Archive for March, 2018|Monthly archive page


In Uncategorized on 03/14/2018 at 15:15

No, not Bonnie Prince Charlie. And this being a non-political blog, firearms are not a topic of conversation. At any rate, not here.

Today’s forty-five is the forty-five days within which the American Association of Historic Preservation (AAHP), a bona fide 501(c)(3) protector, preserver and defender of historic façades, had to approve or reject (within the “secretary’s standards,” whatever those might have been) any alteration to the Tremaine building on Prospect Avenue in colorful downtown Cleveland, OH, after which the Tremaine property was a free-fire zone for Hoffman Properties II, L.P, Five M Acq I, LLC, Tax Matters Partner, Docket No. 14130-15, filed 3/14/18. Hoffman had the usual historic façade easement ploy.

This is a reconsideration motion, based on an order from last July. I never blogged it because it was another “no joy forever.” And Judge Nega sticks to the story.

Hoffman claims that even if AAHP blows the forty-five day cutoff, the OH AG or the public generally can sue. But that doesn’t satisfy the joy-forever. “None of the Ohio law cited by Hoffman, however, states that the Ohio Attorney General’s exercise of such powers imbue him with any greater right or dominion over a charitable interest, or property, than otherwise possessed by the erstwhile ineffective charitable organization. Thus, it is unclear why Hoffman believes that a hypothetical ‘enforcement’ of the agreement by the Ohio Attorney General would somehow alter the scope and applicability of the legal and equitable rights granted through the agreement’s terms.” Order, at p. 9. The OH AG gets no greater rights than AAHP had.

And if Hoffman wants to argue the AG’s cy pres rights to modify charitable agreements to promote the common good, it’s too late to raise it after losing summary J.

Hoffman tries to wild-card in a statement made under penalty of perjury that AAHP is a qualified 501(c)(3), which Section 170(h)(4)(B) requires, even though no one disputes that AAHP is so qualified.

Except the “sworn statement” is the notarial acknowledgement (commonly miscalled a “notarization”) on the easement agreement. But that doesn’t mean that the party signing the document is swearing to the truth of its contents or affirming same under penalty of perjury, only saying they signed it.

Judge Nega: “…there is no need for a notary to administer any oath, or to attest that the representations of the donor-taxpayer and donee were made thereunder. Presumably, should parties wish to comply with the sworn statement requirement by proffering a written declaration made under oath and notarized accordingly, such an affidavit may very well satisfy section 170(h)(4)(B)(ii). Hoffman, however, has neither alleged that the agreement was prepared and signed under oath, nor has Hoffman attempted to argue that any of the notaries’ declarations and seals affixed to the agreement purport to testify as much.” Order, at p. 11 (Footnote omitted, but read it; it’s the standard “he says he signed it” acknowledgement, not the jurat “sworn-to-before-me,” and that makes all the difference).

Takeaway- Boilerplate and routine can be hazardous to your clients’ tax health. And your general health.




In Uncategorized on 03/13/2018 at 23:20

Who Is Glad That TEFRA Is Gone

I am prepared to wager a few bobs that some if not all Tax Court Judges will be glad when the last of the TEFRA dinosaurs waddles to oblivion.

But it’s a long, slow waddle for Judge Mark V. Holmes, as he hunts down Ernie Ryder and his sixteen (count ‘em, sixteen, and they aren’t sweet) dodger cases. Same opinion for everyone of these designated hitters, so here’s Ernest S. Ryder & Associates, Inc., APLC, et al., Docket No. 14619-10, filed 3/13/18.

I’ve blogged Ernie’s adventures and misadventures before.

It turns out that the fight is what is a partnership item (needing FPAA and audit) or nonpartnership (no need for TEFRA activity) is irrelevant here.

Judge Holmes: “The primary issues the parties address are whether funds that passed from a C corporation through partnerships are constructive dividends or otherwise income to the Ryders, whether the Ryders have sufficient basis in those partnerships to take flow-through losses, and whether certain losses were from passive activities and could therefore only offset passive income. The Commissioner says these issues either aren’t partnership items or the relevant entities aren’t subject to TEFRA for the years at issue.” Order, at p. 1.

Judge, please don’t call a Statutory Notice of Deficiency a “NOD.” The term “NOD” is reserved for Notice of Determination, as in a CDP, a worker classification (IC or EE), a stand-alone innocent spouse, or a 501(c)(3) revocation.

