Old men grow garrulous and remember their children’s childhood, anecdotalizing to the four winds. I can hear those little voices still, although the little girls are far away both in space and time. “First, the farmer sows his seed, Then, he stands and takes his ease, Stamps his foot and claps his hands, And turns around to view his land.”

Well, I don’t know if Mark A. Rutkoske, Sr., 149 T.C. 6, filed 8/7/17, did any of the foregoing, but he claims to be a qualified farmer. So does his brother Felix Jr. Felix Jr.’s spouse Karen is along for the hayride.

The Rutkoske clan are farmers for sure, in the Old Line State. They gave a conservation easement on one of their farms, got $1.5 million from the charity, but claimed the donation was a bargain sale, and went for $1.3 million as a charitable gift, because the diminution in the value of the property was that much. Then they sold the property cum easement and claimed capital gain, but they wanted to deduct 100% of the charitable gift in the year of granting the easement, rather than the 50% in Section 170(b)(1)(E)(i).

You get that largesse if you are not merely a farmer, but a “qualified farmer.”

Here’s His Honor Big Julie, a/k/a His Honor Judge Julian I Jacobs, hereinafter referred to as HHBJJJIJ, to give you the down-to-earth story.

“Section 170(b)(1)(E)(iv) provides a special rule for contributions of property used in agriculture or livestock production.  If the individual is a ‘qualified farmer or rancher’ for the taxable year for which the contribution is made, then that individual may deduct the value of the donation up to 100% of the his/her contribution base, less the amount of all other charitable contributions allowable under section 170(b)(1) made during the year.  Section 170(b)(1)(E)(v) defines the term ‘qualified farmer or rancher’ as an individual whose gross income from the trade or business of farming (within the meaning of section 2032A(e)(5)) is greater than 50% of the individual’s gross income for the taxable year.) “ 149 T. C. 6, at p. 10.

Well, the Rutkoskes definitely farmed. “We note that after the sale of the property, petitioners, through Rutkoske Farms, continued to actively farm full time the 1,100 acres on the six other farms, growing and harvesting wheat, soybeans, corn, and barley.” 149 T. C. 6, at pp. 6-7, footnote 5.

But their gross income included the sale of the farm that year, which IRS claims is nonfarm income and disqualifies them. And IRS disputes the valuation of the diminution, but HHBJJJIJ needn’t go there yet.

Although the Rutkoskes claim that sale of an asset used in farming is farming income, section 2032A(e)(5) is much more restrictive.

“We recognize that an individual engaged in the trade or business of farming most likely will engage in activities beyond those enumerated in the statute.  The sale of used equipment by farmers is common.  The acquisition and disposition of land is necessary because without land none of the section 2032A(e)(5) activities could be carried on.  But we are not reviewing petitioners’ activities in the context of determining their operation expense deductions or any other provision of the Code that relates to a business’ general operations.

“Section 170(b)(1)(E) is a narrowly tailored provision intended to provide a tax benefit for a specific action, namely, the contribution of conservation easements by qualified farmers.  We will not broaden the scope of activities listed in section 2032A(e)(5) beyond that ordinarily associated with them because our sole duty is to interpret the law as written by Congress.” 149 T. C. 6, at p. 16.

In other words, the largesse only goes to those farmers 50% of whose gross income comes from cultivating the soil, raising agricultural or horticultural commodities, the handling of such commodities, or tree farming. Real estate investing is something else.

HHBJJJIJ is aware it’s a tough rule. “We recognize that the statute makes it difficult for a farmer to receive a maximum charitable contribution deduction by disposing of a portion of property in a year in which he/she donates a conservation easement, especially in a State with high land values.  But it is not our task to rewrite a statute.” 149 T. C. 6, at p. 18.

The valuation issue will be fought out another day.

That’s the story of Karen L. Ritchie, Docket No. 13788-17, filed 8/4/17. Karen, apparently domiciled in the Old Line State, home of Ch J L Paige (“Iron Fist”) Marvel, sent in a letter with a copy of the SNOD IRS gave her.

Ch J Iron Fist told Karen to pony up the sixty bucks and file an amended petition.

Karen sent back a letter, telling Ch J Iron Fist to “cancel” her petition, as she couldn’t travel to Court.

Ch J Iron Fist bounces Karen’s letter-petition, and tells her to work it out with IRS.

