I would now embark upon a lengthy diatribe about social engineering, using a mechanism for the designed for the collection of revenue as a welfare fund, and agitating for (or decrying) a comprehensive overhaul of the whole shootin’ match.

But as this blog is not a political one, I will merely refer my readers to the sad tale of Richard Alan Saunders and Shelia Candy Saunders, 2019 T. C. Sum. Op. 29, filed 9/30/19, while echoing the oft-used but unreliably-attributed phrase “no good deed goes unpunished.”

STJ Daniel A (“Yuda’) Guy has the message for IRS as hereinabove at the head hereof set forth (as my already-on-their-second-dirty-Grey-Goose-Martini colleagues would say), delivered via designated hitter,  Albert Carnesale & Robin Carnesale, Docket No. 25757-18S, filed 9/30/19.

It’s Al’s & Robin’s trusty accountant who sends in the check that kicks off the match. Al & Robin agree on the tax due, but want to contest the chops. Trusty accountant sends in check in reply to CP2000, stating “’[Petitioners] received the IRS notice CP2000 * * *. We agree with the changes of the tax liabilities. However, we would like to request that [the IRS] waive the penalty being assessed. * * * Payment for [the tax due] is enclosed with this letter in order to remedy the situation expeditiously.’” Order, at p. 1.

Well, that’s not how you do it per Rev. Proc. 2005-18, 2005-1 C.B. 798. Trusty accountant didn’t provide the 7.02 statement, showing what tax, what year, how calculated, and basis for belief trusty accountant is right.

So IRS wants to toss Al & Robin, as payment was a payment and not a deposit, hence no valid deficiency.

Howbeit, “…IRS recorded petitioners’ remittance as ‘Advance payment of tax owed’. No assessments were entered, however, for the tax, penalty, or interest proposed in the Notice CP2000, which left a credit balance in petitioners’ account. Contrary to the procedures established in Rev. Proc. 2005-18, supra, upon which respondent relies, petitioners’ remittance was not offset by a corresponding assessment of additional tax to which the ‘payment’ relates. See sec. 6213(b)(4).

“On this record, the Court concludes that respondent treated petitioners’ remittance as a deposit, not as a payment, and respondent did not assess additional tax equal to the amount of the remittance before issuing the notice of deficiency.” Order, at p. 2 (Citations omitted).

IRS and trusty accountant could have saved time by reading my blogposts “Which Is It?” 8/27/15, and “Went to Make a Deposit,” 10/5/16.

Before IRS can terminate an accepted OIC for failure of the taxpayer to stick to the straight-and-narrow for five (count ‘em, five) succeeding tax years post-acceptance, and make the taxpayer cough up the whole shebang (less what was previously paid), IRS must send a default letter, warning the delinquent to get with the pogrom.

Here, Brookhaven Appeals terminated without confirming issuance of default letter, and Judge Goeke won’t have that. See Coleman Moore, 2019 T. C. Memo. 129, filed 9/30/19.

Coleman claims he never got IRS’ billets doux. Moreover, the address on one of the checks he sent in to cover a late payment chop had his correct address on it, but his returns all had a P.O. Box, as did the 1040-V payment voucher that accompanied the check. Judge Goeke:  ”The address on this check is hardly clear and concise notification to respondent of petitioner’s change of address.” 2019 T. C. Memo. 129, at p. 27.

True, IRS can terminate an OIC for post-acceptance default. IRS may, but need not, allow a defaulter to cure, even though Coleman ultimately remedied every default. And even though his OIC got retro-bounced after he paid up the defaulted taxes, IRS can still terminate.

Except.

Both IRM Part 5 (exam) and Part 8 (Appeals) say there has to be the default letter before termination. And Coleman, a Caliifornian, is dealing with 9 Cir record rule.

