Attorney-at-Law

TWO OLD CASES

In Uncategorized on 01/10/2018 at 07:52

I return from a visit to nearest and dearest in the Magnolia City, once again, as five years ago, with blogpost delayed because of dealings with doctors. Don’t ask.

Leading off, an old friend, Kenneth William Kasper, 150 T. C. 2, filed 1/9/18.

Kenneth William led the Ogden Sunseteers a merry chase. See my blogposts “IRS Loses a Double –Header,” 7/12/11, and “Cain’t Say No,” 8/19/14. I’ve also cited Kenneth William’s case in other contexts, and so has Tax Court.

Well, now the road ends. It turns out the famous bankruptcy file only showed that IRS filed its usual perfunctory Proof of Claim in the ten-day timeframe provided by the IRM.

“The bankruptcy courts provide the IRS with notice of all chapter 11 bankruptcy cases regardless of whether the IRS is listed as a creditor. IRM pt. 5.9.8.3 (May 13, 2008). The case is then assigned to an IRS insolvency specialist who must take “primary case actions” within 10 days of being assigned to the case. Id. pt. 5.9.8.4. This may include filing an estimated proof of claim before the bar date to protect the government’s interest and provide more time to determine the exact liability. IRM pt. 5.9.13.18.1 (May 20, 2008). This ‘unassessed’ claim is then followed as soon as possible by an amended or supplemental proof of claim with the correct tax liability. Id.; see also IRM pt. 5.9.13.8 (Mar. 1, 2007). “ 150 T. C. 2, at p. 31.

Yeah, but IRS originally claimed unpaid FICA/FUTA, exactly what Kenneth William claimed he told IRS (twice). And the insolvency specialist (here a “classifier” in LB&I, in charge of separating big sheep from international clichés) did ask what to do with the alleged malfeasant’s tax return. That’s also SOP, as once classified and the quick-and-dirty Proof of Claim filed to beat the bankruptcy bar date, all returns go into a suspense file until the IRS insolvency department decides what to do.

My thanks to The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being (this time for the unanimous Court), friend of Chenery (the doctrine, not the dodgeflogger), and Foe of the Partitive Genitive (but apparently in recovery), Judge Mark V. Holmes, both for a quick tour of the IRM’s bankruptcy paper-pushing, and an exhaustive (not to say exhausting) examination of the record rule.

But his essay on the limits of Tax Court jurisdiction overtaxes the space I’m allowed. In short, if neither you (person, partnership or corporation) nor your present (or ex) spouse is fighting over liability for tax, all you get is the Administrative Procedures Act’s default scope of review.

“Since section 7623(b) gives no guidance and we have no caselaw on point, we will again look to the default rules. The APA tells a reviewing court to reverse agency action that it finds ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,’ or that it finds ‘unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.’ 5 U.S.C. sec. 706(2)(A), (F). We have already held that the scope of review in whistleblower cases should not be de novo, so APA section 706(2)(F) doesn’t apply either. We are left with APA section 706(2)(A) and its abuse-of-discretion standard of review.” 150 T. C. 2, at p. 22. (Footnote omitted).

Kenneth William gets the bankruptcy stuff included in the administrative record the Court reviews, but still loses.

Remember Kenneth William blew the whistle on unpaid overtime pay that the target (small “t”) stiffed its employees, and on which he claims it owes FICA/FUTA and penalties.

“The employment-tax claims in the proof of claim are also the result of standard IRS procedure. The target filed for bankruptcy, the IRS was notified, an original proof of claim was filed by the insolvency department including ‘unassessed’ claims for FICA, FUTA, and excise taxes, and an amended proof of claim was later filed that corrected these claims to zero. None of the information provided by Kasper in his Form 3949-A [Information Report] would have changed this. The IRS could not have asserted a claim for employment taxes on the allegedly unpaid wages because unpaid wages aren’t taxed. Even though we think it was an error for the WBO not to consider this evidence, we think the error was harmless because the rest of the record shows that the IRS did not proceed with any action resulting in the collection of proceeds using Kasper’s information.” 150 T. C. 2, at pp. 31-32.

I cut short Judge Holmes’ exegesis on the extremely limited jurisdiction of poor l’il ol’ stepchild-of-Congress Tax Court to wheeze to the end of the road for another old blogfodder merchant, Joan Farr f.k.a. Joan Heffington, 2018 T.C. Memo. 2, filed 1/9/18, this time with Judge Chiechi on the bench.

All y’all will recollect my outrage when I found that Joan hadn’t asked me to join the Association for Honest Attorneys, a 501(c)(3) of which she was director, CEO and signatory on checking account and credit card. No? See my blogpost “Why Didn’t She Ask Me?” 4/20/15. Well, it still smarts… or rather did, until I read this case.

Joan gets the private foundation double whammy. AHA gets its 501(c)(3) status revoked retroactively; Joan only filed the ePostcard 990-N for AHA, and never filed 990-PFs or 4720 (excise taxes for private foundations) during years at issue, nor did she correct her alleged miscues by filing same once picked up on audit.

So she gets both the Tier One 25% excess benefits excise tax, and the second-year 200% excise benefit excise tax for each of the three years at issue.

If you’re aching to find out what’s going down with AHA, a quick docket search shows the 501(c)(3) takedown was tried at the end of last year. Decision eagerly awaited, but it don’t look so good for Joan.

I’ll skip Judge Chiechi’s trudge through three (count ‘em, three) years’ worth of AHA’s credit card and bank statements. This blogpost is long enough, without a recitation of payments to “…certain stores, such as Slumberland, Westar Energy, Lowes, T&S Tree Service, Gene’s Stump Grinding Service, Dutch’s, Echostar Dish, Allstate, Roberts Overdoors Inc., Lusco Brick & Stone, MY Construction, and Star Lumber & Supply.” 2018 T. C. Memo. 2, at p. 5.

I really hoped for better.

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