Archive for March, 2020|Monthly archive page


In Uncategorized on 03/13/2020 at 18:55

I most respectfully request Judge Elizabeth A. (“Tex”) Copeland to call a statutory notice of deficiency a SNOD, to distinguish it from a notice of determination, known as a NOD (as, e.g., in a CDP, whistleblower, worker classification, 501(c)(3) or retirement plan disqualification case).

The designated hitter William Michael Shumer & Susan Elaine Shumer, Docket No. 9095-19, filed 3/13/20, was clear enough on the law (no need for a signature on a SNOD), but confusing in nomenclature.


In Uncategorized on 03/13/2020 at 18:45

Saved by the Virus

Judge Courtney D. (Watch This Space) Jones has the cure for last-minute ambushes launched from late-filed amended pleadings. Here, IRS wants to amend its answer eighteen (count ‘em, eighteen) days before trial.

“Whether a party may amend its answer lies within the sound discretion of the Court.  In determining the justice of allowing a proposed amendment, the Court must examine the particular circumstances of the case, and consider, among other factors (1) whether an excuse for the delay exists; and, (2) whether the opposing party would suffer unfair surprise, disadvantage, or prejudice.” Kevin John, Sr. & Whitney S. Witasick, Docket No. 23069-16, filed 3/13/20, at pp. 1-2. (Footnote and citation omitted).

IRS claims the SNOD that kicked off this dust-up was flawed because it contained a “clerical and reporting error,” and so wishes to amend.

Judge Jones isn’t happy. “The Court is troubled by respondent’s motion. The notice of deficiency at issue is dated July 26, 2016, but respondent’s motion was not filed until more than 3 years later. In the years since the petition was filed, respondent has had ample time to identify and seek correction of its ‘clerical and reporting’ error. Petitioners’ frustration on this score is understandable. Further, this case is facing its sixth continuance, and respondent’s motion comes only 18 days prior to the (since canceled) trial.” Order, at p. 3.

A continuance (that’s an adjournment, to you State courtiers) cures unfair surprise, as the surprised party can regroup and recalibrate. And just because an amended pleading makes it harder or more expensive for the erstwhile ambushee to win is no reason to deny the amendment, as long as ambushee has time to prepare.

Judge Jones held a phoneathon, at which Kev suggested a continuance from the March trial date to April. IRS was prepared to buy the April trial date. But this was before the Corona virus intervened to quash the March trial in Philly.

So Judge Jones is unwilling to set a new trial date until the parties have stiped and settled what they can. And reported thereon in May.

IRS is saved by the virus.





In Uncategorized on 03/13/2020 at 11:22

They’re dropping fast. USTC is ditching upcoming appearances in Big D, the Motor City, the Big Apple, and the Steel City. Here’s the official word.

Is blogging next? Stay tuned.


In Uncategorized on 03/12/2020 at 16:41

How often have we seen those words in an order fairly directed to a wit, wag or wiseacre who is dodging a direct answer to a Rule 71 interrog. But today IRS is on the receiving end of that admonition, albeit it administered by Judge Gale “discreetly, reverently, advisedly and soberly,” as a much more exalted source puts it, in Adrian D. Smith & Nancy W. Smith, et al., Docket No. 11382-17, filed 3/12/20.

AD & Nancy want IRS to tell them the legal and factual bases why IRS is bouncing their Section 41 researching deductions.When they asked why and wherefore, IRS tells AD & Nancy to RTFS, namely, Read the SNOD (the “F” is for emphasis).

No no, says Judge Gale.

“In Estate of Allensworth v. Commissioner, 66 T.C. at 39, the Court required the Commissioner to advise the taxpayer of the contentions maintained by him, including his construction of State law, noting that the Commissioner’s responses to the taxpayer’s requested admissions ‘should serve the purposes of Rule 90 by narrowing the issues to be litigated.’ See also Zaentz v. Commissioner, 73 T.C. 469, 478 (1979) (“The notice of deficiency serves to establish the issues which the petitioner must face in the case, and Allensworth makes clear that admissions and requests for discovery may be used by a petitioner to seek clarification of the Commissioner’s position or contentions.”). In Owens-Illinois, Inc. v. Commissioner, 76 T.C. at 499, the Court required the taxpayer to advise the Commissioner of the contentions maintained by it, including its construction of foreign law, in order ‘to proceed with the stipulation process and to get to the merits of the case.’ In doing so, the Court stated that while a party ‘should not have to fully disclose its litigating position before trial’, ‘a party cannot play games with the other party and refuse to disclose the contentions which he, at the time of the request, plans to present in the case. Id. at 498. See also Rule 70(b) (‘If the information or response sought [in a discovery request] is otherwise proper, it is not objectionable merely because the information or response involves an opinion or contention that relates to fact or to the application of law to fact.’). In sum, the Court has been clear that ‘to prepare properly for a trial, it is necessary for each party to know the position of the other party, and discovery may be used to clarify that position.’ Zaentz v. Commissioner, 73 T.C. at 478.” Order, at pp. 3-4 (Footnote omitted, but it says there’s no difference in this case between a Rule 71 interrog and a Rule 90 admission).

