Today William James Basie meets William Shakespeare yet again, as we examine Irvin Hannis Catlett, Jr., 2019 T. C. Memo. 86, filed 7/11/19. Irv is petitioning a NOD from a CDP, but IRS has withdrawn the NFTL and abated all the assessments underlying same, so Judge Albert G (“Scholar Al”) Lauber dismisses Irv’s petition as moot.

Irv ran a tax prep operation, from which he got the assessments and NFTL at no extra charge. He went down in USDCDMD on one count of conspiracy to defraud the US of A (18 USC §371), ten (count ‘em, ten) counts of Section 7206(2) prepping phony tax documents, and one count of Section 7212 obstruction. 4 Cir. affirmed, so Irv at time of petition is our guest, and is expected to remain so until 2026.

Oh, and the District Court ordered $3.8 million in restitution, to be paid $500 per month during Irv’s three years of supervised release, which commences when Irv is sprung.

Well, since Irv doesn’t owe until he starts his supervised release in 2026, IRS can’t assess, lien or levy. But once he rejoins the Free World, IRS will be back.

Irv yells “No! Remember Vigon!” I’m sure all y’all vividly recollect Matthew Dean Vigon, star of my blogpost “Crafty – Akin to the Weasel,” 7/24/17.  Irv’s argument is that releasing the lien and abating the assessments doesn’t determine my liability, and I didn’t get a fair trial.

Judge Scholar Al distinguishes both himself and Matty Dean.

“The Tax Court is an Article I court that is not directly constrained by the case or controversy requirement under Article III of the Constitution.  However, the same principles apply to the exercise of our judicial power.  Accordingly, we will dismiss a case as moot if the parties’ subsequent actions have produced a situation in which neither party retains any ‘legally cognizable interest in the outcome.’

“Generally, a CDP case becomes moot when we can grant the taxpayer no further relief.” 2019 T. C. Memo. 86, at p. 7. (Citations omitted).

But of course Tax Court can redetermine liability where petitioner had no chance to litigate same before. Except Irv did. He lost his trial in USDCDMD, 4 Cir affirmed, and that affirmation is final.

“The instant case differs from Vigon in a critical respect.  The premise of our analysis in Vigon was that the taxpayer had raised a proper challenge to his underlying liability for the penalties, a challenge that we had the authority to adjudicate. Petitioner, by contrast, has not raised a proper challenge to his underlying liability for the restitution, and we have no authority to adjudicate that question. His liability for the restitution was fixed by the District Court’s sentencing order, which is now final, and section 6201(c)(4)(C) bars him from challenging the amount of the restitution he has been ordered to pay.” 2019 T. C. Memo. 86, at pp. 11-12.

Matty Dean was fighting Section 6702 nonassessables. You can’t petition those, since you get no SNOD for those, so no Tax Court trial. Irv got a USDC trial and a 4 Cir appeal.

“In sum, petitioner’s underlying liability for the restitution is not properly before us.  By withdrawing the NFTL filing and abating the assessments as premature, respondent has afforded petitioner all the relief to which he was entitled at the CDP hearing.  Because there is no other relief that we can possibly grant, there is no case or controversy left for us to decide, and we will accordingly dismiss this case as moot.  If respondent elects to reassess the restitution after petitioner is released from prison, current law permits petitioner to challenge that collection effort (on grounds other than nonliability for the restitution) at a future CDP hearing. And if he is dissatisfied with the outcome of that hearing, he may petition this Court for review.” 2019 T. C. Memo. 86, at p. 13.

I make the morning line 8 to 5 that Irv will be back in 2026.

Edited to add, 8/25/21: Hope no one took the bet. See my blogpost “Running Around the Bases,” 8/16/21.

No question that his employers never reimbursed Sunderam Krishnan, 2019 T. C. Sum. Op. 14, filed 7/10/19, for any “…relocation, rent, meals, telephone, internet, equipment, traveling, or commuting costs while he was working on contract projects for its clients.” 2019 T. C. Sum. Op. 14, at p. 4.

And Sun certainly worked in different places.

But his contacts with his uncle’s home in Santone were too tenuous to make it home, so STJ Panuthos finds Sun’s tax home was wherever he might be.

And Sun’s recordkeeping didn’t even come up to shoebox standards.

Sun’s bank records are sufficient, though, to get him cellphone and internet, as what he claims for business was far less than his total bills. And the 2009 liberation of cell and internet from the Section 274 straitjacket definitely helps.

Sun is an IT expert. Too bad he didn’t have the usual software to set up his records.

Unlike Oscar Hammerstein II’s heroine walking through a storm with her head held high at the close of Carousel, Jaroslaw Janusz Waszczuk, Docket No. 23105-18W, filed 7/9/19, will find that he will be tossed if he doesn’t agree to IRS’ standard Rule 103 shield order, protecting the Section 6103 return info of the blown third-party, which IRS will hand over to JJ in the course of discovery.

