Archive for October, 2017|Monthly archive page


In Uncategorized on 10/12/2017 at 15:56

Well, not just yet, Robert Edward Orth, Docket No. 18049-16, filed 10/12/17, but don’t try it again with Judge Buch.

Robert Edward echoes the words of a much more unfortunate but much more exalted personage, after unloading a few choice frivolities, including but without in any way limiting the generality of the foregoing, as my high-priced colleagues say, the Section 83 wages-are-not-compensation quibble, the self-employment-tax-only-applies-to-non-US-citizens misquotation of Section 1402(b), and the Administrative Procedures Act ploy (as to which see my blogpost “Truth or Forfeits,” 7/2/15).

Judge Buch clears these to the boards with minimal “somber reasoning and copious citation of precedents,” via footnotes.

Having struck out swinging, Robert Edward does see a chop in his future.

“Mr. Orth raises the concern that presenting his frivolous arguments in our Court may lead to a sanction being imposed against him.” Order, at p. 3.

Judge Buch’s reply is definitely on the order of “that’s a thwacking great affirmatory, good buddy.”

“He is right to be concerned. Raising frivolous arguments wastes precious court resources. One purpose of sanctions is to deter frivolous arguments from being presented or perpetuated. Although that is precisely what Mr. Orth did, we will not impose a sanction. Rather, we caution him against making frivolous arguments in the future.” Order, at p. 3 (Footnote omitted, but as it’s short, I’ll give it in extenso infra, as my expensive colleagues say).

Here it is: “See sec. 6673(a)(1)(B).” Order, at p. 3, footnote 9.

Thanks for designating this one, Judge. Saved me a lot of time.



In Uncategorized on 10/11/2017 at 17:35

After launching three (count ‘em, three) full-dress T. C.s and two T. C. Memos yesterday, The Glasshouse Gang closes the silos today, with no opinions or designated hitters.

Just as well, because I had to burn the midnight cliché to blog the T. C.s, and left the T. C. Memos alone. Of the latter, only one was amusing, but it was a many-times-told tale.

So I anticipated a useless inspection of the Tax Court website today, in search of hot blogfodder.

But Ch J L Paige (“Iron Fist”) Marvel did not disappoint this humble blogger.

Yadira Campos, Docket No. 20934-17, filed 10/11/17, is, I daresay, unique.

Ch J Iron Fist tells Yadira to file an amended petition. So what else is new, you will ask. There are usually forty of those orders every working day at 400 Second Street, NW.

Well, Yadira’s petition is something special. Or rather, was.

“Although petitioner filled out and signed the Petition and Request for Place of Trial, their written statements on the petition and their signatures on both documents are no longer visible because they were apparently obliterated through the irradiation process. Due to inadvertent clerical error, the Order directing the filing of an Amended Petition was not issued.” Order, at p. 1.

If you don’t agree with your adversary’s pleadings, nuke ‘em. Tax Court’s mail gets routinely irradiated.

So what should Yadira do? Can she “be ready” to deal with the nuclear threat?

Ch J Iron Fist directs Yadira to arm herself to resist the nuclear threat from The City That L’Enfant Built.

“…the Court will direct petitioner to file an amended petition signed by petitioner, preferably using an ink pen that is resistant to irradiation.” Order, at p. 1.

Great advice. Everybody should get one.


In Uncategorized on 10/11/2017 at 01:53

What a thought. It’s enough to make me take a pass on the two T. C. Memos that showed up on 10/10/17, although John V. Hawk-Bey, 2017 T. C. Memo. 199, filed 10/10/17, sorely tempted me.

But as I write this at 0125 on 10/11/17, I’ll forego temptation.

However, I can’t refuse Branden Forbush Jones, Docket No. 19034-17SL, filed 10/10/17. There are two docket numbers for BFJ, and thereby hangs the cliché.

Here’s Ch J L Paige (“Iron Fist”) Marvel with the scoop. And watch the dates; they matter.

