Archive for April, 2019|Monthly archive page


In Uncategorized on 04/22/2019 at 13:55

I intentionally number this blogpost, as it is the first of what will doubtless be a series. Discovery jousting has been the flavor du millennium, and shows no sign of losing that appellation.

Here’s Judge Gale playing supervising magistrate in Adrian D. Smith & Nancy W. Smith, et al., Docket No. 13382-17, filed 4/22/19.

First, responses to interrogatories.

IRS claims A&N failed to state what they paid someone for something. But they did state the date and Bates stamp number of the documents they’d already given IRS. That’s enough for Rule 71(c).

A&N claim they don’t know what their preparer charged to prepare their Form 2065 (sic; of course they meant Form 1065, Partnership Return), as all the preparer invoiced for was “tax return preparation.” Judge Gale is not amused. “We believe a reasonable interpretation of a request for the costs of preparing a Form 1065 would treat the subsidiary forms required to be attached thereto as included. A good-faith response could easily have said: ‘Petitioners do not have a break-out of the amount paid for the Form 1065 standing alone, but the amount paid to [preparer] for the preparation of the Form 1065 and the additional Federal income tax forms required to be attached thereto was $__.’ In any event, the point isn’t worth arguing. Petitioners will be directed to respond with a statement concerning the amount paid for the preparation of…Form 1065, plus the forms and exhibits attached thereto….” Order, at p. 3.

Second, document production. IRS claims they got a “document dump,” a couple USB flash drives (hi, Judge Holmes) with 29.2 gigs, requiring poor IRS to “…sort through a proverbial ‘document dump’ to extract the responsive documents.” Order, at p. 3.

Except this isn’t the case where irrelevant materials are interspersed with the real stuff, in the hope that one’s opponent will miss the trees for the cliché.

A&N claim this is how they keep their records in the ordinary course of business.

Judge Gale points to Rule 73(b)(3)(A), son of FRCP 34(b). Ordinary course of business works fine, and IRS’ sole bœuf is that they got a lot of documents.

“Respondent has not alleged that petitioners have deliberately mingled responsive documents with nonresponsive documents or simply produced a mass of responsive documents with no internal logic reflecting business use. Rather, respondent alleges only that petitioners have produced a lot of documents and that those documents are not organized or labeled in the manner he prefers.

“We believe the screenshot provided by petitioners adequately supports their contention that the documents were produced as they were kept in the usual course of business. The folders are organized in a manner that suggests an internal logic reflecting business use. ‘When a party produces documents “as they are kept in the usual course of business,” it has no duty to organize and label the documents to correspond to each request.’” Order, at p. 4 (Citations omitted)(Emphasis by the Court.).

Discovery geeks, please copy.


In Uncategorized on 04/19/2019 at 16:18

Again this is one of those stories where those who read it don’t need it, and those who need it won’t read it. But having a few minutes on a busy day, here’s the story of Esteban Baeza, Docket No. 3402-18L, filed 4/19/19.

Estaban had three (count ’em, three) years at issue after IRS dropped one year because Estaban proved he was entitled to a refund. He entered into an IA for the remainder, and IRS dropped the levy with which they were trying to collect.

But the lien remained, and Estaban wanted to fight that.

That Obliging Jurist, Judge David Gustafson, gives us a designated hitter to explain to Estaban and others similarly situated.

“Mr. Baeza’s only contention in this case is that Appeals should not have sustained the lien notice since he had entered into an installment agreement with the IRS pursuant to which he had agreed to pay over time the liabilities that were the subject of the lien notice. He has not alleged any other defect in Appeals handling of his CDP hearing. He has not challenged his liability for the taxes whose collection is at issue. He has not contended that Appeals erred by denying him any collection alternative (nor that he proposed any).” Order, at pp. 3-4.

Ordinarily, this would be “game over,” but Judge Gustafson obligingly explains.

“If a delinquent taxpayer enters into an installment agreement with the IRS, then it would stand to reason that the IRS might forebear active collection of the unpaid liabilities–and that is what the IRS did in Mr. Baeza’s case by determining that ‘levy action is no longer warranted’. However, since the IRS has thus agreed to wait for the taxpayer to pay those liabilities over time, it seems reasonable that the IRS might file a notice of lien in order to protect its ability to collect in the event that the taxpayer fails to fulfill the terms of the installment agreement. Mr. Baeza has explained no reason why this is not so in his case.” Order, at p. 4. (Emphasis by the Court.)

“Trust me, trust me” is no answer.





