Archive for November, 2017|Monthly archive page


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.


In Uncategorized on 11/14/2017 at 18:15

That Obliging Jurist, Judge David Gustafson, can’t apply softsoap to Palmolive Building Investors, LLC, DK Palmolive Building Investors SD Participants, LLC, Tax Matters Partner, Docket No. 23444-14, filed 11/14/17.

The Palmolives got their façade demolished when Judge Gustafson refused to follow 1 Cir in the instant case, which is Golsenized to 7 Cir. For more about this, see my blogpost “No Joy Forever- Because Golsen,” 10/11/17.

Well, the Palmolives want a Section 7482(a)(2) interlocutory appeal. For you civilians, that’s an appeal when a case hasn’t been finally decided, but where there’s substantial difference of opinion on a point, the determination of which by an appellate court will materially advance the litigation.

Judge Gustafson allows that there might be a substantial difference as to the “so remote as to be negligible” chance that the Palmolives’ mortgagee might glom casualty insurance proceeds or eminent domain awards to the detriment of the 501(c)(3) guardian of the precious heriditament.

But it comes back to the real issue that the Palmolives are fighting about, the 40% substantial overvaluation chop.

Even if the Palmolives eke out a win on the mortgagee-nicks-the-proceeds issue (maybe Judge Posner is feeling generous), the issue of the FMV of the property before and after doesn’t go away.

There’s gotta be a trial, guys.


In Uncategorized on 11/14/2017 at 17:37

Isn’t Impressed

Back for a second swing at the cliché are Benyamin Avrahami & Orna Avrahami, et al., Docket No. 17594-13, filed 11/14/17, via a Rule 161 Reconsideration of Facts, a/k/a Mulligan.

All y’all will remember Beny & Orna. You don’t? Well, check out my blogpost “The Selfies – Eclipsed,” 8/21/17, and my other and further blogposts therein cited. Beny & Orna were running sketchy captive insurance operations to funnel deductible cash to themselves, and came unglued in 149 T. C. 7.

Well, instead of the Rule 155 beancount and disgorgement, Beny & Orna want The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Indomitable, Indefatigable, Ineluctable, Incontrovertible, Implacable, Illustrious, Industrious and Ineffable Foe of the Partitive Genitive, Old China Hand and Master Silt Stirrer Judge Mark V. Holmes, to recognize that his experts really put on a grand show of running an insurance company, and that the policies Beny’s & Orna’s shackled outfit were claims-made and not when-occurred.

Well, never one to overlook a shot at kicking a partitive genitive to the curb, and in such cases he’s a captive audience, Judge Holmes blows off Beny & Orna in a designated hitter with these gems.

Beny & Orna claimed they hired qualified professionals to set up and run their little roundy-round.

“The question of whether an arrangement looks like insurance doesn’t depend on whether those appearances flowed from professional advice but what actually happened. Here, some of the key facts were the extreme illiquidity of [Beny’s & Orna’s ‘insurer’]’s investment portfolio — so skewed toward flowing funds back to the Avrahamis that it had no other significant investments — and the very telling pattern of receiving claims only after the IRS started an audit. Petitioners cite to no law that says there’s a reasonable-reliance defense on the natural consequence of such activities — namely, a more-likely-than-not finding that this was less insurance as that term is commonly understood and more a way of generating tax-deductible financing for the Avrahamis’ other investments.” Order, at p. 2.

Or as G. B. Shaw put it, you can’t grow roses on concrete by dint of hiring expensive gardeners.

And now that he’s warmed up, Judge Holmes has a partitive genitive lined up.

“Petitioners’ second argument is that ‘there should be no reasonable dispute  that] the policies at issue were claims made policies, not occurrence policies.’ Some were, but as we pointed out, at least one policy was so ill-drafted that it was both a claims-made and an occurrence policy. Id. at __ (slip op. at 82). That was an illustration of a couple more general points — sloppy drafting of policy language and actuarial calculations that did not reflect in all cases the actual policy language — that then buttressed the finding of fact that [Beny’s & Orna’s outfit] was not operating like an insurance company.” Order, at p. 2. (Emphasis by the Court.)

“A couple more general points.” Judge Holmes is on the case.


In Uncategorized on 11/13/2017 at 19:25

My learned and literate readers, drinkers deep from the well of great literature, certainly remember Herman Melville’s “A Story of Wall-Street” and the melancholy figure of Bartleby, the castoff clerk of the Dead-Letter Office in Washington, Delta Charlie.

Who can forget Melville’s pathetic peroration, “Conceive a man by nature and misfortune prone to a pallid hopelessness, can any business seem more fitted to heighten it than that of continually handling these dead letters and assorting them for the flames?”

Well, try reading Tax Court orders, all 150 of them, on a day when no opinions or designated hitters are to be found, when Judge David Gustafson fails or refuses to oblige, and Judge Mark V. Holmes neither stirs silt nor yet again disrespects the partitive genitive.

Judge Goeke does have an off-the-bencher, but after an unreasonably prolonged closing in colorful downtown Levittown, I can’t get up much enthusiasm for Phuongtruc Cao Nguyen, Docket No. 4556-16, filed 11/13/17.

