Rebecca L. Bethune, 2020 T. C. Memo. 96, filed 6/30/20, loses her HOH, dependency and child tax credits, because Kirby, her loved-once, played the above-captioned on her.

Rebecca and Kirby were splitsville, but amended their divorce decree, which originally said nothing about who got the tax breaks for their four (count ’em, four) offspring, two adults and two minors. They amended in the year after the year at issue.

Rebecca took both minors for year at issue, even though they lived with Kirby for the whole year.  And the acknowledged divorce decree amendment said that she could.

What it didn’t say was that Kirby wouldn’t. So when IRS hit Rebecca with a SNOD two years later and she proffered the amended divorce decree, a helpful IRS employee told her to get a Form 8332 from Kirby. Rebecca never heard of a Form 8332; I wonder if she had an attorney, and, if she did, whether that attorney ever had.

So Rebecca went off, got hold of Kirby, and had him sign the Form 8332.

But the helpful IRS employee didn’t tell Rebecca that if Kirby had taken the minors on his return for year at issue, any Form 8332 he signed was worthless unless accompanied by an amended return handing back whatever benefits he took.

See my blogpost “‘I’m From The Government And I’m Here To Help’ – Part Deux,” 3/19/15.

Kirby claims he never signed nuthin’, but Rebecca’s circumstantial testimony convinces Judge David Gustafson that ol’ Kirby’s fibbing. Unhappily, Kirby had taken the minors and never amended.

Sorry, Rebecca.

IRS claims that, even if Kirby signed the Form 8332, it wasn’t attached to Rebecca’s return for year at issue. Now my ultra-sophisticated readers are doubtless exclaiming “But Sec. 1.152-5(e)(2)(i), Proposed Income Tax Regs., 82 Fed. Reg. 6387 (Jan. 19, 2017) says you can hand in a Form 8332 at exam.” Of course proposed regs don’t bind the Court, and are just guidance.

And the “attached” question really applies only in the electronic filing context.

” However, the provisions for electronic filing are not applicable here, where Ms. Bethune filed a paper return, and the provisions for submission during examination are not applicable here, where the custodial parent never relinquished the dependency exemption deduction. The applicable, operative rule is that Ms. Bethune had to ‘attach’ the Form 8332 to her return, but she did not do so. Consequently, she is not entitled to the dependency exemption deductions….” 2020 T. C. Memo. 96, at p. 16.

Of course we remember Judge Holmes’ syntactical macarena in my blogpost “Swift, Light and Unattached,” 12/19/12.

But I go back to an old story. Child care tax breaks are complicated. Quick-and-dirty split-the-years solutions don’t stand up. Family lawyers, read and heed.

Judge Mark V Holmes called it the brush hog, dissenting in Oakbrook (see my blogpost “They Always Must Be With Us,” 5/12/20). And it certainly does chop through everything in its path.

I refer, of course, to the fixed-price payout at extinguishment, which indiscriminately eviscerates scenic/conservation deductions, syndicated or otherwise, abusive or innocuous.

Today we have Habitat Green Investments, LLC, MM Bulldawg Manager, LLC, Tax Matters Partner, et al., Docket No. 14433-17, Green Creek, LLC (same TMP, Docket No. 14435-17), Turtle River Properties, LLC (same TMP, Docket No. 14434-17), and Charles W. Harris & Jacqueline Harris, Docket No. 24201-15, all filed 6/30/20.

The opinions are much of a muchness. Chas & Jacque play the “Swiss cheese” variation (reserving rights to “…install underground utilities, construct structures necessary for drainage, construct bridges foot, horse, bicycle, and maintenance traffic, and construct certain roads, trails, and walkways–all, we assume, subject to the conservation purposes of the deed.” Order, at p. 3.).

But, at close of play, the fixed-price payout at extinguishment sends off all four.

Judge David Gustafson has the whole thing. And he follows Procrustes by putting them all to bed in the same bed.

