“You Might Just Get It”

I remember Judge Carol Arber, in NYS Supreme Court, NY County, thus admonishing me, when I moved for appointment of a receiver in a mortgage foreclosure a dozen years ago. My client was insistent. Well, it was a stone that rolled easily into his garden, but was a hard one to roll out.

And that served as my headline in my blogpost “Be Careful What You Ask For – Part Deux,” 10/21/16.

Well, on a day when Tax Court is rather stingy with opinions and decisions (none of either), I have two orders reiterating that thought.

First, is VK&S Industries, Inc., Docket No. 23295-14L, filed 8/31/17. Judge James S. (“Big Jim”) Halpern cites the LG Kendrick case I mentioned in my blogpost abovecited.

The VK&S crew want to squeeze into the Greene-Thapedi dictum. They claim that although an Appeals review might end collection by reducing liability to the amount already paid, thereby mooting the case, if the petitioner never had a chance to contest liability, and claims that the reduced liability that moots the collection process is still too high and they should get a refund, then Tax Court has jurisdiction to review de novo.

No good, says Judge Big Jim. The VK&S crew went to Appeals twice, once contesting the validity of the SNOD and again on remand when they did get their liability reduced, only not by quite as much as they would like.

I’m still waiting to see if any petitioner can squeeze through the narrow Greene-Thapedi gate.

Next is Association for Honest Attorneys, Docket No. 14562-15X, filed 8/31/17. Apparently, the Association and its CEO were shown the Section 6673 frivolity yellow card by Judge Chiechi yesterday, and she repeats the warning today.

Back on 4/20/15, I was lamenting my exclusion from that Association. See my blogpost “Why Didn’t She Ask Me?” 4/20/15.

But if they’re looking at a Section 6673 chop, I’m just as glad they left me out.

Another Tax Court grammatical extravaganza, and today Judge Lauber gives us a truly prime example in Roberta Borenstein, 149 T. C. 10, filed 8/30/17.

Roberta made a few payments for tax year 2012 during said year, totaling $112K, and Section 6513 deemed them all made as of April 15, 2013 (the dates matter here). Roberta got an extension to October 15, 2013 to file her 2012 return, but she didn’t. Roberta was a wee bit casual, and didn’t file until August 29, 2015.  But IRS beat Roberta to the punch, and hit her with a SNOD on June 19, 2015, from which Roberta timely petitioned.

Turns out Roberta’s late-filed return had her real numbers, and she only owed $79K. Both Roberta and IRS agree.

Roberta wants a refund. In fact, not only Roberta but also the Philip C. Cook Low-Income Taxpayer Clinic and the Harvard Federal Tax Clinic think she should get one.

Sorry, chaps. It’s all about the parenthetical phrase “(with extensions).”

Remember the whole lookback for refunds breaks down into three years from filing or two years from paying. See my blogposts “Lookback in Anger,” 12/12/11, and “Lookback in Anger – Part Deux,” 4/15/15, citing the Butts case, cited extensively in Roberta’s case.

OK, back to “(with extensions).” Section 6512(b)(3) holds the key. “In a case described in subparagraph (B) where the date of the mailing of the notice of deficiency is during the third year after the due date (with extensions) for filing the return of tax and no return was filed before such date, the applicable period under subsections (a) and (b)(2) of section 6511 shall be 3 years.” 149 T. C. 10, at p. 10.

Well, the due date (with extensions) was 10/15/13, so the third year began on October 15, 2015 and ended 10/14/16; the SNOD was June 19, 2015, and the return wasn’t filed until August 29, 2015.

IRS claims the two-year lookback applies, and Roberta is out.

“The ‘third year’ after that date began on October 15, 2015.  But the notice of deficiency was mailed on June 19, 2015.  That date was during the second year, not during the third year, ‘after the due date (with extensions) for filing the return,’ as the 1997 amendment [to Section 6512] requires.  Respondent accordingly contends that the exception set forth in the final sentence of section 6512(b)(3) does not apply, with the result that a refund or credit of petitioner’s $32,411 overpayment is barred by the two-year lookback rule generally applicable to nonfilers.” 149 T. C. 10, at p. 11.