Now why am I blogging this order on a Friday night in August at 11:00 p.m. EDT? Because the Rules provide for an alternative to showing up. See my blogpost “Not So Obliging – Part Deux,” 1/13/16.

Rule 50(c) says that one can present a written statement in lieu of an appearance. Now that Rule speaks of motions, but Rule 122(a) says much the same thing for trials.

I don’t have any facts about Karen’s case, so I can’t tell if there are any controverted facts requiring direct testimony, with concomitant cross-examination. If so, game over.

But it seems a wee bit brusque to toss Karen (she’s pro se, of course) without informing her that there might be an alternative to personally showing her “shining morning face, creeping like snail unwillingly” to the Glasshouse at 400 Second Street, NW.

There’s no Office for the Self-Represented at Tax Court, unlike other tribunals both State and Federal, but there sure ought to be.

Means Be Specific

More than a few years ago, one of my nearest and dearest (I forget which one, but they both refer to me as their “pre-existing condition”) brought home from school a composition marked at the head thereof in red pencil “BS.”

Given the tuition we were paying and the fancy reputation of the institution, I was slightly jarred. Maintaining my parental gravitas, I asked, “What does ‘BS’ mean?”

“Be specific,” she replied.

Well, today Judge Pugh takes up the red pencil and thus advises IRS, as IRS tries to collaterally estop Marvel Ebanks, Docket No. 15605-14, filed 8/4/17.

Marv was a tax preparer and credit repairer. She also lost a big four-count Federal criminal jury trial, getting hit for Section 7206(1) “willfully making, subscribing, and filing false tax returns.” Order, at pp. 2-3.

Marv claimed a bunch of fee money really belonged to her C Corp Marvelous Enterprises, Inc., except IRS proved on the trial that Marvelous Enterprises, Inc., “was not acting as a corporation, that there really wasn’t a corporation, and that this money was gross receipts that should be declared on her Schedule C.” Order, at p. 3.

OK, pause here for as moment and imagine you are IRS counsel. Marv’s conviction is final beyond possibility of appeal or further appeal. Exam has hit Marv with six years’ worth of SNODs, apparently for the years for which Marv took the fall, and Marv has timely petitioned. What do you do?

No prize for the correct answer, but if you answered “move for summary J,” Judge Pugh says “you lose.”

Collateral estoppel, or issue preclusion if you went to a high-priced law school, means satisfying the Big Five:

1. The issue in the second suit must be identical in all respects with the one decided in the first suit.
2. There must be a final judgment rendered by a court of competent jurisdiction.
3. Collateral estoppel may be invoked against parties and their privies to the prior judgment.
4. The parties must actually have litigated the issues and the resolution of these issues must have been essential to the prior decision.
5. The controlling facts and applicable legal rules must remain unchanged from those in the prior litigation.

This list is taken from the order at p. 4.

OK, IRS is in privity with the US of A, and Marv’s conviction is final. But the exact amount of understated income on Marv’s various Schedule Cs wasn’t litigated or decided in the criminal case, just that there were understatements sufficient to justify conviction. No preclusion.

Word to the IRS: Be specific.

Next is the element of willfulness, necessary to justify the 75% fraud chop.

Judge Pugh: “A conviction under section 7206(1) does not collaterally estop a petitioner from challenging the section 6663 civil fraud penalty for the same year but serves as persuasive evidence of fraud. As section 7206(1) does not establish all of the elements needed to impose a section 6663 fraud penalty, collateral estoppel does not apply. Specifically, section 6663 imposes a civil tax penalty for underpayments ‘due to fraud’. This ‘due to fraud’ language requires proof of specific intent to evade tax. But specific intent to evade tax is not a necessary element of the crime covered by section 7206(1). A conviction under section 7206(1) does not establish as a matter of law that the taxpayer violated the legal duty with an intent, or an attempt, to evade taxes.

“Respondent’s motion only asks us to rule that petitioner is precluded from denying the elements necessary for her section 7206(1) conviction, but this is tantamount to finding specific intent. We decline to hold that petitioner is collaterally estopped from litigating this issue.” Order, at p. 6. (Citations omitted, but get them for your memo of law; and while you’re at it, check out the story of Al Bront in my blogpost “Orders in the Court,” 3/9/12. Same old, same old.).

So let’s have a trial.

2 Cir. really knew how to hurt IRS. When they tossed ex-Ch J Michael B (“Iron Mike”) Thornton’s dictionary chewfest back in March, they heaved a concrete block into the IRS’s chopper.