In Uncategorized on 04/18/2019 at 17:04

Judge Holmes again adverts to the magnificent closing passage of Jimmy Joyce’s greatest short story. It seems he finds the “snow faintly falling” as an insufficient precondition to shutting down the Glass House on Second Street and sending off all hands to teletubby chez eux.

Here’s Estate of Arthur S. Andersen, Deceased, Tena Haroldson, Eric Stoval and Harold Albright,  Personal Co-Representative, Docket No. 14067-14, filed 4/18/19.

Tena, Eric and Harold are working on a Rule 155 beancount after a T. C. Memo. I didn’t blog, but “an actual late-winter blizzard” (Order, at p. 1) prevented counsel from meeting with the trio and finishing up.

Judge Holmes will give them some time.

“The Court understands, since it seems to shut down when there a warning of a wisp of snow. See (President Obama unsuccessfully calling for “flinty Chicago toughness” on snow days in DC).” Order at p. 1.


In Uncategorized on 04/18/2019 at 16:50

Seems like we’re heading toward this result, even in US Tax Court, despite homage to Branerton and Rule 71(c)(1)(B). But that Obliging Jurist, Judge David Gustafson, stands like Horatius at the “Play Nice” bridge, in Cross Refined Coal, LLC, USA Refined Coal LLC, Tax Matters Partner, Docket No. 19502-17, filed 4/18/19.

Cross Refined is anything but, with four (count ‘em, four) discovery motions. Two are for document production, one to review responses to requests for admissions, and the last to take a deposition. Judge Gustafson gives IRS a couple weeks (hi, Judge Holmes) to answer the lot.

But Judge Gustafson won’t play magistrate and supervise discovery. These trial court tactics don’t polish the windows at The Glass House on Second Street, NW.

He orders both sides to “…continue to confer with a view toward resolving these discovery disputes themselves, to the maximum extent possible. To this end, petitioner’s counsel shall initiate an in-person or telephone conference with respondent’s counsel at a mutually convenient time no later than Wednesday, April 24, 2019. As to the fourth of the motions, we observe that, under Rule 74(c)(1)(B), ‘The taking of a deposition of a party … is an extraordinary method of discovery.’ It seems likely to be even moreso [sic] when the party whose facts are the subject of the lawsuit proposes to depose the party with no personal knowledge of the facts and who first had access to the relevant information only after the fact and indirectly. On the other hand, the relative unavailability of depositions under the Tax Court’s rules may, in some circumstances, be a reason that the parties should be required to be especially forthcoming in response to other forms of discovery. The parties might consider this in their further negotiations.” Order, at pp. 1-2.

In short, cut the games and get with the program.


In Uncategorized on 04/18/2019 at 16:37

Innocent spousery falls to the lot of STJ Lewis (“Honor That Name”) Carluzzo, as he enwraps himself in the mantle of a judge of even greater renown, in Elaine S. Thomas, Petitioner and Robert Roy Thomas, Intervenor, Docket No. 5680-18S, filed 4/18/19.

This off-the-bench designated hitter is about something less than $5K. STJ Lew questions the stipulated attribution of all to Rob Roy, but apparently is convinced by the record.

STJ Lew loves IRS counsel’s pretrial memo, which “…accurately and thoroughly (1) sets forth the background of this case; (2) describes the procedures respondent follows in such matters; and (3) lists the factors considered by respondent in responding to a taxpayer’s request for section 6015 relief. The pretrial memorandum also correctly notes that the Court, in general, considers the same set of factors respondent considers, although we are not limited to those factors or bound by respondent’s conclusions with respect to each factor.” Transcript, at p. 5.

It’s so good STJ Lew doesn’t bother to quote it. What a shame we all can’t read it, unless we surry on down to the stone soul picnic at 400 Second Street, NW; wouldn’t it be loverly if we could peruse each page at our leisure and at a dime a throw on PACER or equivalent?

STJ Lew cavils with only a couple points (hi, Judge Holmes, best holiday wishes to you and the whole crowd at The Glass House).

Elaine testifies credibly she didn’t know that Rob Roy was going to stiff the Federales, despite IRS and Rob Roy claiming she did know. Rob Roy was paying timely on a IA covering other years at that point, so she reasonably thought he’d throw this one in as well.

“We are more persuaded by the specific conduct pointed out by petitioner than we are by the general description of her and intervenor’s financial condition at the relevant time. We consider this factor neutral, rather than weighing against relief, as respondent scored it.

