Or the Electrons

Judge Gale has a designated hitter that makes my day. Laura B. Walker, Docket No. 3136-20S, filed 10/30/20, is regrettably unable to manage her own affairs, but I am grateful to her for the vindication of my long-standing campaign for recognition that a power of attorney is a piece of paper or a concatenation of electrons. It follows therefrom that the human being who is appointed by said paper or electrons is either a Representative (see Form 2848) or an agent (see, e.g., See 20 Pa. Stat. and Cons. Stat. Ann. secs. 5601.1, 5604(a) (Westlaw through 2020 Reg. Sess. Act 79)).

Laura B., prior to becoming so unable, appointed Kimberly Walker Fuller as her agent. Judge Gale elucidates.

“The Petition in this case was filed by Ms. Fuller, acting as petitioner’s agent, to seek redetermination of a deficiency determined for petitioner’s … taxable year. Attached to the Petition is a copy of a power of attorney authorizing Ms. Fuller to act as petitioner’s agent for a variety of purposes, including ‘[t]o pursue claims and litigation’ and ‘[t]o pursue tax matters’. The power of attorney also provides that it ‘shall not be affected by * * * [petitioner’s] subsequent disability or incapacity’, and that it is governed by Pennsylvania law.” Order, at pp. 1-2.

Here in NY we have something like this, but check your local laws for correct forms and nomenclature; as always, YMMV. BTW, an amendment to our statute has passed the Legislature, but somehow has failed of delivery to the Governor for signature. Given our State’s Byzantine legislative process, I’m not surprised.

Howbeit, IRS wants Judge Gale to extend Next Friendship to Kimberly. Judge Gale does a boot-scoot through Pa. Stat. and Cons State Ann., finding that the Penn’s Woods Commonwealth allows Kimberly to “‘…protest and litigate tax assessments’, ‘claim, sue for and collect tax refunds’, and ‘waive rights and sign all documents required to settle, pay, and determine tax liabilities’.” Order, at p. 2.

So Kimberly, formerly agent, is now next friend. But never Power of Attorney.

How’s that for a question on the next Tax Court admission exam? Under what circumstances can a State form of Power of Attorney authorize a non-admitted person to appear in Tax Court for another?

That’s Judge Buch’s view of the plight of Peter Hoskey, Docket No. 17570-19L, filed 10/30/20. Pete is up against it; he tried to take his grandchildren as dependents, IRS gave Pete a SNOD which he never petitioned, and he defaulted on the IA he entered into thereafter.

IRS gives Pete a NITL at no extra charge, which Pete CDPs claiming inability to pay, but provides no Form 433-A and doesn’t show for the phone conference or answer the last-chance letter. Appeals NODs the NITL, and Pete petitions Tax Court. Here’s Judge Buch’s off-the-bencher: “At trial, Mr. Hoskey testified about his efforts to provide information to the Commissioner and his current collectability status. Mr. Hoskey was, at some time, responsive to the Commissioner. It is likely that he was responsive during an earlier time, for example, when getting his installment agreement. But there is no evidence that he responded to the Appeals Officer during this collection proceeding. As for collectability, Mr. Hoskey had stopped making payments on his liability because he could no longer afford to do so.” Order, Transcript, at p. 6.

I have a certain amount of sympathy for Pete’s story. The old pilot’s Big Three “Aviate, Navigate, Communicate” is as true on the ground as in the air. First, don’t crash, fly the plane; second, find your way out of trouble; only then go on the air. But Appeals, even though independent of IRS, shares IRS’ proclivity to get peeved when ignored.

Pete’s tale gets sadder.”In the time since the Commissioner issued his notice of determination, matters have only gotten worse.  Mr. Hoskey had been earning income selling produce along the roadside. We glean from Mr. Hoskey’s testimony that his truck was impounded, and as a result, he lost that source of income. The result is that Mr. Hoskey remains unable to pay his liability or make the payments on the installment agreement.” Order, Transcript, at pp. 6-7. The Commissioner’s notice of determination? I thought Appeals was independent.