“In Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo. 2020-54, we held a deed violates the “protected in perpetuity” requirement of section 170(h)(5), as interpreted in 26 C.F.R. sec.1.170A-14(g)(6), if the donee’s share of the extinguishment proceeds is reduced by excluding the value of any improvements made by the donor after the date of gift. We reached the same conclusion in Hewitt v. Commissioner, T.C. Memo. 2020-89, where the deed at issue was equivalent to the Deed at issue here. (The provision allocating the proceeds in the event of a judicial extinguishment in the deed in Hewitt contained language virtually identical to the critical parenthetical in paragraph 9.4 in the Deed at issue here).

“Petitioners contend that we misconstrue the regulation. However, we strictly construe Section 1.170A-14(g)(6), Income Tax Regs., see Hewitt, slip op. at *15- 17 (and in the cases cited therein), and such construction requires in the context of allocating proceeds from an extinguishment that ‘the value of post easement improvements may not be subtracted out of the proceeds before determining the donee’s proportionate share.’ Id. slip op. at *19; see also Oakbrook Land Holdings, slip op. at *37-41.” Harris, Order, at p. 6, but the others follow suit, with slight but insignificant variation.

For the story of Dave Hewitt, who saved Daddy’s farm from the mobile homesters, see my blogpost “‘Gude Faith, He Maunna’ Fau’ That’- Part Deux,” 6/17/20.

When the USCCAs get their innings, watch out for the silt-stir. I’m still backing Judge Holmes’ dissent in Oakbrook.

Now lest I be accused of favoring phony dodges, allow me to point out that Judge Holmes said there remains the trial, where Tax Court expertise in valuations will assure that bogus valuations and bogus valuers will share the fate of the crumbling façade easement merchants.

A docket search of Sheila Lynne Rosenthal & Sheri Lyn Holbrook 18392-19S, filed 6/29/20, shows their formidable counsel is none other than Temple Keith Fogg, Esq., Clinical Professor of Law at the redoubtable Harvard Law School.

And Temple Keith and his formidable colleagues are, naturally, au courant with the latest handy hints and kinks in USTC practice. So when their hapless clients petition their small-claimer to the IRS and not to The Glasshouse Gang, resulting in their petition getting to the Glasshouse fifty (count ’em, fifty) days late after IRS at Laguna Niguel, CA relays the same, Temple Keith and crew try the equitable tolling gambit.

I said it was a loser when I edited my blogpost “Le Quinzième Juillet,” 4/10/20, on 4/18/20. “But the explicit Section 6213 language, with the stay of collection, makes the 90-150 day limitation on petitioning a SNOD jurisdictional.” Equitable tolling only works when no prejudice to the other side. But to impose a stay of collection activities after IRS may have reasonably commenced same is muy prejudicial. And the uncertainty such a ruling would create is even worse.

Apparently the Harvard guys reached the same result.

“On January 15, 2020, petitioners filed a Response to the order to show cause, in which they argued that I.R.C. section 6213(a) is not jurisdictional and is subject to equitable tolling. On June 26, 2020, petitioners filed a Status Report, in which they state that they no longer object to the order to show cause issued in this case being made absolute and the Court dismissing this case for lack of jurisdiction as untimely filed. The record establishes that the petition was not timely filed.” Order, at pp. 1-2.

I certainly do not presume to suggest that so exalted a squadron as the Harvard Law School Federal Tax Clinic, the ne plus ultra of pro bono taxologists, deigns to read so paltry a production as this my blog.

Still, as we said on The Hill Far Above: “Harvard…because not everybody can go to Cornell.”

Although I gave credit to Mark Twain for years for this one, it’s really much older. But whether an anonymous English humorist or an anonymous nineteenth-century schoolchild gets the credit, on a Friday in the doldrums, with neither opinion nor designated hitter on the Glasshouse radar, the blogger must take what he can get from wherever he can get it.

So here is the short tale of Juan Carlos Canales, Docket No. 15657-19, filed 6/26/20.

I’ll let Judge Albert G (“Scholar Al”) Lauber tell the story. It is truly a scholar’s tale.