Roberta and the clinicians claim the phrase “(with extensions)” isn’t tied to the third year.

“Petitioner’s textual argument focuses on the parenthetical ‘(with extensions)’ as it appears in the longer phrase, ‘during the third year after the due date (with extensions) for filing the return of tax.’  Respondent contends that this parenthetical phrase modifies ‘due date,’ the immediately preceding noun.  Petitioner contends that ‘with extensions’ should be taken instead to modify ‘the third year, a noun phrase that appears earlier in the sentence.  In that event, ‘the third year’ would be determined by reference to the original due date for her return and would be prolonged to include the six-month extension period.  Alternatively, petitioner contends that ‘with extensions’ should be taken to modify ‘3 years,’ the last two words in the sentence.  In that event, section 6512(b)(3) would afford taxpayers a maximum lookback period, not of three years, but of 3-1/2 years.  Under either of these interpretations petitioner would get her refund.” 149 T. C. 10, at pp. 15-16.

No dice, Roberta and clinicians.

“We find neither of these constructions plausible from the standpoint of normal English syntax.  A modifying phrase is normally read to modify the nearest plausible antecedent.  This rule is typically referred to as the ‘last antecedent’ rule.” 149 T. C. 10, at p. 16.

“Wholly apart from sentence structure, construing ‘with extensions’ to modify ‘due date’ results in a more logical and natural reading.  Congress knows that due dates for filing tax returns can be extended; ‘with extensions’ is thus read quite naturally to modify ‘due date.’  Years, on the other hand, do not have ’extensions’; they cannot be extended but invariably end 12 months after they begin. Congress is thus unlikely to have intended ‘with extensions’ to modify ‘3 years’ or ‘the third year.’” 149 T. C. 10, at p. 17.

Finally, this gem. “In a similar vein, amici curiae [the clinicians] urge that we consult the dictionary to learn that the preposition ‘with’ has among its accepted meanings ‘inclusive of.’  But unless the parenthetical phrase is read to modify something other than ‘due date,’ making this substitution does not help petitioner.  The ‘due date (inclusive of extensions) for filing the return of tax’ was October 15, 2013–the same date produced by respondent’s construction of the statute.  In effect, amici curiae argue that we should view ‘inclusive of’ as modifying the gestalt of the entire sentence, i.e., the sentence should be read generously to be ‘inclusive of’ taxpayers like petitioner.  That is not how prepositions work.” 149 T. C. 10, at p. 17.

We have legislative history and the anti-absurdity rule, but neither helps Roberta. IRC is littered with “due date (with extensions).” “With extensions” modifies “due date,” nothing else.

But Judge Lauber has some thoughts for the weary blogger who has to plow through this stuff (and unlike him is not getting paid to do this).

“Anyone who has managed to plod thus far through this Opinion will understand that the statutory provisions we are construing are extremely technical and complex.  It is possible that the drafters of the 1997 amendment [to Section 6512] did not think through all of the ramifications of Congress’ decision to ‘inject filing extensions into the lookback period mechanism,’ as petitioner puts it.  But wittingly or unwittingly Congress placed the words ‘with extensions’ in the text of the statute immediately after ‘due date.’  We must give meaning to those words.” 149 T. C. 10. at pp. 27-28.

And give them meaning Judge Lauber does, even though it hurts Roberta.

Another lesson, as if one were needed, that most of what we do is of very minor importance.

What is important: my younger daughter making sure the people she manages stay safe. Her husband going to help with the rescue work. My elder daughter trying to stay calm and teach my granddaughters how to weather the storm. Her husband staunching the leaks in my granddaughters’ bedroom without waking them as the rain poured down.

Their friends encouraging one another, helping.

The help from all over this country.

Houston strong. America strong.

Nails the 8867 Prep Failure with a 6695(g)

If the above is utterly incomprehensible to you, my heartiest congratulations! You’re a human being and not engaged in tax preparation, tax consultation, tax controversy, or anything more complicated than handing your friendly neighborhood zombie who does this stuff the shoebox and the check.

Alas, that’s not the story of Abdiwali Suldan Mohamed, 2017 T. C. Sum. Op. 69, filed 8/29/17. Abs is a CPA in WA, and prepares a lot of returns. High on his faves list is the Schedule EIC, with accompanying 1040 or subset.

