I had stated some time ago that “Obliging Is Contagious,” 7/14/16. Then it was Ch J L Paige (“Iron Fist”) Marvel whom I apostrophized. Now I address Ch J Maurice B (“Mighty Mo”) Foley, who exhibits the same commendable characteristic in Frederick Edward Wellman, Docket No. 18854-19W, filed 3/31/20.

I was perhaps too stern with Ch J Mighty Mo when he tossed petitions for short-changing USTC the sixty Georges a week after they were filed. But now his treatment of Fred deserves praise.

IRS moves to toss Fred’s petition with the usual pre-Lacey brush-off. “’Petitioner appears to challenge only respondent’s decision not to pursue petitioner’s claim. Because this Court lacks the authority to direct respondent to initiate an administrative or judicial action, there is no relief available to petitioner.’” Order, at p. 1.

But Ch J Mighty Mo won’t have that.

“However, in Lacey v. Commissioner, 153 T.C. __ (Nov. 25, 2019), we held that the Court can review, for abuse of discretion, the Whistleblower Office’s (WBO) decision to reject a whistleblower claim for failure to meet certain threshold criteria. A fair reading of the allegations contained in the amended petition shows that petitioner is challenging the WBO’s rejection of his whistleblower claim. Giving petitioner not only the benefit of every doubt as we are required to do at this stage of the proceedings, see Hicks v. Small, 69 F.3d 967, 969 (9th Cir. 1995), but also wide pleading latitude as a self-represented litigant, see Estelle v. Gamble, 429 U.S. 97, 106 (1976), the allegations made by petitioner in this case are sufficient to avoid dismissal upon respondent’s motion.” Order, at pp. 1-2.

Even more praiseworthy is Ch J Mighty Mo’s obliging nature when, as my astute readers doubtless recollect, he was a dissenter in Lacey, endorsing the Ogden Sunseteers’ mantra “No dough, so you must go.” And I dissented from the dissenters myself, quite explicitly, at that time. See my blogpost “The Whistleblower Office – Blown,” 11/25/19.

Well done, Your Honor. I am not so impudent as to give Judges and STJs a Taishoff “Good Job,  First Class.”

I’ve pointed out before now that remand is a double-edged sword; while remand can let you get in facts and arguments you missed the first time around, it also lets IRS clean up its act, and refresh and refurbish the administrative record.

Looks like IRS has a problem with Richard G. Saffire, Jr., Docket No. 101-18W, filed 3/30/20. Richard wants discovery, and IRS, leafing through the documents responsive thereto, finds some unturned stones that maybe perhaps the Ogden Sunseteers might want to check out.

Remember, the administrative record in a Section 7623 whistleblower case is “All ye know on earth, and all ye need to know,” as a much greater writer than I put it.

So IRS says “send it through again.” Richard wants discovery first. Now usually Tax Court will remand whistleblower cases, even though Judge Vasquez once thought they couldn’t. See my blogpost “Remand? You Can Whistle For It,” 1/31/18.

So why is Richard fighting remand? Well, I haven’t seen his papers, and The Glasshouse in Lockdown City is itself locked down, as is your blogger, so no one can say. But maybe a glimpse of my blogpost “Trust Me – It Wasn’t Yours,” 3/12/19, will give a hint at Richard’s impatience with the Ogden Sunseteers.

Howbeit, Ch J Maurice B (“Mighty Mo”) Foley is willing to cut the OS crowd some cliché.

“In this case, it appears the administrative record is presently incomplete, and we find that remanding petitioner’s whistleblower claim for further consideration by the WBO prior to the parties engaging in any further discovery will be the most efficient way to supplement the administrative record and conserve the resources of the parties and the Court.” Order, at p. 2.

Lest the IRS and the OS become too elated, Ch J Mighty Mo, like a much more exalted authority with a much more exalted personage, reserves for them a thorn in the flesh.

“We will, however, hold petitioner’s motion to compel in abeyance.” Order, at p. 2.

I want to be the first blogger to welcome Erin M. (“Go Brách”) Collins as new National Taxpayer Advocate. I’m sure she will be a beacon star to cheer and guide the hapless taxpayer, trapped in the toils of the IRS.

Loran Thompson & Sherry Delisle, Index No. 27015-17, filed 3/27/20, call themselves Indians, not Native Americans. So I shall “respect and use their terminology, “ as does Judge Buch; see Order, at p. 3, footnote 7.

Loran & Sherry claim the rental income they get from their apartments on the Akwesasne Reservation, and Loran’s from-home telecom business is “derived from Indian lands,” therefore is tax-exempt.