“It is clear that the OIC was not terminated because of circumstances beyond petitioner’s control.  His default was his own doing.  He failed to carefully manage his income tax liabilities and filing obligations for five years after being granted a favorable OIC that was conditioned on his tax compliance.  He also failed to notify respondent of a change to his mailing address.  However, these failures on petitioner’s part do not excuse respondent’s failure to follow his own administrative procedures for terminating an OIC.  The administrative record does not contain a potential default letter providing an opportunity to cure the noncompliance.  If respondent did send a potential default letter to petitioner’s last known address, it is unlikely petitioner would have received it.  However, the administrative record does not establish that respondent sent a potential default letter to petitioner’s last known address.” 2019 T. C. Memo. 129, at p. 28.

Although Coleman did drop the ball a couple times (hi, Judge Holmes), IRS was not faultless.

“We have no way of knowing what respondent may have proposed for petitioner to cure the noncompliance if he indeed sent a potential default letter. What we do know is that petitioner cured the noncompliance promptly once he discovered that he owed additional amounts.  Notably, respondent did not revoke the release of the liens for the years at issue associated with the terminated OIC until after petitioner had already paid the income tax liabilities due, and he did not issue the notice of intent to levy at issue in the original and supplemental CDP hearings until over one year after petitioner had paid the tax.” 2019 T. C. Memo. 129, at p. 29. (Footnote omitted, but read it. It says the termination letter said Coleman failed to cure by a date certain, which seems to show that paying up cures the default in his case).

So Judge Goeke sends them back to appeals, recommending a new SO this time.

Paraphrasing the immortal words of Roger Christian and Brian Wilson, “Well I’m not bragging babe so don’t put me down, But I’ve got the fastest little blog in this town.”

Here’s that Obliging Jurist, Judge David Gustafson, playing catch-up, in Wendell C. Robinson & May T. Jung-Robinson, Docket No. 6446-19L, filed 9/30/19.

“Page 2 of our order of September 27, 2019 (Doc. 21), ironically reflected, in a paragraph describing ‘mathematical errors’, an incorrect figure resulting from an editing error by the undersigned judge. That paragraph should read:

However, the Commissioner’s response shows that the Robinsons’ return reflected six mathematical errors, that their correction increased the Robinsons’ tax liability by $13,267.20 to a total of $101,989.11, and that this larger total was timely assessed….” Order, at p. 1.

See my blogpost “Lawyers Can’t Add – Part Deux,” 9/27/19.

Sam T. Coleridge, That Is

Judge Mark V Holmes was busy today. But not so busy that, like Sammy Coleridge’s nautical immortal, he could not stop one of three.

Here’s Maria G. Leslie, Docket No. 15277-17, filed 9/27/19. This is the coda to a long-running saga, all parts of which haver been resolved by trial, appeal or stip, save one last issue: what part, if any, of Maria’s legal fees in her ongoing despedida from her loved-once, Byron, may she deduct?

Maria claimed she had not legal capacity when she agreed to a split of Byron’s assets. Turns out Byron had another $50 million Maria wotted not of. Then Byron stashed $1.56 million in a trust fund for Maria that she couldn’t touch, but that she had to sue to get. Finally, Maria sued for breach of fiduciary duty in that Byron diminished her share of the community property estate (this is CA).

Judge Holmes gives Maria deductions for the legal fees in the second. The source of claim was directly alimony, taxable to Maria per Section 71. And Section 212, as then in effect, gave her the expenses-for-production-of-income.

But setting aside the agreed split of assets didn’t necessarily produce income, only a property split. “The origin of the claim for this litigation was an alleged flaw in the formation of the [settlement agreement], not a claim to more alimony under the [settlement agreement] or some other basis. Even if we focused on the consequences of this litigation, Leslie would lose because success wouldn’t directly lead to more… income, but only to the setting aside of the [settlement agreement]. The California Superior Court would have ordered a new division of marital assets. This division of assets — unless a separate agreement was reached — would have split all the community property and debts in half. And an action to divide community property is not an action for alimony.” Order, at p. 5 (unnumbered)(Citations omitted).

And the fiduciary duty impairment litigation falls for the same reason.  This arose from the marriage dissolution and the split of the community estate, not the grant of alimony. While maybe at close of play Maria would have gotten more alimony, it’s the source of the claim, not the downstream result, that determines deductability.

So Judge Holmes did Sammy C proud.

Once again I repeat the old tale.