“This case involves petitioner’s Federal income tax liability for tax year 2017. The notice of deficiency asserted that petitioner had received unreported income for 2017, determining a deficiency and an accuracy-related penalty. In his petition petitioner alleged that the income in question was received by his father and uncle, whose names resemble his.” Order, at p. 1.

Remember Sunset Charlie Shaffran, Sr., whose signature so resembled his son’s that he got slugged with $85K in TFRPs when he signed a couple checks (hi, Judge Holmes) for said son’s soon-to-be defunct-restaurant? No? Really? Then read my blogpost “Chi Se Firma È Perduto,” 2/17/17.

IRS is kinder to Juan Carlos than they were to Sunset Charlie.

“… respondent’s counsel filed a status report indicating that the IRS Appeals Office had agreed to a settlement under which the deficiency and penalty ‘would not be sustained.’ This appears to mean that the IRS has decided to concede this case in full.” Order, at p. 2.

But since Juan Carlos didn’t sign off on the decision document IRS proffered, maybe IRS should move for entry of decision showing zero due.

The line that gives me my title is “The plays of Shakespeare were not written by Shakespeare, but by another man of the same name.”

Judge Albert G (“Scholar Al”) Lauber has a reprise of the miscoded CAP-CDP duo, which caused IRS to certify to State Dep’t that Vivian Ruesch, 154 T. C. 13, filed 6/25/20, was a serious tax delinquent. This means State grabbed Vivian’s passport. IRS unscrambled the computer-generated frittata, told State “let her go, let her go, God bless her,” and Vivian is decertified.

Now I’m sure my readers are wondering why this rehash of my blogpost “So Many Taxes, So Little Time,” 1/30/19, is furnishing forth the table in a full dress T. C.

Well, because Jersey Boys. Yes, the famous Hackensack Hardchargers want Judge Lauber to knock out Vivian’s liabilities altogether. But there’s a wee wingéd creature in the cliché.

Judge Lauber says he can’t do it, and anyway it’s moot. Remember, this is pore l’il ole Article I Tax Court.

“Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine ‘whether the certification was erroneous or whether the * * * [IRS] has failed to reverse the certification.’ If we find that a certification was erroneous, we ‘may order the Secretary [of the Treasury] to notify the Secretary of State that such certification was erroneous.’ Sec. 7345(e)(2). The statute specifies no other form of relief that we may grant.” 154 T. C. 13, at pp. 9-10.

Well, IRS already told State “fuggedaboutit,” as we say on this island where both Judge Scholar Al and my colleague Peter Reilly, CPA, attended a prestigious preparatory school, where such language was never used. So what else to do?

The Jersey Boys riposte, “plenty.”

First, IRS may go back to its old ways and wrongly recertify. Nope, says Judge Scholar Al.

“Nor is there any reasonable expectation that the alleged violation will recur. Petitioner’s challenge to her liability for the penalties is now pending in the IRS Appeals Office. Under section 7345(b)(2)(B), the IRS is barred from recertifying petitioner as a person with a seriously delinquent tax debt during the pendency of that CDP proceeding. If petitioner in that proceeding is determined to have no liability for the penalties, there is no reason to believe that the IRS would defy the law by recertifying her anyway. And if she is ultimately determined to be liable for the penalties, a certification by the IRS at that point would not be a ‘violation,’ assuming that the other requirements for a ‘seriously delinquent tax debt’ are then met. See sec. 7345(b). If petitioner believed that those other requirements were not met, she would be free to seek review of that future certification in this Court at that time. Any future violation, should it occur, will not escape judicial review.” 154 T. C. 13, at p. 19.

Unlike a Section 6330 levy, there’s no limit to the number of Section 7345 passport reviews. Y’all will recall Judge David Gustafson upending IRS in my blogpost “Crafty – Akin to the Weasel,” 7/24/17, because IRS ducked the CDP Matty Dean Vigon brought for the Section 6702s that lacked Section 6751(b) Boss Hoss sign-offs. IRS withdrew the penalties and claimed mootness, expressly reserving the right to try again. Now Matty Dean was in a Canadian slammer, and filing another CDP four (count ’em, four) years down the road (IRS claiming no SOL on 6702s) didn’t sit well with Judge Gustafson, especially with the one-CDP rule for Section 6330s.