Howbeit, maybe so it’s time for Churchill. No, not Winston, although Judge Buch has nothing to offer Pete but blood, toil, tears, and sweat. I mean John L. Churchill, as to whom see my blogpost “Back to the Future,” 8/1/11, where John L.’s divorce earned him a remand back to Appeals.

“In limited situations, we can remand a case to appeals for further consideration even if the Commissioner did not abuse his discretion. One such instance occurs where a taxpayer has undergone a material change in circumstances after the Commissioner issued a determination. A material change in circumstances occurs when the taxpayer’s ability to pay has decreased such that Appeal’s determination would have differed had the circumstance been present at the time of the hearing.” Order, Transcript, at p. 10. (Citations omitted, but get them for your memos of law file).

Alas, that doesn’t help poor Pete. He was broke when he went to Appeals, so losing his truck and his produce-pushing gig makes him broker, but that isn’t remandable.

“In this particular case, Mr. Hoskey’s change in circumstances is not material under this standard. At the time Mr. Hoskey requested a collection hearing, he did not have the ability to pay the taxes owed. The Appeals Officer sustained the levy because Mr. Hoskey failed to provide the requested documentation substantiating his financial situation. If he could have afforded to pay and the subsequent loss of income made him uncollectible, this likely would have constituted a material change. However, Mr. Hoskey claimed to be unable to pay at the time he requested Appeals consideration, and his loss of income does not alter his claimed inability to pay. If he was uncollectible beforehand, his reduction in income does not change that material fact – that he was and remains uncollectible.” Order, Transcript, at pp. 10-11.

Pete could have requested CNC, but he provided no information, so the AO had nothing to go on. Pete can always go back to Appeals with documents in hand, and request CNC, but Judge Buch can’t give that to him on this record.

This is a classic case for a LITC, but Pete needs to be told to go to one.

Maybe the end of Daylight Time is causing judicial grumpiness at The Glasshouse On the Street Where Taxation Lives. I cannot tell, but something is causing the Tax Court Bar to be on the receiving end of a bunch rebukes (hi, Judge Holmes).

First, counsel for Mark Yagalla, Docket No. 12152-20L, filed 10/30/20.”… improperly filed a Redacted Petition in paper form. No motion to be exempt from electronic filing (eFiling) accompanied the paper filing.

“Petitioner’s counsel is reminded that eFiling is mandatory for most documents filed by parties represented by counsel. If petitioner’s counsel wishes to be exempt from the eFiling requirements, he must file a motion and show good cause why he should be exempt from eFiling. See Rule 26(b),Tax Court Rules of Practice and Procedure.” Order, at p. 1.

And of course Ch J Maurice B (“Mighty Mo”) Foley, apparently taking his text from Luke 11:52, tosses the paper.

Taishoff says said counsel could easily have become confused by reading all the orders where self-representeds had their electronic petitions tossed. And only the very old technophobes can gain exemption from electrofiling. See my blogpost “(Old) Technophobes, Rejoice!” 12/28/13.

Next, Beanstalk Computing, Inc., Docket No. 7850-20S, filed 10/31/20. It’s our old chum Form 6, a notorious stumbling block. Ch J Mighty Mo admonishes the Beanstalks thus: “…the Court directed petitioner to file an Ownership Disclosure Statement on or before October 5, 2020. To date, no such statement has been received by the Court, despite petitioner being represented by counsel. Petitioner is also reminded of the Court’s electronic filing (eFiling) requirements.” Order, at p. 1.

Taishoff asks exactly what purpose this document serves except to confuse self-representeds and some counsel, as 99% of the corporations coming into Tax Court are closely-held Sub Ss, which cannot have publicly-helds as shareholders, and 90% of such petitioners are not subsidiaries.

Finally, Parkerson Church Reserve, LLC, Stuckey Timberland, Inc., Tax Matters Partner, Docket No. 11686-20, filed 10/30/20. Here the object of Ch J Mighty Mo’s bawling-out is an associate in a well-known tax white-shoe, who, prior to shedding his lace-ups for slip-ons, served as an Honors Attorney in the IRS Office of Chief Counsel where he represented the IRS in Tax Court litigation as lead counsel and trial team co-chair.