If the foregoing leaves you befogged, see my blogpost “The Jersey Bounce – Part Deux,” 3/22/17.

I trust you can see clearly now, the rain has gone, right?

OK, so here’s STJ Diana L. (“Sidewalks of New York”) Leyden, the taxpayers’ friend (offer of proof for the foregoing, my blogpost “Straight From the Sidewalks of New York,” 3/24/16), laying it on IRS with the Section 6751(b) Boss Hoss gambit, subsection (b)(2) electronic variation.

The order is Great Lakes Concrete Products LLC, Docket No. 15602-15L, filed 8/3/17. The Great Lakers blew a bunch FICA/FUTA/ITW 941 quarterlies (hi, Judge Holmes), got chopped therefor, got slugged with NITLs, and lost the CDP.

The SO, as usual, confirmed, as George Shaw put it, “that the administrative departments were consuming miles of red tape in the correctest forms of activity, and that everything was for the best in the best of all possible worlds.”

So IRS wants STJ Di to give IRS summary J, telling the Great Lakers to jump in the cliché.

But STJ Di notes that there was no mention of Section 6751(b) Boss Hossery.

“If respondent wishes to pursue summary judgment as to the entirety of this case, he shall file a supplemental memorandum in support of his motion including a declaration that attaches any relevant documents. If respondent believes that the Appeals Office was not required to verify compliance with section 6751(b)(1)-e.g., in light of the exception in section 6751(b)(2) (“paragraph (1) shall not apply to * * * any other penalty automatically calculated through electronic means”)–he shall set forth those arguments in his supplemental memorandum. Alternatively, if respondent concludes that the failure to deposit penalties were not properly assessed, he should consider abating those penalties, in which case the Court will consider the motion as it applies to the balance of the unpaid tax liabilities for the tax periods at issue.” Order, at p. 3.

I tell ya, STJ Di is as obliging as Judge David Gustafson; ask politely, and she’ll draft your papers for you. Even if you’re the IRS.

The loyal long-time readers of this my blog will doubtless remember the ongoing scrimmage between IRS and various enfants de la patrie (both temporary and permanent) over the creditability against US income tax for payments on account of the  contribution sociale généralisée and the contribution pour le remboursement de la dette sociale.

Well, if you’re a malihini, as they say on the most beautiful islands I know of, or maybe so have forgotten, check out my blogposts “Va-T’en, Enfants de la Patrie,” 4/2/14, and “Revenez, Enfants de la Patrie,” 9/21/16.

OK, so you dig that DC Cir. tossed the dictionary at Judge Lauber, and told him to put away childish things, and figure out what the US of A and France were doing when they crafted and drafted the Tote, which for you civilians is the Agreement on Social Security Between the United States of America and the French Republic, March 2, 1987, 2260 U.N.T.S. 145, available at https:// www.ssa.gov/international/Agreement_Texts/french.html.

So today Ch J L Paige (“Iron Fist”) Marvel gets into it in Robert Eslampour & Sophie Eslampour, Docket No. 10515-12, filed 8/3/17.

Like Ory & Linda Eshel, co-stars of the second of my abovecited blogposts, Rob & Sophie want to credit or deduct, as the case may be, their CSG and CRDS. But that depends, as aforesaid.

So Ch J Iron Fist, seeing that IRS is waiting for France to stride forth like the famous 1830 Delacroix, tells both sides to cool it.

“Respondent’s counsel states that counsel for the Internal Revenue Service is in the process of requesting an official position from the French government regarding Eshel and will submit it to the Court. Respondent’s counsel states that a resolution of the issue in Eshel may facilitate a settlement of this case and requests in effect that proceedings in this case be stayed until a decision in Eshel has been issued. Respondent’s counsel requests that this Court permit respondent to file a written status report 30 days after this Court issues its decision in Eshel.”

Cain’t hardly wait.

That small but mighty band, the readers of this my blog, are thoroughly conversant with the CARDS dodge, flogged by that leading dodge-flogger Chenery. But for those who tune in late, check out my blogposts “House of CARDS,” 3/8/11, and “It Ain’t What You Do With What You Got – Part Deux,” 11/1/12, and get to V2.