Well, Abs is a prep, but not a perp, as CID pays him a courtesy call and clears him of actual criminality.

However, some of Abs’ 300 clients for the years at issue got hit with audits, causing Abs to be visited by a TCO. That’s a tax compliance officer, who gigged Abs for missing or defective 8867 Paid Preparer’s Due Diligence Checklist, which Abs was supposed to fill out in extenso and grapple to his soul with hoops of steel for ever so many years.

Abs and the TCO hashed it out, and the TCO gigged Abs for 20 out of the original 50 sketchy 8867s. Nothing daunted, Abs went to Appeals, did some other and further slicing-and-dicing, and got the 20 unrighteous reduced to 14. Only Abraham did better with the Cities of the Plain.

Meantime, “(T)he TCO prepared a Form 8484, Report of Suspected Practitioner Misconduct and Report of Appraiser Penalty, for submission to the Office of Professional Responsibility (OPR).  The TCO attached to the Form 8484 a copy of the audit report.  …(T)he TCO’s acting immediate supervisor attached her digital signature to ‘Part E-Management Approval’ of the Form 8484.” 2017 T. C. Sum. Op. 69, at p. 4.

After Appeals had done, the AO sent Abs a letter telling him he was up for a $7K Section 6695(g) prep chop (14 defectives at $500 a throw). He could pay and sue for a refund in USDC or USCFC.

Abs did neither, waited for the NITL, and petitioned. STJ Daniel A. (“Yuda”) Guy got this one.

OK, Abs wanted to relitigate liability, but he had had two shots at that and won both, sort of. “Third time lucky” doesn’t play in a CDP. One swing at the cliché is all you get.

Nothing new here, so why the story?

Well, where’s the 6751(b) Boss Hoss sign-off on the 6695(g) chops raining down on Abs?

STJ Yuda will tell us.

“Respondent avers that the TCO’s (acting) immediate supervisor approved the initial determination to impose 20 section 6695(g) penalties on petitioner when she signed the Form 8484 and approved the referral of the matter, including the audit report, to the OPR. We agree with respondent.” 2017 T. C. Sum. Op. 69, at p. 13. Footnote omitted, but it’s interesting.

“Respondent did not offer a Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, which normally is used to assert preparer penalties. Internal Revenue Manual (IRM) pt. 20.1.6.5.9 (May 16, 2012).” 2017 T. C. Sum. Op. 69, at p. 13, Footnote 6.

So the 6751(b) Boss Hoss (sorry, acting Boss Hoss) chop clearance can take whatever form IRS likes?

Of course, this is a non-appealable, nonprecedential small-claimer, so why sweat it?

Well, in the first place add a zero. Abs probably had to do a lot of EITCs to get $7K in fees, maybe in great haste in late March and early April. As much work as my expensive colleagues have to do in ten or twelve hours of researching the law on Advance Payment Agreements.

And that Schedule EIC and 1040A involves “…a 17-part test, accompanied by a mandatory cross-examination worthy of Clarence Darrow in his prime, to provide what is claimed to be tax relief for, but is really welfare to, (presumably) the poorest in our society….” See my blogpost “The $500 Misunderstanding,” 10/25/11, for the full rant.

But this is a nonpolitical blog.

But Uncovered

Once again, a shortcoming in the operational sector of the Affordable Care Act wreaks an injustice in Steven A. McGuire and Robin L. McGuire, 149 T. C. 9, filed 8/28/17, Judge Buch giving the McGuires the bad news.

The McGuires signed up with Covered California, the same exchange that messed up Gregory Thomas Orr. See my blogpost “The Affordable Care Act,” 3/2/17.

Steve and Robin were under the 400% of poverty cutoff when they signed up, but during the year Robin got a job, busted the income limit, and Covered Cal never sent them a Form 1095-A to recalculate and pay back the credit. Robin appealed Covered Cal’s failure to reassign them, but the CA ALJ didn’t have jurisdiction to review a misclassification.

Steve and Robin get hit for the credit the insurance company got but they didn’t. And, of course, but for the credit they never would have bought the expensive insurance they did buy.

