opposing the IRS’s motion to dismiss on grounds of mootness and, if it does so persist, shall (1) respond to the hypotheses stated above, (2) explain whether it contends the…remittances were ‘deposits’ (and, if so, shall explain the effect on mootness), and (3) make any other response it wishes to make.” Order, at p. 3.



In Uncategorized on 07/25/2017 at 15:55

No, this is not a re-make of the 1437 Scots ballad about brave Catherine Douglas and the slain King James I. This is the unavailing argument of the FedEx driver that he couldn’t enter the Glasshouse on the Magic Day to deliver the petition in Organic Cannabis Foundation, LLC. d.b.a. Organicann Health Center, Docket No. 10593-15, filed7/25/17.

And the Organicanns aren’t just blowing smoke; there’s better than a million bucks’ worth of deficiencies here. Source unspecified, but maybe business deductions potted by Section 280E.

First the Organicanns claim the SNOD was sent to the wrong address, because the P. O. Box number was omitted. The ZIP+4 puts paid to that one, as the USPS website says the SNOD got to the P. O. Box with 78 of the 90 days remaining. Plenty of time to file a petition.

Next is the hook for today’s sermonette, the mailed-is-filed, or maybe not, rule.

The Organicanns overnighted their petition via FedEx “First Overnight.” FedEx “First Overnight” is now one of the “blessed communion, fellowship divine,” anointed by John (“Kosi”) Koskinen, Boss Hoss at 1111 Constitution Ave., NW. Except it wasn’t when the Organicanns sent in their petition. FedEx “First Overnight” didn’t make the cut for another two weeks thereafter.

So the Organicanns are out? Yes, but. They have one last dive at the goal line. But Judge Pugh stifles that one too.

“Petitioner urges the Court apply Guralnik v. Commissioner, 146 T.C. 230 (2016), to conclude that the petition was timely filed because the Clerk’s office was not accessible to the FedEx delivery driver on the last day for filing. In Guralnik, the taxpayer’s statutorily prescribed filing deadline ended on a day the Court was officially closed due to a snow emergency. Id. at 233-234. We concluded that the ‘timely mailed, timely filed’ rule did not apply because the taxpayer used the FedEx First Overnight service (as petitioner used here), which service was not then listed among the designated private delivery services under section 7206(f). Id. at 240-241. We also declined to give Notice 2015-38 retroactive effect. Id. at 241. However, we applied Rule 6(a)(3), Federal Rules of Civil Procedure, to hold that when the Clerk’s office is inaccessible because of inclement weather, government closings or for other reasons, the time for filing is extended to the first accessible day that is not a Saturday, Sunday, or legal holiday. Unlike the snow emergency closing in Guralnik, here, the Court’s Clerk’s office was open during its normal business hours and was not inaccessible the entire day due to inclement weather, government closings, or other reasons. We, therefore, find Guralnik distinguishable and we decline to expand our holding in Guralnik to cover circumstances where an unspecified event may have blocked access for a period of time but the Clerk’s office is not inaccessible due to closure for the entire day.” Order, at p. 5.

Y’all will remember Felix Guralnik from my blogpost “Neither Equity Nor Designation,” 6/2/16. As usual, you read it here first.

Takeaway 1- Get the current list of the “blessed communion, fellowship divine” private delivery services and post a copy on every flat surface you can find.

Takeaway 2- Upon receipt of SNOD or NOD, pull a Form 2 petition off the Tax Court website, fill in a barebones “I object to everything” and send in same with a check. By the time you get the motion to strike for failure to state a claim, you’ve bought enough time to amend.

Takeaway 3- Unless it’s a DC public holiday or the Glasshouse is totally inaccessible all day, keep banging on the door. Katie Barlass is long gone.


In Uncategorized on 07/24/2017 at 16:16

A phrase that brings back happy memories of my little girl laughing as she describes some story takes me to the present with Dean Matthew Vigon, 149 T. C. 4, filed 7/24/17.

IRS is being very crafty, and definitely kin to the weasel.

But Dean Matty is no angel, either; apparently he’s currently in a Canadian slammer.

Surely you remember Dean Matty and his Forms 1041, each of which IRS claims should get the $5K Section 6702 chop? What, no? See my blogposts “Robosigner?” 6/23/16, and “Not Moot Court,” 5/17/17. There now, you’re all caught up.

Once again that Obliging Jurist David Gustafson upends IRS. IRS seems to be trying to do an end-run around a bunch of missing Section 6751(b) Boss Hoss signoffs. These should have been obtained before IRS chopped Dean Matty. First IRS asked for and got a remand back to Appeals to get the Boss Hosses. IRS came back from Appeals and claimed they had them, but Judge Gustafson wasn’t convinced. My blogpost “Robosigner?” above-cited delves into the dubiety of the Boss Hosses asserted.

Remember Judge Gustafson trashed IRS’ summary J motion and ordered a trial.

So IRS gets truly crafty, akin to the weasel. “Instead, the Commissioner moved for a continuance, explaining:  that the IRS would abate the penalties at issue; 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.” 149 T. C. 4, at pp. 6-7.

OK, says Judge Gustafson, that’s cool, but what about underlying liability? Isn’t Dean Matty entitled to a finding on underlying liability, as Section 6702 chops are non-assessible and he didn’t get a prior chance to contest?

No sweat, says IRS, there’s no statute of limitations on Section 6702 chops, so when we chop Dean Matty again, he gets another CDP. And we aren’t saying we won’t chop Dean Matty again.

