In Uncategorized on 07/16/2018 at 20:39

Or, Never Time to Do It Right

Word-processing software is the boon and bane of our existence. I was talking to a colleague over coffee yesterday, and we were discussing the demise of the legal secretary, now that we all have computers and files of documents from which to cut, paste, extrapolate, interpolate and obfuscate on every topic that may possibly swim into our working-day ken.

So speed beats care, and there’s never time enough to do it right, but always time to do it over. Except even then we are the prisoners of our electrons.

Today Judge Cohen shows no patience with an IRS attorney who grinds out the pretrial memo and opening brief, and then changes his story on reply brief, in Darrell Archer, 2018 T. C. Memo. 111, filed 7/16/18.

I can sympathize with the IRS attorney. What Darrell lacks in substantiation he doesn’t make up for in testimony, so most of his deductions go the way of all clichés.

Darrell, like so many of the unsubstantiated, owns and operates rental real estate. I expect the IRS attorney thought this was a throwaway, and went for the first boilerplate paragraphs he could find.

It proved an impediment.

“Respondent argues in his pretrial memorandum and in his opening brief that petitioner is not entitled to deduct the rental losses … to the extent they exceed $25,000 because of the passive activity limitations of section 469. See sec. 469(i). Nothing in the record, however, suggests that the loss deductions claimed exceeded $25,000, or that any overall limitation was the reason for disallowance. We see no reason, therefore, to discuss further the complex provisions of section 469. We interpret respondent’s arguments as a concession as to any substantiated expenses totaling less than $25,000.” 2018 T. C. Memo.111, at pp. 12-13.

Might have done better to forego the passive losses and stayed with the non-substantiation. But the attempted goal-line save is even worse.

“In his reply brief respondent argues that petitioner failed to substantiate his rental losses and seeks to impose additional obligations on petitioner not addressed in respondent’s pretrial memorandum, at trial, or on opening brief. We disregard those belated contentions.” 2018 T. C. Memo. 111, at p. 13.

So Judge Cohen hands Darrell $5K in real estate losses, based on Cohan and Darrell’s testimony that otherwise flunks the other tests.

“His testimony and his brief emphasize his subjective belief that ‘every deduction that I made I believed to be an absolute legitimate deduction. A deduction that I deserved and should take’. Such testimony does not carry his burden.” 2018 T. C. Memo. 111, at p. 9.

Boilerplate is indeed a hazardous substance.



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