Ernie was running cash from a C Corp through a bevy of partnerships, and having the cash applied to his personal benefit. Ernie claims IRS is trying to treat the partnerships as shams, and that’s a partnership-level determination, so TEFRA applies.

“But these things are irrelevant to the question of whether funds leaving a C corporation were income to Ryder. See Watkins v. Commissioner, 108 T.C.M. 337, 340 (2014) (where Commissioner agreed partnerships not shams and partnership distributions didn’t go directly to petitioners, ‘[t]he fact that the funds may have at some point come from a distribution from [a partnership] does not make the petitioners’ alleged use of the funds for personal gain necessarily a partnership item’).” Order, at p. 2.

Watkins was the asbestos-remover with the tiered LLCs that came unglued. For the backstory, see my blogpost “Substance Over Form,” 2/11/11. The 2014 T. C. Memo. Judge Holmes quotes was a follow-up.

So TEFRA is irrelevant. But IRS is rather farblungeit (please pardon technical term) as to which of Ernie’s multifarious partnerships is or is not a partnership subject to TEFRA. IRS’ counsel’s record-building isn’t of the best.

But even as to the partnership IRS concedes is a TEFRA partnership, IRS accepted the relevant year’s return as filed, so no audit, no partnership-level proceeding, and all items are strictly partner items, and Judge Holmes has jurisdiction. Remember, no FPAA, no partnership audit, no TEFRA.

Ernie does win on the claim that IRS can’t litigate in this proceeding whether his car outfit was operated for profit in the relevant years. That’s a TEFRA issue. But whether Ernie can take losses from that business for those years is something else. Even if the car thing was for profit, has Ernie sufficient basis and is he subject to the passive loss rules?

After all, this is a motion in limine and to dismiss for lack of jurisdiction, essentially the same thing. But as Judge Holmes finds he has jurisdiction, I eagerly await the opnion.




In Uncategorized on 03/13/2018 at 16:07

Judge James S. (“Big Jim”) Halpern casts a wide net when dealing with the wrinkled skin of our tax law. And when a new legal planet swims into his ken, he invites others to share, and bids the parties involved look at each other with a wild surmise. Thus today’s designated hitter, Brian H. McClane, Docket No. 20317-13K, filed 3/13/18.

But Judge Big Jim is a fair man. “We recognize that petitioner, as a pro se taxpayer, may have difficulty addressing the legal questions that we would like covered by the parties’ supplemental briefs. And the amount at stake does not appear to justify the hiring of private counsel. Petitioner may be able to obtain assistance in preparing his supplemental brief on a pro bono basis from a low income taxpayer clinic (LITC) in his locale.” Order, at p. 5. And he gives Brian H. a list of the local LITCs.

Clearly, the supplemental briefing Judge Big Jim wants is not for amateurs.

To begin with, Brian H. claims he never got the SNOD for the year at issue, but since IRS allows him greater deductions than he claimed and agrees he overpaid, it’s all moot except for Brian H.’s claim he should get a refund. And even though not pled, the issue is deemed tried by consent (Rule 41(b)(1))

Unfortunately, the year at issue was nine years ago.

Notwithstanding anything otherwise or to the contrary contained in the foregoing sentence (as my high-priced colleagues would say), Judge Big Jim delivers himself of the following.

“We view section 6330(d)(1) as the principal (if not sole) basis for our jurisdiction in this case. That section allows us to consider a taxpayer’s appeal of a determination made by the Internal Revenue Service Appeals office. Our authority under that section would thus appear to be limited to matters within the scope of Appeals’ determination. We thus can decline to uphold Appeals’ determination to sustain the NFTL in regard to petitioner’s 2008 taxable year. Whether section 6330(d)(1) allows us to go further and determine that respondent’s Appeals office erred in not ordering a refund to petitioner of any portion of the tax he previously paid for that year may turn on whether Appeals had the authority to take that action. Appeals cannot have erred in failing to do something that it lacked the authority to do. Thus, we expect petitioner to advise us of whether he views our ability to order the refund he seeks as within the jurisdiction granted to us by section 6330(d)(1) and, if so, what analysis or authorities support that view. If respondent’s position is that our jurisdiction under section 6330(d)(1) does not allow us to order the refund of an overpayment because his Appeals office had no authority to do so, we expect him to provide us with relevant documentation regarding the scope of Appeals’ authority.” Order, at pp. 2-3.

Of course Tax Court can order a refund in a deficiency case, if the strictures of Section 6511(a) are met. But this isn’t a deficiency case, and nine years is a wee bit too long for a Section 6511(a) lookback.