Notwithstanding the foregoing and anything hereinabove or hereinbelow, express or implied, to the contrary or at variance therewith (as I’m sure said counsel and his high-priced colleagues would say), Ch J Mighty Mo observes said counsel’s miscue and responds like many a drill sergeant I had the dubious pleasure of encountering long ago.

“[Mr P.] improperly filed an Entry of Appearance as counsel for petitioners in paper form. An Entry of Appearance must be electronically filed. See Rule 26(b), Tax Court Rules of Practice and Procedure. The Entry of Appearance was not accompanied by a motion for exception from electronic filing. Accordingly, we will strike as improperly filed Mr. P’s Entry of Appearance.” Order, at p. 1. (Name omitted).

And he can file electronically if he wants to stay in.

A copy of this order goes to his firm. And to the client, of course. I expect the PIC (partner in charge) will receive The Phone Call.

I wonder if twenty pushups will follow. On the gravel-strewn Company Street.

From and including tomorrow, Friday, 10/30/20, The Glasshouse Gang will stop in-person acceptance of hand-delivered documents, until further notice.

Here’s the skinny.

The 1971 Rod Stewart-Martin Quittenton lament of the pool-playing schoolboy echoes in Judge Gale’s tale of Ram Ratan Sharma and Shakuntala Sharma, 2020 T. C. Memo. 147, filed 10/29/20. Ram and Shak are trying to deduct $27K of rental real estate losses, but fall foul of the Section 469(i) $25K stop-loss, to the extent of a $5230 deficiency, and a Section 6662(a) chop.

IRS concedes the chop, but Judge Gale sustains the deficiency.

Ram and Shak agree they’re not real estate pros, but they do actively participate in their real estating. Thus, they claim the $25K stop-loss.

” The $25,000 maximum exemption is subject to a phaseout that reduces the exemption by 50% of the amount by which a taxpayer’s “modified adjusted gross income” (MAGI) for the taxable year exceeds $100,000. See sec. 469(i)(3)(A), (F). Consequently, if a taxpayer’s MAGI is $150,000 or more, the Section 469(i) exemption is fully phased out. Spouses who have filed a joint return are treated as a single taxpayer for purposes of the MAGI calculation, and both spouses’ income therefore must be taken into account in calculating their MAGI.” 2020 T. C. Memo. 147, at p. 5. (Citations and footnote omitted, but the footnote says that the $27K Ram and Shak claim is over the $25K, so the $25K is the best they could get even if they’re right, which they’re not).

Ram and Shak want to exclude their IRA and pension income from their Section 469 MAGI. They claim the instructions to Form 8582 allow this, and attach a copy of said instructions for a year other than the year at issue. Judge Gale allows this, taking judicial notice that those instructions do not vary.

Except the instructions don’t allow deductions for contributions to IRAs, much less withdrawals. Ram and Shak didn’t make any such contributions; if they had, the amount thereof would only increase their MAGI, and hence their deficiency.

There has to be a Rule 155 beancount, because Ram and Shak overstated the Social Security they received, so they need a Section 86 recalculation, and thus yet another go-around with MAGI.

See the title at the head hereof.

Chasing mirages and searching for pots of gold at the ends of rainbows have nothing on trying Section 7482 interlocutory appeals. The statute says it’s available; caselaw proves it isn’t. Case in point: Frederick Howe & Bonita A. McVaugh-Howe, Docket No. 29743-14, filed 10/29/20.

Quick man-‘splain from Judge Kerrigan: “Section 7482(a)(2)(A) provides that a Court of Appeals, upon a timely request by a party to litigation in this Court, may permit an immediate appeal of an interlocutory order of this Court when it contains a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation. Each of these three grounds must be met before we certify an interlocutory order for immediate appeal.” Order, at pp. 1-2. (Citations omitted).

The usual rule is one can appeal only from final judgments, that decide the case “and leave not a rack behind,” as a far better writer than I put it. Here, there’s still plenty of stuff; see my blogpost “Estopped to Estop,” 6/8/20.

