Two venerable veterans furnish materials for designated hitters today, and since they churned up good blogfodder I’m sorry to see them go.

First up, Judge David Gustafson goes beyond vacating his own decisions. While denying vacation to Douglas Stauffer Bell & Nancy Clark Bell, Docket No. 1973-10L, filed 8/15/18, he does give Nancy Bell a hint about when to appeal.

This, even though Doug & Nancy Bell never cooperated with IRS to prepare for trial, despite Judge David Gustafson’s almost-paternal directions on numerous occasions. After Judge Gustafson entered decision in June, after Doug & Nancy Bell ignored Judge Gustafson’s OSC, on the date set for the non-trial, Nancy Bell walks into court with some papers.

“On the morning of August 6, 2018, the date that the Bells’ now-closed case had been calendared for trial, and a month after the Court had entered its Order and Decision, Ms. Bell appeared in the courtroom in Winston-Salem, where another trial was ongoing. The Commissioner’s attorney assigned to this case was absent from the courtroom (appropriately, since decision had been entered in the case), was at her work station 30 miles away in Greensboro, North Carolina, and immediately drove to Winston-Salem to appear in this case. During a break in the proceedings in the other case, the Court called the Bells’ case and heard from Ms. Bell. She stated that she wanted to have her trial and that she had documents with her–documents, however, that she had not previously identified or exchanged with her opponent. Ms. Bell made comments that we construe as petitioners’ oral motion for reconsideration and their oral motion to vacate the Court’s Order and Decision entered on July 5, 2018.” Order, at p. 3.

Turns out August 6 was the last day a Rule 162 vacation motion could be made. So Judge Gustafson asked Nancy Bell why she sat out the last eight (count ‘em, eight) years. But she only wanted to go to trial with these unexchanged documents.

Nancy Bell gets tossed, of course. But Judge Gustafson takes his text from a much more exalted authority who said something about forgiving seventy times seven times.

“At the August 6 hearing, Ms. Bell asked questions about appealing this Court’s decision. It is not our place to advise her. However, we note the following truisms: The period for filing an appeal in this case is ‘90 days after the decision of the Tax Court is entered.’ I.R.C. section 7483; see also Tax Court Rule 190(a). Decision was entered July 5, 2018 (see Doc. 72), and the 90-day period would expire October 3, 2018. However, Rule 13(a)(1)(B) of the Federal Rules of Appellate Procedure provides: ‘If, under Tax Court rules, a party makes a timely motion to vacate or revise the Tax Court’s decision, the time to file a notice of appeal runs from the entry of the order disposing of the motion”–i.e., from the date of this order. By so stating, we do not imply that such an appeal would have any merit.” Order, at p. 4.

And not a single Section 6673 chop in sight. IRS’ counsel is almost as obliging as Judge David Gustafson.

In the nightcap of this doubleheader, there comes to the mound Judge Mark V Holmes. And he throws smoke at IRS in Renka, Inc., Docket No. 15998-11R, filed 8/15/18. And the smoke is labeled Chenery.

I missed the argument of a previous IRS try at summary J. And the Renka team never raised Chenery back then. See my blogpost “Chen-Chenery,” 8/21/14.

For those who tuned in late, the Chenery doctrine states that when an administrative agency’s actions are under review, the actions stand or fall based on what evidence the agency had and what explanation they gave for their decision, not what they might have decided or what they came up with later. In other words, no could’a would’a should’a.

But does the Chenery doctrine apply in ESOP cases? You betcha, because the parties agree and so does Judge Holmes. This is a new day, and the old question raised back in 2014 about applying Chenery to ESOPs is answered with a thwacking great affirmatory, good buddy.

So IRS is thoroughly trounced. They relied on the 1998 status of the Renka ESOP to disqualify the plan, but the 1998 facts showed the plan was qualified. That it might have been disqualified later is nothing to the point. IRS relied on 1998; IRS is stuck with 1998.

Beside, correctly disqualified plans can’t subsequently migrate to qualified status; so a correctly qualified plan doesn’t migrate to disqualification.

Maybe IRS can try again, but there’s a bunch of closed years in between.