But here there’s no limit.

Vivian can contest liability at her CDP, which will generate a NOD, which Vivian can petition. Or she can pay and sue for a refund.

But the Jersey Boys aren’t finished yet.

“Petitioner asks that we exercise ‘judicial discretion’ to issue a ruling that determines her underlying tax liability now, rather than await the outcome of the CDP litigation. Because we currently lack jurisdiction over her underlying liability challenge, we must demur to this request. There clearly remains a dispute between petitioner and the IRS about the penalties, but that dispute does not give rise to a justiciable controversy in this case. ‘[I]f a case raises a question within the jurisdictional purview of the [T]ax [C]ourt, and that question is subsequently resolved, the case is moot notwithstanding the existence of other live controversies between the taxpayer and the IRS’ that currently lie outside this Court’s jurisdiction.” 154 T. C. 13, at p. 23. (Citation omitted).

Vivian has gotten all Tax Court could give.

Though the Jersey Boys couldn’t get more from Tax Court, they can get more from Taishoff: a Taishoff “good try, third class.”

It’s the run-up (or more properly, the walk-up) to the true start of summer, the July Fourth weekend. Today being Johannestag notwithstanding, Tax Court has already begun the lapse into the doldrums, with neither opinion nor designated hitter to slake the blogger’s thirst for copy.

So I’m surprised, but gratified, that Judge Nega is putting the pedal to the cliché in Estate of Eileen A. O’Malley, Deceased, Mary A. Shannon, Executor, Docket No. 18633-13, filed 6/24/20.

This long-running show is coming up on Anniversary Seven. Judge Nega notes “…the case has developed into a lengthy docket record.” Order, at p. 1. Counsel have shuttled in and out like short relievers in a slugfest, with an appearance (non-electronic) by Old Bill Wise, celebrated technophobe; see my blogpost “(Old) Technophobes, Rejoice!” 12/28/13.

There’s a plethora of unopposed continuances, but Judge Nega has been on this case for only ten months or so, only gaving up one continuance.

Now we’ve seen Tax Court cases go on for decades (e.g., the Kesting saga), to end only with the deaths of all the non-governmental participants.

But today, when everything seems somnolent, Judge Nega has had enough.

“Upon review of the parties’ status report it is clear that the parties differ in their characterization of the facts and the status of this case. The Court is concerned about the seeming lack of progress by the parties’ [sic] with respect to their settlement negotiations. Therefore the Court will give the parties one last opportunity to work together in good faith to narrow the issues in an effort to settle this case.” Order, at p. 1. (Emphasis by the Court).

Apparently IRS made a settlement offer to Mary. If she’s unhappy with it, let her make a counteroffer to IRS and tell Judge Nega that she did.

In any case, by 9/30, let both sides report, wherein “(T)he parties shall identify the meetings the parties have held (or scheduled) toward the preparation of the stipulation of facts and/or their efforts to settle the case.” Order, at p. 2.

A little judicial intervention can move things along. Even in summer.

More syndicated conservation/scenic easement cases today, and though they all go off on extinguishment (the 501(c)(3) doesn’t get the stepped-up value for improvements on extinguishment, thus not perpetual), the valuation gambit is the better move.

It’s well-known that I have touted Judge Holmes’ dissent in Oakbrook as soon as his wordprocessor cooled down. See my blogpost “They Always Must Be With Us,” 6/12/20. And Judge Kerrigan’s conclusion that “Treasury exercised reasoned judgment in its effort to reach the goal of section 170(h)(5)(A),” while it sounds good, is just what Judge Holmes said: a sledgehammer that takes out legitimate easements as well as syndicated, marked-up phonies.

