Archive for May, 2018|Monthly archive page


In Uncategorized on 05/11/2018 at 15:21

Today’s practice tip from Ch J L Paige (“Iron Fist”) Marvel involves neither politics nor history. But as the stipulated decision is a hardy perennial in the Tax Court garden, it behooves the practitioner to know how to deal with the odd erroneous stipdec.

Here’s Harold D. Rawlings & Ulrica A. Rawlings, Docket No. 12184-17, filed 5/11/18.

The end of last month IRS and counsel for Harold & Ulrica stiped out the case. Lo and behold, the numbers were wrong.

What to do?

IRS goes to a Rule 162 revisor, to which counsel for Harold & Ulrica doesn’t object. Revise the stipdec to correct the numbers, and enter accordingly.

Nope, says Ch J Iron Fist.

“…a motion for the Court to revise a stipulated decision pursuant to Rule 162 is procedurally improper. Accordingly, the Court will deny respondent’s motion. At this juncture, however, the Court will permit respondent to file an appropriate motion to vacate the stipulated decision, pursuant to Rule 162, and submit a revised stipulated decision executed by the parties.” Order, at p. 1.

Presumably they’ll get the numbers right this time.

But practitioner, remember. Vacation beats revision when your stipdec gets it wrong.


In Uncategorized on 05/10/2018 at 20:55, the host of this my blog, tells me that, as at this writing, I have made 2,392 posts, which have received 130,027 views from 53,170 visitors, over the last seven (count ‘em) seven years or so that this my blog has been up and running.

Until now, none of my posts has gone unread.

But here’s the one exception, that brings to mind Paul Simon’s magnum opus, which gives me the title for this little essay.

“Knowledge, Skill, Experience, Education or Training,” 5/9/18, received no views. Not one.



In Uncategorized on 05/10/2018 at 16:55

Mica Ringo is back, again posing conundra for IRS and Tax Court, in Docket No. 29562-12W, filed 5/10/18.

If you’ve forgotten Mica, check out my blogpost “A Hotly Burning Question What Has Swept the Continent – Redivivus,” 7/28/17. Mica features therein, and the questions posed then reverberate now.

Mica and IRS made a joint motion to remand this whistleblower case to Appeals, and IRS files a motion for leave to file a supplement to the joint motion, and the First Supplement.

“Foot fault!” shout my hip readers. “You file your motion for leave, and lodge, not file, your supplement.” Remember, in Tax Court, it’s “mother, may I?”

Ch J L Paige (“Iron Fist”) Marvel jumps on the point, of course, and so gently chides IRS. “Because a motion for leave should be resolved prior to the filing of the supplement, the First Supplement to Motion To Remand should have been lodged rather than filed.” Order, at p. 1.

I bet Ch J Iron Fist can’t wait for the salute-and-march-off at the change of command ceremony at the end of this month, when Ch J-elect Maurice B (“Mighty Mo”) Foley steps forward to play “Mother, may I?”

But there’s a twist.

Mica’s cool with the motion for leave to file the supp, but changed his mind as to the remand.

Lots of good tactical theory here. If the supp helps Mica, let it come in, and let Ch J Iron Fist or her designate decide the case on the present record plus the supp, without the further delay of sending everybody back to Appeals.

Check out Judge Albert G (“Scholar Al”) Lauber’s take in my abovecited blogpost.

On the other hand, if the supp helps Mica, but if IRS needs to refurbish, reconstitute and reupholster the administrative record to keep the supp from sinking them, why give IRS a second swing at the baseball?

And the question of a motion to remand in a whistleblower case is not finally determined. All those I know of were joint motions, so no need for a judge to look behind.

But here one party, having consented, now reneges. Sounds like something ripped from the headlines, huh? Sorry, this is a non-political blog.

So Ch J Iron Fist denies the motion for leave, strikes the supp, and tells the parties to show cause why the joint motion should not be stricken from the record.

Depending upon how Mica and IRS come back, Ch J Iron Fist will let the parties each file what motion they like.