And if IRS is objecting that AD & Nancy are trying to shift the BoP or trying to derail Greenberg’s Express by going behind the SNOD, those objections are overruled.

Takeaway- I quoted Judge Gale’s order in extenso so you can crib the whole thing and cut-and-paste it in your declaration in support of your motion to get IRS to pony up and come clean when they try to dodge your well-crafted interrogs or requests for admission.


In Uncategorized on 03/12/2020 at 16:14

Those magic words either open or close the door to a fight over liability for a tax, addition, or chop, or all of the above. Thus, when Joseph Thomas Lander and Kimberly W. Lander, 154 T. C. 7, filed 3/12/20, who admittedly did not receive the SNOD that the IRS mailed both to their last known residence and JT’s temporary abode in a Federal slammer, the question arises.

Was a meeting with Appeals, whereat JT & Kim disputed their liability to the extent that Appeals abated some of it, such an opportunity? Prior caselaw says that in an assessable, where no SNOD required, a trip to Appeals where the party assessed gets a chance to bukh about how IRS did them wrong, is sufficient. But what about where an unreceived SNOD is involved?

STJ Daniel A. (“Yuda”) Guy had this one, but since it’s a first-impression job, the generalities get a whack at it, and Judge Goeke, writing for a unanimous bench, hands down the full-dress T. C., saying, yes the trip to Appeals was a chance to contest.

“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.” 154 T. C. 7, at pp. 31-32. (Name omitted).

It seems JT & Kim also asked for CNC, which Appeals never considered, and Kim wanted innocent spousery, which Appeals apparently also overlooked. So Judge Goeke remands for a hash-out for those.

Takeaway- If offered a trip to Appeals, take it, but lay everything on the table.


In Uncategorized on 03/11/2020 at 16:46

What You Never Got

After once again lamenting the constricted jurisdiction of pore l’il ole Tax Court, Judge Elizabeth A. (“Tex”) Copeland imparts the above lesson to Mark Alan Staples, 2020 T. C. Memo. 34, filed 3/11/20. Mark Alan is a disabled retiree from the US Patent Office. When he sought his pension from FERS (Federal Employees Retirement System), the Federal Retirers sent him off to get SSDI, which he did. Whereupon the Federal Retirers mulcted Mark Alan for the amount he got from SSDI against his FERS pension payments.

FERS did a couple re-sets (hi, Judge Holmes) over a couple years (hi again), chopping and changing the cut-outs, which Mark Alan protested, but when told to try it with Merit Systems Protection Board (apparently the appeals crowd for such cases), Judge Tex can’t find that Mark Alan did pursue his administrative remedies.

Howbeit, Mark Alan took a loss on his income tax return for the mulcts aforesaid.

Judge Tex says no can do.

“Petitioner contends that the reduction of his FERS annuity was a loss which he should be able to account for by deducting it from his income.  He claims the loss is akin to a gambling loss, casualty loss, disaster loss, theft loss, or business loss.  However, petitioner did not experience a gambling, casualty, disaster, theft, or business loss….  Instead, he did not receive additional anticipated income which, if received, would have been subject to tax.  There was no receipt of that income and thus no tax and likewise no applicable deduction.  We disagree with petitioner’s contention because he cannot deduct a loss for unrealized income.” 2020 T. C. Memo. 34, at pp. 8-9.

Then, having canvassed the FERS cut-outs of SSDI through judicial interpretation, legislative history and statutory construction, Judge Tex returns to the plight of pore l’il ole Tax Court.

“…we lack jurisdiction to decide employee benefit entitlement issues that fall within the purview of the various Federal agencies. However, we have jurisdiction under sections 6213 and 6512(b)(1) to redetermine an income tax deficiency or to determine an overpayment by petitioner.  The sole issue before us is whether the reduction to petitioner’s FERS annuity was a loss for which he is entitled to a deduction in the amount of the reduction.  In other words, petitioner seeks a deduction for an amount of income which he expected to realize but did not.

“Petitioner is a cash basis taxpayer.  It is well established that no deduction is allowed under any Code section for the loss of unrealized income by a cash basis taxpayer.” 2020 T. C. Memo. 34, at p. 11. (Copious citation of precedent and somber reasoning omitted).


In Uncategorized on 03/11/2020 at 16:25

Although claiming rent for a house in a residential community is a business expense for your picture framing business seems a wee bit of a stretch, Edwin D. Benton and Sheila E. Benton, 2020 T. C. Sum. Op.12, filed 3/11/20, manage to pull it off.

First, IRS blows an essential part of the play.

“The parties stipulated that petitioners did not reside in the house where Mr. Benton conducted his business.” 2020 T. C. Sum. Op. 12, at p. 8. Thus Section 280A(d), the residence smackdown, is off the table. IRS forgot Taishoff’s well-settled maxim: “Stipulate, Don’t Capitulate.”

Second, Ed has testimony that helps STJ Daniel A (“Yuda”) Guy put away IRS’s shootdown of Ed’s $38K rent deduction.