So let’s compare and contrast Lumpkin One Five Six, LLC, 156 Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 94, filed 6/23/20, and its companion Lumpkin HC, LLC, Hurricane Creek Partners, LLC, Tax Matters Partner, 2020 T. C. Memo. 95, filed 6/23/20, with Plateau Holdings, LLC, Waterfall Development Manager, LLC, Tax Matters Partner, 2020 T. C. Memo.93, filed 6/23/20.

The phrase above quoted comes from 2020 T. C. Memo. 94, at p. 13.

And though Judge Kerrigan in both Lumpkin cases hews to the Oakbrook majority line, with a healthy dose of Chevron for good measure, the basic objection remains. Treasury’s reg. 1.170A-14(g)(6)(ii) gives the 501(c) a windfall and penalizes the honest grantor. Like a certain hard master in a story told by a far more exalted personage, in the extremely unlikely event of judicial extinguishment, the 501(c)(3) is “reaping where you have not sown, and gathering where you have not scattered seed.” And the reg torpedoes the easement, properly valued or overvalued, on the possibility of an event “so remote as to be negligible.” No governmental authority is going to raise taxes to condemn this kind of junk property. These strip-mined GA wastelands, miles from nowhere, with low six-figure bases, somehow are allegedly worth millions. In a valuation case, they are toast.

Judge Lauber does a better job with Plateau Holdings. The easement, supposedly reducing the value of this TN ex-strip mine by $25.5 million, covered land sold eight (count ’em, eight) days before for less than $6 million. And the best part of the land was not included in the easement.

True, Judge Lauber plays the Oakbrook extinguishment gambit, but goes on to slug the Plateau crew with the 40% chop. And the job he does on the Plateau’s appraisal is well worth reading in full. That should have been the opinion.

Judge Lauber does want to know how to deal with the 20% chop on whatever was left of the deduction after he demolished it. So let the parties brief that, and he’ll give me more blogfodder anon.

Footnote to my colleague Peter Reilly, CPA: Though Lumpkin was the name of a Hobbit pony, this Lumpkin is a county in GA.

I hope y’all have your money on Judge Holmes in the Oakbrook appeal. I didn’t even have a sentimental penny on Tiz The Law.

They’re Back

The “neither rain, nor snow” guys, so apostrophized by “The Father of History,” are headed back to the locked-down Glasshouse on July 10.

Here’s the scoop.

So if your snail-mailed petition, amendment, motion, or birthday card is sitting in a USPS warehouse, the postal workers will be hauling it over.

If your billet doux got bounced back to you, resend with original envelope that shows the USPS official postmark. But wait until July 10.

That’s the job description of James A. Lloyd, 2020 T. C. Memo. 92, filed 6/22/20, at p. 4. He runs a religious-type sales operation and internet-based radio stations. For the years at issue, he employed no one and was employed by no one. He also claimed that the Federal income tax was null and void, and if it wasn’t, then he’s a church.

Judge Halpern has this one.

Jim’s income tax-is-void argument got Crained. “Petitioner’s argument that the income tax is null and void is devoid of merit, and we reject it summarily. We do so in mind of what the Court of Appeals for the Fifth Circuit said many years ago and reiterated earlier this year: ‘We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.’ Williams v. Commissioner, 801 F. App’x 328, 329 (5th Cir. 2020) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)); see also Wnuck v. Commissioner, 136 T.C. 498, 501 (2011); Wells v. Commissioner, T.C. Memo. 2019-134, at *5.” 2020 T. C. Memo. 92, at p. 13.

Of course, Jim’s tax liability is computed via bank account reconstruction, because Jim never filed anything. His only objection to IRS’ numbers falls short. “Indeed, in response to respondent’s proposed findings of facts with respect to petitioner’s financial activity and income, petitioner has a stock response: ‘Petitioner Objects to the financial figures as they are too voluminous to evaluate within any realistic time frame.’ That is not a claim that the figures are incorrect, only that petitioner has had inadequate time to evaluate them, a claim we do not believe. Petitioner had access to the KeyBank, eBay, and PayPal records at least by December 11, 2018, the date of trial, when the records were received into evidence. Petitioner’s answering brief was not due until more than six months after. Facsimiles appear in the Court’s docket and are available to petitioner electronically.” 2020 T. C. Memo. 92, at pp. 14-15.