Valuing Ms. Nguyen’s Chanel bags, Prada bags, a watch and other handbags may suit an honors graduate of the University of KY Law School and former Senior Trial Attorney in Chief Counsel’s Office, but I would prefer not to.


In Uncategorized on 11/10/2017 at 15:30
This from the Tax Court website.

The Court’s eAccess system will be unavailable while system maintenance is performed between 6:00 a.m. and 12:00 p.m. Eastern time on Saturday, November 11, 2017. No documents may be eFiled through Petitioner Access or Practitioner Access during this time.

Tax Court shuts down for Veterans’ Day.


In Uncategorized on 11/09/2017 at 17:01

I suppose some people think that tax controversy is dull, dry as dust, hypertechnical, soporific. I find it intensely interesting.

Now I’m not saying that Joszeph Hjalmer Eotvos & Kelly Mae Eotvos, 21450-16S, filed 11/9/17, are the equals of Charles J. Weiss and his trusty attorney DP (whose never-say-die attitude and tactical improvisation are more particularly bounded and described in my blogpost “Ya Can’t Make This Stuff Up,” 8/17/16).

But Joszeph Hjalmer really gives it the good old college try and inspires Judge Buch to deliver a designated hitter off-the-bencher to a thirsty blogger on a cold, raw November evening.

Kelly Mae runs a child care operation from the marital domicile. They claimed heavy depreciation for use of home and personal assets.

Judge Buch: “When called upon to substantiate those expenses, the Eotvoses did not directly substantiate what was claimed. Instead, they reconstructed those expenses by photographing a wide array of household assets and estimating their value. Those assets included swords and battle axes, which Mr. Eotvos collects, and Mrs. Eotvos’s jewelry.” Order, transcript, at p. 4.

Judge Buch is pardonably understated. “Battle axes were not used as children’s playthings, and their acquisition and maintenance was not in furtherance of the day care business.” Order, at p. 6.

Judge, I’ve heard of rambunctious infants, but this is “a wee bit ower t’score,” as they say in the Hielan’s.

There’s more, of course, but the battle axes finished Joszeph Hjalmer’s tour as a witness. “And a witness who can testify with a straight face about the nexus between a battle axe and a day care business earns no credibility.” Order, transcript, at pp. 6-7.


In Uncategorized on 11/09/2017 at 16:38

I’ll reprise a song from the 1955 Douglass Wallop, George Abbott and Jerry Ross classic musical. The four small-claimers on the program at 400 Second Street, NW, today “need not long detain the tourist,” as the Guide Michelin used to say. And the designated hitters offered little.

One exception: the Judge With a Heart, STJ Armen, disappointed me. Really disappointed me.

Poor Amy L. Goline, 20756-16S, filed 11/9/17 was a day late and a lot more than a dollar short with her petition from a SNOD. But instead of telling Amy to pay the tax, if able, apply for a refund and get down to USDC or USCFC if refund not forthcoming, he offhandedly cites McCormick, and brushes off Amy.

“…under prescribed conditions it is possible that petitioner may have judicial recourse in another court system based on an action for refund. See McCormick v. Commissioner, 55 T.C. 138, 142 (1970). However, the possibility of such recourse is a matter that this Court need not, and does not, address; rather, in that regard, petitioner may wish to consult a competent tax advisor.” Order, at p. 3.

C’mon, Judge, anyone pro se in a small-claimer is probably too rich to get a lawyer from a LITC and too poor to get one from the free world. At least be more specific, like all the other Tax Court judges. Maybe the Court “need not” address the option, but there’s no reason you can’t.


In Uncategorized on 11/08/2017 at 17:33

Lest it appear that I’m an ungrateful guest, I acknowledge the generosity and good fellowship of my esteemed colleague Peter Reilly, CPA, ace blogger at It was a fun lunch today, my friend, and safe travels back to the Back Bay. I gratefully acknowledge your permission to post on one of the topics we discussed over le hamburger and le croque monsieur.

A case in point: The Coca-Cola Company and Subsidiaries, Docket No. 31183-15, filed 11/8/17.

Judge Lauber spends fourteen (count ‘em, fourteen) pages of his Order mixing and matching, tailoring, trimming, cutting, redacting and detracting from the transcripts, filings, and exhibits that the Cokers want to put in on the trial, so that we, the public, can see everything not utterly protectable by trade secret and privilege. Homage to Section 7461(a).

Judge Lauber diligently guards both the Cokers’ rights and privileges, and the public’s right to see justice done and the whys and wherefores thereof.

I won’t even try to digest the meticulous approach Judge Lauber takes. Read the order; it is a masterpiece of judicial surgery.

OK, Judge Lauber lets us in on whatever the law allows.

All we have to do is surry down to the stoned soul picnic at 400 Second Street, NW, politely ask the clerk to open the voluminous file, and while away our idle hours reading. That is, those of us who don’t have day jobs.

Now if Tax Court were on the PACER system or equivalent, we could follow the advice of Ireland’s great poet and lengthen our days by stealing a few hours from the night, lighting the darkness with the glistering glow from our laptops, and paging through the night over that which Judge Lauber so painstakingly and scrupulously has excised and extracted for our edification.