Judge Buch has no jurisdiction to wipe out the tax, but he wipes out all the chops.

Covered Cal didn’t cover themselves with glory in this case, and admitted as much, but the ACA rollout wasn’t a masterpiece either.

I stated at the close of my above-cited blogpost that “Congressional leadership and the White House state that come soon the ACA will either cease to exist, or else be refurbished, reupholstered and re-engineered so as to be unrecognizable.”

I’m sure that will give Steve and Robin no end of comfort. But this is a nonpolitical blog, guys; I report, you decide.

And The Footnote Says It All

No, Big River Development, L.P., Cork Factory LP, Tax Matters Partner, 2017 T. C. Memo. 166, filed 8/28/17, isn’t quoting Alfred, Lord Tennyson’s famous line “My strength is as the strength of ten, because my heart is pure.”

Whether or not their collective hearts are pure, ten is equal to one.

Because their deed of gift conveying the historic preservation easement for the Armstrong Cork Factory to the Pittsburgh History and Landmarks Foundation, though it mentions the infamous “Ten Dollars” that sunk poor Randy Schrimsher, has the merger clause, the Big River Gang wins.

Well, so did Randy’s deed have a merger clause, but Judge Michael B. (“Iron Mike”) Thornton brushed it aside back in 2011.

Today, Judge Lauber brushes aside the Ten Dollars, maybe because the Big River Gang’s deed only used initial capitals, rather than all caps (ya think?).

“Apart from the charitable conveyance and the covenants attending the easement, the deed of easement contains only two references to ‘consideration.’  The first is the granting provision’s reference to ‘consideration of Ten Dollars ($10.00) * * * [and] other good and valuable consideration.’  Neither party contends that PHLF actually furnished LP with any valuable goods or services in exchange for its gift.  Evaluating this clause in the context of the deed overall, we conclude that this clause constitutes ‘“boilerplate language and has no legal effect for purposes of sec. 170(f)(8).’” 310 Retail, LLC, T.C. Memo. 2017-164, at *17 (quoting RP Golf, LLC, 104 T.C.M. (CCH) at 416 n.7).” 2017 T. C. Memo. 166, at pp. 11-12. Footnote omitted, but it’s the whole point of this decision; see below.

The deed of gift also required the Big River Gang to pay PHLF $93K for monitoring compliance with the easement supporting historic preservation. IRS claimed that was “services.”

Judge Lauber gives a polite version of a Taishoff “Oh Please!”

“By inspecting the building to ensure compliance with the easement restrictions, PHLF would be discharging its own enforcement responsibilities as a charitable organization holding conservation easements.  Its monitoring would be an odd form of ‘service’ because it could generate no upside for LP but only downside.  If the monitoring disclosed a violation, the deed authorized PHLF to seek an injunction requiring LP to restore the property to the status quo ante and to demand reimbursement for any costs thus incurred. And because the easements held by PHLF are its property, any contribution to an ‘easement defense fund’ would seem to benefit it rather than its donors.” 2017 T. C. Memo. 166, at p. 12-13.

Howbeit, there was a statement of the value of the “services” if that’s what they are, so Section 170 was complied with.

Now for the big news here. Guess what case isn’t cited in this opinion? Why, Randall A. and Kelly C. Schrimsher, 2011 T. C. Memo. 71, filed 3/28/11.

And here’s the famous footnote: “We find no legally significant distinction between the boilerplate language of the granting provision in the instant case (which recited receipt of ‘Ten Dollars ($10.00) * * * and other good and valuable consideration’), in 310 Retail, LLC (which recited receipt of  ‘One Dollar ($1.00) and * * * other good and valuable consideration’), and in RP Golf, LLC (which recited receipt of  ‘other good and valuable consideration’ without mentioning a nominal dollar amount).” 2017 T. C. Memo. 166, at p. 12, Footnote 3.

So is Schrimsher overruled? Distinguished? Ignored?

Judge Lauber, I’d love to know the answer.

Judges and lawyers have a trade jargon that can confound the human being. It’s grown up over the centuries, starting with William the Conqueror sticking the Angles and Saxons with Norman French, and continuing through medieval Latin. Then we get the add-ons that clever litigants dream up and judges enjoy.