“Next the Commissioner suggests we should ignore the letter’s details and consider instead its ‘independent gravamen’ (emphasis in original). Unsurprisingly, he doesn’t cite any authority that says we can decide whether a final agency determination was an abuse of discretion by considering only the determination’s gravamen. It’s true that we can ‘uphold * * * [an administrative agency’s] decision of less than ideal clarity if the agency’s path may reasonably be discerned,’ Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974), but the reasoning in the Commissioner’s letter here isn’t ambiguous — it’s just wrong.” Order, at p. 2.

There’s much discussion about “management” in an affiliated service group; see Section 414, if you suffer from terminal insomnia. But Renka didn’t manage, they did the job; they weren’t even a player-coach, they were players. And IRS’ only argument is a proposed regulation they later withdrew. Proposed regulations are just argument. And an argument based on an argument is nothing.

Renka wins.

But He Is

Amas Canzoni, 2018 T. C. Memo. 130, filed 8/15/18, jogged my memory. He featured all the way back in August, 2016 in my blogpost “Indians Not Taxed – Part Deux,” 8/25/16.

As I said then, Judge Kerrigan missed the chance to declare that, whether or not the Indians are taxed, Amas is.

But she got a second chance, and missed it.

Amas filed chapter as soon as Judge Kerrigan entered her decision, which whanged Amas’ pate for the tax he never paid. So Judge Kerrigan vacated her decision in deference to 11USC§362(a)(8), and waited on Bankruptcy Court (WDWA) to adjudicate Amas.

USBCWDWA took its time, but eventually tossed Amas, undischarged, in May, so IRS got an OSC why Amas’ pate shouldn’t be rewhanged.

Amas responded, but what he had to say is buried in the Glasshouse files, because Judge Kerrigan reissues the 2016 T. C. Memo. (No. 165) in idem verba, as my scholarly colleagues like Peter Reilly, CPA would say.

Amas is taxed. Again.

I’ve called STJ Robert N. Armen “The Judge With a Heart,” as he let off the truly repentant. But today his designated hitter Marshall M. Goldstein, Docket No. 361-18W, filed 8/14/18, has no room for heart, as Appeals bounced Tax Exempt/Government Entities’ proposed 30-day letter for fear of litigation.

No proceeds, no whistleblower award.

Marshall wanted discovery, specifically the entire Appeals Transmittal and Case Memo that bounced TEGE, unredacted.

“Thus, on the Schedule of Adjustments that is a part of the Appeals Transmittal And Case Memo the description of the adjustments examined for 2013 and 2014 has been redacted, although the dollar amounts of TEGE’s adjustments and changes made by the Office of Appeals are not redacted. But of much greater concern to petitioner is the fact that most of the portion of that document that was authored by the Appeals officer, i.e., the Appeals Case Memorandum, is redacted. Thus, all of the section entitled ‘BRIEF BACKGROUND’ is redacted, as is the portion under ‘DISCUSSION AND ANALYSIS’ that is devoted to ‘Exam’s Position’. Although most of the portion under ‘DISCUSSION AND ANALYSIS’ that is devoted to ‘Law and Legal Analysis’ is not redacted, a substantial portion is. Further, most of the portion under ‘MY EVALUATION’ is redacted, as is most of the portion under the introductory heading ‘SUMMARY AND RECOMMENDATION’.” Order, at p. 5.

IRS wants to bounce Marshall’s petition for failure to state a claim. No money means no claim.

STJ Armen comes to the point fast. “The Court’s jurisdiction does not contemplate review of the Commissioner’s determination of the alleged tax liability to which the claim pertains.” Order, at p. 5 (Citation omitted).

“Petitioner contends that respondent may be hiding information and that the production of certain documents, specifically an unredacted copy of the Appeals Transmittal And Case Memorandum, would ‘provide transparency’ as to whether there was ‘no collection’ of proceeds.” Order, at p. 6.

Now discovery has been granted in the past, but then in cases where there were collected proceeds. The question was, to what extent did the information those petitioners furnished result in collecting those proceeds.

But here there were no proceeds. And therefore, whatever the reason Appeals chickened out, it avails Marshall not.

But tomorrow is another day. “Petitioner also argues that discovery is warranted because the information he provided may possibly lead to, somehow or sometime in the future, collected proceeds. Such argument strikes the Court as too speculative to warrant the granting of petitioner’s motion. Nor will the Court presume that the redaction of the Appeals Transmittal And Case Memo represents anything other than respondent’s good faith effort to comply with his view regarding limitations affecting the disclosure of confidential taxpayer returns and return information as prescribed by section 6103(h)(4).” Order, at p. 7.