“…the Court received a petition, attached to which was a copy of a notice of determination concerning collection action dated August 8, 2017, issued to petitioner with respect to taxable years 2012, 2013, 2014, and 2015. The petition had been sent by a designated private delivery service with a ship date of September 7, 2017, but was not accompanied by payment of the Court’s $60.00 filing fee. To protect petitioner’s statutory time period within which to begin a case, the Court filed that petition to commence a case at Docket No. 19034-17SL and issued an Order which directed petitioner to pay the filing fee for that case on or before October 30, 2017.

“Meanwhile, on September 11, 2017, the Court received from petitioner a second petition, attached to which was a copy of the notice of determination dated August 8, 2017, issued to petitioner with respect to taxable years 2012, 2013, 2014, and 2015. That petition had been sent by a designated private delivery service with a ship date of September 8, 2017, and was accompanied by the $60.00 filing fee. It was filed to commence a case at Docket No. 19273-17SL.” Order, at p. 1.

Remember that this is a CDP case, and August has 31 days. So if BFJ stumps up the sixty bucks as directed, 19034 is timely. But 19273 isn’t; it’s a day late and much more than a dollar short.

So IRS files a motion to dismiss for untimeliness, and requests the Court to close for duplication.

Sound familiar? No? Then see my blogpost “Another Taishoff ‘Oh Please,’” 9/24/14.

Close the timely petition for duplication and dismiss the untimely one for late service. Down in flames goes BFJ.


“…respondent then filed at Docket No. 19273-17SL a Motion To Dismiss for Lack of Jurisdiction, on the ground that the petition in that case was not timely filed within the period prescribed by section 6330(d)(1) or 7502 of the Internal Revenue Code (I.R.C.). Respondent also explained that the case was subject to closure as a duplicate of the petition filed at Docket No. 19034-17SL. The motion indicated that petitioner had no objection thereto, provided that the filing fee paid at Docket No. 19273-17SL could be applied to Docket No. 19034-17SL.” Order, at p.1.

Well, what a sea change! IRS does the right thing.

Of course, Ch J Iron Fist gives BFJ the credit. And wipes out the late-filed petition for duplication.

Does IRS read my blog? What a thought.



In Uncategorized on 10/11/2017 at 01:17

All y’all will recall the 1 Cir’s blow-off of IRS and Gordo and Lorna Kaufman, when Lorna’s mortgagee could nick the casualty and condemnation moolah. That wasn’t enough to up-end Gordo’s and Lorna’s façade deduction, said First Cir.

What, you forgot already? Well, see my blogpost “A Joy Forever – Maybe Not,” 7/20/12.

OK, being thus refreshed, know that Obliging Jurist, Judge David Gustafson, he of the victorious dissent in Graev which earned kudos in 2 Cir, refuses to follow 1 Cir around the Chicago Loop in Palmolive Building Investors, LLC, DK Palmolive Building Investors Participants, LLC, Tax Matters Partner , 149 T. C. 18, filed 10/10/17.

Maybe the spectre of Judge Posner of 7 Cir, glaring down on any “loquacity and lame attempts at humor,” to say nothing of daring to cite to a different Cir, frightened Judge Gustafson into the following: “This Court ‘follow[s] a Court of Appeals decision which is squarely in point where appeal from our decision lies to that Court of Appeals and to that court alone.’ Golsen v. Commissioner, 54 T.C. at 757. However, in this case, appealable to a different Court of Appeals, we are not bound to follow this decision of the Court of Appeals for the First Circuit, and we respectfully decline to do so, for the reasons explained herein.” 149 T. C. 18, at pp. 31-32.

Basically, says Judge Gustafson, we were right and 1 Cir was wrong. The Palmolives didn’t get their two mortgagees to subordinate to the easement. The mortgagees had first dibs on casualty and condemnation proceeds. They carefully carved out, in ever so many places in the deed of easement, their rights to the cash ahead of the 501(c)(3) that was supposed to protect, preserve and defend said easement.

So the 501(c)(3) guardian had no present property right superior in all respects to the mortgagees. And neither condemnation nor casualty was so remote as to be negligible, else why all the verbiage carving out the exceptions?

The Palmolives tried to save the carve-outs by claiming foreclosure couldn’t wipe out the 501(c)(3), but that’s not enough. And I agree: a non-disturbance isn’t a subordination. There doesn’t have to be a foreclosure for the mortgagees to grab the cash and leave the 501(c)(3) nothing.