Here’s Wendell C. Robinson & May T. Jung-Robinson, Docket No. 6446-19L, filed 9/27/19, from the wordprocessor of that Obliging Jurist, Judge David Gustafson, again helping out a tired old blogger with a designated hitter.

Wendell & May want partial summary J in this CDP. They don’t get it.

“The Robinsons’ motion shows that they reported on their [year at issue] tax return an income tax liability of $88,721.91 and paid that liability by withholding and by a check that accompanied the return. They argue that their… liability has therefore been paid in full, that the statute of limitations (section 6501(a)) bars further assessments, and that the proposed levy to make further collections … cannot be sustained.” Order, at p. 1.

IRS’ riposte seems to have a minor arithmetic glitch.

“However, the Commissioner’s response shows that the Robinsons’ return reflected six mathematical errors, that their correction increased the Robinsons’ tax liability by $13,267.20 to a total of $88,721.91, and that this larger total was timely assessed…. The Commissioner explains that these mathematical errors were corrected as such pursuant to section 6213(b)(1), which provides for a ‘notif[ication] … [that] shall not be considered as a notice of deficiency’.” Order, at p. 2.

Guys, $88,721.91 plus $13,267.20 does not equal $88,721.91. Even if you take off your gloves, your shoes and your socks, and lie on your backs with limbs in the air, $88,721.91 plus $13,267.20 does not “increase the Robinsons’ tax liability to a total of $88,721.91.”

Judge Gustafson finds issues of material facts here.

“The recitation of verification in Appeals’ notice of determination makes no mention of mathematical corrections under section 6213(b)(1), nor of whether the IRS ‘notified’ the Robinsons of such corrections in compliance with that provision so as to give them the opportunity to request abatement pursuant to section 6213(b)(2)(A) and thereby obtain the opportunity to resist the corrections under deficiency procedures. The Commissioner’s brief describes the alleged mathematical errors and cites section 6213(b)(1), but it makes no allegation about notification to the Robinsons or an opportunity to request abatement. We would expect to receive evidence on this issue in due course.” Order, at p. 2.

I would expect to see a motion to amend the answer, too.

I’ll tell ya, Fridays are days this blogger dreads. Tax Court never, but never, issues an opinion, not even a small-claimer, on Fridays. Most of the time, there’s a bushelbasketful of housekeeping orders, through each of which I must plod, trying to find something non-banal wherewith to amuse, if not instruct, my readers. Judges are loath to burden the hard-laboring clerks and flailing datestampers with designated orders, wherefore I must root through them all. So even if I find a “gem of purest ray serene” in the “dark unfathom’d caves” of Tax Court’s Friday’s undesignated hitters, the said readers are heading out for the weekend, and have zero time for this stuff.

And it’s worse, because this is the penultimate business day of this month of September, and my website hits aren’t coming.

But Judge Mark V Holmes comes to my rescue, and the legendary cavalry of my young days at the movies have nothing on Judge Mark V.  He’s designated fifteen (count ‘em, fifteen) orders, with docket numbers going back fourteen (count ‘em, fourteen) years. Cases tried, opinions issued, and the Rule 155 beancount is supposedly going on.

Here’s David B. Greenberg, et al., Docket No. 1143-05, filed 9/27/19. David and the als were part of AD Global. For the backstory, see my blogpost “Slog,” 5/31/18.

It seems Will is back from Portugal or wherever, and wants a stay to relitigate whether the FPAA for AD Global tolled the SOL for the individual partners.

Except.

Will and Dave lost that one in USCFC and Fed Cir affirmed. Besides, the criminal indictments severed the partnership items and dropped them to the partners as nonpartnership items. So mox nix whatever happens to AD Global the nonpartnership. Dear old TEFRA. Besides, Tax Court affirmed the legality of the conversions back in 2011.

Finally, “…[Will] argues a stay is necessary in these cases because he seeks to litigate (or, more precisely, relitigate) this statute-of-limitations issue in AD Global in the Court of Federal Claims. The Court of Federal Claims has stayed AD Global until final decisions are entered in these cases. On September 13, 2019, the Court of Federal Claims refused to lift that stay. Order dated Sept. 13, 2019, AD Global, 67 Fed. Cl. 657 (2005), aff’d, 481 F.3d 1351 (Fed. Cir. 2007) (No. 4-336T). Were we to grant this motion, cases in both courts would be suspended and no progress in bringing this whole litigation to a close would ever occur.