Today we have Curtis Investment Company, LLC, Henry J. Bird, A Partner Other Than the Tax Matters Partner, 2017 T. C. Memo. 150, filed 8/2/17, no less than Ch J L Paige (“Iron Fist”) Marvel bringing down the House of CARDS on Henry J, when bro R. Alan, the TMP, elected to sit this dance out, and incidentally Momma Lonnie C. Baxter, who is conjoined in this family affair.

The Birds had holdings in a family C Corp in the nine-figure range, basis the usual. They wanted a ten-year sell-and-diversify plan, but got a tender offer they couldn’t refuse, so were looking at a heavy capital gains tax.

If you read my previously-abovecited blogposts, and if I may quote the best online chess commentator, we can stop here.

The Birds and Momma claim they wanted money to play the market and didn’t consider taxes. They testify they never spoke of it. But the cash outlay for the cash they got was 44%. A loan origination fee of 44%? Maybe on the waterfront when Marlon Brando was there.

It was the usual phony loan from a German bank, 100% collateralized with the same cash, a phony mix-and-match with UK indifferents and assumption of the entire liability by sensitives, the loan unwound in one year, generating an offsetting loss to the big capital gain.

Economic substance? Yeah, roger that. Ch J Iron Fist isn’t buying.

“This Court has examined other CARDS transactions promoted by Chenery. We have held that the CARDS transaction lacked economic substance on each occasion.” 2017 T. C. Memo. 150, at pp. 26-27. (Citations omitted, but I blogged most of them).

Borrowing money to play the stock market has economic substance, but that’s not the droid Ch J Iron Fist is looking for. It’s not the legitimate deal married to the fraud that saves the fraud. The fraud collapses on its own.

And the Birds don’t proffer any expert testimony dealing with the CARDS deal, only with what they might make on the investment, which is beside the point. And the Birds tweeting about how they never discussed tax benefits does not go over big.

But this is a TEFRA FPAA case. So what about good faith reliance on expert advice?

“Partner-level defenses, including reasonable cause and good faith, may not be asserted in a partnership-level TEFRA proceeding such as the one we have  here.  See New Millennium Trading, L.L.C. v. Commissioner, 131 T.C. 275, 288-289 (2008).  But when the reasonable cause defense rests on the partnership’s actions, such as in the cases here, we may entertain the defense at the partnership level, ‘taking into account the state of mind of the general partner.’  Superior Trading, LLC v. Commissioner, 137 T.C. 70, 91 (2011), aff’d, 728 F.3d 676 (7th Cir. 2013).” 2017 T. C. Memo., 150, at pp. 38-39.

You remember Superior Trading, where Judge Posner laid a whuppin’ on poor Judge Wherry, no? No? See my blogpost “There Goes the Neighborhood,” 9/3/13.

Well, the states of mind of Henry J and Momma Lonnie were somewhat less than optimal. The only tax opinion they got was the boilerplate fill-in-the-blanks from a certain NYC law firm, who got paid by Chenery out of the money that Henry J and Momma Lonnie paid Chenery.

BTW, see ABA Model Rule 1.8, Comment 11: “Because third-party payers frequently have interests that differ from those of the client, including interests in minimizing the amount spent on the representation and in learning how the representation is progressing, lawyers are prohibited from accepting or continuing such representations unless the lawyer determines that there will be no interference with the lawyer’s independent professional judgment and there is informed consent from the client. See also Rule 5.4(c) (prohibiting interference with a lawyer’s professional judgment by one who recommends, employs or pays the lawyer to render legal services for another).”

The Birds and Momma Lonnie were sophisticated high-rollers, unlike poor Charlie Carroll, the gravedigger who strutted and fretted his hour upon the stage in my blogpost “Woods, Concrete & Sham,”3/23/15, under whose mantle the Birds want to hide.

Give ‘em the 40% chop.

Judge Lauber is singing the Sammy Cahn-Jimmy Van Heusen 1960 hit, as IRS tries a second go at summary J in Whistleblower 23711-15W, filed 8/1/17. Whistleblower 23711-15W is hereinafter referred to as “One-Fifteen Whiskey.”

IRS tried summary J back in February and got stuffed by Judge Lauber. For the details of the stuffing, see my blogpost “Tainted,” 2/22/17.

Not a whit dismayed, IRS tries again, forgetting to tell Judge Lauber they tried before. I seem to remember in my young day as a State courtier that, when you made certain motions, you put in your affidavit in support the following: “no prior application for the relief sought herein has been made to any court or judge. “ But maybe I’m just old-fashioned.

