Judge Albert G (“Scholar Al”) Lauber understands that more than one expert may have prepared an expert witness’ report. So each needs to testify on the trial. And the best way to find the truth is to try the case.

But there’s also the question whether their report (which is their direct testimony) should be admitted.

This is the latest tactic in the ongoing conservation easement joust, the motion in limine. Ordinarily, I like motions that dispose of major issues, if not the whole case. But not when they’re just time-wasting paperchasing.

Here’s Plateau Holdings, LLC, Waterfall Development Manager, LLC, Tax Matters Partner, Docket No. 12519-16, filed 5/14/19.

The report in question, the usual before-and-after appraisal, has two authors.

“…respondent urges that the Report is problematic because it represents the testimony of two experts, without making clear which expert is responsible for which portions. According to respondent, this could complicate the task of cross-examination.

“In the case of a co-authored report, we agree with respondent that both experts must testify in person and be subject to cross-examination. If the experts do not share all opinions or if they did not work collaboratively to reach those opinions, then that division of opinion or labor must be disclosed.” Order, at p. 2. (Citations omitted).

But the answer is to sweat the “experts” on the stand on voir dire (that’s checking out their qualifications and whether they are experts), finding out who did what and when and where and how, and whether they worked together. Tossing the report doesn’t get it.

And though their report valued two easements together rather than separately, and used allegedly dubious methodology, that’s not grounds to exclude. Rather, that’s a chance for the vigorous cross-examination and production of contrary, probative evidence at the trial.

If the experts flunk the voir dire, they can be tossed at that point. Even if they survive, their evidence may not withstand that “best legal engine for discovery of truth yet invented.”

So it’s time to get to work.

Tax Court self-representeds are endlessly inventive. The hard-laboring blogger is often overmastered, trying to keep up with their improvisational reinventions of the game.

Martin G. Plotkin, Docket No. 16224-14L, filed 5/13/19, has kept the ball in the air for nearly five (count ‘em, nearly five) years, and is still fresh as a cliché. He got Judge Morrison to pull his order and decision granting IRS partial summary J, so as to consider Martin’s motion for reconsideration, because Martin eschews electronic filing.

But Martin isn’t through, not by a long chalk.

Martin wants to set up a bench-clearing brawl at the Glasshouse on Second Street. He moves for reconsideration en banc.

“The motion in question asks the entire Tax Court to review various actions in this case. Neither the Internal Revenue Code of 1986 nor the Tax Court Rules of Practice & Procedure provides for such a motion. Section 7460(b) of the Internal Revenue Code of 1986, provides that a report of a division of the Tax Court becomes the report of the Tax Court within 30 days after the report by the division, unless within such period the chief judge directs that such report be reviewed by the Tax Court. Section 7460(b) does not allow a party to move for review by the Tax Court. Furthermore, the 30-day period described in section 7460(b) has expired. The motion is procedurally improper and will be denied.” Order, at p. 1.

Even though the banc shot doesn’t go in (sorry, guys), ya gotta give a tip of the old trilby to Martin. Inventiveness is his long suit.

But Be Reasonable

Fred B. Barbara and Lisa M. Barbara, 2019 T. C. Memo. 50, filed 5/13/19, had a trusty attorney, whom I’ll call John. John gets Fred into the materially-participated charmed circle, so his money-lending business’ NOL from a closed year is portable to the open years at issue.

But getting there wasn’t half the fun, the old Cunard commercial to the contrary notwithstanding. Fred and Lisa made some concessions, but all John argued was that Fred was reasonable in claiming he materially participated, not that he was reasonable in every position he took, even though he later folded some of them.

Of course, Fred and Lisa are OK on the materially-participated front, so they were more than reasonable – they were right.

But IRS got the Section 6751(b) Boss Hossery right, wherefore the Section 6662(d)(1) five-and-ten chops for the whole picture will await the Rule 155 beancount Judge Morrison orders.