JJ protests. “…petitioner filed a 136-page Opposition to respondent’s aforementioned motion, alleging such motion to be ‘frivolous, meritless, and groundless’. Petitioner then goes on to allege that ‘By granting the Motion for Protective Order to Respondent, the Court would interfere with Petitioner’s litigations in State of California Courts and with Petitioner’s complaints with various state and federal law enforcement agencies.’ The scores of pages and exhibits that then follow this allegation suggest to this Court (i.e., to the Tax Court) that petitioner may regard the present whistleblower proceeding as collateral to his other ‘litigations’ and ‘complaints’ and that he may also regard the present whistleblower proceeding useful in unearthing material for his use in such other ‘litigations’ and ‘complaints’.” Order, at p. 2.

The Judge with a Heart, STJ Robt N Armen, is unimpressed.

IRS won’t dish Section 6103 protected info without a tough protective order, limiting the use thereof to this case only. And without the Section 6103 info, JJ should understand he “…has little, if any, likelihood of success in this Court insofar as the whistleblower’s claim for reward under section 7623(b) is concerned. (This is not to say that the disclosure of Section 6103 Information by the Commissioner to the whistleblower assures such success.).” Order, at p. 3.

But STJ Armen lets JJ decide: he can withdraw his opposition, consent to the Rule 103 gag, and try his whistleblower but nothing else. Or he can continue to object, in which event he gets nothing, and can play the Michael Corleone gambit.

But because of JJ’s predilection to leap into print, STJ Armen cautions him.

“(A) lengthy response to this Order is not required; indeed, a lengthy response would be inappropriate and may be regarded by the Court as tantamount to petitioner choosing….” to oppose the motion and get nothing. Order, at p. 4.

And if JJ tries to rewrite the Rule 103 order, he’ll be deemed to have chosen to oppose and get nothing.

So if JJ wants to grab the spoils from the blown, he had better not get the Rule 103 gag tossed.

Edited to add, 6/5/20: Doesn’t matter whether JJ was gagged or not, he got tossed. See 2020 T. C. Memo. 75, filed 6/4/20.

Today we have two more candidates for the “’ollow square” treatment.

First, to establish that it is unwise to try to stonewall IRS, especially when you have massively understated income, we have Shahram Kohan and Yonina Kohan, 2019 T. C. Memo. 85, filed 7/9/19. Judge Albert G (“Scholar Al”) Lauber is unimpressed by Shah’s less-than-candid testimony, especially after he tried stiff-arming the IRS examiner, dodging informal discovery, and ignoring court-ordered formal discovery. Shah (that’s Doctor Shah, dentist) finally hires counsel, and admits to underreporting better than $300K in each of two years. He never mentioned the cash and credit card payments he got, only the insurance reimbursements and a guess at the copays.

Scholar All pins five of the eight badges of fraud on Doctor Shah.

Second is STJ Panuthos expending 123 (count ‘em, 123) pages of prose on Martin A. Kapp, 2019 T. C. Memo. 84, filed 7/9/19. Martin is a CPA and EA, and his specialty was misinterpreting two Tax Court cases, thereby causing some thousands of mariners to claim deductions for meals provided by their employers, for which they were never charged. In short, claiming expenses, either for which they were reimbursed or never paid.

STJ Panuthos quotes at length from Martin’s websites, wherein he promised the jolly tars mighty refunds. Martin apparently was unaware that, while it pays to advertise, a short glance at 2 Samuel 1:20 would counsel a lower profile.

Although enjoined by USDCCDCA, affirmed by 9 Cir., at the close of play, Martin goes down for Section 6701 phony return chops for 5,176 (count ‘em, 5,176) returns over four years. That’s a three million dollar hit.

March off.

Samuel Wegbreit and Elizabeth J. Wegbreit, 2019 T. C. Memo. 82, filed 7/8/19, have unerring noses for fraud. And among other frauds, they meet up with “…Sugarloaf Investment Fund (Sugarloaf).  Sugarloaf contributed Brazilian receivables to the [Wegbreit phony trust] as part of a distressed asset trust transaction (DAT transaction).  Petitioners Wegbreit claimed losses generated by the DAT transaction on their return….  Their deductions of losses in the DAT transaction were not allowable, and the parties have stipulated that they would be bound by this Court’s final judgment in Kenna Trading, LLC v. Commissioner, 143 T.C. 322 (2014), aff’d, 911 F.3d 854 (7th Cir. 2018).” 2019 T. C. Memo. 82, at pp. 39-40.

Readers of this my blog will recall Mr. Rogers and his dicey neighborhood; if not, see my blog “To Build a Record,” 10/16/14.