“Does petitioner claim that respondent’s issuance of the NFTL, or any other event that occurred as part of this CDP case, suspended the running of the period of limitations provided in section 6511(a)? If so, on what authority does petitioner rely? Alternatively, does petitioner claim that he took action prior to the expiration of the period of limitations to preserve his ability to claim a refund of any overpayment he might have made for 2008? If so, what was that action? If respondent’s issuance of the NFTL did not affect petitioner’s ability to pursue a refund claim that has since become time-barred, he has no apparent grounds for complaint about our inability to entertain a belated refund claim as part of the present case.” Order, at p. 5.

So IRS may have started collection, and put the year at issue in play, but does that toll SOL? What says IRS?

There’s more, but I will let y’all read it.

I can only commend Judge Big Jim for sending Brian H. to a LITC. I doubt Brian H. is prepared to deal with Judge Big Jim’s conundrums on his own.



In Uncategorized on 03/13/2018 at 15:23

It was a truism from the most verdant of my salad days, that upon hearing those words, one should stand up, check equipment, hook up, stand in the jump door and jump. Yelling “Geronimo!” was optional; bailing out was not.

Judge Buch echoes this old chestnut today in Patricia Guzik, Docket No. 26364-16L, filed 3/13/18.

One paragraph from this designated hitter will suffice to prove, once again, the truth of the truism.

“Ms. Guzik had three different attorneys during the 14 or so months that the settlement officer conducted her hearing. At nearly every stage her attorneys requested extensions of time to complete necessary paperwork. Each time the settlement officer granted reasonable extensions. Even with all of those extensions, Ms. Guzik did not submit an installment agreement proposal. The settlement officer cannot be forced to propose a collection alternative for a taxpayer who refuses to do so.” Order, at p. 7.

Guess whom the petitioner will blame. No prize for the correct answer.


In Uncategorized on 03/12/2018 at 17:15

No, this is not a political blog. I’ve said again and again I do not set my toes in the political swamp; anyway, not here.

But The Great Dissenter, s/a/k/a The Great Concurrer, Master Silt-Stirrer and medalist in the Reverse Judicial Backflip event, Judge Mark V. Holmes, refuses to give evidentiary credence to extracts from The New York Times, Chicago Tribune, Los Angeles Times, Washington Post, Time magazine and Vanity Fair.

Moreover, Maltby Capital, Deutsche Bank, Enders Analysis and S&P Global fare no better. Even PricewaterhouseCoopers, that illustrious firm wherein toils that tax guru so dear to my heart, gets short shrift.

Here’s the latest episode of the long-running show starring the late King of Pop, Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor, Docket No. 17152-13, filed 3/12/18, a designated hitter knocking off both the gems of journalism and a bunch of reports (largely anonymous) from distinguished opiners.

“This case was tried at a special session beginning on February 6, 2017, and the posttrial briefing runs into later this year. The parties filed their first stipulation of facts before trial. In it they expressly objected to some exhibits on hearsay grounds. They also reserved the right to object to any exhibit on relevancy and materiality grounds.” Order, at p. 1.

FRE 801(c) and 802 jettison the whole bunch.

“Newspaper and magazine articles are out-of-court statements by their authors and are therefore inadmissible hearsay if offered for the truth of the matters asserted. This is of course also true of articles on the internet. Statements that articles quote are double hearsay; for them to be admissible, a hearsay exception must apply both to the quoted statement and to the article itself, which is a statement by its author.” Order, at p. 2 (Citations omitted, but get them for your next memo of law).

Can’t cross-examine a piece of paper, much less a concatenation of electrons.

As for the financial savants proffered by the co-ex’rs, these are “…the financial prospects of either the music industry as a whole or of certain companies within it…. With the exception of the Deutsche Bank reports, it’s not clear who the actual human authors of the exhibits are. These reports are all out-of-court statements that are hearsay if offered for the truth of the matters asserted, and nothing in the record suggests that any hearsay exception applies.” Order, at p. 2.

If they’re in at all, they’re in only for the fact that someone said something, not that what they said is true or false. What use they are at that point is, of course, another story.


In Uncategorized on 03/09/2018 at 15:47

No, Legislative Backstab

He’s the original Mixmaster when it comes to stirring the silt, the gold medal-winning gymnast of the reverse judicial backflip; he writes like a human being, having broken his habit of dissing the partitive genitive, a feat only equaled by giving up smoking.