“There were other adjustments in the notice of deficiency that are unrelated to whether Mr. Barbara materially participated in the lending business.  Many of these adjustments were conceded by the Barbaras and could result in underpayments for the years at issue.  However, the Barbaras did not argue that the reasonable-cause exception applies to any portions of underpayments due to these conceded adjustments.  The Barbaras did not propose findings of fact regarding these conceded adjustments.  The record does not show that the reasonable-cause exception applies to these conceded adjustments.  The Barbaras did not make any arguments on brief about these conceded adjustments or the applicability of the reasonable-cause exception to these conceded adjustments.  In summary, the Barbaras do not argue, and the record does not support, the applicability of the reasonable-cause exception as to these conceded adjustments.” 2019 T. C. Memo. 50, at pp. 9-10.

All y’all will recall that IRS often folds in a case, but when the prevalent party asks for Section 7430 legals and admins, IRS routinely claims justification (reasonableness?), even when they folded right after the petition his the table. And IRS gets the win, even when they were wrong.

I’m not singling John out. The only football position I ever played is Monday morning (or afternoon, in my case) quarterback.

Takeaway- Your client, was, is, and always will be utterly reasonable, at all times, in all places, in every position they took or will take.  Even when they fold.

No, not the 2000 Indie flick. This is Ch J Maurice B (“Mighty Mo’) Foley revising the Entry of Appearance form to allow for limited appearances, when counsel follows Rule 1.2(c) of the ABA Model Rules of Professional Conduct.

It’s a good start. Check it out: https://www.ustaxcourt.gov/rules/limited_eoa/Admin_Order_No_2019-01.pdf

Now how ‘bout an Entry of Appearance form for firms?

Litigators are conditioned to oppose. When the Lone Ranger rides to their rescue, they suspect Silver is a Trojan Horse, and want to run him out of town. Given the usual course of American litigation, I can’t say that it’s the wrong attitude. But sometimes it’s proof of my old adage: “Lawyers can’t add.”

Here’s our breaker-buddies Eaton Corporation and Subsidiaries, Docket 28040-14, filed 5/10/19.

Eaton is sweating out the “dission” in 2017 T. C. Memo. 147, where apparently the Rule 155 beancount Judge Kerrigan ordered is still undone; for more about that, see my blogpost “Breaking Bad,” 7/26/17. Trying to move the case, the parties cross-moved for summary J, but didn’t get it. They got a full-dress T. C. instead. See my blogpost “When Judge Gustafson Dissents,” 2/25/19.

Well, with nothing doing, and trial not yet scheduled, IRS decides to stir up the old silt by moving to amend its answer.

“Respondent’s requested first amendment to answer seeks to raise a new issue which would adjust petitioner’s income under sections 951 and 956. This new issue involves petitioner’s upper-tier CFCs’ loans to one of its U.S. corporations, AT Holdings Corporation (Loans). Respondent’s position is that the Loans are ‘obligations of a United States person’ and, as such, are U.S. property under section 956(c)(1)(C), supporting an increased income inclusion to petitioner under section 951(a)(1)(B). In support of respondent’s motion, respondent states that because the increased income to petitioner would result in redetermined adjustments for each taxable year in an amount less than the amount determined in the notice of deficiency, the requested first amendment to answer does not result in an increased deficiency for any year.” Order, at p. 2.

Well, sound discretion of the Court, avoid more trial prep and more expense, and all that jazz. But at close of play, IRS is asking for less than the SNOD sought that started this fight.

Eaton’s counsel, white shoe to the core, objects.

“Petitioner contends that respondent’s motion would cause petitioner to suffer substantial delay and prejudice. Petitioner further contends that respondent previously had ample opportunity to identify and characterize the Loans as U.S. property attributable to the upper-tier CFC partners, and that respondent’s mischaracterization results from a lack of due diligence.” Order, at pp. 2-3.

Well, maybe IRS could have done better, but Judge Kerrigan doesn’t see how Eaton is really hurt.

“…, the circumstances of this proceeding do not meet the requisite prejudice or delay to justify denial of respondent’s motion. The requested first amendment to answer will not require substantial new preparation at a late stage in the proceedings, nor will it ‘surprise and/or unfairly disadvantage’ petitioner.” Order, at p. 3. (Citation omitted).