But no. Tax Court’s lowly Article One online lips are sealed. Only orders, opinions and decisions are to be had on the world-wide web. As the Sweet Swan of Avon put it so well, “the rest is silence.”

Judge Lauber’s labor’s lost for the greatest majority of his fans.

So c’mon, Tax Court, let it all hang out. Put the backstories on line. Bankruptcy Court does, USDCs and CCAs do, why not you?


In Uncategorized on 11/08/2017 at 16:54

It turns out that the old saying about the shortest way home both helps and hurts Robert Hudson and Eleanor M. Hudson, 2017 T. C. Memo. 221, filed 11/8/17.

It’s Cap’n Bob’s story. Cap’n Bob was ex-Air Force Reserve and ex-Northwest Airlines, retired from both, but seeking to stay in the skies he loved. He wanted to go foreign, because the non-US flag carriers would respect his seniority. Why that matters is best described in fellow-aviator Ernest K. Gann’s 1961 classic “Fate is the Hunter.” That number can mean life or death.

So Cap’n Rob went to GAP. No, that’s not an accounting method, that’s a US recruiter of flyboys and girls for the global skies. Apparently, when Cap’n Bob was jobhunting, going through GAP paid more than a touch-and-go with the airlines’ headquarters. The long way round, y’know; it pays off.

Cap’n Bob was taken up by Korean Airlines. His deal with GAP said he wasn’t GAP’s employee, but an alone-in-the-sky IC.

Cap’n Bob got to push a 747-400 from and to The Land of the Morning Calm, and was a Seoul man, although he spent all his vacation days and downtime (when not on reserve) in the Land of the Free, where he owned three (count ‘em, three) homes, none of them principal.

Cap’n Bob was lucky to retain the services of Eric W. Johnson, esq., when IRS dumped some of his home mortgage deduction, and blew away his foreign earned income exclusion.

All y’all will remember EW, the hard-charging MN tax attorney who provides “honest representation at reasonable rates.” What, no? How fleeting is fame. Well, see my blogposts “Abate, Don’t Debate,” 8/25/14, and “Honest representations at reasonable rates,” 8/28/14.

Cap’n Bob’s foreigner status is a nonstarter. Too few days outside the home of the brave and the free, only the hotel-and-suitcase ties to The Land of the Morning Calm, and Cap’n Bob is back in the USA for tax purposes.

But IRS isn’t done. They claim the deal with GAP makes Cap’n Bob an IC. No he wasn’t, shows EW, and wins that one.

Judge Pugh: “We hold that Mr. Hudson’s proper work classification during the years in issue was that of an employee.  Korean Airlines exercised considerable control over his work.  While flying Korean Airlines aircraft, Mr. Hudson was required to abide by the policies and procedures listed in the employee manual he received from Korean Airlines.  See, e.g., Weber v. Commissioner, 103 T.C. 378 (finding that as the taxpayer was bound by rules determined by his principal, the principal  held sufficient control for the taxpayer to be classified as an employee).” 2017 T. C. Memo. 221, at pp. 18-19.

The GAP agreement can’t change the facts that bound Cap’n Bob to Korean Airlines’ command and control.

Moreover, since Cap’n Bob relied on the CPA GAP found for him, and consulted EW (at his usual reasonable rates), no chops for Cap’n Bob.


In Uncategorized on 11/07/2017 at 16:58

Over the years I’ve run, in a desultory way on this my blog, the Taishoff “Good Excuse” Sweepstakes, in various categories, such as late returns (or nonfilings), mislabelled income and deductions, internet reliance, and such. I await the grand (no prize) winner.

Today there is one excuse that falls at the first fence, but it’s as explicit in its candor as it is defective in its effect, enough so that I’ll forgo blogging STJ Lewis (“Say It Loud, Say It Proud”) Carluzzo’s designated off-the-bencher concerning health insurance premium deductions under an obscure provision of Section 35.

Here’s Rodney Morrison, Docket No. 21066-10, filed 11/7/17. A long-running show, but Rod wanted more.

Ex-Chief STJ Panuthos: “At some point after these cases were set for trial the Court was advised that a basis of settlement had been reached in these dockets and that the parties would submit settlement documents.

“… respondent filed a status report and also filed a Motion for Entry of Decision. Respondent asserts that proposed decision documents were sent to petitioners…. Respondent further asserts that petitioner Rodney Morrison advised respondent that he and his wife signed the settlement documents however they were delaying the return of the documents to respondent in order hold off potential collection action.” Order, at p. 1.

Ya gotta like candor. Rod is obviously someone who tells it like it is.

Ex-Chief STJ Panuthos is not amused.

“It appears that there is no doubt that the parties have arrived at a basis of settlement in these cases given that settlement documents prepared by respondent have been executed by or on behalf of petitioners. Petitioners have not presented any justifiable reason for failing to return the signed documents to respondent for execution and submission to the Court.” Order, at p. 1.

So, Rod, show cause why decision should not be entered.