But why show cause why the motion should not be stricken from the record, and not just denied?



In Uncategorized on 05/10/2018 at 15:12

In baseball hagiography, the line-up of the 1927 New York Yankees was so-called, although I am told the term originated with the 1918 Boston Red Sox; Babe Ruth was on both teams. ‘Nuff said.

In Tax Court lore, murderers’ row denotes those seventeen or eighteen pages of questions (the number of pages governed by the sadism of the preparers thereof) on the Admission to Practice for Non-Attorneys examination.

This year’s slaughter of the innocents will take place at quarter-past-noon on Thursday, November 8, 2018.

Get those applications in, ladies and gentlemen. You have nothing to lose but your minds.

Here’s the blurb with the skinny:



In Uncategorized on 05/09/2018 at 13:52

Surely one possessed of one or more of the attributes listed at the head hereof, and listed in FRE 702(a), can definitively lift the burden from CSTJ Lewis (“The Name of Names”) Carluzzo, which IRS and petitioner have laid upon his shoulders in 130 Ionia, LLC, Andrew T. Winkel Trust U/A/D January 30, 2008, Tax Matters Partner, Docket No. 4901-16, filed 5/9/18.

CSTJ Lew: “As characterized by petitioner, the “question is simple; is * * * [the property] listed in the National Register”. The question might be simple to a person with “knowledge, skill, experience, training, or education”, see Fed. R. Evid. 702, with respect to the National Register, but the question is not so simple to allow for a finding based upon judicial notice, see Fed. R. Evid. 201. In the absence of a stipulation, expert opinion might be necessary to resolve the dispute between the parties on the point. So far, neither party has submitted anything that would qualify as such that would conclusively answer the question.” Order, at p. 1.

Well, CSTJ Lew, if the property isn’t so listed, petitioner loses, so don’t wager the ranch that petitioner stipulates to that. And if IRS does so stipulate, they have to try the case rather than win a quick summary J, so that ain’t in the cards neither.

This is obviously another historic easement jumpball, with Section 170(h)(4)(C)(i) front-and-center.

So CSTJ Lew denies IRS “partial” summary J.

I don’t see how it’s “partial” if granting the motion nonsuits the Ionians.

So send in the dudes with knowledge, skill, experience, training or education. Or all thereof. Looks like CSTJ Lew might need it.

Note to my practitioner readers: Finding the answer from one’s desktop isn’t as easy as it looks. The National Parks Service website has some links one might search, but to my aging eyes these look a wee bit less than slam-dunk certain.



In Uncategorized on 05/09/2018 at 10:19



In Uncategorized on 05/08/2018 at 22:32

The old Philo 101 legend went like this. Bertrand Russell and Alfred North Whitehead were writing their three-volume mathematics text, and the story was logic. Everything was logical. Russell told Whitehead, “It’s all about logic, Alfie. Grant me that two plus two equals five, and I’ll prove to you I’m the King of England.”

Well, today we see that if you stipulate to what isn’t, Bertie may have gotten it right.

Here’s Vincent C. Hamilton and Stephanie Hamilton, 2018 T. C. Memo. 62, filed 5/8/18. They stipulate that, if they were insolvent because son Andy’s bank account shouldn’t be counted as theirs, the $158K forgiveness of the student loan they took out for son Andy was not taxable per Section 108(a)(1)(B). IRS agrees.

Vince and Steph were off the cliché on the loan because Vince hurt his back and was therefore disabled. Vince couldn’t work. But during the year at issue, “…Mr. Hamilton received a $308,105 nontaxable cash distribution relating to his 14.4% interest in a limited liability company.” 2018 T. C. Memo. 62, at p. 2.

Of course, we don’t know what other debts Vince and Steph may have had, and whether any thereof was discharged, on the magic date, the date immediately prior to the date of the forgiveness of the student loan debt.

But Steph, concerned that Vince was spending a wee bit too freely, transferred $323K to Andy’s savings account. Andy gave Steph the magic info so she could tap in periodically for household expenses on-line. What part of the $323K Andy kept is nowhere set forth.