Even though Judge Tamara Ashford follows counsels’ lead in calling it the “crewmen’s exemption,” I’ll jump headlong into the Twentieth Century (if not the Twenty-First) and call it the “crews’ exemption.” For those whose practice is limited to these shores, check out Section 3121(b)(4).

Now that y’all are aboard, let’s hoist the revenue pennant to the maintop, and muster the IRS boarding party.

DAF Charters, LLC, 152 T. C. 14, filed 5/9/19, is a FL LLC wholly-owned by a Cayman Islands corporation. So DAF is disregarded, and all its tax attributes are those of its owner. For the year at issue, DAF operated the charter yacht Diamonds Are Forever in and out of US territorial waters.

Except.

The issue is FICA. An LLC is a regarded taxpayer since 2009, when FICA is on the menu. See my blogpost “Is an LLC a Person?” 9/11/15.

OK, so DAF is a FL LLC, but the yacht is Cayman Islands registered, so it isn’t an “American Vessel,” as the statute defines that term.

Then is DAF an “American Employer”? And one such is “…a corporation organized under the laws of the United States or of any State.’ Sec. 3121(h); see also sec. 31.3121(h)-1, Employment Tax Regs. (reiterating statutory rule).  Neither section 3121 nor any other provision in subtitle C of the Code separately defines ‘corporation’.” 152 T. C. 14, at p. 15 (footnote omitted, but it says the FUTA definition of “employer” as anyone who pays anyone to do anything works for FICA as well. Nobody doubts DAF was an employer; but was DAF an American employer?).

The famous “check-the-box” regs give all kinds of room for businesspeople to slice and dice their enterprises, be they regarded or disregarded. But when it comes to employment taxes, the statute bodychecks the would be box-checker and makes the entity (LLC) into a corporation and separate from its ownership.

Judge Ashford Judge’splains: “In other words, a disregarded entity is treated as a separate entity for purposes of employment taxes imposed under subtitle C and, in addition, the separate entity is treated as a corporation for purposes of employment taxes imposed under subtitle C and related reporting requirements.” 152 T. C. 14, at p. 18.

Although DAF’s counsel points out what absurd results one might get by variations on the statutory theme, those aren’t this case. DAF proposed no collection alternatives at Appeals, so the levy stands.

Away, boarders!

No opinions or designated hitters today, May 8, 2019, so I have to work through six (count ‘em, six) pages of Tax Court orders, which have the most stultifying effect on me, your blogger. The labors inherent in this search would wear out even the gamest trufflepig in the forests of Limousin.

But I will never quit (well, hardly ever).

Here’s Catera Nelson, Docket No. 3983-19, filed 5/8/19.

Catera neither signed her petition, nor did she fork over the Sixty Buck small blind, so Ch J Maurice B (“Mighty Mo”) Foley gave her a separate order for each, at no extra charge.

Catera stands mute.

IRS answered, attaching the SNOD from which Catera supposedly petitions, but never discusses timeliness of the petition. “Not through the Iron Duke,” says Ch J Mighty Mo, with his weather eye firmly upon the calendar. The SNOD says petition by February 4; Catera’s envelope is postmarked Feb. 15.

OK, so what? The usual OSC why the Court shouldn’t toss Catera for tardiness, right?

Not quite. And thereby hangs the cliché.

Oh yes, there’s the OSC.

But here’s the kicker: “ORDERED that the Court’s $60.00 filing fee for this case is waived, and petitioner is no longer required to pay such amount.” Order, at p. 2.

Unlike Jose F. Pacheco Jaime, whose tale of ducking-by-stip I blogged the other day, and unlike Mark E. Wood, Jr., whose holography got him waived through yestrerday, Catera didn’t even bother trying.

And she still gets a bye, when others would routinely get tossed.

I’m confused. Isn’t the rule that once you break the entry plane at the Glasshouse on Second Street, NW, timely or otherwise, you owe the sixty bucks unless you can get a waiver; but you gotta ask for the waiver.

Or is the sixty-buck-ticket-to-justice optional?