In a manner worthy of Lord Tennyson, STJ Armen concludes “Whether the concession by the Office of Appeals was warranted is not a matter over which the Court has jurisdiction in this whistleblower case. In short, it is enough to know that the Office of Appeals fully conceded the case and then closed it; why it did so is not properly a subject for inquiry.” Order, at p. 7. (Citation omitted).

 Ours not to reason why. Once again, what happens before matters not. Greenberg’s Express rolls on.

Tax Court once again manifests its user-friendly side; Judge David Gustafson is even more obliging, and Ch J Maurice B (“Mighty Mo”) Foley is giving a couple nonpayor-nonjurors (hi, Judge Holmes) a second chance.

For the latter, see, e.g., as my already-on-their-second-Grey-Goose-Gibson colleagues say, Alicia Tisdale & Roland Tisdale, Docket No. 10833-18S, filed 8/13/18.

For Judge Gustafson’s latest, see Michael Paul Snoonian, 2381-17, filed 8/13/18.

Judge Gustafson warned Mike back in June that he needed to “…cooperate and communicate with his opponent (counsel for the IRS) in order to prepare his case for trial (and so that the parties can resolve among themselves any issues that can be resolved without the Court’s involvement). A petitioner’s failure to fulfill this duty can result in dismissal of the case ‘for failure … properly to prosecute’, pursuant to Rule 123(b).” Order, at p. 1.

Mike didn’t.

Judge Gustafson had warned him at the same time that a Section 7459(d) win for the IRS was on the menu.

Mike does nothing.

So Judge Gustafson tosses Mike’s petition for failure to prosecute. And hands IRS the win.

Except.

“Mr. Snoonian is advised that, under Rule 162, the deadline for filing a motion to vacate this decision would be 30 days after entry of the decision. By so advising him we do not imply that such a motion would be granted.” Order, at p. 2.

Totally obliging.

Echoing, without citing, the words of a much more exalted personage than any Tax Court Judge, Judge David Gustafson has a lesson in the first of two designated hitters (for there are two cases) for Debra L. March, Docket No. 6161-17L, 8/10/18.

IRS claims Deb isn’t playing nice, and unloads the usual Rule 91(f) “deemed admitted” OSC.

Without prejudging IRS’ claim that Deb is being recalcitrant, Judge Gustafson offers some advice.

“Under this Court’s rules, the parties have a duty to cooperate in preparing a joint stipulation (i.e., a written statement signed by both parties) setting out the agreed facts in the case. For Ms. March’s information, we note that the stipulation process is often a substantial help to the petitioner, especially a petitioner who does not have a lawyer. Offering documents into evidence during the trial of the case is a process that the self-represented petitioner may find somewhat difficult. However, the stipulation can include (and usually does include) documents that the petitioner would otherwise have to offer into evidence, and we encourage Ms. March to propose this to the Commissioner. If the parties include Ms. March’s documents in the stipulation, then those documents will come into evidence at the beginning of the trial without further effort by Ms. March. And in case Ms. March is concerned that her cooperating in preparation of the stipulation might somehow bar her from producing at trial additional evidence not included in the stipulation, we assure her that it does not. She can offer additional evidence not included in the stipulation.” Order, at pp. 1-2 (Emphasis by the Court).

Nobody asked me, but I’ve seen experienced counsel get flummoxed trying to get disputed documents into evidence on the trial.

However, maybe Deb has a point. In the second case, IRS is trying to collect on a SNOD that they had stipulated in an earlier case wasn’t sent to last known address.

So Judge Gustafson has a few questions for IRS, which has reassessed the taxes, filed a NFTL, and Appeals sustained same.

“We cannot tell the authority on which the IRS relied to assess the … income tax at issue in this case. The NOD cites ‘§6201’. Section 6201(a)(1) authorizes the IRS to assess ‘taxes … as to which returns … are made’, but it appears Ms. March has filed no return. We see no other obviously pertinent provision in section 6201, except for its cross reference in subsection (e) to ‘deficiencies’ in ‘subchapter B’–i.e., sections 6211 to 6216. Those provisions authorize the IRS to determine a deficiency, to mail the taxpayer an [sic] SNOD, and to assess the deficiency upon the passage of 90 days after that mailing (unless a Tax Court petition is timely filed); but the parties stipulated in Docket No. 10223-14 that no SNOD had been properly mailed, and the NOD appears to indicate that no SNOD was mailed thereafter.