Loran & Sherry are registered members of the Saint Regis Mohawk Tribe (Mohawk Tribe), and lived on the tribe’s Akwesasne Reservation located in the State of New York. They have deeds from the Tribe for their land, but “(T)he Mohawk Tribe owns and holds title to the land on the Akwesasne Reservation. The land is not held in trust by the Federal government and allotted to individual tribal members. Individual tribal members, like Ms. Thompson and Ms. Delisle, may hold deeds issued from the tribe to occupy land on the Akwesasne Reservation; however, these individuals do not have the right to sell or convey this land.” Order, at p. 2.

To start with, the various treaties are no help to Loran & Sherry. (This being a non-political blog, I make no comment on how the Indians have fared under various treaties). Neither the Jay Treaty, the Canandaigua Treaty of 1794, nor the Treaty of Ghent gives any relief. For more, see my blogpost “Indians Not Taxed – But They Are,” 3/1/18.

To be in the land game, the land in question must be held in trust by the Federales and allocated to members of the Tribe. Here, the Tribe owns the land and deeded it to Loran & Sherry.

As for derivation, “…Mr. Thompson and Ms. Delisle did not directly derive their income from the land. We have previously held that rental income from apartments sitting on tribal land is not income directly derived from that land. Telecommunication services also do not exploit the land in a way that meets the ‘directly derived’ standard. Mr. Thompson and Ms. Delisle’s income is not exempt from Federal tax.” Order, at p. 4.

“Directly derived” from the land means mining, logging, farming, or ranching. In short, getting dirt from the land on your hands.

Loran & Sherry many not have dirt on their hands from alloted land, but IRS sure has Clay on theirs. “The Commissioner conceded the section 6662(a) accuracy-related penalties determined in the notice of deficiency because he could not meet his burden of production required under sections 7491(c) and 6751(b). Because the Commissioner cannot meet his burden of production, we find that Mr. Thompson and Ms. Delisle are not liable for the section 6662(a) penalties.” Order, at p. 5.

For Clay, see my blogpost “Indians Not Taxed – Not!” 4/24/19.

And thanks to Judge Buch for designating this order. I’d have had to plow through nearly 200 orders to find this without your generosity. Please Judges and STJs; there are more orders than ever just now, 99% of them clearing out cases for trial sessions that aren’t going to happen. Give us bloggers a break. If you’ve got a good order, let us know.

I was admitted to the Bar of Our Fair State fifty-three (count ’em, fifty-three) years ago today. It’s been a lotta laughs (and a lotta grief). Roll on the next!

IRS claims they haven’t a clue that a bunch of purported non-taxable stock purchases were really payments to settle patent infringement cases, wherefore nondisclosure triggers the 6SOL substantial omission of gross income. Naturally, Acqis Technology, Inc. and Consolidated Subsidiary, 2020 T. C. Memo. 38, filed 3/26/20, tell Judge Ruwe that IRS should have twigged to their little ballet at once, 3SOL and thus IRS is SOL.

Acquis had a bunch of ultra-tech patents. They claimed the likes of IBM, H-P, and Oracle infringed thereon. Laying a blast on these Fortune 50s, Acqis picked up about $30 million and the Fortunates got bundles of Acqis Class B stock, with which now one could relieve oneself of a shortage of an extremely necessary domestic article, and a couple license agreements (hi, Judge Holmes).

There were also cash settlements with other alleged infringers, but those were reported and play no part here.

Acquis claims contributions to its capital, no tax due. Judge Ruwe has the Schedule L to the relevant 1120 for Year One, and it shows a $30 million increase in capital stock. No mention of patent litigation, except they showed $12 million in “settlement legal fees” on Sched A, offsetting the $2 million of gross receipts on the 1120. Oh, and “…petitioner listed its business activity as ‘Sales & Development’ and listed its product or service as ‘Computer.’ 2020 T. C. Memo. 38, at p. 6.

For Year Two, business has changed to “Patents” and product as “Royalties.” The capital stock increased by $8 million.

Year Three showed $337K in royalties (no gross receipts), legal fees of another $12 million, but the capital stock was up $30 million.

A real growth industry. IRS invested a SNOD in the operation, in exchange for which IRS got a petition.

Is the SNOD time-barred? Of course the law (Section 6501) changed in between the years at issue, but Judge Ruwe isn’t going there (yet). See 2020 T. C. Memo. 38, at pp. 11-12, footnote 5, for a real head-spinner.

Howbeit, the test is whether the return and attachments gave IRS enough information to suss out the unreported income.

