I’m sure the phrase set forth at the foot hereof has long since been discarded, and anyone using it marked as antique, but it’s all I can use for Ch J Maurice B (“Mighty Mo”) Foley’s disposition of two nonpayments today.

No, these aren’t landlord-tenant cases; those are found in State court. This is nonpayment of the sixty buck small blind in Tax Court.

First up, Michaeljon Murphy, Docket No. 12755-18, filed 10/2/18. Michaeljon was told back at the end of June to amend his petition and pony up, but didn’t. So Ch J Mighty Mo tells Michaeljon to throw in the sixty Georges or a waiver, and the amended petition, by 10/22/18, or get tossed.

And he sends Michaeljon a Form 2 amended petition blank to speed him on his way.

Compare and contrast with Guy Michael Strohbeen, Docket No. 18716-18, filed 10/2/18.

“The petition in this case was filed on September 21, 2018. The Court’s $60.00 filing fee in this case was not paid. See I.R.C. sec. 7451. Because petitioner has failed to pay the filing fee, it is ORDERED that this case is dismissed.” Order, at p. 1.

Michaeljon gets four months plus a form, and Guy Michael gets less than two weeks?

Judge, whass up wit’ dis?

Were I a punster (Heaven forfend!) I might suggest we sing a chorus of Das Lied von der Urda to welcome the newest designee to the Tax Court bench, Judge Patrick J. Urda.

The Tax Court website, apparently taken unaware by Judge Urda’s appointment last week, has no biography, so I will crib one from the Internet to try to make amends for the first sentence hereinabove set forth.

Judge Patrick J. Urda, was born August 29, 1976, and received his Bachelor of Arts degree in classics, summa cum laude, from the University of Notre Dame, where he was inducted into Phi Beta Kappa. He received his Juris Doctor from Harvard Law School. He spent three years in private practice and clerked for Judge Daniel Anthony Manion on the Seventh Circuit Court of Appeals.

Note Judge Albert G (“Scholar Al”) Lauber is also an honors graduate in classics.

Judge Urda served as counsel to the Deputy Assistant Attorney General in DOJ Tax Division, litigated over eighty (count ‘em, eighty) tax appeals, appearing in all CCAs, appeared before the Supremes, and was a five-time winner of DOJ Tax Division’s distinguished attorney award. He received IRS’ Michael Rogovin award.

Let’s all give a hearty welcome to Judge Patrick J. (“Scholar Pat”) Urda. I look forward to great opinions.

Well, that’s the question for Richard M. Hellmann & Dianna G. Hellmann, et al., Docket No. 8486-17, filed 10/1/18.

The issue for Rich, Di and the als is whether their family investment operation (hereinafter “Hellmannco”) is a Lender; that is, entitled to the same treatment as Lender Management, LLC.

If you’ve forgotten Lender and the Section 162 vs Section 212 deduction issue for family investment operations, see my blogpost “All in the Family – Part Deux,” 12/13/17.

Hellmannco claims it’s in the trade or business of running a mutual fund. IRS says the operation is not a trade or business, but an “activity ‘for the production or collection of income’ or ‘for the management, conservation, or maintenance of property held for the production of income,’ within the meaning of section 212.” Order, at p. 2.

And of course Hellmannco gets all its business deductions if it is a trade or business, but if it’s a mere “activity” the members (and Hellmannco is an LLC, presumably box-checked as a partnership) get hit with the 2% AGI floor for the Schedule A miscellany, the Schedule A phaseout, and AMIT.

And with the 2017 Jobs Creation and Tax Act, Schedule A miscellaneous deductions don’t look so good for this year and out to 2026. You can’t take them until 2026, so the suspension of the Schedule A phaseout doesn’t help the Hellmannco crowd. They won’t figure in AMIT either.

“These cases appear to resemble Lender Management in some respects, but not in others. [Hellmannco] is a family office that managed investment assets for four family members. All four family members resided in the Atlanta metropolitan area and appear to have been on good terms. [Hellmannco] received performance-based compensation keyed to the success of the investments it made. One investor… appears to have had authority over day-to-day investment decisions. But here, unlike in Lender Management, all of the other investors were also owners of the management company, with each investor holding a 25% profits interest in [Hellmannco].” Order, at p. 3. (Name omitted).

Remember, the Lender crowd was spread out, and hated one another. And the Boss Hoss of the Lender mutual fund got 99% of the profits therefrom, but only had a small piece of the action in the portfolio.

In the end it’s facts & circumstances. Did the management entity add value, and personalize investment advice to the individual members (“know your customer”)? Most importantly, were the profits from the management arm paid over to the members of the investment arm in the same proportion as their interests in the investment arm?

“In cases such as these, an important question is whether the owners of the family office are ‘actively engaged in providing services to others,’ Lender Management, at *26, or are simply providing services to themselves. See Dagres, 136 T.C. at 281 (‘Selling one’s investment expertise to others is as much a business as selling one’s legal expertise.’). Here, each family member had a 25% profits interest in [Hellmannco]. If each family member (for example) also had an aggregate 25% interest in the assets under management, there would be perfect proportionality between the two streams of income. In that event, it would not matter how [Hellmannco] was compensated, because that compensation, once distributed ratably to the four owners, would simply replace investment income that each person would otherwise have derived from the investment portfolios. That was not the case in Lender Management, where one family member had a 99% profits interest in the management company, but held only minority interests in the assets under management. The facts currently in the record do not enable the Court to assess the degree or proportionality (or lack thereof) here.” Order, at p. 4.

So while Judge Albert G (“Scholar Al”) Lauber lays out a laundry list of questions for Hellmannco and IRS to answer, as to ownership, management, operation, services, and portfolio composition of Hellmannco, the real question is the old question: “Who got the money?”

This well-known rhetorical technique does not serve IRS very well in Semere Misgina Hagos, Docket No. 2018 T. C. Memo. 166, filed 10/1/18.

Judge Goeke shreds Seme’s deductions for nonsubstantiation. But back in April he told Seme and IRS to do a Branerton-style play-nice to resolve the Section 6751(b) Boss Hoss reopener IRS wanted so as to stick Seme with the Section 6662(a) accuracy chops. And let him know how it all comes out.

Seme’s attorney bails at this point, and no one objects, so Judge Goeke lets him out. I might mention Seme or his attorney tried a Battat recusal that flunked. For Battat, see my blogpost “Necessity Knows No Law,” 2/6/17.

But neither IRS nor Seme tells Judge Goeke anything about their efforts to resolve the reopener.

“The Court issued a second order seeking a response on the Graev issue.  In response to this second order respondent simply asserts that the Court should reopen the record.  Given respondent’s failure to respond to our order of April 4, 2018, to seriously seek an agreed resolution of the evidentiary issue, and to address the issues raised in petitioner’s objection filed to the motion to reopen the record, we decline to reopen the record and hold that respondent has failed to carry the threshold burden for the Court to sustain the penalty.” 2018 T. C. Memo. at pp. 8-9.

Play-nice beats dogmatic assertion every time in Judge Goeke’s courtroom. And I wouldn’t bet too many quatloos that it works too well in any other courtroom.

I’m sure my readers will join with me in expressing our thoughts and prayers to the family, friends and colleagues of Judge David Laro.

The title expresses my views.

Here is the Tax Court press release. https://www.ustaxcourt.gov/press/092518.pdf