But there’s a lot more. Backdated documents, dubious notarial acknowledgements, trusts that are alter egos, and offshore insurance policies from insurers whose existence is, let us say, problematic. And trial  testimony that is, shall we say, unhelpful.

Judge Mary Ann (“S.E.C. = She Eschews Cognomens”) Cohen trudges through the morass and nails the Wegbreits on all counts.

But she seems to have gotten little help from counsel on both sides. “The number of documents in the record that are on their face unreliable has made this case considerably more difficult.  Our chore is compounded because the parties included numerous duplicate copies of key documents without explanation or analysis.  Notwithstanding the Court’s comments and directions at the conclusion of the trial, the briefs of the parties failed to focus on the material facts.  Respondent’s proposed findings of fact merely summarize testimony and documents and generally fail to analyze the transactions and entities involved.  See Rule 151(e).  Respondent continues to use the shotgun approach to theories of the case rather than selecting the strongest arguments and focusing on them.  Petitioners Wegbreit’s briefs misstate the record and are unreliable.  After dealing directly with the record with little aid from the parties’ briefs, we conclude that the reliable evidence is clear and convincing as to unreported income and fraudulent intent.” 2019 T. C. Memo. 82, at pp. 48-49.

Takeaway- Make the judge’s job easy, and she might make yours easy, too.

Being engaged has its upsides and downsides, as Joseph Thomas Lander & Kimberly W. Lander, Docket No. 25751-15L, filed 7/8/19, find out. This is a 33-page designated hitter from STJ Daniel A (“Yuda”) Guy, which is up for comment by the parties per Rule 183(c), and referral to Ch J Maurice B (“Mighty Mo”) Foley for ultimate disposition. See Rules 182 and 183; these don’t happen very often.

JT was in the slammer, and Kimberly had POA, and the IRS exam unit first bounced Kim’s protest of the 30-day letter, and then got the certified mail numbers wrong on the SNODs (they put JT’s SNOD in the envelope with Kim’s number, and vice versa), but the last known addresses were right.

Except Kim never picked up hers, and JT’s went to the slammer from which he had been moved before the SNOD got there (although he was still there when it was mailed).

After the usual argy-bargy, the Taxpayer Advocate got JT and Kim an audit reconsideration, which didn’t resolve their protests, so the case got sent to Appeals. In the meantime, JT got sprung.

JT & Kim argued they never got the SNODs, but the AO met with them twice, and in the end knocked off $61K of tax (and the interest thereon) and about $30K in penalties. There followed a NFTL for the rest.

JT & Kim filed Letter 12153 to fight over nonreceipt of the SNODs, to claim they couldn’t pay, and Kim wants innocent spousery.

At this CDP, the SO said they’d settled at the audit reconsideration-to-Appeals, so no go, but didn’t address collection alternatives nor innocent spousery. STJ Yuda proposes to buck those issues back to Appeals.

But the key here is engagement: JT & Kim had full opportunity to fight over the capital gain vs unreported income in one of JT’s partnerships.

First, the mixed-up certified mail numbers.

“The Court finds that the information recorded on Form 3877 and confirmed by USPS.com track and confirm records is correct and accurate and that Tax Examiner M inadvertently switched the certified mail numbers associated with the [Kim] and [JT] notices when he prepared the file copies in question. Although TE M’s error caused confusion, it does not undermine the trustworthiness of the cumulative evidence related to the mailing of the notice of deficiency by certified mail outlined above.” Order, at pp. 25-26 (Name omitted).

For another case of getting certified mailings messed up, see my blogpost “Going Postal, 2/4/13.”

Now for engagement.

“The record shows that petitioners were afforded a postassessment conference with the Appeals Office. After the IRS sent petitioners a notice and demand for payment of the tax due…, they requested a reexamination of their tax liability. The audit reconsideration process that followed began with a review of the matter by the Examination Division. When the Examination Division reaffirmed the adjustments to petitioners’ tax liability as determined in the notice of deficiency, they requested and were granted an independent review in the Appeals Office. AO B engaged with petitioners, took a fresh look at the record, conceded certain issues, and abated a significant portion of the tax previously assessed against them. Only then did the IRS file the tax lien that led to the additional collection review proceedings in the Appeals Office and this action.

“Petitioners’ argument that they were not given a full and fair opportunity to challenge their tax liability during the audit reconsideration process is belied by the record.” Order, at p. 30. (Name omitted).

More engagement.

“The record shows that petitioners were fully engaged with AO B, that he reviewed the evidence and arguments that they presented to him, and that in the end petitioners enjoyed a full and fair opportunity to challenge their underlying tax liability before the Appeals Office during the course of the audit reconsideration process. Under the circumstances, the Court is satisfied that the Appeals Office correctly determined, within the context of the collection review process, that petitioners had an opportunity to dispute their tax liability within the meaning of section 6330(c)(2)(B).” Order, at p. 31 (Name and footnote omitted, but the footnote says JT & Kim and pay and sue for a refund).

