Archive for November, 2018|Monthly archive page


In Uncategorized on 11/16/2018 at 19:01

There are moments. When you talk yourself off the winning horse, and your spouse tipped the winner; when the remark that would have been brilliant at the dinner party comes to mind as you open your front door; and today, when the winged messenger of the Olympians brings the perfect title for a blogpost after you’ve posted.

Today’s title was “Hold ‘Em.”

Hold ‘em was an attorney who, he claimed, had never been cautioned or sanctioned in 36 (count ‘em, thirty-six) years of practice. But Judge Mary Ann (“She Who Eschews Cognomens”) Cohen yellow-carded him today for littering the Mobile, AL trial calendar with 42 (count ‘em, 42) cases over the last twelvemonth, all of which he moved to withdraw.

They were all petitions from CDPs, so dismissal on the eve of trial penalized no one but IRS, who Section 6330(e) estopped from collection activities, and the hard-laboring clerks and flailing datestampers at 400 Second Street, NW, who had more electrons to corral.

Remember, Wagner v. Com’r, 118 T. C. 330 (2002), said that withdrawing a petition from a CDP, unlike one from a SNOD, incurs no penalty.

So Hold ‘em did this 42 times, stymieing IRS for months.

I really should have taken a hint from George Bernard Shaw’s 1898 retelling of Der Ring des Nibelungen.

Hold ‘em is indeed The Perfect Wagnerite.



In Uncategorized on 11/16/2018 at 14:25

No, not the World Series of Poker; there are no rivers here, but a great number of flops. This is the story of an attorney in Shreveport, LA, the author of the flops, whom I’ll hereinafter call “Hold ‘em.”

There are a couple orders today (hi, Judge Holmes) involving Hold ‘em who states proudly “in 36 years of practice he has never been sanctioned, warned or admonished.”

Well, his streak is broken today, and The Judge Who Eschews Cognomens, Judge Mary Ann Cohen, is the Judge to do it.

The case is D & K Care Service, Inc., Docket No. 20661-17L, filed 11/16/18.

Petition filed, trial set for Mobile, AL, and petitioner moves to dismiss. Of course Wagner makes this a free kick, no sanction, no decision for IRS.


“Filing the petition resulted in a suspension of collection activities under Internal Revenue Code section 6330(e). The Court observed a pattern in nine cases on the February 13, 2019, calendar, 25 cases on the January 31, 2018, calendar, and eight cases on the April 26, 2017, calendar in Mobile, all filed by the same counsel. Thus the Court ordered petitioner to supplement their motion [to dismiss] and respondent to report with respect to the perceived pattern, raising the consideration of section 6673 and a penalty for cases instituted primarily for delay.” Order, at p. 1.

The problem with a great gimmick is overuse. Dodgefloggers with real great shucks-and-jives advertise their wares and IRS steps in. Cute moves and cutesy names are all very well, until they disclose themselves. I’ve blogged the foregoing in extenso. So let it be with Hold ‘em.

“Respondent’s response to the Court’s order was filed on November 7, 2018, and confirmed the pattern observed by the Court. Petitioner’s response was filed November 9, 2018. Petitioner’s counsel argues that his conduct is not as bad as other situations where penalties have been imposed and that the motion to dismiss avoided further activity in this case.” Order, at p. 1.

Yes, but.

“His arguments do not overcome the inference that this case was instituted primarily for delay. Counsel argues that in 36 years of practice he has never been sanctioned, warned or admonished. He has now been warned and admonished that if this perceived pattern continues, he and/or his client may face sanctions.” Order, at p. 1.

To repeat another old Texas traditionalism, “pigs git fed, hogs git et.”


In Uncategorized on 11/16/2018 at 14:06

Fans of this my blog must have been standing a-tiptoe, waiting for that Obliging Jurist, Judge David Gustafson, to locate the missing TMPs of long ago in Capitol BC Restaurants, LLC, Banyan Equity Investors, Inc., Banyan Equity Investors II, Inc.,  Banyan Mezzanine Fund, LP, Banyan Mezzanine Fund II, LP, et al, Docket 9281-17, filed 11/16/18.