“On the other hand, because in the marital separation agreement, petitioner agreed to pay half of the…liability, we weigh the legal obligation factor against granting relief, even though respondent scored the factor as neutral.” Transcript, at pp. 6-7.

You can see STJ Lew reaching for that mantle, and the scourge of whips attributed by his successor to the famous Judge above-cited.

“We are particularly influenced by petitioner’s agreement to pay half of the [year at issue] liability. We are also influenced by the decision made by petitioner and intervenor to pay certain expenses rather than their [year at issue] income tax liability. Although the record shows their financial situation was less than comfortable, the record also shows that they had the resources to pay the liability but chose to save or allocate funds for other Purposes [sic]. Lastly, we are influenced by the fact that the unpaid [year at issue] liability is mostly, if not entirely attributable to intervenor. Giving effect to the martial settlement agreement, we see no reason why petitioner should continue to be liable for his share, nor do we see any reason why, or consider it inequitable to continue to hold her liable for hers.” Transcript, at pp. 7-8.



In Uncategorized on 04/18/2019 at 16:06

The USDCJ spoke for most of humanity when he said “I don’t know what effect that has on the Internal Revenue Service with all your penalties and interests [sic] and whatever, it seems to me that if you hope to get anything out of this guy, freezing his number at $507,995 is a pretty good idea.  And that is what’s ordered by the court.” Randy Alan Carpenter, 152 T. C. 12, filed 4/18/19.

Randy Alan went down for two years’ worth of fraudulent returns, thus the $500K-plus restitution. But the USDCJ also ordered $100-per-month payments, although at the same time he said the entire amount was immediately payable.

Randy Alan claims he’s broke, but when IRS filed NFTL and NITL, Randy goes to Appeals, withdraws his request for collection alternatives, and says IRS needs a further order from USDCWDNC before they can grab whatever little he has.

No way, says Judge Mary Ann (“S.E.C. = She Eschews Cognomens”) Cohen.

“With the enactment of section 6201(a)(4) Congress expanded the Secretary’s collection authority in relation to criminal restitution ordered after August 16, 2010.  See Firearms Excise Tax Improvement Act of 2010 (FETIA), Pub. L. No. 111-237, sec. 3, 124 Stat. at 2497.  This provision directs that ‘[t]he Secretary shall assess and collect the amount of restitution under an order pursuant to section 3556 of title 18, United States Code, for failure to pay any tax imposed under this title in the same manner as if such amount were such tax.’” 152 T. C. 12, at p. 15. Moreover, IRS isn’t bound by SOL while any appeals from the criminal conviction are taken and decided. See Section 6501(c)(11).

As if. Hans Vaihinger, thou should’st be living at this hour.

There’s a whole megillah (please pardon arcane technical term) about whether a USDCJ’s oral comments about payment schedules overrides that same jurist’s statement that restitution is “immediately due.” When you’ve read the opinion and you’re thoroughly confused, the best I can tell you is “it depends.” In Randy Alan’s case, though he stuck to the schedule ($100-per-month), it avails him not. The USDCJ used the magic language in the magic way.

Neither Section 6230(b) nor Section 6330(b) precluded Randy Alan from offering a collection alternative, even in a restitution case, but he was behind four (count ‘em, four) years’ worth of tax returns when he petitioned, so that route didn’t look too auspicious.

IRS did abate interest and penalties. For the skinny on this, see my blogpost “IRS Gets Zip,” 10/3/17.

Takeaway- Criminal defense Bar, please stay safe out there. If you want a schedule, make sure the USDCJ says “schedule payment and not, repeat not, immediately due.”


In Uncategorized on 04/17/2019 at 16:03

Much fanfare accompanied the promulgation of the so-called “Taxpayer Bill of Rights.” Judge James S (“Big Jim”) Halpern has compressed this title into TBOR, and I shall do likewise.

Maria Ivon Moya, 152 T. C. 11, filed 4/17/19, claims IRS trampled on these rights by not giving her an audit nearer her home, sent her misleading correspondence, and inconsistent information. But Maria Ivon never challenged IRS’ determinations blowing off her Sched C losses and raising her taxable Social Security payments. And although she timely petitioned the SNOD IRS sent her, she never assigned error to what IRS did. And Judge Big Jim catechized Maria Ivon both telephonically and personally to raise specific issues with IRS’ numbers. She didn’t.

In her post-trial brief, Maria Ivon complained about IRS’ counsel and the Taxpayer Advocate not helping her, but Judge Big Jim says even if he considered that, it wouldn’t change the result.