And it ends up with Tommy Hobbes’ immortal jibe in Book VIII of Leviathan: “When men write whole volumes of such stuffe, are they not Mad, or intend to make others so?”

Steps into the breach Judge Mark V. Holmes, who tells it in English to Michele Louise Dostert, Docket No. 27122-16 L., filed 8/28/17.

Like his exegeses “Basis for Dummies,” 11/24/11, and “The Sum of its Parts,” 3/12/12, you have to read the whole thing.

Here’s a sample.

“Ms. Dostert was a North Dakota resident when she filed her petition. This means that how we decide this summary-judgment motion is dictated by a case called Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006). This case requires the Tax Court to follow what lawyers call the ‘record rule.’ What this means is that the Court has to look at the same things that the IRS looked at during the collection due process hearing (the so-called ‘administrative record’) to decide whether the IRS officer abused his discretion in upholding the lien. An IRS officer abuses his discretion if he makes a decision based on an erroneous view of the law or a clearly erroneous analysis of the facts. Fargo v. Commissioner, 447 F.3d 706, 709 (9th Cir. 2006).” Order, at pp. 1-2.

Ms. D wants to contest liability, but never petitioned the SNOD, and her late-filed attempt at a return for the year at issue was unsigned…multiple times.

As the well-known chess analyst from Adelaide, SA, puts it “And we can stop here.”

The start of the last weekend in August inspires me with no immoderate zeal to unpack run-of-the-mine Tax Court orders, as Never on Friday is the rule for opinions and decisions.

But that Obliging Jurist, Judge David Gustafson, designates Robert Fred Helms, Jr., Docket No. 11046-16L, filed 8/25/17, and therein is an ace that we can all keep.

Rob Fred seems to think a CDP is maybe a mediation. But whatever, he has two years at issue now, for which he filed returns two and three years late, respectively.

He did have five (count ‘em, five) years of unpaid taxes, exclusive of one these two years now at issue, for which IRS filed a lien seven years ago.

That NFTL is not (Judge Gustafson’s emphasis) the predicate for this case, even though the years now at issue was roped into that lien.

Clear? Thought not.

The point of all this (I hear my readers saying, “There was one? How quaint.”) is that back then Rob Fred filed Chapter, 13 variety.

“The IRS filed a Proof of Claim in that bankruptcy case for the total amount of $236,998,for years including both [years now at issue]. Respondent asserted an unsecured priority claim as to [year one at issue] in the amount of $1,281 in tax due and $157 in interest (as accrued up to the bankruptcy petition date) and, as to [year two at issue], in the amount of $500 in tax due with a notation ‘pending examination’.” Order, at p. 2.

Rob Fred moved in Bankruptcy Court to establish value and priority of tax claim, but folded. IRS opposed his Ch 13 plan, but in any case Rob Fred never paid up in full, so the plan got tossed.

So the two years now at issue were unfrozen when the Ch 13 plan cratered. IRS now levies for the $4500 Rob Fred owes for the two years aforesaid.

Rob Fred petitions, and wants to fight the liability.

OK, Rob Fred never got a SNOD.

Or did he?

“…pursuant to section 6330(c)(2)(B), IRS Appeals must consider a taxpayer’s challenge to his underlying tax liability, but only if he ‘did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.’ Mr. Helms had such an opportunity in his bankruptcy case. See Everett Assoc., Inc. v. Commissioner, T. C. Memo. 2012-143 (‘Where a taxpayer has filed a bankruptcy action and the Commissioner has submitted a proof of claim for unpaid Federal tax liabilities in that action, we have held that the taxpayer has had the opportunity to dispute the liabilities for purposes of section 6330(c)(2)(B)’; citations omitted). Mr. Helms is therefore not entitled to challenge his liability in this case.” Order, at pp. 6-7.

Another case where a SNOD need not take any specific form.

Or, Everything West of the Hudson Is Still Kansas

I was rebuked by the Tax Section of the American Bar Association, to which august body I do not belong, when I suggested that Form 5, Request for Place of Trial, be modified. See my blogpost “Pro Se Taxpayers and the Forms,” 7/31/17.