Apparently Judge Gustafson sicced IRS’ top bloodhounds on the two missing mutterers, so the Clerk is posting off to them the order referred to in my blogpost “Un Regno di Giorno?” 10/5/18.

You can run but you can’t hide when Judge Gustafson is on the case.


In Uncategorized on 11/16/2018 at 00:24

The late James P. Keeter is back in Tax Court, although, as he is the late James P., it’s his ex’rs and spouse Julie, sub. nom. (as my expensive clients would say) Estate of James P. Keeter, Deceased, Garry L. Holton, Jr., and Thomas W. Schaefer, Co-Executors, and Julie Keeter, 2018 T. C. Memo.191, filed 11/14/18.

Now how many of my long-time readers remember the late James P. and his bogus partnership? Well, if you don’t, see my blogposts “Inside, Outside – Redivivus,” 4/3/17, and “Best of Luck,” 5/5/17.

Now it turns out that the late James P. wins his motion to restrain collection. But Julie and the ex’rs can put the Salon le Mesnil back in the cooler, because Judge Goeke finds their motion to get back the $19.2 million IRS got out of them is premature.

And Tax Court does have jurisdiction, because the SNODs IRS issued and the late James’ ex’rs and Julie petitioned, do have non-computational affected items, namely, viz. and to wit, the basis and gain (if any) on the securities and foreign currency distributed to the late James P. (before he became the late James P.) and Julie.

Now the ex’rs and Julie claim the partnership was a sham, so no partnership-level TEFRA tohubohu is needed, and there was a case in USDCNDCA four years ago that said so. IRS says maybe didn’t decide the sham part, just no economic substance.

Judge Goeke: “We do not address the parties’ position that the partnership-level case effectively determined that the partnership was a sham. We do not need to determine for purposes of petitioners’ motion whether the case so held as we hold that even if the partnership was a sham, a partner-level determination is required relating to the assets that [phony] formally distributed to the Keeters.” 2018 T. C. Memo. 191, at p. 11, footnote 4.

If the partnership is disregarded for whatever reason, it’s as if the partners were doing it all individually their own selves. Thus the late James P. and Julie acquired said securities and foreign currency directly, and sold same ditto. So we go to Section 1012(a), cost basis.

The SNODs challenged the late James P.’s and Julie’s basis therein and the gain or loss on the sale thereof. They petitioned.

Section 6213(a) lets Tax Court enjoin assessment and collection while the proceeding is pending. So Judge Goeke can do that.

But until the basis question is resolved, there’s no refund to order. And if I may editorialize, there may not be any when the question is resolved.

So go try the basis and gain-or-loss issues.



In Uncategorized on 11/14/2018 at 19:54

No, this is not a candidate for one of those aviation videos on youtube. This is Judge Kerrigan delivering an off-the bencher, wherein a pilot’s logbook, derived from his GPS readings, avoids the Section 6662(a) substantial understatement chop.

Here’s David McCallum & Annie M. McCallum, Docket No. 16833-17, filed 11/14/18. It’s Dave’s story. He’s an aircraft mechanic who works out of Napa County Airport, the “Skyport to the Wine Country.” Sometimes a gig last only six minutes. Dave works for several different outfits, and flies between jobs in his own airplane.

Dave deducts his aircraft flying as unreimbursed employee business expenses. And they are unreimbursed, because the outfits wouldn’t pay Dave to fly. But they would provide car services to take him from KAPC (that’s the airport code for Napa County) to wherever the airplane needing Dave’s ministrations might be.

Dave’s deductions spin out.

“Except for taxpayers on temporary work assignments, costs of traveling to and from a place of business are considered personal expenses and are not deductible. Commissioner v. Flowers, 326 U.S. 465, 473-474 (1946). Petitioner husband was not on a temporary work assignment. He chose to fly his plane instead of taking transportation provided by [employers]. His unreimbursed travel expenses are considered personal expenses and are not deductible as ordinary and necessary business expenses or as unreimbursed employee expenses.” Order, transcript, at pp. 7-8.

IRS’s counsel flourishes a Civil Penalty Approval Form, and has shown a substantial understatement.