“In order to determine whether disclosure was adequate to apprise the Commissioner of the nature and amount of omitted income, the Court examines whether the return offered a ‘clue’ regarding the existence, nature, and amount of the omitted income. The disclosure need not detail every underlying fact but must be ‘more substantial than simply providing a clue that would intrigue the likes of Sherlock Holmes.’ Although a   misleading statement may provide a ‘clue’ to omitted gross income, it does not adequately apprise the Commissioner of the nature and amount of an item.” 2020 T. C. Memo. 38, at pp. 13-14 (Citations omitted).

And this is a question of fact.

Acqis wants a subjective test. We have to report how we characterized the transactions, not what IRS thought or might think, and that’s enough.

No, says Judge Ruwe, characterize and report whatever you want, but “…the disclosure must still provide an adequate clue as to the nature and amount of omitted income, even if the taxpayer may report the legal construction of a transaction as he sees fit. In this case the Court must know what the nature of the underlying transaction actually is, not just the taxpayer’s subjective view of how the underlying transaction should be characterized, in order to determine if an adequate clue was provided by the taxpayer’s disclosure.” 2020 T. C. Memo. 38, at p. 15 (Citations omitted).

But IRS isn’t off the hook, either. “Respondent implicitly argues in his motion that the adequacy of disclosure should be judged according to his view of the transactions. Respondent’s motion is a Trojan horse, and this Court would have to adopt his view of the transactions in order to grant it. Certain material facts remain in dispute regarding the proper characterization of the transactions, and therefore it would be premature for the Court to reach a conclusion as to which party’s view of the transactions is correct and accordingly whether disclosure was adequate.” 2020 T. C. Memo. 38, at p. 17 (Footnotes omitted).

But there are other facts (not mentioned in the opinion) concerning how these deals actually happened have to be resolved, so no summary J for either side.

That’s not grade school arithmetic gone bonkers, that’s Ch J Maurice B (“Mighty Mo”) Foley again tossing a late-filed petition in Josefa Castillo, Docket No. 18336-19L, filed 3/25/20. Jo’s time to petition the NOD was extended by the Guralnik shutdown rule, as to which see my blogpost “Neither Equity Nor Designation,” 6/2/16. Notwithstanding the foregoing, Jo was  249 (count ‘em, 249) days with her petition.

But Jo has an argument. “…petitioner asserts/indicates that: (1) respondent has not provided a properly completed U.S. Postal Service Form 3877 establishing the IRS sent the notice of determination by certified mail to petitioner at her last known address on December 11, 2018; and (2) the U.S. Postal Service never delivered that notice of determination to her.” Order, at p. 2.

Oh no, please, Ch J Mighty Mo, not “asserts/indicates”! That’s son of “and/or.” As a much more exalted Personage put it “But let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No.’ For whatever is more than these is from the evil one.”

Anyhow, whether she asserts or indicates or simply says, Jo loses.

“Contrary to petitioner’s argument, however, even without the presumption of official regularity afforded by a properly completed USPS Form 3877, the IRS can still prevail so long as it provides evidence of mailing that is ‘otherwise sufficient’. As respondent notes in his … Response, attached as Exhibit B to respondent’s motion to dismiss is a USPS Form 3800 which includes a U.S. Postal Service postmark … and a certified mail number that matches the certified mail number on the notice of determination.” Order, at p. 2. (Citation omitted).

The USPS Form 3800 is the green slip the postal clerk gives you when you send a certified letter, showing postage paid, addressee, and USPS date stamp. It’s just as good as a Form 3877 Proof of Mailing “because reasons.” As my granddaughters say. But Ch J Mighty Mo indicates the reasons.

“…the procedures authorized by I.R.C. section 6212(a) and (b) for sending a notice of deficiency apply to the mailing of a notice of determination issued pursuant to I.R.C. section 6320 and/or 6330. A notice of determination issued in a collection due process case that is mailed in accordance with section 6212(a) and (b) is sufficient to start the 30-day period within which a taxpayer may appeal the determination to the Tax Court under section 6330(d). If a notice of determination issued pursuant to section 6330 is properly mailed to a taxpayer’s last known address by certified mail, the date on which the taxpayer actually receives the notice of determination is irrelevant in determining whether a petition appealing that determination was filed within the 30-day period prescribed in section 6330(d)(1).” Order, at p. 2 (Citations omitted).

I’ll overlook the “and/or” in the foregoing paragraph, lest I be accused of piling on after the whistle.