“Mr. Benton testified that he used the house exclusively for business purposes and offered photos to show that he displayed framed pictures and various types of artwork in some of the rooms.  In addition one of Mr. Benton’s customers appeared at trial and testified that she visited the house two or three times during the year in issue to pick up photos that Mr. Benton had framed for her and it was her impression that he used the house to conduct the framing business.  We conclude that petitioners did not use the house in question as a residence, see sec. 280A(d), and that section 280A is not applicable.” 2020 T. C. Sum Op. 12, at pp. 8-9.

Ed has trouble with his auto deduction (Section 274 roadblock), and Sheila doesn’t establish she had the 12 straight weeks of unemployment compensation she needs to duck the 10%  additional tax-early withdrawal penalty per Section 72(t)(2)(D) on her IRA drawdown.

So a Taishoff “Good Job” goes to Steven H. Hornstein, Esq., Ed’s and Sheila’s trusty attorney, who got IRS to stip away the Section 280A(d) defense.


In Uncategorized on 03/11/2020 at 14:29

From Hartford CT to Salt Lake City UT; from Philadelphia PA to San Francisco CA; from Los Angeles CA to Boston MA; from Milwaukee WI to Provo, UT; from The Glasshouse at 400 Second Street, NW, “to every living heart and hearthstone, all over this broad land,” (as a much better writer than I put it) the word has gone out.

“Due to concerns relating to coronavirus (COVID-19), the trial session scheduled to begin…is canceled and the parties do not need to appear at Court…. The Court expects that the parties will continue to work together to exchange information and work towards a resolution of the issue(s) in this case. If necessary, this case will be rescheduled for trial in due course.”

So play nice, every one: wash your hands, don’t touch your faces, avoid crowds and public spaces.


In Uncategorized on 03/10/2020 at 21:55

From the USTC website, 3/10/20:

Considering recent announcements and media coverage regarding the COVID-19/Coronavirus, the U.S. Tax Court would like to assure the public that the Court is following recommended guidelines provided by the Centers for Disease Control and Prevention.

  • Effective March 9, 2020, and until further notice, out of an abundance of caution, the Court is encouraging social distancing and will therefore limit the number of people in the courtroom at any one time.
  • If you are required to appear in Court and are experiencing any flu like symptoms, have a fever, or are coughing or sneezing, please contact the Court before appearing. The Court will make reasonable accommodations and reschedule appearances, hearings, and trials as needed.
  • If you have recently traveled from an area with widespread or ongoing community spread of COVID-19 and you have symptoms of the disease (fever, cough, shortness of breath) reach out to your healthcare provider for details on how to proceed with proper medical care.

Stay informed by:

Thank you for your attention, and please monitor the Court’s website for updates regarding Court operations.


In Uncategorized on 03/10/2020 at 21:51

The Hombres’ one-hit wonder from 1967 furnished me with titles galore, so I revert yet again, to tell the story of a designated hitter from the wordprocessor of Judge Elizabeth A. (“Tex”) Copeland, Ryan Foster, Docket No. 7073-19, filed 3/10/20.

Ryan is apparently a potter who wants Section 280E ruled unconstitutional on Fifth, Eighth, and Sixteenth Amendment grounds, among others. Ryan is apparently a principal of High Mountain Medz LLC, a retailer of herbal medicaments legal in his home State, but proscribed by the Federales.

But before IRS can respond to Ryan’s summary J motion, Judge Tex needs Ryan to do as the headline hereof directs.

“A more detailed review of petitioner’s motion by this Court has illuminated issues with his summary judgment motion that must be addressed before respondent should be obligated to respond. Importantly, the factual assertions in petitioner’s summary judgment motion were not supported by affidavits or declarations made on personal knowledge or by documents.

“As a general rule, documents that are not part of the record must be introduced to the Court, in support of a motion for summary judgment, by way of an authenticating affidavit or declaration made on personal knowledge. See Rule 121(d); see also 11 James Wm. Moore, Moore’s Federal Practice, para. 56.92[3], at 56-209 (3d ed.2014). Statements in briefs do not constitute evidence. See Rule 143(c). In addition, documents referred to in a motion for summary judgment should be attached thereto and properly authenticated. See Fed.R.Evid. 901 and 902.2 Without documents identified by a proper affidavit or otherwise made admissible in evidence, factual assertions in a summary judgment motion are not admissible evidence, and they cannot be properly relied on by this Court in considering petitioner’s motion.” Order, at pp. 2-3 (Footnote omitted, but it says see FRE 901 for what needs authenticating, and FRE 902 for what is self-authenticating.).

All Ryan says is that he and his co-principals were never convicted of a crime. OK, but “(T)he factual inquiry key to all seven of petitioner’s above delineated legal and Constitutional challenges to respondent’s notice of deficiency is whether petitioner was trafficking in a controlled substance through an entity known as High Mountain Medz LLC (HMM), in which he was a principal. However, petitioner has put forth no evidence via affidavit or otherwise regarding HMM’s line of business.” Order, at p. 3.

Summary J denied, without prejudice.

Once again, in USTC, let it all hang out.