But Dave the pilot keeps pilot’s records.

“Petitioner husband kept records of his flights through his plane’s GPS system. The GPS system recorded the flights in real time. Later, petitioner husband compiled the data from his plane’s GPS system. He separated his business flights from his nonbusiness flights in his records.” Order, transcript at p. 5.

That’s good enough for Judge Kerrigan.

“Petitioner husband kept records pertaining to all of his flights for his travel to and from jobs. He provided credible testimony on how he calculated the miles he traveled and the amount of reimbursement he received. We find that petitioner husband acted in good faith. Petitioners are not liable for the section 6662(a) penalty.” Order, transcript, at p. 8.

Takeaway- GPS is ubiquitous. Most people have some version thereof on their smartphones. Surely some bright fourteen-year-old has an app that permits tracking one’s whereabouts “in real time.” What a help this would be in a Section 274 set-to! Or real estate pro-ship. I can just imagine a petitioner asking that Siri be sworn to testify as to his/her peregrinations and hours on the jobsites.


In Uncategorized on 11/13/2018 at 16:17

If anyone needed more proof that Judge Holmes got it right last year, when The Great Concurrer predicted cataclysmic silt-stirring after Tax Court put the Section 6751(b) Boss Hoss sign-off front-and-center whenever and wherever a chop is invoked (see my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17) , here’s Roy E. Hahn & Linda G. Montgomery, Docket No. 1910-14. Filed 11/13/18.

All y’all must, without the slightest doubt, remember Roy Hahn. If y’all do not, by whatever mischance, check out my blogposts “House of CARDS,” 3/8/11 and “CARDS – A Busted Flush,” 7/2/18.

Roy was one of the top guns at Chenery, dodgefloggers extraordinary.

In the year-and-a-half-plus since Judge Nega closed the record at Roy’s & Linda’s trial, IRS has been rooting around for the Boss Hoss truffles wherewith to inflict chops on Roy & Linda. Judge Nega burns up two-and-a-half pages of order chronicling how he refereed the prolonged back-and-forth between IRS and Roy’s and Linda’s counsel.

One may doubt the parties have moved any closer to a resolution.

“To eliminate any possible prejudice to any of the parties, we will direct the parties to cooperate in developing all facts relevant and necessary to aid this Court in rendering a determination with respect to the application of the section 6751(b)(1) requirement. The parties shall file a report proposing a schedule for further proceedings in this case.” Order, at p. 3.

Now to do this, “…the parties shall each file a status report advising the Court if the relevant facts with respect to the section 6751(b)(1) requirement can be resolved by way of: (1) additional discovery, or (2) a supplemental stipulation of facts, or (3) a stipulation of settled issues, and/or (4) whether there is a need for further trial solely as to the issue of the Commissioner’s compliance with the section 6751(b)(1) requirement. If there is a need for a further trial then the parties shall also include an estimate of the expected length of trial, and a list of anticipated witnesses and exhibits that they intend to rely on. The Court would appreciate specific references to the issues discussed so the Court can ensure that progress is being made to move this case to either further trial or other resolution.” Order, at p. 4.

And if the parties really want another trial, Judge Nega can oblige them next March in The City by the Bay.


In Uncategorized on 11/09/2018 at 19:39

Sir Winston Churchill ascribed this pejorative term to a near neighbor, and it was not at all well-received. But what am I to say about Bolivia’s eleven million fifty thousand inhabitants (I won’t ask you to count ‘em; I rely on the World Bank’s 2017 figure), not one of whom has ventured to read this my blog?

I can well understand that no citizen of Cuba, Niger, Chad, Senegal or Mongolia (Inner or Outer) has evinced the slightest interest either in myself or the United States Tax Court. Neither I nor the Court has any impact, however remote, on their nation or themselves.

Guiana, French to the core, likewise holds aloof.

But Bolivia? It’s the only independent nation on the continent that ignores me.