“Rather, the “IRS restored the tax assessment’. We would benefit from an explanation of the authority for this action.” Order, at pp. 2-3.

And thanks, Judge, for using SNOD to distinguish from NOD.

Takeaway- Oh, those stips. Very useful, but as a much better writer than I put it, trust them “as I will adders fanged.”

I’ve quoted the late Professor Richard C. Blakeslee’s famous song as regards conduits, but today I quote it to show the obliging nature of that Obliging Jurist, Judge David Gustafson.

At times too numerous and voluminous for me to catalogue here, I chronicled that he’d write your papers for you, mark opposing pleadings so you can prepare your response to IRS’ summary J motion (see Northside Carting, Inc., Docket No. 1117-18L, filed 8/10/18; Judge Gustafson took me back to my salad days fifty years ago, when we’d mark opposing pleadings to attach to summary J motions to make life easy for the judge), try your case in the slammer where you dwelt, bring coffee and Krispy Cremes to calendar call, and even feed the parking meter as the clerk called names.

Now today IRS thinks that their face-off with Dale Brewer, Docket No. 12223-17, filed 8/10/18, adjourned from February’s Boston trial schedule, is about to settle.

Judge Gustafson, who kept jurisdiction, is well-pleased.

But, just in case, “…it so happens that the undersigned judge is scheduled to preside at a trial session in Boson [sic] beginning in about 9 weeks on October 15, 2018.” Order, at p. 1.

So if they need a trial, Judge Gustafson is there to help, even though he’s only passing through.

Ch J Maurice B (“Mighty Mo”) Foley certainly has claimed that title.

Yesterday he bounced a nonpayor and nonjuror (didn’t swear poverty) after a mere three weeks post-petition.

Today, he has a pro se partner other than TMP with a TEFRA FPAA small-claimer imperfectly petitioned. She gets the same three weeks to ante up with pleadings conforming to Section 6226 and Rule 241.

Otherwise, she too will be at risk.

I’m not saying Ch J Mighty Mo is wrong. Too many wisepeople try to use Tax Court as a temporary restraining order against the IRS by submitting junk to buy time.

Of course, having not seen the petition nor having any knowledge of the facts, I cannot suggest that Signet Interactive LLC, Ashley Paige Mathis, A Partner Other Than The Tax Matters Partner, Docket No. 15099-18S, filed 8/9/18, has anything but a bona fide claim.

But even some attorneys file less than letter-perfect petitions in TEFRA FPAAs. And the Ownership Disclosure Form (not filed in this case) baffles many who confront it.

All I can suggest is that a pro se in a small-claimer confronting TEFRA might get an extra week or two and the name of a LITC.

And wiseacres and wags, beware.

Judge Buch has the answer when a partnership with onshore and offshore partners has effectively connected US income, and the partnership fails to withhold per Section 1446.

Here’s YA Global Investments, LP f.k.a Cornell Capital Partners, LP, Yorkville Advisors, GP LLC, Tax Matters Partner, and YA Global Investments, LP f.k.a. Cornell Capital Partners, LP, Yorkville Advisors, LLC, Tax Matters Partner, 151 T. C. 2, filed 8/8/18.

YA claims it’s a passive investor. IRS says they’re securities dealers per Section 475. If YA is a dealer, all its income is active (not portfolio, as YA claims) and is effectively connected to a US trade or business, thus must withhold from distributions to its offshore partners, which it didn’t.

YA is fighting the Section 475 dealership fight, but claims there’s no jurisdiction over the Section 1446 withholding or the chops arising therefrom, as these are partner items.

IRS claims Section 6231(a)(3) makes the withholding a partnership item, and Section 1446 is one of the rare provisions that makes partnerships liable for withholding (like FIRPTA, Section 1445(c), which Judge Buch cites). And Section 1461 ropes in any partnership required to withhold tax.

Now Treasury could promulgate regulations expressly putting Section 1446 withholding as a partnership-level item.

