In Uncategorized on 11/15/2017 at 14:02

Judge Lauber has an addition to my “don’t ambush” series. I had Indians, whether taxed or untaxed (see my blogpost “Don’t Ambush the Indians,” 4/7/11), or the accountants (see my blogpost “Don’t Ambush the Accountants, Either,” 8/17/11).

Here’s Estelle C. Grainger, Docket No. 27817-16, filed 11/15/17.  Estelle and IRS are fighting about women’s clothing and accessories, specifically the value of the Talbot’s stuff Estelle says she gave to charity.

Estelle claims $34K, but Examination only gives her $2590. Estelle goes to Appeals, who ups the ante by $3527 as Estelle claims she bought the rest with her “Talbot points,” apparently a frequent-spender gimme, for a grand total of $6117 allowed charitable deduction. IRS throws in a SNOD at no extra charge.

They go to trial, at the conclusion of which IRS moves to amend its pleadings.

“At the close of trial respondent stated that he would move to amend his answer to ‘conform the pleadings to the proof.’ In his motion he asserts an increased deficiency, urging that the examination team correctly limited petitioner’s deduction to the amount she had paid for the clothing as shown by cash register receipts. Alternatively, he contends that the evidence at trial showed that petitioner applied only $150 of ‘points,’ rather than $3,527, toward purchase of the clothing.” Order, at p. 1.

And IRS wants to amend to add a 20% five-and-ten chop as well.

I remember some young wiseacre trying this in a non-tax case where I personally was the defendant (we won, of course), and getting nowhere. Judge Lauber won’t have it, either.

“We shall deny respondent’s motion. To the extent he urges that the Appeals Office erred in allowing petitioner an increased deduction of any sort, we see no reason why he waited until after trial to advance that contention. In this respect respondent’s argument is unrelated to the evidence submitted at trial and does not seek to ‘conform the pleadings to the proof.’ To the extent respondent seeks to contest the monetary value of the points petitioner actually used, we think petitioner would be prejudiced by the proposed amendment. She had no notice before trial that the dollar value of her ‘points’ would be in dispute, the IRS in the notice of deficiency having accepted the full value of the points she alleged.” Order, at p. 2.

And no chops either. The deficiency remains below $5K, and IRS never raised the five-and-ten chop until after trial.

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