“This we will not do.” Order, at p. 3.

C’mon, Judge, no yellow card? If this move doesn’t merit a Section 6673 chop, what does? More to the point, Will’s motion is made in all fifteen (count ‘em, fifteen) cases. Even without taking off my shoes and socks, I figure fifteen times $25K is $375K, a World-record delay-of-the-game penalty.

And this is delay-of-the-game on steroids.

Carolyn J. Cole, Docket No. 14526-19, filed 9/26/19, is a self-represented petitioner who is also a lawyer. This reminds me of the old paradox of the barber who shaves everyone in town, except those who shave themselves; the question goes “then who shaves the barber?”

Carolyn J. Cole, Esq., does seem to have resolved the issue of the SNOD, which IRS bestowed upon her.  So IRS moves to dismiss her petition as untimely.

Except the SNOD wasn’t the issue. Ch J Maurice B (“Mighty Mo”) Foley explains. Carolyn J. Cole, Esq., wanted interest abated.

“Pursuant to I.R.C. section 6404(h) the Tax Court shall have jurisdiction over an interest abatement action brought by a taxpayer who meets the net worth requirement of section 7430(c)(4)(A)(ii) to determine whether the Secretary’s failure to abate interest under section 6404 was an abuse of discretion, and may order an abatement if such action is brought at any time (1) after the earlier of(a) the date of mailing of the Secretary’s final determination not to abate interest, or (b) the date which is 180 days after the date of filing with the Secretary of a claim for abatement of interest under section 6404, but (2) not later than the date which is 180 days after the date of the Secretary’s mailing of the final determination not to abate interest. I.R.C. sec. 6404(h)(1) (A) and (B).” Order, at p. 1.

So let IRS’ counsel check the record to see if either IRS rejected, or 180 days went by since Carolyn J. Cole, Esq., requested, abatement.

Apparently Ch J Mighty Mo’s directions to IRS to make jurisdictional motions on day 91 after anything hits their desks has taken effect.

Too great an effect.

Judge Halpern and Ch J Foley each have a take on the title of this blogpost. But in each case, the upshot is the same: once you take a certain position, you can’t go back.

Judge Halpern opens with Claude Tate George, 2019 T. C. Memo. 128, filed 9/25/19, while I was high above the clouds homeward bound. Hence the late post.

Claude T, ex- NJ Net and Milwaukee Buck guard, is caught in a full-court press. While sitting in stir, he gets a $200K pension distribution from the NBA. Claude T files neither an automatic extension nor a return, so IRS gives him one for free. Plus a deficiency for whatever the NBA didn’t withhold, and additions for late filing and nonpaying.

“Petitioner’s principal defense to respondent’s additions to tax is that he has been incarcerated, so that documents evidencing deductible expenditures are unavailable to him, and it would be inadvisable for him to file a … return until he obtains documents that might evidence those deductible expenditures.” 2019 T. C. Memo. 128, at p. 9.

Well, being in the slammer is not necessarily an excuse for not filing. And Claude T’s papers are bereft of any specific deductions he might have had. Claude T’s claim that his family might suffer hardship is for another day.

“And while petitioner avers in the petition that paying the amounts owed under the notice would pose a hardship on him and his family, he has not responded to the motion with any specific facts showing that he exercised ordinary business care and prudence in providing for his … tax liability. Nor has he responded with specific facts concerning his financial situation while the failure to pay penalty accrued. While his incarceration may have hampered his ability to obtain documents establishing the relevant facts, petitioner admits to family but fails to explain why family members did not assist him in gathering documents not in his immediate possession.” 2019 T. C. Memo. 128, at pp. 11-12.

Most importantly, if you want to itemize deductions, you have to file a return and elect itemized deductions. See Section 63(e)(1). If you don’t file and elect, you can’t go back.