Maria Ivon argues the SNOD was invalid because IRS violated her rights. Well, apparently Mark Zuckerberg tried a similar move based on TBOR back in 2017 in USDCNDCA; see Facebook and Subsidiaries v. Com’r, 17-cv-06490-LB, 2018. Mark fared no better.

Greenberg’s Express is the barrier. In a deficiency case, you get a de novo review. Therefore, all that is past isn’t even prologue. For sixty bucks and a certified letter, you get a new shuffle-and-deal, whatever IRS did or didn’t do.

When TBOR first blipped the radar, its biggest proponent, NTA Nina E. (“The Big O”) Olsen, made it crystal clear that no new rights were created thereby. All TBOR did was put in one place, and in simple terms, what was scattered throughout the IRC.

Legislative attempts to require IRS’ high command to “teach them diligently” to all IRS personnel, and to “talk of them when thou sittest in thine house, and when thou walkest by the way, and when thou liest down, and when thou risest up,” as a much more Exalted Authority put it in connection with ten much more significant pronouncements, never got enacted.

Simple, right? Raise your objections to the deficiency in your petition, or lose them; forget the IRS’ missteps. Only the most blatant Constitutional violations will avail, and this isn’t such a case.

One thing puzzles me: IRS ”…alleges that petitioner will have the opportunity to resolve this case with the IRS Office of Appeals.” 152 T. C. 11, at p. 6. How? Maria Ivon had her chance in this proceeding, and never addressed the deficiencies themselves. No way do you get a second chance at liability on a CDP if you got the deficiency, petitioned it, and lost in Tax Court. Maybe IRS meant CNC, IA, OIC as to collection, but that was certainly a misleading statement.

Howbeit, this case was hardly well-litigated, and I’m sorry we didn’t get a better fact pattern and record in a precedent-setting case.

“Neither party has presented us with a rigorous argument either way as to whether the IRS TBOR accorded petitioner rights the violation of which would give us reason to ignore the principle articulated in Greenberg’s Express and look behind the notice in order to remediate any violation.  Petitioner has made no argument at all.  Respondent’s argument that rights found in the IRS TBOR are not constitutional rights is perfunctory.  Nevertheless, on our own examination of the question, we conclude that, even if we were to credit petitioner’s claims that, in examining her returns, respondent violated her rights to be informed, to challenge the IRS position and be heard, and to a fair and just tax system (all rights found in the IRS TBOR) and, also, that he failed to afford her an interview near her home in California before he issued the notice, we would neither invalidate the notice, relieve petitioner of any portion of the burden of proof, nor take any other action to remediate those violations or failure.  The simple reasons are that (1) the IRS TBOR did not add to petitioner’s rights and (2) even if everything she says is true, respondent’s missteps that petitioner complains of would not in this de novo proceeding cause us to either lift or lighten her burden of proving error in respondent’s determinations of deficiencies in her tax.” 152 T. C. 11, at pp. 16-17.

So if you get a de novo hearing before an impartial tribunal (which Tax Court is), unless IRS used unConstitutionally obtained evidence, IRS can do whatever it wanted before.

The Taxpayer Bill of Rights is the Taxpayer Bill of Goods.


In Uncategorized on 04/16/2019 at 17:44

Oh, those electrons! Sneaky little chappies, they can undo and confound without regard to age and status.

Here’s the sad tale of Wm W Smith, Esq., name partner in the firm of Smith & Alspaugh, PC, Docket No. 4315-19L, filed 4/16/19.

Looks like Wm W, representing his eponymous PC, filed what Ch J Maurice B (“Mighty Mo”) Foley recharacterizes.

“…petitioner’s counsel William W. Smith filed a Motion For Leave To File Motion for Permission To File with Paper as well as Electronically, which is in fact a motion to be exempt from E-filing.” Order, at p. 1.

Well, we remember the Texas Technophobes, headed by Terri M. Morgeson, Esq. You don’t? Then see my blogpost “The Best Little Low-Income Tax Clinic in Texas,” 7/18/14. And Old Bill Wise, star of my blogpost “(Old) Technophobes, Rejoice!” 12/18/13.

Wm W’s story is that he’s 77 years old and he isn’t proficient at electronic filing.

Well, I’m not all that much younger than Wm W, but I can generally figure out how to scan and get a PDF thereof into most e-filing systems. However, I readily agree not everyone can assimilate the Body Electronic.

But Wm W sets off his own electronic petard.