They objected to complicating a form that many self-representeds get wrong without my assistance.

Well, maybe they were right, as even the order clerks at The Glasshouse at 400 Second St, NW, in The City Gen’l. Ross Burned in 1814, get it wrong.

Here’s Glendol T. Bush, Docket No. 13160-17, filed 8/24/17.

Glendol makes the usual mistake, asking for a full-dress in a venue only suited to small-claimers. Glendol wants Cheyenne, WY. Glendol doesn’t request small-claimer status even when asked, so gets Denver, CO.

But when Ch J L. Paige (“Iron Fist”) Marvel tries to give Glendol the “Goodbye, Ol’ Paint” treatment, the clerks do it thus.

“…petitioner lodged in the above-docketed matter a Request for Place of Trial form marking Cheyenne, Wyoming, as the requested place of trial. The Tax Court, however, does not sit in X for purposes of hearing regular cases. The Cheyenne facilities are available only for trials in small tax cases….” Order, at p. 1.

X, huh?

Maybe everything west of the Hudson is still Kansas. See my blogpost “Everything West of the Hudson Is Kansas,” 7/5/17.

Paul A. Gardner, 2017 T. C. No. 165, filed 8/24/17, is a real Nimrod. See Genesis 10:9. But Paul’s collection of hooves, horns, heads, hides and disjecta membra overran his trophy room, even after he divorced his wife and built a bigger one.

So Paul met up with a hunting buddy on one of his five-figure safaris to kill animals who never did him any harm (although he left the meat for the locals). And the buddy turned him on to the Dallas Ecological Foundation, subsequently known and designated as The Outdoors Tomorrow Foundation. These benevolent types, 501(c)(3) variety, accepted donations of unwanted trophies and suchlike from the Nimrods.

The buddy also threw in Doc Fullington, appraiser of trophies, but apparently not available to testify on  the trial.

The Doc whipped up a multi-page catalogue raisonné of Paul’s hooves, horns, heads, hides, etc., and Paul claimed a deduction of $1,425,900 as replacement value for 179 trophies, including “…no full body mounts and only three shoulder mounts (one of which was a ‘European mount’ featuring just the animal’s head).  The remaining 174 items consisted of:  58 skins and hides, 72 skulls (39 with horns or antlers), 15 horns, 15 antlers, 6 tails, 5 sets of hooves, 2 ears, and 1 set of tusks.” 2017 T. C. Memo. 165, at p. 5.

Well, IRS goes hunting for dollars. And Judge Lauber doesn’t care much for Paul’s witnesses, even though one of them was “…a technical consultant in the anthropology division of the American Museum of Natural History in New York.” 2017 T. C. Memo. 165, at p.17. But he never hunted, wasn’t a taxidermist, and wasn’t an appraiser.

Another was an art appraiser who had never appraised animals. And Paul also had as a witness a hunting consultant who runs “fair chase” safaris, providing thrills for the hunters and terror for the hunted at substantial costs to the hunter and ultimate cost to the hunted. This expert fails to include in his very large estimate of “replacement cost” the enjoyment factor.

In any event, the stuff Paul gave away was “commodities,” that is, stuff for which a regular market exists and has existed for years, with few fluctuations. Paul’s “replacement cost” theory, a separate hunt for each specimen across Europe, Asia, and Africa, doesn’t bring home the clichê.

At day’s end, IRS has an appraiser, who ”… has been involved with the taxidermy trade for more than 30 years.  He owns and operates a business that stuffs and mounts birds, fish, and small and large mammals for display or study.  He is a licensed taxidermist, has taught taxidermy classes, and has authored books on the subject.

“Since 2013 Mr. [IRS expert] has been a certified appraiser specializing in taxidermy items.  He has conducted at least 20 appraisals for insurance purposes and for valuing trophy mount donations.  He has been retained to conduct taxidermy appraisals by museums, State and local governments, and the IRS.” 2017 T. C. Memo. 165, at p. 14.

Paul had four (count ‘em, four) lawyers on this case. But no taxidermists.

Doesn’t help. Without a taxidermist on the stand, Paul gets stuffed.