Jim can’t be exempt from tax, because organizations may be, but individuals aren’t. I’m sort of surprised Jim didn’t try the corporation sole dodge, but maybe that’s too obvious, and excites unwelcome attention.

IRS drops the Section 6651(f) fraudulent nonfiling chop. But Jim does get nonfiling, nonpayment, nonestimateds, and SE chops.

What makes this case interesting is Judge Halpern hitting Jim with a Section 6673 frivolity chop.

“We may, on our own initiative, require a taxpayer to pay a section 6673(a)(1) penalty. Petitioner failed to report substantial amounts of income for six years and his argument that the Code is null and void is frivolous. We need not decide whether petitioner’s other argument, that he is functioning as a church (which, in the context of this case, we reject), is also frivolous. A taxpayer who makes frivolous arguments is not immune from penalty just because some of his arguments may not be frivolous. Petitioner was warned by respondent both in the answer and in respondent’s pretrial memorandum that he was making frivolous arguments in challenging the constitutionality of the Federal income tax system. Petitioner ignored those warnings at his peril. We believe petitioner is deserving of a penalty under section 6673(a)(1) of $2,500.” 2020 T. C. Memo. 92, at pp. 23-24. (Citations omitted).

I was wondering last week what it took to get a Section 6673 chop. See my blogpost “Titanium? Tungsten? Chromium?” 6/19/20.

It seems I’ve gotten my answer. Dodge paying tax frivolously enough (after IRS warning), get chopped. Repeatedly deny your sworn testimony, resulting in delay of collection and waste of judicial resources, no chop.

Back in May, 2013, some person using the name Alex chided me for blogging when  “…people are already in a difficult place and with your blogger persecution making it worse.” I protested the word “persecution,” then and now, because Alex never furnished particulars, only badly-constructed generalities. He never surfaced again.

Howbeit, I am left with the blogger’s unfortunate lot, always “an hour to play and the last man in.”

The litigants, their counsel, and the Judges and STJs have all had their innings.

When I get my turn, I’m always out of time. But what was written, was written, and it remains. And it’s all the daily grist that comes to the blogger’s mill. I object to being accused of “piling on.”

So here’s Dan Israely & Zahava Israely, Docket 18108-18, filed 6/19/20. It’s not Dan’s or Zahava’s story, although they’ve something to say at the end.

Perhaps it’s the strain of isolation; or the strains of family, friends, cohabitants, pets, or all the above; or the temptation of kitchen and Amazon-chock-a-blocked refrigerator, freezer, and cupboards; whichever it is, has caused IRS’ counsel to turn out less than a perfect effort. I won’t name her, because I’m sure ex-Ch J Michael B (“Iron Mike”)’s gentle admonition stings more than my “persecution.”

“Respondent’s motion for leave to file first amendment to answer states that it is made ‘in order to assert additional bases for the adjustments to Schedule C expenses and an increase in the deficiency and [sic] for tax years 2014 and 2015.’ However, neither respondent’s motion nor the first amendment to answer lodged therewith states the amount or contemplated calculation of any increased deficiencies. In fact, the first amendment to answer as lodged…concludes by requesting that ‘respondent’s determination, as set forth in the notice of deficiency, be in all respects approved.’ Consequently, we are left in doubt as to whether respondent is actually seeking increased deficiencies and, if so, in what amounts. We are also left in doubt as to how any increased deficiencies relate to the various alternative ‘additional bases’ respondent has advanced in his lodged first amendment to petition.” Order, at p. 1.

Of course, Dan’s and Zahava’s counsel comes in to oppose, but appropriately raises Section 7491 “new matter” BoP shift, both as to facts and legal theories.

So let IRS’ counsel respond to Dan’s & Zahava’s counsel’s objections, but don’t forget ex-Ch J Iron Mike.