In Uncategorized on 09/24/2019 at 23:04

Once again we hear the story of Neil L. Whitesell and Tracy L. Whitesell, 2019 T. C. Memo. 126, filed 9/24/19. The story started (as far as this blog is concerned) with my blogpost “The Law of Return,” 5/18/17.

You’ll remember (or you will after you read my above-cited blogpost) that Neil and Tracy’s SOL started with the deficiency they got, not that which went to their wholly-owned Sub S.

Neil and Tracy took a big deduction when they lost a trade secrets case. But they appealed, and three years after they took the big deduction, the appellate court reversed and remanded. Neil and Tracy claim this means that trial court could reinstate the verdict appealed from, but Judge Morrison says that until the trial court does, the verdict is reversed.

So Neil and Tracy want to amend their already amended petition to claim the SOL ran on the periods for which IRS sought a deficiency. They claim they were pro sese and overwhelmed by Tax Court technicalities.

Except they had a CPA advising them, with a law firm writing memos of law in the wings.

“Because the Whitesells received assistance from W [CPA] and the TC law firm, we are not persuaded that the Whitesells’ pro se (i.e., unrepresented) status excuses their delay in raising the argument they now seek to make in their proposed amendment to amended petition.” 2019 T. C. Memo. 126, at p. 25. (Names omitted).

Also IRS is ambushed big-time, if Judge Morrison lets Neil and Tracy amend now. Neil and Tracy want to claim that giving them back the deduction for the reversed verdict should be in a year that everyone agrees is barred by SOL. But they argued for another year all along.

“In determining the potential for unfair prejudice, the question is whether allowing a party to add a new issue by a later amendment, rather than inclusion in the initial pleading, works an unfair disadvantage to the other party. The issue the Whitesells wish to raise is the argument that [new year] was the only year for which there should be an income inclusion. Had they made this argument in their amended petition, which was filed in December 2015, the IRS could have made an assessment for the [new year] tax year. But if the Whitesells are allowed to file their amendment to raise the issue now, the IRS would be prejudiced because the three-year period for assessing the tax for [new year] has ended.” 2019 T. C. Memo. 126, at pp. 27-28. (Footnote omitted, but it says that requiring IRS to prove 6SOL at this point is an ambush, and Neil and Tracy didn’t raise Section 1311 mitigation, so that’s off the table).

So be careful in pleading years, lest you pass the point of no return.







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