Vince’s and Steph’s CPA said they were insolvent, and prepared their return for the year at issue, which they filed almost two years late.

My hip readers already shouted “Section 6651(a) chop!”

Here’s Ch J-elect Maurice B (“Mighty Mo”) Foley.

“The parties’ stipulations reflect that although the transferred funds were placed in Andrew’s savings account, Mrs. Hamilton was able to freely transfer funds to petitioners’ joint account to pay household bills (i.e., she exercised dominion and control). There is no evidence that Andrew paid any consideration for the funds transferred to his savings account, or that the funds were transferred in anticipation of a lawsuit or a liability. There is, however, sufficient evidence to establish that a close relationship existed between petitioners and their son Andrew, and that petitioners continued to enjoy the benefits of the funds they transferred to Andrew’s savings account. In short, petitioners have failed to establish that Andrew was not their nominee. See Rule 142(a).” 2018 T. C. Memo. 62, at pp. 5-6.

Vince and Steph were therefore in the black to the tune of $60K, so the forgiveness is taxable, and they get the Section 6651(a) late-filing chop at no extra charge. Vince and Steph had no reasonable cause for the delay.

My hip readers aforesaid have doubtless wondered if the CPA aforesaid got Vince and Steph out from under the Section 6662 negligence-accuracy chops.

Nope. IRS dug its own Graev (sorry, guys) when they failed to come up with the Section 6751(b) Boss Hoss sign-off.

Be careful of those major premises.


In Uncategorized on 05/07/2018 at 17:44

IRS did win the Boss Hoss TEFRA throwdown.  But when the remainder of Dynamo Holdings Limited Partnership, Dynamo, GP, Inc., Tax Matters Partner, 2018 T. C. Memo. 61, filed 5/7/18, came around, IRS was only able to win the undervalued transfers among related parties.

True, there were big bucks involved, heavy-duty chops and withholding penalties (FIRPTA style), and IRS’ experts prevailed on the low-ball numbers.

But Dynamo, and its buddy Beekman, proved their somewhat unorthodox loan system did create real indebtedness, which was accounted for and paid off. Of course, IRS had no one to challenge Dynamo’s ace CPA, who spent “…thousands of hours analyzing the financial records of Dynamo and Beekman and selected records of Canada Square, each of which maintained separate books.  He prepared schedules of all the transactions recorded by Dynamo and Beekman from 2005 to 2011.” 2018 T. C. Memo. 61, at pp. 14-15.

And when it came to whether a commercial lender would have lent to Dynamo, once again Israel (“Bring Home the Bacon”) Shaked, the hero of my blogpost “The Scottish Play,” 6/19/12, works his magic. Of course, IRS’ expert would better have stayed home. He employed some method known as the KMV-Merton model.

“The KMV-Merton model increases the probability of default over time.  The Court questioned Mr. L on the nature of this assumption in his report.  The Court asked Mr. L whether over a 10-year period, where each year the company had a 2% chance of default, the company would have a 20% chance of default.  Mr. Lucas said that it would.  Yet when the Court asked Mr. L:  ‘If I were to flip a coin twice, do I have a 100 percent chance of getting heads in one of those two flips?’, Mr. L replied ‘No’ and then added that “I may have misresponded to the additive nature of the probability of default’.  Mr. L’s original report was riddled with errors, and his testimony indicated a lack of familiarity with  probabilities, the very subject about which he testified.  After corrections for errors, Mr. L’s report largely supported  petitioners’ position that Dynamo would have been able to borrow from a third party lender.” 2018 T. C. Memo. 61, at pp. 21-22 (Name omitted).

I suppose we taxpayers paid for this dude’s opinion.

Gwen Kestin is back. You remember Gwen from my blogpost “Gustafson on Evidence,” 2/1/18.