In Uncategorized on 11/09/2018 at 15:02

Yeah, Roger That

That argute jurist and classical scholar Judge Albert G (“Scholar Al”) Lauber is sealing and unsealing today the multitudinous and multifarious trial exhibits, briefs and billets doux from the three-month trial, its antecedents and postludes, in The Coca-Cola Company and Subsidiaries, Docket No. 31183-15, filed 11/9/18. And he orders “(T)he Clerk of the Court shall file the redacted versions of these briefs, which will then be placed on the docket and made available for public inspection.” Order, at p. 2.

I await, breathless, his opinion. It will doubtless be the Marbury v Madison, 1 Cranch 137 (1803) of transfer pricing.

Y’all will recall Judge Scholar Al’s brilliant judicial surgery, which unveiled all permissible of the transcripts, filings and exhibits the Cokers wanted to put in on the trial; see my blogpost “Judge Lauber Makes It Public – Hurrah!” 11/8/17.

Now the briefs are sealed and unsealed, as needed.

As aforesaid, he ends today’s order on a hopeful note. I do hope he will not take to heart my somewhat cynical reply.

I said it a year ago.

“All we have to do is surry down to the stoned soul picnic at 400 Second Street, NW, politely ask the clerk to open the voluminous file, and while away our idle hours reading. That is, those of us who don’t have day jobs.

“Now if Tax Court were on the PACER system or equivalent, we could follow the advice of Ireland’s great poet and lengthen our days by stealing a few hours from the night, lighting the darkness with the glistering glow from our laptops, and paging through the night over that which Judge Lauber so painstakingly and scrupulously has excised and extracted for our edification.

“But no. Tax Court’s lowly Article One online lips are sealed. Only orders, opinions and decisions are to be had on the world-wide web. As the Sweet Swan of Avon put it so well, ‘the rest is silence.’

“Judge Lauber’s labor’s lost for the greatest majority of his fans.”

Others have said it long ago, and much better; the best Peter and Paul combination in a long time, Peter Reilly, CPA at, and Paul Streckfus at EO Tax Journal, have been vocal. I must mention an earlier commentator still going strong, Prof. Leandra Lederman at U of Indiana, surly but trenchant.

But I’ll say it again: “So c’mon, Tax Court, let it all hang out. Put the backstories on line. Bankruptcy Court does, USDCs and CCAs do, why not you?”



In Uncategorized on 11/07/2018 at 16:19

This isn’t a promotion for a twelve-step program, although these are of great value. Rather, Judge Gustafson issues an off-the-bench designated hitter that sends off IRS and Paul C. Nordberg & Debra L. Nordberg, Docket No. 1426-17, filed 11/7/18, to figure out how much of Paul’s CSRS (Civil Service Retirement System, the Fed pension plan) payments are tax-exempt.

Paul’s argument that his pension is like an IRA (Roth or trad) craters when no separate account was set up for Paul per Section 408(q), because Paul didn’t make voluntary contributions, and CSRS doesn’t make separate accounts. And while Paul could have rolled his CSRS into a Roth IRA, he didn’t. If he had, he’d have had to pay tax on any earnings beyond his base contributions.

And he would have had other troubles that Judge Gustafson hadn’t to deal with. See my blogpost “The (Naked) Civil Servant,” 9/23/14; and note Judge Gustafson agreed with Judge Buch’s dissent and would have permitted the rollover then.

Paul also claims the Federal payout is far worse than the private sector would have paid him, but that’s tough. Congress made the plan, and Judge Gustafson can’t change it.

“Mr. Nordberg urges that it is unfair for the Government to give him a pension that (he reckons) is so far below what a fair return on his money would have yielded and, at the same time, to add insult to injury by taxing him on that disappointing return on his money. However, we do not have authority to depart from the laws Congress has enacted and to instead devise rules of taxation based on felt fairness.” Order, transcript at p. 9.

I note Paul’s Federal employment was on the staff of a member of Congress.

Paul claims the whole payment is exempt, but that loses. The Feds gave him 1099-Rs showing only $1550 was exempt out of $22,044 in one year at issue, and the same $1550 out of $21,720 for the other, despite the disparity in the amounts distributed.

Paul says, based on his after-tax contributions, he’d have to live to age 95 to get all his own money back tax-free.

