In Uncategorized on 02/01/2018 at 00:33

Halloween comes early for The Great Dissenter/Concurrer, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes.

Today his designated hitter strikes our old chums Kumar Rajagopalan & Susamma Kumar, et al., Docket No. 21934-11, filed 1/31/18. Y’all recall Kum and Sus, no? Well, for those recently tuned in to this my blog, check out my blogposts “Have a Heart, Guys,” 12/5/17, “Back From the Graev –Part Deux,” 7/9/15, and “Old-Time Head-Banging,” 6/5/15.

And my posts are going up late at night due to flu season and other ills that flesh is heir to.

Anyway, Kum and Sus are fighting about conservation easements, “…but penalties — and the Commissioner’s compliance with I.R.C. § 6751(b)(1) — have thus far taken center stage. We’ve already decided that it’s too late for the Commissioner to introduce additional evidence that he complied with § 6751(b)(1) for the 40% gross-valuation-misstatement penalties raised in his amended answers. See Rajagopalan v. Commissioner, Docket No. 21394-11, Order, Dec. 20, 2017. (We note, however, that he did produce some evidence of that compliance which the parties analyze in their posttrial briefs.) Now he asks us to reopen the record to let in evidence to show that he complied with that section for the 20% accuracy related penalties determined in his notices of deficiency. Petitioners object.” Order, at p. 1.

I missed the shoot-down of the 40% chop, but not surprising. I was Graev’ed out, as the IRS scramble to come up with Boss Hossery for cases long tried and awaiting opinion had turned into The Scramble of the Year.

Anyway, nobody raised Boss Hoss at the trial, but Kum & Sus mentioned it in their posttrial brief. Moreover, Kum & Sus FOIL’ed the IRS file and found a Boss Hoss for their partnership, but not them. IRS said mox nix, negligence applies at partner level. Oh TEFRA, thy sins survive thine exit.

So everybody knew about Boss Hossery, even though the trial was pre-Graev. But this is a close call.

And Judge Holmes predicted that, if a trial record was reopened for 20% chops but the Section 6751(b) signoff was for negligence, what about accuracy (the five-and-ten)?

Judge Homes said both sides were less than diligent for leaving out Boss Hossery on the trial. The evidence IRS wants to put in is business records properly authenticated, unlike the hearsay affidavit on the 40% chop. Kum & Sus yell “prejudice,” and failure to provide FRE 902(11) notice that they’re going to enter business records, but the evidence would change the outcome of the trial and is admissible. And 902(11) isn’t an insuperable obstacle. And it isn’t hearsay, like the 40% chop affidavit.

“But the penalty-approval forms here are different. They are evidence that we would likely have admitted at trial under the business-records exception to hearsay — just as we are doing now — and it is unclear how petitioners would’ve benefitted from cross-examination. Petitioners don’t make a convincing case that introducing these forms at trial would’ve made any difference to them: They primarily argue that they should be ‘entitled to question’ the supervisor and subordinate to confirm that the penalties ‘were properly asserted and whether [the Commissioner] complied with Code section 6751(b).’ The penalty-approval forms either answer those questions or they don’t; once they are in under the business records exception, they are in. And we can’t conclude this time that petitioners would be prejudiced.” Order, at p. 3.

True, IRS was slow-footed. But this was pre-Graev, so no one knew whether it was burden of production on IRS or affirmative defense on Kum & Sus. And Kum & Sus knew what was what when they FOIL’ed the IRS record, but didn’t raise it on the trial.

But to answer Judge Holmes’ hotly burning question, the penalty-approval forms are in… but only as to negligence, not accuracy.

So record closed, and time for opinion.

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