Well, IRS gets summary J that Gwen’s amended return was frivolous. But IRS seemed to think when Gwen sent them a photocopy of her frivolous 1040X in response to the Letter 3176 that IRS sent her, that was frivolous return number 2, so IRS zonked Gwen with a second $5K chop. And the chops kept on coming as Gwen and IRS ping-ponged her forms, until Gwen is up to $35K and counting.

So how many chops are on the table?

Ex-PFC Wintergreen, where are you now that we need you?

By the way, the Boss Hoss sign-offs aren’t clear on the Form 8278. But maybe the “presumption of regularity” would solve the problem. So let the parties brief that one.



In Uncategorized on 05/07/2018 at 16:18

A Graev Production

No, Larry and Lorna haven’t gone into the movie business, but their collapsed façade has been a gift to the hard-laboring blogger.

And now Judge Buch has the answer to a question that has evoked Graev doubts. Has IRS the burden of production of the Section 6751 Boss Hoss sign-off at a FPAA partnership-level throwdown?

After all, the magic language in Section 7491(c), whereby hangs the cliché in all burden-of-prod chop cases is “…with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title.” (Emphasis added).

So our old friends Beekman (a C Corp) and Dynamo (a partnership) should’a raised the issue in their petitions as an affirmative defense. They didn’t. Of course, their trial was early last year, before the Great Boss Hoss kerfuffle, which I’ve blogged hither and yon.

Beekman and Dynamo were fuel for the discovery wonks’ campfire in my earlier blogposts, but here it’s the penalties. Judge Buch leaves the undervaluation of the properties exchanged between them for another opinion.

This is a full-dress T. C., Dynamo Holdings Limited Partnership, Dynamo, GP, Inc., Tax Matters Partner, 150 T. C. 10, filed 5/7/18.

IRS wants a reopener; this is SOP post-Graev for pre-Graev trials. IRS flourishes various documents allegedly signed by one or another Boss Hoss who oversaw the labors of the RAs who chopped Dynamo and Beekman. Dynamo and Beekman say these guys weren’t the true Boss Hosses.

First as to the reopener IRS wants.

Judge Buch: “If we conclude that granting a motion to reopen the record would not affect the outcome of the cases, the motion should be denied.  Granting such a motion would be a meaningless gesture if it would not affect the outcome, and it would be a waste of judicial resources.” 150 T. C. 10, at p. 11.

So do the penalties or additions at issue meet the Boss Hoss test?

Judge Buch: “The notice of deficiency issued to Beekman Vista determined for each year an addition to tax under section 6651(a) for failure to file and a penalty under section 6656 for failure to make deposits.  The FPAA issued with respect to Dynamo determined the applicability of an accuracy-related penalty under section 6662(a).  Additions to tax under section 6651 are not subject to the supervisory approval requirement of section 6751.  See sec. 6751(b)(2)(A).  Accordingly, whether there was supervisory approval for the section 6651(a) addition to tax is not an issue we need to consider.” 150 T. C. 10, at pp. 11-12.

Late filing and late paying aren’t judgment calls. Either you did file and pay, or you didn’t. And in any case, the good faith defense is yours.

OK, so now the big question, where we have six (count ‘em, six) lawyers for Dynamo and Beekman, and five (count ‘em, five) lawyers for IRS: does a partnership get the Section 7491(c) ticket to the Section 6751(b) Boss Hoss production?

Beekman is the low-hanging cliché. Tax Court ruled twelve years ago that a corporation isn’t an individual, whatever the Supremes may say about a corporation’s religious views or right to free speech.

So what about Dynamo?

Well, in some cases Tax Court just assumed IRS had met the burden. Sometimes Tax Court didn’t have to decide, because IRS had met the burden and nobody claimed otherwise. But for Dynamo the evidence is apparently inconclusive that IRS met the burden (if it has the burden to begin with).

Judge Buch trudges through the TEFRA mire, and indulges in the obligatory dictionary-chaw.