And the famous release of lien says “With respect to each assessment below, unless notice of lien is refiled by the date in column(e) [i.e., dates in 2021 and 2022], this notice shall constitute the certificate of release of lien as defined in IRC 6325(a).” 149 T. C. 4, at p. 8.

So IRS claims it can refile four years from now, and go after Dean Matty, no doubt after it has gotten Section 6751(b)s from every Boss Hoss up to and including Com’r John (“Kosi”) Koskinen or his successor.

Tax Court review of a CDP determination is exactly that…the determination, not the NITL or NFTL, but what Appeals did and what Appeals found. And that means the underlying liability, if appropriate. Abating penalties and releasing the lien is all very well, but liability wasn’t determined.

Tax Court’s jurisdiction is determined when it is first invoked. Of course, circumstances may have changed since then. If a tax is paid, or if a lien is released and the statute of limitations has run such that the lien cannot be refiled, then the case is moot and should be dismissed.

Except here it isn’t.

“The Commissioner asserts, however, that the section 6702 penalty for ‘Frivolous Tax Submissions’, unlike the income tax, cf. sec. 6501(a), has no statute of limitations in the Code.  For purposes of the Commissioner’s motion to dismiss, we so assume.  The Commissioner has abated the previous penalty assessments against Mr. Vigon; but, as the Commissioner observes, if this case is dismissed, the IRS claims the right to reassess against and collect from Mr. Vigon identical section 6702 penalties for the same nine alleged frivolous submissions. Here, abatement is a tactical retreat but not a surrender.” 149 T. C. 4, at p. 19.

IRS says, “yeah, but Dean Matty gets the whole NFTL and right to a new CDP, so he can fight it out again.”

Judge Gustafson assumes for the purposes of this case that there is no SOL for Section 6702 chops.

“We assume this is true, but we see in the Commissioner’s position no reason that he could not do it again–abate the second set of assessments, moot the second CDP case, and lie in wait.  Mr. Vigon’s supposed remedy depends on his recognizing the second lien notice, timely requesting a CDP hearing before IRS Appeals, challenging the liability in that hearing, and then timely filing a Tax Court suit when IRS Appeals issues an adverse determination–all while he is incarcerated.  Our CDP jurisdiction is littered with the sad tales of taxpayers who, even when not in prison, stumble on one or more of those requirements.  But if Mr. Vigon did succeed in putting his reassessed liabilities before this Court in a future, second CDP case, the Commissioner has, in his view, the unilateral power to render the second case moot by abating the penalties, while retaining the prospect of reassessing yet again at any future time.” 149 T. C. 4, at pp. 20-21. (Footnote omitted, but IRS might be right about this one, because 6702s are about filings, not about “taxable periods to which the filing relates.”)

Don’tcha just love this stuff? It’s like the endless epistolary volleying between blowers and the Ogden Sunseteers. This could go on for decades.

Except Judge David Gustafson says “enough already.”

IRS’ weasel-wording and sleight-of-hand merely left the case sleeping, not dead. IRS doesn’t say they irrevocably release the lien or say they will not ever again assert the Section 6702 chops.

IRS, the case is not moot. Tax Court has jurisdiction.

Now about those Section 6751(b) Boss Hoss signoffs….



In Uncategorized on 07/21/2017 at 18:33

I had a word or two with a fellow practitioner (CPA-type) at the Jersey Boys’ CPE-on-CDP confab yesterday, as we sipped soft drinks during a break. I mentioned my view on unciteables, namely T. C. Sum. Op.s and orders.

These should be read, marked and inwardly digested; while Rule 50(f) bars citing orders for anything but preclusion and law of the case in the particular case wherein the order was issued, and Section 7463(b) says Sum. Op. small-claimers can’t be cited as precedent, you can copy any statute, reg, T. C. or T. C. Memo cited in any thereof, and lift the reasoning, even by cut-and-paste. It’s not allowed to be cited, so you can’t. But the reasoning and the law, regs, etc., from whatever source derived, are either valid or invalid. And if naught else, you can see how a Judge will decide an issue, maybe so.

My colleague was dubious at first, but I think I persuaded him. And if my powers of persuasion were insufficient advocacy, here’s that Obliging Jurist, Judge David Gustafson, with a designated hitter, second-seating me.

“…petitioner filed a motion to compel production of documents. We will order respondent to file a response and petitioner to file a reply. In preparing that response and reply, the parties may wish to reflect on our non-precedential orders addressing motions to compel in another whistleblower case—Insinga v. Commissioner, No. 9011-13W (July 27, 2016 (Doc. 109), and January 27, 2017 (Doc. 161)). These orders are not precedential, see Rule 50(f); we do not expect the parties to cite them, distinguish them, or rely on them; and we have not considered petitioner’s instant motion sufficiently to conclude that they actually involve the same questions. However, the orders may be helpful to the parties in showing the undersigned judge’s thinking about this area. The parties are invited to correct that thinking where they think it may be in error.” Order, at p. 1.

Y’all surely remember Fighting Joe Insinga. What, no?! Well, scope the old chap out on this my blog. I think I posted Fighting Joe’s set-tos with the Ogden Sunseteers ten times over the last four years.

And this order involves a newcomer to my blog, who came on the scene just two weeks ago. It’s Loys Vallee, Docket No. 13513-16W, filed 7/21/17. See my blogpost “General Knowledge, Private Information,” 7/7/17.

Thanks, Judge Gustafson.