One last try. The Palmolives have a savings clause. If anything jeopardizes the easement, the deed of easement is automatically amended to cut out the offending provisions. But any such automatic amendment is subject to mortgagee approval, thus undoing the amendment just when it’s most needed, and anyway, the 501(c)(3)’s rights have to be fully vested at inception, not sometime later.

With a $33 million deduction up for grabs, will the Palmolives see if Judge Posner is in his usual contrarian mood when confronted with a full-dress T. C., even to so obliging a jurist as Judge David Gustafson? The suspense is killing me.



In Uncategorized on 10/11/2017 at 00:25

The refundable credit, that piñata full of unguided Congressional largesse, makes more blogfodder in James M. Galloway and Sarah M. Galloway, 149 T. C. 19, filed 10/10/17. Judge James S (“Big Jim”) Halpern drew this one, and it’s a great cure for insomnia.

Jim and Sarah, relying on “Lassiter’s” tax guide (149 T. C. 19, at p. 5; I expect he meant J. K. Lasser’s annual Sinaitical tome), got the American Opportunity Credit really wrong.

Judge Halpern explains.

“Petitioners’ Form 1040 for 2011 also included a Form 8863, which reported qualified expenses for each of J.G., G.G., and E.G. (another dependent child of petitioners). G.G. and J.G. each completed his or her undergraduate degree in the spring term of 2011. Petitioners’ 2011 Form 8863 reports a tentative AOC of $2,500 per child, or $7,500, and a refundable AOC of $3,000 ($7,500 x 40%). The $3,000 refundable AOC also appears on line 66 of petitioners’ 2011 Form 1040.

“Part IV of petitioners’ 2011 Form 8863 is incomplete. It reports on line 15 the $4,500 difference between the total AOC claimed and the $3,000 refundable portion of the credit, but that difference is not carried to either line 23 of the Form 8863 (nonrefundable education credits) or line 49 of petitioners’ Form 1040.

“Petitioners’ 2011 Form 8863 provided no facts related to the claimed credit other than the qualified expenses attributable to each child.” 149 T. C. 19, at p. 4.

On the trial, Jim concedes the whole $7500 AOC, but doesn’t explain why. Doing the numbers, IRS asserts a $7500 deficiency, but Jim and Sarah claim $6,984, because they take the tax shown on their form and give back the $3K refundable AOC.

So this is a fight about $516.

“Respondent’s position rests on the premise that the excess of the tax shown on a taxpayer’s return over any rebates made can be a negative amount that increases the taxpayer’s deficiency when the amount of the rebate exceeds the amount of tax shown. (Because the excess of the tax shown on the return over rebates is subtracted from the tax imposed to arrive at the taxpayer’s deficiency, if that excess is a negative number, subtracting it from the tax imposed will increase the taxpayer’s deficiency.)

“In normal parlance, one might say that if amount B is larger than amount A, then A does not exceed B by any amount–that is, the excess of A over B is zero. Nonetheless, it ‘is both linguistically and mathematically possible’ for the excess of a smaller number over a larger one to be a negative amount. Indianapolis Life Ins. Co. v. United States, 115 F.3d 430, 435 (7th Cir. 1997). Moreover, as respondent observes, in applying the statutory formula provided in section 6211(a) for determining a deficiency, we have implicitly accepted the premise that the excess of the tax shown on a return over rebates can be negative.” 149 T. C. 19, at p. 9. (Citations omitted).

The idea is to allow petitioners to contest denial of refundables. But of course, if the refundables are successfully disallowed, the deficiency is greater. And that’s what happens here.

Jim and Sarah get the 20% substantial understatement of tax chop. Their concession that they had no entitlement to the AOC, without explaining why they thought they had it when they filed their erroneous return, rules out good faith.


In Uncategorized on 10/10/2017 at 23:23

The Cahn – Van Heusen chanson gives me my title for the first of the three (count ‘em, three) full-dress T. C.s that the Glasshouse Gang unloaded on me while I was away from the wordprocessor.

