I’m sure my readers, whether they first saw Snuffy as parents or children, recall Big Bird’s BFF Mr. Snuffleupagus, whom no adult could ever see, despite Big Bird’s assiduous efforts. 

Well, today Bert Kroner, 2020 T. C. Memo. 73, filed 6/1/20, finds himself situated as did Big Bird before the celebrated Episode 2096. And alas, ex-Ch J L Paige (“Iron Fist”) Marvel has not the imagination to conceive that Mr H (name omitted, but the latter-day counterpart of Will Shakespeare’s “onlie begetter”) could have gifted Bert with $24.775 million as soon as Mr H bailed out of some cashflow-financing deals.

For the latecomers, cashflow-financing means buying up structured settlements, lottery winning payouts, and similar payment-over-time deals by paying recipients spot cash and taking assignments of the remaining income stream. Sort of OID-on-steroids.

Bert and Mr H, who was a UK US-indifferent, did some deals together, and according to Bert and Mr H’s attorney (whom I’ll call Bob and who later became Bert’s attorney as well), became real chummy.

So chummy, in fact, that whenever Mr H cashed out heavy-duty on a cashflow financing deal, he gave his buddy Burt seven figures. Bert split the beneficence among some entities, on and off shore, that Bob set up for him aided by Mr H’s associate, whom I’ll call Mr M.

Bert claimed these were all motivated by “detached and disinterested generosity, out of affection, respect, admiration, charity or like impulses.” 2020 T. C. Memo. 73, at p. 8, and so neither reported nor paid tax on any thereof, per Section 102, as advised by Bob.

We should all have such friends.

Of course, the one who can best explain this munificence is Mr H. Except Mr H never shows for the trial, and Bert has no idea where he lives or even what his phone number is. 2020 T. C. Memo. 73, at p. 17, footnote 8.

“The intention with which Mr. H made the transfers is the most critical factor. Although the Court granted petitioner’s motion in limine to preclude the drawing of any adverse inference from Mr. H’s absence at trial, the Court also warned the parties on multiple occasions of the importance of hearing Mr. H’s testimony. The Court’s ruling on the motion in no way relieved petitioner of his burden of proving Mr. H’s intention by a preponderance of credible evidence.” 2020 T. C. Memo. 73, at p. 9.

So it’s time for the trier-of-fact to sort through the evidence.

The only paper is a one-page note drafted by Bob and Mr M, who also authenticate Mr H’s signature. It gets into evidence, over IRS’ objection, per FRE 803(3). “Rule 803(3) of the Federal Rules of Evidence excludes from the rule against hearsay statements that describe a declarant’s then- existing state of mind (such as motive, intent, or plan). Because we find that rule 803(3) applies, we admit the note over respondent’s objection.” 2020 T. C. Memo. 73, at p. 20. But ex-Ch J Iron Fist says it’s not credible evidence.

Neither is Bert’s trial testimony. In fact, since on one deal Bert was barred by a noncompete from being in the business, it looked like Mr H was Bert’s nominee. And Bert allegedly acted as nominee for Mr H on another deal.

Before we leave Bert and his deficiencies, remember I said in my immediately previous blogpost this date that the only time IRS loses on BoP is Graev defects in Boss Hossery? Well, here IRS does it again. The RA hits Bert with a Letter 915 and then a Letter 950, each time attaching Form 4549. What IRS didn’t have was a CPAF signed off by Boss Hoss before either.

IRS’ claim that the Letter 915 was merely a request for information and not a 30-day letter goes the way of Bert’s testimony. Titles mean nothing; substance means everything.

$1.7 million in chops vanish with Mr H.