In Uncategorized on 09/09/2019 at 19:51

My readers will remember the Fairey Fireflying Edward G. Kurdziel, Jr., Docket No. 21186-12, filed 9/9/19. If you don’t, see my blogpost “The Excuse Sweepstakes,” 3/21/19.

Well, after the pretrial discovery and briefing, after the trial, and after the posttrial briefing, IRS finds they messed up the numbers and wants to amend their pleadings.

For one of the years at issue, Ed owes less post-amendment, so he’s cool with that. But there’s two more years.

“Commissioner now wants to make — after discovery, after the trial, after even the posttrial briefing — would mean that Kurdziel owes more to the IRS for two of the years at issue. The Commissioner has moved to amend his answer to increase the deficiencies he now wants.

“Kurdziel objects.” Order, at p. 3. Surprise, surprise.

Judge Holmes has this one.

“Section 6214(a) of the Code does give us jurisdiction ‘to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency* * * if claim therefor is asserted by the Secretary at or before the hearing or a rehearing.’ (emphases added). The italicized language is no bar to the Commissioner’s motion — though it might surprise a nonspecialist, that phrase doesn’t mean ‘at or before the trial,’ but means any time before our Court enters a final decision.” Order, at p. 3. (Citations omitted).

Now some of the changes result from the Section 469(i)(3)(a) phaseout of Ed’s rental real estate losses, and maybe Judge Holmes might let that go, as Ed wasn’t ambushed. “The revenue agent should have noticed this, but by the time of trial the Commissioner had. At the very start of trial, the Court raised it with the parties and Kurdziel’s lawyer specifically acknowledged that the phase out would apply to any posttrial computations and would be entirely mathematical.

“There’s no surprise and no unreasonable delay here. As the Commissioner rightly points out, there is much case law that allows amendments to conform to things that happen at trial.” Order, at p. 4. (Citations omitted).

But there’s a hitch. There’s usually a hitch.

“There’s a difference, however, in the somewhat more complicated changes that the Commissioner proposes for the treatment of the gross receipts from Mr. Kurdziel’s plane project. These were not brought up at trial. And the only excuse for delay that the Commissioner suggests for their late arrival is that he didn’t notice them until it came time to do the computations.” Order, at p. 4.

Judges have discretion when it comes to out-of-time amendments to pleadings, and Judge Holmes uses his.

“Justice doesn’t require letting him fix mistakes in his own notice of deficiency that he should have noticed a long time ago and that now come as a surprise to his adversary.” Order, at p. 5.

Ed wins that one. But I still wish he’d named his plane “Rufus T.”



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