Creditguard of America, Inc., 149 T. C. 17, filed 10/10/17, admits they owe the $216K deficiency for the year at issue. But IRS yanked their tax-exempt status ten years later, and wants interest for the whole ten years.

The Creditguards claim they only owe from the date of yank. They couldn’t have paid the tax for the year at issue when due, because they were still exempt, as far as they knew. Or anybody else knew, until IRS yanked their tax-exempt status.

Well, that cuts no ice for The Counterfactual King, Judge Lauber.

“To be sure, ‘until we devise time machines, a change can have its effects only in the future. Bergerco Can. v. U.S. Treasury Dep’t, Office of Foreign Assets Control, 129 F.3d 189, 192 (D.C. Cir. 1997). But the purpose of making a change retroactive is to suspend reality and invoke a counterfactual premise. Here, the premise is that petitioner was not in fact tax exempt during [year at issue] but rather was a corporation subject to the regular corporate income tax. Because petitioner did not actually pay that tax on the date prescribed for payment, it is liable for interest beginning on that date.” 149 T. C. 19, at pp. 13-14.

“Underpayment interest is designed to compensate the Government for the period during which the taxpayer has enjoyed use of the Government’s money. ‘Interest, in tax cases as in others, is merely compensatory; it is not a penalty.’ Vick v. Phinney, 414 F.2d 444, 448 (5th Cir. 1969). Under this use-of-funds rationale, ‘a taxpayer who initially failed to satisfy his tax liability is obligated to pay interest on the taxes due from the date the tax return should have been filed, regardless of whether the failure to pay resulted from the taxpayer’s miscalculation or the [G]overnment’s redetermination.’ Brookhurst, Inc. v. United States, 931 F.2d 554, 558 (9th Cir. 1991).” 149 T. C. 17, at p. 15.

Bottom line: The Creditguards had the money. The fisc didn’t. That means interest is due. All the way.


In Uncategorized on 10/09/2017 at 12:53

Inasmuch as this is a resolutely nonpolitical blog, the debates, polemics, and philippics anent the proper nomenclature in respect of today’s public observance will not have any place here.

United States Tax Court is closed on this public holiday in the District of Columbia. The Glasshouse is shuttered; the hard-laboring intake clerks and flailing datestampers, the order clerks posting acres of discomposed electrons as a motley to the view, all have called a truce to their labors; and if they are not feasting with friends and neighbors, at least they have the day off.

So I’m taking the day off too. See all y’all tomorrow.


In Uncategorized on 10/06/2017 at 16:28

The question posed by the late great Larry Hart, to the immortal music of Richard Rodgers, in the 1937 hit Babes in Arms, sets up the interesting off-the-bencher by that Obliging Jurist Judge David Gustafson, to which I animadverted yesterday in  my blogpost “Oblige Me With the Page,” 10/5/17.

Turns out the complete off-the-bencher was on the Docket Search page.

Nathanael L. Kenan, Docket No. 22293-16, filed 10/5/17, claims he sent USPS a change-of-address form when he moved six months before IRS sent him the SNOD. Judge Gustafson believes Nat when he says he never got the SNOD, but that’s not enough.

Judge Gustafson warned Nat back in August that he had the burden of proof, so he had to prove dates when he sent in the change-of-address.

Nat shows up for “trial,” although it’s not a trial. IRS claims untimely petition, Nat claims invalid SNOD because not sent to last known address. “(Our order stated that the case would proceed ‘to trial’, but since both parties dispute our jurisdiction (though for different reasons), a trial of the merits of Mr. Kenan’s … liability could not happen in this case, and the proceeding was in the nature of an evidentiary hearing as to jurisdiction.).” Order, at transcript, p. 6. What we State courtiers call a “traverse.”

But Nat has only the Michael Corleone gambit. He doesn’t have a copy of the change-of-address form, nor the confirmatory letter USPS is supposed to send confirming receipt, nor any letter with the new address sticker showing it was properly forwarded.