Well, if I am, so is Judge Lauber. In fact, he gets just a trifle testy with IRS. “In his second motion, respondent does not acknowledge that we denied his first motion five months ago. We look with disfavor on this piecemeal litigating strategy, and we will direct respondent to show cause why we should not refuse to consider his new motion.” Order, at p. 1.

IRS has what it claims are fresh declarations from a CID type, and a couple Ogden Sunseteers staffers (hi, Judge Holmes) to show that, notwithstanding they sweated One-Fifteen Whiskey good, all they got was privileged material, that they put in separate envelopes, and nobody else never did nothing never with that fruit of the poisoned cliché.

Although scope of review was never discussed before, IRS unloads on abuse-of-discretion, record rule, Chenery, and hoc genus omne. Well, a couple days ago (hi again, Judge Holmes), I put odds of 8 to 5 on abuse-of-discretion in the scope of review classic. See my blogpost “A Hotly Burning Question What Has Swept The Continent – Redivivus,” 7/28/17.

But before we get there, Judge Lauber has to deal with the sandbagging issue.

“Unlike the local rules of some district courts, Rule 121 of this Court’s Rules does not require leave of Court before filing a second motion for summary judgment. See Uscinski v.Commissioner, T.C. Memo. 2005-124, 89 T.C.M. (CCH) 1337, 1339; compare, e.g., U.S. Bank Nat’l Ass’n v. Verizon Commc’ns Inc., No. 3:10-CV-1842-G, 2013 WL 12124306, at *6 n.14 (N.D. Tex. June 18, 2013); Jeffrey O. v. City of Boca Raton, 511 F. Supp. 2d 1328, 1338 (S.D. Fla. 2007). Nevertheless, Federal courts ‘do not approve in general the piecemeal consideration of successive motions for summary judgment.” Allstate Fin. Corp. v. Zimmerman, 296 F.2d 797, 799 (5th Cir. 1961). Accordingly, parties moving for summary judgment in this Court may ‘normally be held to the requirement that they present their strongest case for summary judgment when the matter is first raised.” Ibid.

“Every circuit to have considered the issue seems to have concluded that the decision to consider a second motion for summary judgment is committed to the trial court’s sound discretion.” Order, at p. 3. (Citations omitted.)

But there may be exceptions. Oh, how jolly! Exceptions! Just the thing for a warm summer’s day!

“To be sure, no Federal ‘litigant has an absolute right to bring multiple, piecemeal motions for summary judgment.’ But a renewed or second motion for summary judgment may be considered proper after denial of a prior motion if supported by ‘an expanded record.’ Conversely, ‘successive motions for summary judgment may be procedurally improper if the arguments in the second motion could have been raised in the first motion.’ Courts routinely refuse to consider a second motion for summary judgment when the movant ‘has not raised any new facts or arguments which it could not have raised in the first round of briefing.’” Order, at p. 4. (Citations omitted, but get them, and bookmark these paragraphs; if you’re ever in a sandbagging slugfest, they’re a great cut-and-paste for your memo of law, and you needn’t, in fact you can’t, cite the source).

Anyway, IRS has the whole administrative record; the CID dude and the couple staffers (hey, Judge Holmes, always a pleasure) were available back in February, and their papers discuss what happened long before February and not since; and the law hasn’t changed on scope of review.

So, IRS, says Judge Lauber, lay it on me.

“Moreover, respondent’s position would confine the Court’s review to the administrative record in a whistleblower case. (None of the declarations supplied in support of respondent’s second motion for summary judgment was part of the administrative record in this case.) The administrative record in a whistleblower case, developed by the IRS, is by definition accessible to and subject to the control of respondent. Unless the administrative record is somehow incomplete, so as to require supplementation through discovery, it is hard to see why respondent, if his position as to the scope and standard of review is correct, should not be limited in a whistleblower case to a single motion for summary judgment.” Order, at pp. 4-5.

Now let IRS show cause why their second time around shouldn’t get tossed.

And here are three questions to answer: Are there any new grounds for summary J that weren’t there in February? Was there any reason why the info you now trot out wasn’t trotted out back in February? And what kept you from arguing abuse-of-discretion scope of review back in February?

IRS, cough up or strike out.

Summary J isn’t love. Ol’ Blue-eyes to the contrary notwithstanding, it isn’t better the second time around.