It’s Judge Mark V. Holmes, and today he goes hunting a rare ghoul from the Tax Court Graev, the record reopener to let in the Section 6751 Boss Hoss signoff for the Section 6651(f) nonfiling 75% fraud chop.

It’s Randy Jenkins, et al,, Docket No. 28712-11, filed 3/9/18.

Surely all y’all remember impecunious Randy and his als? What, you don’t? Then check out my blogpost “Psst – Y’Wanna Buy a Transcript Cheap?” 1/14/15. Randy is still at it. And so is IRS, moving after a mere 27 months post-trial, to wild card in the Boss Hoss for the Section 6651(f) nonfiling version of the 75% chop about to be laid upon Randy and the als.

Randy ripostes: “Mr. Gentry’s response (1) takes issue with another prior order that granted the Commissioner’s motion to amend his answer to conform his pleadings to the proof, (2) inexplicably denies the Commissioner’s explanation of I.R.C. § 6751(b), (3) argues, without any citations, that the Commissioner is ‘procedurally barred’ from reopening the case to correct any deficiency under I.R.C. § 6751(b), and (4) claims the District Court’s criminal-forfeiture order was excessive. He notably does not argue that the Commissioner made a mistake when he said in his motion that the Gentrys did not object. There just isn’t enough here for us to reconsider our order.” Order, at p. 1, footnote 1.

Rule 60(b) gives the menu for setting aside orders: “mistake, inadvertence, surprise, or excusable neglect; newly discovered evidence; fraud; or any other reason that justifies relief.” Order, at p. 2.

The key is whether letting in the Boss Hoss changes the outcome of the case. And thereby hangs the tale.

Another monument of unaging Congressional intellect is putting the 75% fraud chop in Section 6651, albeit near the tail of the procession, the overwhelming majority of which deals with electronically-calculated stuff and pure arithmetic. And then having Section 6751(b)(2)(A) knock out the Boss Hoss altogether for anything in Section 6651, including but without in any way, directly or by implication, construction, canon or rule, limiting (as my high-priced colleagues would say) the Section 6651(f) fraud chop.

Judge Holmes notes the obvious: “We can certainly imagine a scenario where the 75% maximum penalty of I.R.C. § 6651(f) might be used as a bargaining chip to extract a taxpayer concession — most taxpayers likely favor the 25% maximum penalty under I.R.C. § 6651(a) or, even better, no penalty at all. But the plain language of I.R.C. § 6751 is what it is, we have an opinion on point, and we will follow it here.” Order, at p. 3.

The “opinion on point” is Beam, 2017 T. C. Memo. 200, filed 10/10/17, which I didn’t blog because it was CDP where Beam was trying to contest liability but blew his chance to petition the SNODs. Judge Lauber dealt with the Section 6651(f) vs Section 6751(b)(2)(A) issue with a throwaway.

“The IRS in the notice of deficiency determined and assessed ‘additions to tax’ under sections 6651(a)(2) and (f) and 6654(a).  Section 6751(b) by its terms does not apply to ‘any addition to tax under section 6651, 6654, or 6655.’  Sec. 6751(b)(2)(A).  The SO therefore was not required to verify that the additions to tax assessed against petitioner had been approved by a supervisor.  See Mohamed v. Commissioner, T.C. Memo. 2013-255 (distinguishing the fraudulent failure-to-file addition to tax under section 6651(f) from a section 6663 civil fraud penalty).” 2013 T. C. Memo. 200, at p. 14.

OK, but in Mohamed (and, mea culpa, I didn’t blog that one either) Judge Halpern, no fan of fraudsters, let off Mohamed, an admittedly bad dude, on the Section 6651(f) but nailed him for Section 6663. And Judge Halpern waxed lyrical about the Rule of Lenity. “Nevertheless, notwithstanding that lack of universal approval, since section 6651(f) imposes an addition to tax (indeed, the addition to tax is described in the heading to subsection (f) as an ‘[i]ncrease in penalty’), any ambiguity in its application is resolved by the rule of lenity.” 2013 T. C. Memo. 200, at p. 25-26.

But Judge Holmes lets the IRS RO whack the non-filing taxpayer with the 75% chop to exact a settlement, with the Boss Hoss totally out of the play, even though the IRM pt. (Mar. 27, 2017), quoted by Judge Holmes at p. 2 of the order, tells IRS to get the Boss Hoss signoff in a Section 6651(f).