Except Treasury didn’t.

Judge Buch: “Thus, at first blush, it might appear that the tax imposed by section 1446 is not treated as a partnership item.  But our inquiry does not end there.

“The tax imposed by section 1446 is brought within the scope of partnership items because that tax is a partnership liability.  ‘Partnership liabilities’ are included within the scope of the definition of partnership items.  Sec. 301.6231(a)(3)-1(a)(1)(v), Proced. & Admin. Regs.  Because section 1461 makes the partnership liable for any tax required to be withheld under section 1446, any tax required to be withheld under section 1446 is a partnership liability.  And the regulations are clear that partnership liabilities are partnership items.

“Most penalties cannot be partnership items.  Penalties are generally found in subtitle F, and to be a partnership item, an item must be in subtitle A.  But Congress expanded the scope of partnership-level proceedings to include ‘any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item’.  Sec. 6221.  And insofar as this Court’s jurisdiction is concerned, section 6226(f) explicitly includes determining any penalty, addition to tax, or additional amount that relates to an adjustment to a partnership item within the scope of our judicial review.  Consequently, the penalties included in the FPAAs are properly before the Court in this partnership-level proceeding.” 151 T. C. 2, at pp. 9-10.

Except, says YA, the partners aren’t here.

So what, says Judge Buch, this is a TEFRA FPAA, and we can determine these partnership chops.

Ch J Maurice B (“Mighty Mo”) Foley is cracking the whip. There’s a bunch of these orders today, but I’ll take Patrese Blackwood, Docket 14148-18, filed 8/8/18, chosen at random, as an exemplar.

Patrese petitioned July 18, but didn’t send in a check or a waiver request. So today, scarcely three (count ‘em, three) weeks into the program, Ch J Mighty Mo bounces Patrese’s petition.

Now formerly the nonpayors would get at least a second chance before the bounce. Ex-Ch J L Paige (“Iron Fist”) Marvel would give the recalcitrant petitioner a couple months (hi, Judge Holmes) to come up with the sixty smackers, or plead and prove poverty, before kicking said petitioner to the cliché. And if my decaying memory is correct, so did ex-Ch J Michael B (“Iron Mike”) Thornton. Some even got a third chance.

But Ch J Mighty Mo is nowise inclined to humor the thrifty petitioner.

So, seekers for “the sixty-buck ticket to justice,” plunk down the sixty greenbacks supernaculum ab initio, or find the Glasshouse doors barred with hoops of steel.

Luis Palafox and Hilda Arellano, 2018 T. C. 124, filed 8/7/18, have a problem with MAGI, but it’s not the lady in the 1971 Rod Stewart – Martin Quittenton lament that ranks 131st on the Rolling Stone 2004 all-time list.

No, this MAGI is Modified Adjusted Gross Income for computing Advanced Premium Tax Credit, that vestigial remnant of the much-contemned Affordable Care Act.

Luis was kicking in $25 per week on a Chapter 13 wage-earner, and wants that offset against MAGI, to cut the bite on the Form 8962 (that Luis and Hilda didn’t file).

Ex-Ch J Michael B (“Iron Mike”) Thornton has this one, and he has sympathy for Luis, but that’s all.

“Although we are sympathetic to petitioners’ situation, the law affords no relief in this circumstance.  There is no evidence to show that the bankruptcy plan payments represent items that are properly taken into account in determining petitioners’ MAGI.  And absent a reduction in their MAGI there is no legal basis for reducing petitioners’ household income for purposes of determining their PTC eligibility.  Although section 36B provides for certain increases to AGI for purposes of determining household income, it does not provide for any decreases to AGI for any purpose.  See sec. 36B(d)(2)(B).  Consequently, petitioners are not entitled to reduce their household income by the amount of the bankruptcy plan payments.  In any event, even if we were to agree with petitioners that their household income should be reduced by the $300 of total bankruptcy plan payments they made during 2014, it would not change the outcome of this case–their MAGI would still be significantly greater than [400% of poverty], and so they still would be entitled to no PTC….” 2018 T. C. Memo. 124, at pp. 7-8. (Footnotes omitted, but one says the payments in the Chapter 13 weren’t allocated even to Section 62 AGI deductions).

He couldn’t have tried any more.