Ever obliging, here’s Judge Gustafson: “We hope he will do so, but we share his feeling that this would be excessively optimistic from an actuarial point of view. OPM [Office of Personnel Management] began paying Mr. Nordberg’s pension in 2008, and we note that the Social Security Administration’s “Period Life Table, 2007” (2008 is not available) projects, for a male age 65, a life expectancy of about 17 years, not 30 years. See (We do not rely on this information to find a life expectancy.)

“Neither party has proposed a specific, alternative non-taxable amount, but our reading of section 72 suggests as follows: It appears that under section 72(d)(1)(B), Mr. Nordberg’s contributions (which totaled $46,476) were to be recovered over 260 months–i.e., at $179 per month, or $2,148 per year. That is, it appears that the non-taxable portion may have been not $1,550, as OPM evidently figured, but rather $2,148. If, as it seems, the non-taxable amount is not $1,550, then the deficiency will have to be recomputed. If that calculation of an alternative non-taxable amount of $2,148 is not correct, then the parties can propose the correct calculation….” Order, Transcript, at pp 10-11.

And they can have a Rule 155 beancount to do so at no extra charge.

Although this is an off-the-bencher, and therefore can’t be cited as precedent, I suggest practitioners can use the reasoning even in cases beyond those involving Federal pensions.


In Uncategorized on 11/06/2018 at 16:14

STJ Panuthos has a designated hitter today, examining the fine line between deductible damages and nondeductible fines. Here’s Edwin L. Gage & Elaine R. Gage, Docket No. 23874-17, filed 11/6/18 (and I do hope you US persons voted today).

The problem was a nursing home where Ed & Elaine personally guaranteed a HUD-insured refi. Of course there was a regulatory agreement, which HUD claims Ed & Elaine and partners violated, making away with assets and cash.

This Ed & Elaine strenuously denied, but settled the litigation HUD brought by paying HUD $875K. IRS had sued for double damages per 12 U.S.C. §1715z-4a, as well as “federal common law” damages for wrongful use of the project assets and income.

“The settlement agreement also contained a provision that nothing in the agreement constituted a representation or agreement by the government concerning the characterization of the settlement amount for purposes of the Internal Revenue Code.” Order, at p. 2.

Ed & Elaine took the $875K they paid HUD as a deduction per Section 162(a) “ordinary and necessary.”

IRS says no, it’s a fine.

STJ Panuthos: “Section 162(f), however, proscribes a deduction under section 162(a) for any fine or similar penalty paid to a government for the violation of any law. Section 1.162-21(b)(1)(iii)), Income Tax Regs., defines fine or similar penalty to include an amount paid in settlement of the taxpayer’s actual or potential liability for a civil or criminal fine or penalty. Section 1.162-21(b)(2) of the regulations, on the other hand, provides that compensatory damages paid to a government do not constitute a fine or penalty.” Order, at p. 2.

Awarding double damages is permissible and punishes or deters wrongdoing, but that’s within the trial court’s discretion; this trial court didn’t say anything about that.  And damages for wrongful use (which is unjust enrichment by another name) is compensatory, not punitive or deterrent.

Both Ed & Elaine, and IRS, wants summary J. Neither side is getting it.

“Among other things, upon reviewing the motion papers and materials offered in the instant case by petitioners and respondent, the Court concludes that genuine issues of material fact exist, including as to: (1) the characterization and purpose of the $875,000 settlement payment made by petitioners to the government; (2) whether that $875,000 payment represented compensation to the government or double damages; and (3) if that $875,000 payment represents double damages, whether the parties to the settlement agreement intended the payment to compensate the government for its losses or to deter and punish defendants for their conduct.” Order, at p. 3 (Citations omitted, but one is important.)

In  Frensius [sic; should be “Fresenius”] Medical Care Holdings, Inc. v. United States, 763 F.3d 64, at pp. 69-70 (1st Cir. 2014), 1 Cir blew off IRS’ argument that, absent explicit agreement on tax characterization, the payment is not deductible. If the parties leave the question open, it’s our old friend “what did the parties really settle, not what they say (or didn’t say) they settled.”

See my blogpost “An Unsettling Settlement,” 10/3/11

No summary J.