So there’s no need for a reopener. The Boss Hoss doesn’t change the outcome for Randy and the als, because IRS don’t need no stinkin’ Section 6751 Boss Hoss signoff when Section 6651(f) is in play, notwithstanding the inherent unfairness of this bludgeon-wielding result.

This is an ambush. I should have weighed in before now, but this is still an ambush, however bad actors Randy and the als might be.

Edited to add: Of course, if IRS had gotten the Boss Hoss timely, it doesn’t help Randy and the als. If the outcome would change, all Judge Holmes has to do is let in the Boss Hoss, and Randy and the als lose anyway. But how prescient of IRS to get it two years before the IRM required it, and after Mohamed said they don’t need it.



In Uncategorized on 03/08/2018 at 18:03

Judge Wherry’s retirement back in January brought a wistful smile to many of us. Despite the shellacking he got from Judge Posner of 7 Cir, his good humor and archetypical judicial demeanor were much appreciated. See my blogpost “Goodbye to Whimsey,” 1/7/18.

But Mr. Rogers’ neighborhood (not that of the late and much-lamented Mr. Fred Rogers, rather the DADs of dodgemeister John E. Rogers), the source of Judge Posner’s ire, is without a judicial presence, so Jetstream, Warwick, Sugarloaf, and the rest wind up on Judge Goeke’s plate.

Good luck and good hunting.


In Uncategorized on 03/08/2018 at 17:25

No, this is definitely not a theological treatise; such exalted matters are far above my paygrade.

Rather, STJ Diana L. (“The Taxpayer’s Friend”) Leyden sends IRS off to trial, as she can’t figure out whether George Luniw, Docket No. 17789-16SL, filed 3/8/18, sent in one or three frivolous returns during his protracted epistolary rally with IRS.

George tried the “all zeros” plus Form 4852 dodge (to try to knock out the W-2s) for the year at issue. IRS gets partial summary J on Appeals’ denial of CNC, as George gave them no Form 433-A. His beef as to a NFTL gets bounced for lack of jurisdiction, as George’s Letter 12153 was five (count ’em, five) months late.

The 1040s were all for the same year, bore the same date, and manifested the same all-zeros frivolity. IRS put different date stamps on all, but the meanings thereof are obscure, says STJ Di.

George sent the return (or returns) in seriatim during the rally aforesaid, so IRS asked for three (count ‘em, three) Section 6702 $5K frivolity chops.

Nope, says STJ Di in this designated hitter.

So, is it one three times or three one time each?



In Uncategorized on 03/08/2018 at 16:38

Since settling up with IRS after the lackluster performance of their previous attorney (as to which see my blogpost “Straighten Up and Fly Right,” 8/8/13), Farrokh E. Pourmirzaie and Minoo S. Pourmirzaie, 2018 T. C. Memo. 26, filed 3/8/18 (a day of great significance in our house) are back again, this time with new counsel, but they don’t do a lot better.

Minoo is claiming Section 469(c)(7) real estate pro status, but her calendars of hours spent is the usual prepared-during-audit and her testimony doesn’t help her cause.

“Her husband, she testified, was a workaholic.  Nevertheless, she proposes that we find that she, herself, spent 15 to 20 hours a week at the San Jose property carrying out management tasks.  If we add to her suggested totals the 14 hours a week that her husband was at the San Jose property performing management tasks, then we have the couple spending 29 to 34 hours a week managing a four-unit residential apartment building at which they neither kept an office nor stored any tools. Simply stated, we do not believe it.” 2018 T. C. Memo. 26, at pp. 14-15.

Judge Halpern does a mix-and-match, and comes up with 416 hours for Minoo for each audit year, well short of the 750 cut.

And Judge Halpern hands Minoo a five-and-ten chop as well for substantial understatement.

A tough day for the bullpen.


In Uncategorized on 03/07/2018 at 16:44

I got a request from some online service, of which I had never heard, to provide “expert analysis.” The gist of my reply follows. I hope it explains this site.

I mostly cover US Tax Court. I don’t write “expert analysis.” I write tips and hacks for the in-the-trenches controversialists, and the preparers and advisers, who haven’t time to read law review articles. If I go over five hundred words in any blogpost, quoted matter included, I’ve failed. I take my text from Habakkuk 2:2: “Write the vision, and make it plain upon tables, that he may run that readeth it.”

If you want fast and simple, I’m your man. If you’re looking for law review, in the immortal words of Nobel Laureate Robert Alan Zimmerman, “it ain’t me, babe.”