Be careful about getting engaged.

Voltaire’s famous deathbed riposte to the Abbe gives me my headline. But today it’s Alfred Q. Campbell, III, Docket No. 3597-17L, filed 7/5/19, who’s posed the question, and Judge Albert G (“Scholar Al”) Lauber wants to know what IRS thinks about it all.

Alf Q. petitioned a NOD, got remanded for a supplemental CDP when he claimed he never got the NITL, but at the supp IRS produced the certified mail list showing mailing to last known address, so sustentation of NOD and back to Tax Court.

Alf Q claims signer of NITL, Bill B, wasn’t appropriately delegated by the then-Sec’y, so NITL invalid.

“Petitioner did not contend in the original hearing, the supplemental hearing, or his petition that Mr. B was not duly authorized to issue the notice of deficiency [sic]. Rather, he raised this argument for the first time when responding to the summary judgment.” Order, at pp. 1-2. (Name omitted).

Judge, this was a Section 6330 CDP, so wasn’t the Letter 3219 a Notice of Intent to Levy, and not a Notice of Deficiency?

Howbeit, the question is whether the SO must check the IRM delegation list before issuing the NOD, or whether IRS can come up with it later, even on the Glasshouse steps on the day of trial.

“In two recent CDP cases the Court has considered whether notices of deficiency were signed by duly authorized individuals. See Gregory v. Commissioner, T.C. Memo. 2018-192 at *8-*9; Williams v. Commissioner, T.C. Memo. 2018-50 at *5. In each case the Court held that the notices were valid because the person signing each notice was authorized by IRS Delegation Order 4-8, as set forth in the Internal Revenue Manual pt. 1.2.43.9 (Sept. 4, 2012). Because the signatory was duly authorized, we had no need to decide whether an SO would abuse his discretion if he did not investigate that question sua sponte.” Order, at p. 2.

For whatever reason, I didn’t blog either Gregory or Williams.

“The Court would benefit from knowing respondent’s position on two questions: (1) whether a taxpayer may challenge in this Court an SO’s verification of an assessment on the ground that the person signing the notice of deficiency lacked delegated authority to do so, where the taxpayer did not advance that argument at any point during the CDP hearing or (as here) the supplemental hearing; and (2) whether Mr. B was duly authorized to issue the notice of deficiency in this case.” Order, at p. 2. (Name omitted)(See my earlier comment: NITL, not SNOD).

Whatever IRS says about (1), I’m betting this case comes off over (2).

Edited to add, 8/6/19: I may have been mistaken, although it isn’t clear from Judge Scholar Al’s order. Alf Q. may have been challenging Bill B’s signature on the SNOD which led to the NITL, which SNOD Alf Q. may not have petitioned, and not the signature on the NITL.

I’d appreciate enlightenment.

Memory takes me back today to story-time with my two little princesses, so long ago. The book was R. J. Unstead’s “Princes and Rebels”; I would interpolate into Mr. Unstead’s prose certain remarks of mine own. The heroine of this story, Margaret Paston, 15th Century fighting woman and epistolarian, was again besieged, and desperate to find money to fund the family’s numerous lawsuits.

I interpolated “The lawyers would not be paid!” On cue, my babies responded “Wooo!” Young as they were, they well understood much depended upon a certain lawyer being paid.

Well, today Judge J. R. Goeke has the gladsome news for the lawyers for Blue Lake Rancheria Economic Development Corporation, Docket No. 16150-17L, filed 7/5/19.

“ORDERED and DECIDED that petitioner is entitled to reasonable litigation costs in the amount of $483,331.93.” Order, at p. 1.

For the whole story, see my blogpost “Indians Divided and Not Taxed,” 3/6/19.

As written by Ms. Gretchen Peters and sung by Ms. Martina McBride; and very definitely off-topic.

“Let freedom ring, let the white dove sing/ Let the whole world know that today is a day of reckoning/ Let the weak be strong, let the right be wrong/ Roll the stone away, let the guilty pay/ it’s Independence Day.”

Although the hard-laboring clerks, flailing datestampers, STJs, judges, and auxiliaries of every type have taken themselves off to the beach and barbecue from The Glasshouse at 400 Second Street, NW, there are some dozens of orders today.

And before this blogger “homeward plods his weary way,” as a much finer writer put it, I note the appearance of the successor to the Ownership Disclosure Statement (Form 6), that has baffled corporatists and even their advisers, even to the degree of getting their petitions tossed for failure to write “NONE” twice.

Its successor has Ch J Maurice B (“Mighty Mo”) playing geography, sending self-representeds off to trial at a venue of his choice,, because these petitioners failed to include Request for Place of Trial (Form 2), even though a nice clean copy thereof was included with the petition form.

I wonder what’s next?