No, not the now-passé, formerly ubiquitous, three-dimensional imagery. Today we have the lesser-known version of the term, meaning “entirely in one’s own handwriting.” This was the delight of the wills and trusts professors of my young day, teasing out those jurisdictions where such scrawls were accorded probate as wills.

If memory serves, recourse to the holographic will was limited to active-duty servicemembers. It needed to be written almost on the field of battle and in the presence of the enemy, the testator having no time to revoke same by the execution of a proper instrument in the presence of alert witnesses and competent counsel.

That doughty guardian of the USTC coffers, ever alert to bounce, without notice or warning, thrifty petitioners who fail to ante up the Big Sixty small blind, Ch J Maurice B (“Mighty Mo”) Foley, lets in a holographic waiver from Mark E. Wood, Jr., Docket No. 6339-19, filed 5/7/19.

“…the Court directed petitioner to pay the Court’s $60.00 filing fee or submit an Application for Fee Waiver for consideration. …(P)etitioner filed a Request for Place of Trial, upon which he handwrote a request for fee waiver.” Order, at p. 1.

Ch J Mighty Mo gives Mark Jr. the waiver.

Word to the impecunious: When you send whatever to the Glasshouse at 400 Second Street, NW, write something about how you want a waiver.

Jose F. Pacheco Jaime, Docket No. 24023-18, filed 5/6/19, didn’t bother signing his petition or sending in the sixty Georges, so Ch J Maurice B (“Mighty Mo”) Foley, having given him a second chance, tossed JFPJ a couple weeks ago (hi, Judge Holmes).

But now JFPJ and IRS have a stipulated decision.

So “upon due consideration and to permit entry of the stipulated decision,” Order, at p. 1, Ch J Mighty Mo vacates the toss.

OK, so what happened to the sixty bucks? We know that defective petitions and unsigned petitions get cured by a stiped decision. But Ch J Mighty Mo has tossed petitions less than a week after they come through the door at 400 Second Street, NW, for want of the sixty bucks. See, e.g. (as my two-Grey-Goose-Gibson-lunching colleagues would put it), my blogpost “The Tossed Petitioner,” 10/29/18.

So can we save sixty bucks by shooting in a petition, stipping out with IRS, and, if in the meantime we’ve been tossed, reversing the toss by entering decision?

Looks like JFPJ did just that. Here’s the stiped decision.

Frequenters of the fountain in Washington Square Park, on this Minor Outlying Island off the North American Coast,  so long ago will remember a lugubrious ditty entitled, if rusty memory serves, “Down in the Valley,” wherein appeared the title hereof. Said lament continued “send it by mail, send it in care of, the Birmingham jail.”

Well, today, Ch J Maurice B (“Mighty Mo”) Foley tells IRS to put His Honor wise as to what happened to the letters from Michael T. Sestak, Docket No. 17286-18, filed 5/3/19.

Mike and IRS are fighting about tax year Y, but the same RA and Mike had a joust over earlier tax year X. Mike attaches some exhibits to his riposte to IRS’ motion to toss to show IRS knew Mike’s epistolary whereabouts long since.

Thus, the SNOD for tax year Y is invalid as not mailed to last known address.

Of course, this brings into play Rev. Proc. 2010-16, 2010-19 I.R.B. 664, specifically Section 5(.04)(1)(b): “Correspondence sent by the Service that solicits or requires a response by the taxpayer that is returned to the Service by the taxpayer with corrections marked on the taxpayer’s address information will constitute clear and concise written notification of change of address.” Order, at p. 2.

So let IRS file a Second Supplement to its Answer to Mike’s petition, stating whether Mike’s exhibits “…constitutes, or should have been treated by the Internal Revenue Service as, clear and concise notification by petitioner of petitioner’s change of address to… SPC McCreary…, Pine Knot, TN 42635, under Rev. Proc. 2010-16.” Order, at p. 2.

This is the second go-round with Mike’s present residence. My readers will remember Mike from my blogpost “Numbered With The Transgressors,” 12/14/18, wherein I moved Mike from TN to KY, an error induced by the happiness of that festal day and which I now correct.

I suggest IRS heed the words of the captioned ballad, and sing along.