Briana Dawn Ho, Docket No. 12250-19, filed 9/25/19, seems to be unaware of my blogpost “Good Call,” 7/14/17. Briana Dawn sent in a letter, which Ch J Maurice B (“Mighty Mo”) Foley treated as a petition, but stiffed the Court for the sixty Georges. Ch J Mighty Mo, ever alert for freeloaders, ordered Briana Dawn to stump up or fold.

Briana Dawn replies that she’d rather work with IRS. So one would expect Ch J Mighty Mo would toss Briana Dawn on the spot.

Not quite.

“Yet the closing statement of her recent letter gives pause, as petitioner concluded: ‘However, I do not wish to close the door with the United States Tax Court in the event I might need to knock in the future.”” Order, at p. 1.

Ch J Mighty Mo tells Briana Dawn that’s exactly what she is doing.

“Once such a dismissal has become final, the Court would be unable to revisit the determinations regarding [year at issue] made by the IRS in the… notice of deficiency, either in this case or in a new case. Except in very limited situations, this Court lacks jurisdiction over a proceeding once a decision or dismissal for lack of jurisdiction becomes final within the meaning of section 7481, I.R.C. A reviewable decision of the Tax Court becomes final ‘Upon the expiration of the time allowed for filing a notice of appeal, if no such notice has been duly filed within such time”. Sec. 7481(a)(1), I.R.C. Section 7483, I.R.C., provides that a notice of appeal may be filed within 90 days after a decision is entered. A nonreviewable decision, such as a disposition in a small tax case ‘S’ proceeding, becomes final “upon the expiration of 90 days after the decision is entered’. Sec. 7481(b), I.R.C.” Order, at pp. 1-2. (Citations omitted).

In simpler terms, Briana Dawn, if you don’t pay (or plead and prove poverty and get a waiver), after 90 days, the door is shut. All IRS has to do is run out the clock, do nothing, and your only remedy is to pay, file for a refund, wait the six (count ‘em, six) months, and sue in USDC or USCFC. Assuming SOL hasn’t run by the time you file for the refund. And that will cost you a lot more than sixty bucks, trust me.

Michael Balice, Docket No. 17799-18L, filed 9/24/19 justifies a prediction I made back in 2015; see my blogpost “The Jolly Rounder,” 3/16/15. Mike is back, albeit not on a Rule 161, but fighting off IRS’ summary J motion to affirm Appeals’ bouncing of Mike’s CDP without a hearing on the grounds of frivolity.

That Obliging Jurist, Judge David Gustafson, aware of Mike’s shady track record in Tax Court, nevertheless finds that not every word of Mike’s form letter petition is frivolous or shows an intent to delay and hinder the collection of revenue.

“In this case our review of Appeals’ determination would be assisted by more information about which positions reflected in Mr. Balice’s CDP hearing request are ‘position[s] which the Secretary has identified as frivolous under subsection (c)’ of section 6702.

“It is not clear whether there could be anything frivolous or dilatory about calling on Appeals to conduct the ‘verification’ required by sections 6320(c) and 6330(c)(1). Mr. Balice may be mistaken in his purported demand that the verification ‘be provided to me before the hearing’, since the statute requires that it be obtained ‘at the hearing’, sec. 6330(c)(1); but we do not yet see how this renders his position not just erroneous but ‘frivolous’.” Order, at p. 6.

Moreover, there is a chop in Mike’s latest case, and neither IRS nor Appeals seems to have dealt with the Section 6751(b) Boss Hoss sign-off.

“If, for purposes of section 6330(g), only some “portion” or “portions” of Mr. Balice’s CDP hearing request were frivolous or dilatory, but not the entire request, then it would seem that Appeals may have abused its discretion in denying Mr. Balice a CDP hearing. When this case is called from the calendar, the parties should be prepared to discuss whether that is so and, if it is, what further proceedings are appropriate in this case.” Order, at pp. 6-7.

Glad to see Mike is out of the Ft Dix FCI. It’s just about three weeks shy of fifty (count ‘em, fifty) years since I departed Ft Dix (albeit it not the FCI), DD214 in hand.