“Not only do partnership-level proceedings not determine liabilities, but they also are not proceedings with respect to individuals.  See sec. 7491(c).  Partnerships themselves are not individuals.  Sec. 761(a).  The term ‘individual’ is not explicitly defined in the Code.  When a term is not defined, we give it its ordinary meaning.  Black’s Law Dictionary 892 (10th ed. 2014) defines the word ‘individual’ as ‘1. Existing as an indivisible entity. 2. Of, relating to, or involving a single person or thing, as opposed to a group.’ Merriam-Webster’s Collegiate Dictionary 593 (10th ed. 1996) defines ‘individual’ as ‘a particular being or thing as distinguished from a class, species, or collection: [such] as * * * a single human being’.  The ‘single human being’ definition is consistent with the Code.  Section 7701(a)(1) defines a person as ‘an individual, a trust, estate, partnership, association, company or corporation’, making clear that an individual is distinct from any of the other entities on the list.” 150 T. C. 10, at p. 17. (Citations omitted).

And Section 7491(a)(2)(c) deals with the burden in the partnership setting, while Section 7491(c) deals with individuals. But in both cases, the focus is on the proceeding.

Finally, Judge Buch puts down the dictionary and turns to the world as it is.

“The practical effect of applying section 7491(c) in a partnership-level proceeding would be to require the Commissioner and the Court to identify the ultimate taxpaying partners of a partnership to determine who bears the burden of production as to penalties.  In cases with tiered partnership structures the Commissioner and the Court would spend time and resources to identify the ultimate taxpaying partners, something the TEFRA notice provisions are designed to avoid.  See sec. 6223(c).  And in a partnership in which one of the ultimate taxpaying partners is a corporation and another is an individual, the Commissioner would bear the burden of production as to one partner but not the other.  As applied in cases like these, the Court might need to render separate holdings if the Commissioner did not have the burden of production as to one partner but had the burden of production (and failed to meet it) as to another partner.” 150 T. C. 10, at pp. 20-21.

Reopener would change nothing. Beekman never had the right to a Boss Hoss, and Dynamo isn’t an individual.

Now with TEFRA gone, where are we?



In Uncategorized on 05/04/2018 at 16:02

Judge Holmes reiterates the wisdom of that great American C. D. Stengel that heads this blogpost in a bunch of designated hitters. I’ll choose Frank W. Dollarhide & Michelle D. Dollarhide, et al., Docket No. 23113-12, filed 5/4/18.

The Dollarhides lost late last year, and decision was entered. And they’re not disputing those numbers.

But the Rule 162 vacation they want is based on some overpayments they claim from 2006, although they didn’t file their 2006 return, wherein they claimed said overpayments, until 2011.

Section 6511(b)(2) says three (count ‘em, three) years for refund claim from date of filing return.

“The Dollarhides claim, however, that they never would have agreed to the stipulation of settled issues if they knew they weren’t going to get that refund. Is that enough?” Order, at p. 2.

Well, let’s see.

“In ruling on Rule 162 motions, we look to Federal Rule of Civil Procedure 60. FRCP Rule 60(b) is the rule that’s applicable here, and the Dollarhides point us to FRCP 60(b)(3) which requires a showing of ‘fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party.’ The fraud or other misconduct that the Dollarhides argue the Commissioner engaged in is not telling them about the legal requirement that they had only three years from the due date of their 2006 tax return to file a claim for refund of any overpayment.” Order, at p. 2 (Citation omitted).

Well, that’s a nonstarter.

As set forth at the head hereof, “you could look it up.” The IRC says what it says. And the text is available in many places for free.

Second, “The Dollarhides do also complain that the only reason that they didn’t file their 2006 tax return within three years of its due date is that the revenue agent examining that year insisted that they submit it to her. The records that they attach to their motion, however, do not show that there was even an ongoing audit of this year for themselves as individuals (in contrast to their corporation, Dollarhide Enterprises, Inc.) within three years of that return’s due date.” Order, at pp. 2-3.

Finally, when the Dollarhides petitioned, they never mentioned the refund, so when the stip of settled issues said it resolved the issues in their case the stip was correct, as the refund question was not on the table at that time.

No vacation.