“He further states that he will attempt to electronically file, and in fact, electronically filed his motion to be exempt from electronically filing.” Order, at p. 1.

But instead of giving Wm W a “well done” for having mastered the new (to him) electronic frontier, Ch J Mighty Mo gives Wm W the toss.

“In pertinent part, Rule 26(b), Tax Court Rules of Practice and Procedure, generally provides that electronic filing is required for all papers filed by parties represented by counsel in open cases. Mandatory electronic filing does not apply to petitions and other papers that are not eligible for electronic filing. Rule 26(b)(1), Tax Court Rules of Practice and Procedure. However, Rule 26(b)(3), Tax Court Rules of Practice and Procedure, provides that any counsel in a case upon motion filed in paper form and for good cause shown may be granted an exception from the electronic filing requirement.” Order, at p. 1. (Emphasis by the Court).

Wm W, you filed electronically, so you are forever electronicuted.


In Uncategorized on 04/16/2019 at 15:51

Sorry, George Jones and Speedy, but relief from (getting out of) a signed stipulation in US Tax Court is not “just a swallow away.”

Just ask Edward Roberson & Connie Roberson, Docket No. 27486-15, filed 4/16/19. And Judge Buch will definitely roger that transmission.

Ed & Connie were fighting with IRS over Ed’s Sched C. They were on for trial last November. They answered the calendar call and were awaiting trial, when they stiped out. Fellow practitioners tell me that maybe 70% of Tax Court cases on the calendar either get bounced on default or are stiped out.

IRS promptly sent the decision documents to Ed & Connie in November. Judge Buch gave them to January 7 this year to sign, but Shutdown.

When IRS went back to work, Ed & Connie said they weren’t signing, because the Sched C income was lower and deductible expenses higher.

IRS moved to enter decision (what we State courtiers call “judgment”) based on the stip; Ed & Connie counter with their revised numbers.

Judge Buch: “We may modify or set aside a stipulation that is clearly contrary to the facts, but we do not set aside a stipulation that is consistent with the record simply because one party claims the stipulation is erroneous. We may grant relief if a party asserts contractual defenses, but a unilateral mistake of fact in a binding, unambiguous stipulation is not a ground for relief.

“The Robersons did not present any contractual defenses. The Robersons raised the issue of this alleged error only after the parties entered into the stipulation. The Robersons’ unilateral mistake (assuming there was one) is not grounds to set aside a contract.” Order, at p. 2. (Citations omitted, but get them for your memo of law file).

The Robersons claim the stip was a “take it or leave it” proposition. But they knew from IRS’ amended answer four months before trial that Sched C numbers were on the table.

And finally, the real point: “Moreover, the Robersons were represented by their counsel who also had notice of the items in dispute. The parties thus freely and fairly signed the stipulation long after both parties were aware of what was at issue. We are reluctant to relieve a party from a stipulation when the party entered into the stipulation with full knowledge of the relevant facts.” Order, at pp. 3-4. (Citations omitted; see above parenthetical).

Of course, Ed & Connie could have gone to trial. They didn’t, so they’re stuck. Who stipulates, capitulates.


In Uncategorized on 04/16/2019 at 10:28

Always eager to help my colleagues, I refresh my reference to separate checks for attorneys appearing in Tax Court: there is no Entry of Appearance for law firms.

See my blogpost “Separate Checks,” 9/1/15.

Today we have an attorney, in the firm that represents the petitioners, trying to solve a problem expeditiously with a letter, and getting unceremoniously tossed by Ch J Maurice B (“Mighty Mo”) Foley.

See Gelacio R. Nepomuceno & Nancy G. Nepomuceno, Docket No. 4510-19, filed 4/16/19.

Unfortunately the only currently-filed Entry of Appearance names the senior managing attorney individually.

Perhaps the problem-solver should have enclosed her own Entry of Appearance with her letter.

Word to the Chief Clerk: There exist such things as law firms, with principals and associates all of whom are admitted to Tax Court. So there really needs to be a new form of Entry of Appearance, recognizing that law firms do exist, that various attorneys employed therein share files among themselves, and might occasionally ask a colleague to cover a routine matter while on trial or on vacation. Maybe we don’t need the covering attorney to file an Entry of Appearance for essentially a one-time appearance. Perhaps a one-size-fits-all law firm Entry of Appearance, listing all admittees in one place, might save time and paper (or electrons).

Meantime, to my law firm colleagues, and any solos using per diems, make sure everybody has an Entry of Appearance (Form 7) to send in (in duplicate) any time they need to step in for the colleague or solo.