In Uncategorized on 02/05/2018 at 16:47

No one can question that the universe is running down, and inevitably will approach some form of absolute zero, when all molecular activity will end. As a much more exalted authority put it, “Work, for the night is coming when no one can work.”

Well, personally, the last four weeks, with health and economic issues, have certainly pointed the way to that last gasp. And today the Glasshouse website has made its contribution to general collapse.

While the connectivity interruptus featured on its homepage seems to be abated, today we have 140 orders on the Orders Search, and only one (count it, one) order opens directly with a link. And both designated orders are similarly inaccessible.

Of course I e-mailed the Tax Court webmeister. I thought, however, that a phonecall might help the process. I reached an IT person who spent some time trying to get my attorney registration number (the relevance of which I could not ascertain, but I thought it might be subject to connection). At the end of his search (Tax Court’s software does not permit a name search), I explained the problem. The IT person promised to contact the webmeister. At this writing, however, no joy.

If you need to read an order, you’ll need to do a docket search.

The opinions do open directly.  Connie L. Minton a.k.a. Connie L. Keeney, 2018 T. C. Memo. 15, filed 2/5/18, ekes out innocent spousery per Section 6015(f), even after she works hard and comes up with the $6K deficiency she wants to lay at the door of her deadbeat ex, who can’t be found.

Connie can’t show she was defrauded, or that deadbeat ex stole the money to pay the tax, nor was she so abused that she couldn’t challenge what the return showed. While deadbeat ex lied about his business prospects, the tax was generated when Connie drew down her 401(k) to fund deadbeat ex’s get-rich-quickery, thus triggering tax.

Judge Pugh: “We reach a different answer with respect to the liability attributable to Mr. Keeney’s business. Unlike respondent, we conclude that liability is not attributable to petitioner because petitioner’s involvement in the business was nominal only. Therefore, we conclude that petitioner satisfies the threshold conditions for relief with respect to the liability (including self-employment tax) associated with the income from Mr. Keeney’s business. Our remaining analysis is limited to that liability.” 2018 T. C. Memo. 15, at p. 10.

Deadbeat ex’s tall tales about his great business saves Connie.

“We are convinced by petitioner’s testimony that she believed the Federal tax liability would be paid out of the proceeds from the ‘big contract’ that Mr. Keeney promised was coming. Given petitioner’s lack of sophistication and her position in the marriage, and taking into account Mr. Keeney’s duplicity and abuse, we also conclude that her belief was reasonable. Therefore, this factor weighs in favor of relief. Because respondent did not dispute whether the other factors favored relief or are neutral, we will not consider them further here. And because we find that this factor also favors relief, we conclude that relief is appropriate.” 2015 T. C. Memo. 15, at pp.  14-15.

Because Connie is plausible and sympathetic, even though she coughed up the whole deficiency, she can get a refund of whatever part thereof is attributable to deadbeat ex.

Homero F. Meruelo, 2018 T. C. Memo. 16, filed 2/5/18, is trying the “incorporated pocketbook” gambit to try to build basis in his melted-down Sub S. Judge Lauber isn’t buying.

Homero has a bunch of Sub Ss in his real estate empire, along with partnerships and LLCs, some of which were owned with others. The Black 08 (real estate pros need no explanation) put paid to the lot, and Homero wants a thundering NOL, but IRS says no.

“Here, petitioner seeks to treat as his incorporated pocketbook 11 distinct [Sub S] affiliates. Many of these companies had co-owners besides petitioner. And because the inter-company payments allegedly creating his basis involved netting hundreds of accounts payable against hundreds of accounts receivable, petitioner is necessarily contending that his ‘incorporated pocketbook’ not only disbursed funds but regularly received them. We have never found an incorporated pocketbook on such facts.” 2018 T. C. Memo. 16, at pp. 18-19.

There’s more, like a back-to-back loan argument, but defective paperwork torpedoes all that.

Finally, what’s a day at the Glasshouse without The Great Dissenter/Concurrer, a/k/a The Judge Who Writes Like a Human Being, Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes, playing another variation on the Section 6751(b) Boss Hoss double concerto for taxpayer, IRS and orchestra?

Today it’s a designated hitter, Great Lakes Concrete Products LLC, 15602-15L, filed 2/5/18. The Great Lakers are on for trial in June, but they want a penalty abated. And it’s not one of the usual ones.

“The penalty involved is one for failure to deposit under I.R.C. § 6656. This prompted the parties to realize that this case raises yet another problem in the aftermath of Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017), aff’g in part, rev ‘g in part 109 T.C.M. 1206 (2015): Is the penalty under that section one that is ‘automatically calculated through electronic means’? I.R.C. § 6751(b)(2)(B). If it is not, then did the immediate supervisor of whoever made the initial determination to impose that penalty approve it in writing? And there are likely to be collateral problems as well, such as whether proof of the IRS’s compliance with § 6751 is part of the verification ‘that the requirements of any applicable law or administrative procedure have been met,’ I.R.C. § 6330(c)(1), or is part of a challenge to the underlying liability, I.R.C. § 6330(c)(2)(B).” Order, at p. 1.

Well, there is the statutory formula, and it doesn’t take N. deGrasse Tyson to do the numbers. But that’s maybe for someone else to decide.

Phoneathon time. And Judge Holmes gets both sides to agree to a remand. Really, when it comes to punting, Judge Holmes should try out for the Eagles.

But Judge Holmes doesn’t trust the vagaries of Appeals, or IRS’ focus.

“Any supplemental notice of determination should explain the IRS’s position on whether penalty abatement is a precluded issue for each liability at issue, a full explanation of whether Great Lakes met the reasonable-cause exception to penalties for each period at issue, and a statement and explanation of the effect of § 6751 and Chai on this case.” Order, at p. 2.

  1. […] Lew Taishoff covered the decision after getting a little philosophical in Entropy. […]


  2. […] Lew Taishoff covered the decision after getting a little philosophical in Entropy. […]


  3. […] Lew Taishoff covered the decision after getting a little philosophical in Entropy. […]


  4. Everybody seems to be ripping off my colleague Peter Reilly, CPA, by taking his blogposts for their own. I don’t believe either mine or his is copyrighted, so there is no legal impediment. It might be nice to give him credit, though, as he has ” borne the burden and heat of the day,” as a much more exalted source put it.


  5. […] <p>Lew Taishoff covered the case briefly in a post titled <a href="; target="_blank" rel="nofollow">Entropy.</a></p> […]


  6. Yes, I do cover cases quickly. I’m writing for busy practitioners who haven’t time for extensive reading. If my brief blogpost interests them enough, I’ve linked to the opinion or order, and they can read it for themselves when they’ve time.


  7. […] Lew Taishoff covered the decision after getting a little philosophical in Entropy. […]


  8. […] Lew Taishoff covered the case briefly in a post titled Entropy. […]


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