So 3800 does equal 3877, when you’re playing post office. But see my blogpost “Form Over Substance?” 12/23/15. Maybe this time IRS got the Form 3800 gambit right, unlike Latrina Gray’s case/

.

Once again the words of Gus Cannon, songwriter and eponymous chief of the Cannon Jug Stompers, from back in 1929, echo in the order of Judge Gale today, in Brian Clifford Chubboy, Docket No. 12131-18W, filed 3/24/20. BC was twice taped by IRS at a sit-down, and now demands copies thereof.

IRS claims they already gave BC a copy of one of the tapings, but can’t find the other. Judge Gale tossed BC’s motion to produce.

But now BC wants reconsideration as to the missing tape. And he gets it.

“In his Motion for Reconsideration, petitioner provides a list of the attendees of the [missing tape] interview, describes the location of the recording device during the interview, and states that ‘Petitioner’s lawyer sat to the left of the Petitioner’ during the interview.” Order, at p. 1.

Judge Gale’s order raises a fascinating question, one I never encountered in all my years of negotiating, representing people in depositions, arguing in court, or even taking a client out for a friendly dram.

“Does it matter where your lawyer sits?”

Judge Gale seems to say it does.

Note this interview took place at least nine (count ‘em, nine) years ago.

So let IRS report in detail in a couple weeks (hi, Judge Holmes) its efforts to search out the tape, any transcripts, pictures, descriptions and accounts thereof.

And meanwhile let BC “…contact his lawyer who attended the …interview for the purpose of determining whether the lawyer possesses a copy of the audio recording of the … interview, any transcript thereof, or any other materials relating to the recording or the substance of the…interview.” Order at p. 2.

And when he’s done that, but in any case when or before IRS has to bukh, “…file a report describing in detail his efforts to contact his lawyer who attended the … interview and advising the Court whether any of the aforementioned materials are in the lawyer’s possession.” Order, at p. 2.

So counsel, walk right in, set right down, but make sure your client takes note where you set.

Maybe Someone Will Listen

It was difficult to resist the pun for the headline, but Karen D. Grim, Docket No. 19478-19S, filed 3/24/20, is an innocent bystander. It’s her attorneys who are under the gun here. Apparently two “relationship-centered” attorneys from a well-known KC MO firm were doing an intramural hand-off of her case, a not-uncommon occurrence. In every firm I was ever in, retainer (engagement) letters always specified that hand-offs might take place within the firm, based upon delivering most efficient service to the client and needs of the firm.

C h J Maurice B (“Mighty Mo”) Foley, to whom this blogpost is respectfully specifically addressed, takes up the story. I’ll name the attorneys involved, as their names figure prominently on their firm’s website, and they’ve made a perfectly natural assumption, which would work anywhere except in US Tax Court.

“…counsel Bobby J. Taylor filed in entry of appearance in the above-docketed matter, thereby becoming counsel of record on behalf of petitioner. Thereafter, a separate entry of appearance reflecting Kent A. Coxe was filed…,using Bobby J. Taylor’s electronic access code. Such entry of appearance was thus reflected on the docket record as another entry of appearance by Bobby J. Taylor, a moot action.” Order, at p. 1.

So Kent’s EoA is stricken, and Ch J Mighty Mo admonishes him thus: “Kent A. Coxe is advised that if he wishes to enter an appearances as counsel for petitioner in this case, Kent A. Coxe must electronically file such entry of appearance not using the electronic access code issued to Bobby J. Taylor or other such practitioner.” Order, at p. 1.

Now a quick docket search shown that Kent A. Coxe just did that.

But why not a firm-wide access code for all partners and associates admitted to US Tax Court to enter appearances? All, or almost all, Tax Court judges and STJs have been in private practice, and none, or almost none, has ever been a single-shingle like me. So they must know that intramural hand-offs are almost daily occurrences.

Such a system would require no cybernetic reverse judicial backflips, and would save time and effort. Most importantly, it would recognize the realities of law firm practice.

How ‘bout it, Ch J Mighty Mo?

The Tax Court homepage was mumchance on March 9 when Judge Travis A. Greaves was sworn in. Unlike his colleague Judge Courtney D. (“Watch This Space, I’m Working on It”) Jones, Judge Greaves’ curriculum vitæ is already spread upon the record, and a distinguished one it is.

So welcome, Judge Greaves. And I’ll have a cognomen for you too, as soon as I find one for Judge Courtney D Jones.

Now since we’re looking at Senate confirmations, what’s the story with Judge Mark V Holmes? I don’t want to get political and violate my own Prime Directive, but get with the program.