Worse, “In the absence of any document reflecting what Mr. Kenan submitted to the USPS, we are also unable to find whether, in the words of the regulation, ‘the taxpayer’s name and last known address in IRS records match the taxpayer’s name and old mailing address contained in the NCOA [National Change of Address] database’. Before assuming that a new address in the USPS database is really the address of a taxpayer, the IRS must be able to correlate that new address to the old address and the taxpayer. Any difference in the IRS’s record of the taxpayer’s name and old address, on the one hand, and the USPS’s data of an individual and his new address, on the other, would be a reason not to use the USPS address as an LKA for a taxpayer. Without any documentation of Mr. Kenan’s notice to the USPS, we cannot know whether his name and old address as he rendered them on it might have differed from his LKA [Last Known Address] maintained in the IRS records, by something like the presence or absence of a middle name, the use of initials or a nickname, or an abbreviation or misspelling of a street name or city name. We are unable to find precisely what he submitted to the USPS or when.” Order, at Transcript pp. 9-10.

Takeaway- Sloppy drafting can sink your client, and you’ll never know it. Adding (or losing) a middle name or initial, abbreviating or leaving out “street,” “road,” “avenue,” or whatever can let IRS off the hook when they send a SNOD to the wrong address.


In Uncategorized on 10/06/2017 at 15:41

It’s a Tax Court cliché that once a petitioner drops the sixty bucks in the Glasshouse pushke (please pardon the technical term), the money is gone, even if the case is dismissed. The sixty bucks defrays the costs and expenses of the hard-laboring intake clerks, flailing datestampers, and the odd cup coffee for the judges working long into the night (hi, Judge Holmes).

At best, if a case is dismissed for duplication, the sixty bucks might be credited against the unpaid fee for the unduplicative case. Both got into the Glasshouse.

But maybe so, in a rare instance, the credit might go beyond duplicity.

Here’s Oralia Vargas, Docket No. 14334-17L, filed 10/6/17, to tell you all about it. Or rather, Oralia’s story is the springboard for Ch J L Paige (“Iron Fist”) Marvel.

Oralia apparently got slugged with a bunch of Section 6694 preparer chops. She got Notice LT11, telling her she was on deck for a levy (NITL), and sent in a Letter 12153 requesting a CDP. These she attaches to her petition.

What’s wrong with this picture?

No SNOD? No problem. Preparer chops are not subject to deficiency procedures, per Section 6696(b).

No NOD. Oralia ponied up the sixty bucks and lays out her sad story that she wasn’t liable for the chops aforesaid, but no NOD. And the NITL only talks about Years X and Y, but Oralia says she’s been chopped for Year Z also.

“Furthermore, as to any notice of determination concerning collection action with respect to the civil penalties for [Year X] and [Year Y] as a result of petitioner’s request for a collection due process hearing, it appears that petitioner filed the petition in this case prior to the issuance of any such notice of determination. Finally, respondent has not assessed any civil penalty with respect to petitioner’s [Year Z] and, thus, petitioner has not been issued any notice sufficient to confer jurisdiction on this Court as to a civil penalty for [Year Z].” Order, at p. 3.

This is the old leg-before-wicket, when the petitioner petitions before the SNOD or NOD is issued. And Oralia has a shot at underlying liability in the CDP, as she had no chance to contest before.

So Ch J Iron Fist has a deal for Oralia.

“Petitioner is advised that, if respondent’s Appeals Office issues to her a notice of determination with respect to the civil penalties assessed for tax years [Year X] and [Year Y] following a collection due process hearing, then petitioner should timely file a petition if petitioner wants to challenge the proposed collection action. In view of the fact that petitioner paid the filing fee in the instant case, petitioner may request that the Court waive the filing fee in such a subsequent case.” Order, at p. 4.

Takeaway- Practitioner, in an oddball case you might want to try the “I gave at the office” gambit. And tell ‘em Oralia sent you.


In Uncategorized on 10/05/2017 at 16:14

That Obliging Jurist, Judge David Gustafson, has an off-the-bench designated hitter I thought might be interesting, except page 5 of the transcript never made it to the Tax Court website. So would Judge David Gustafson or one of the hard-laboring order clerks put up the missing page in Nathanael L. Kenan, Docket No. 22293-16, filed 10/5/17?