Boni was out of the case by virtue of innocent spousery, so Fred is on his own here, with an $8 million deficiency and chops proportional.

There has to be a substantial variance of opinion on a legal issue essential to the case. Here, it’s a question whether an 872-AD is a contract like a Section 7122 closing agreement, and the caselaw says it isn’t, nemine contradicente as my high-priced colleagues would say.

Walt Whitman has certainly given me the gift that keeps on giving. My “electronic” takeoff of his leaf of grass is now in its fourth year, with no end in sight (groans from my readers).

Today, that obliging jurist Judge David Gustafson obliges me and Rashida Vance McNeil, Docket No. 14472-19, filed 10/29/20, with a pretrial checklist for the Zoomgov age. Technology provides that, although “Each degree of Latitude, Strung about Creation, Seeth one or more of us,” as a far better writer than I put it, we all can gather for a Zoomie-based teletubby.

But to make it work, here’s what y’all need to do, as Judge Gustafson advises Ms McNeil in a phoneathon.

“…the Court…instructed her to review any draft stipulation of facts that the Commissioner proposes, to propose any necessary corrections, and to cooperate with the Commissioner’s counsel in filing a joint stipulation of facts timely. The Court also gave instruction to Ms. McNeil to immediately share with her opponent any documents that she will offer into evidence at trial. The Court reminded her that any non-stipulated exhibits are also due to be filed on Monday, November 2, 2020, so that her opponent can see them in advance of trial and so that the documents can be accessed by the parties and the Court during the remote trial proceedings.” Order, at p. 1.  

And don’t forget the pretrial memorandum. Apparently Ms McNeil has, and that does not bode well. “The Court noted that one important aspect of the pretrial memorandum is its identification of any witnesses that the parties expect to call. The Court observed that this information is overdue and urged Ms. McNeil to promptly notify [IRS’ counsel] of any witnesses and to prepare for the witnesses’ participation in the video proceeding.” Order, at pp. 1-2.

Finally, make sure your laptop has a video camera, and show up for the Zoomgov dry run.

Did ex-Ch J Michael B (“Iron Mike”) Thornton stir some unnecessary silt in analyzing Van Bemmelen, when allowed that only three (count ’em, three) objections were available to a frustrated whistleblower? Ex-Ch J Iron Mike permitted challenges to the Ogden Sunseteers’ shotdowns only for incomplete record (whether so rendered negligently or intentionally), need for background information to see whether agency considered all relevant factors, and provided so abbreviated a record that judicial review is impossible. See my blogpost “Administering Supplements,” 8/27/20 for ex-Ch J Iron Mike’s take.

It seems summary J is inapposite for whistleblowing review. Summary J is fact-finding, not fact-deciding. But post Van Bemmelen, conflicting facts aren’t the point; only an adequate basis in the record is needed, whatever the variances between facts alleged by the parties.

That’s the point of departure for Judge Courtney D. (“CD”) Jones, when she unpacks Bobbi V Marvel, Docket No. 10452-19W, filed 10/28/20. The OS can’t even get Bobbi’s name right (Order, at p. 2, footnote 2).

But at the close of play, the SBSE evaluater decided that the amount at issue was too small to trigger an audit, despite some five (count ’em, five) years of target’s nonfiling. “As the record supports the WBO’s actions and there are no disputes of fact, the result of the case does not turn on which standard is applied.” Order, at p. 2.

“We review the WBO’s determination for abuse of discretion, and the scope of our review is generally limited to the administrative record. We will decide if the WBO’s actions were arbitrary, capricious, or without sound basis in fact or law.

“But we do not oversee the IRS’s audit and collection activity. Consequently, ‘we do not review the IRS’s decision whether to audit a target in response to a whistleblower’s claim and * * * we have no authority to require the IRS to explain a decision not to audit.’ To the extent that denial of petitioner’s claim encompassed a decision not to audit, we do not review that decision.” Order, at pp. 2-3 (Citations omitted, but expect to see them often cited).

The SBSE checked out what Bobbi provided for the relevant years, and decided it was too small to pursue.

That’s enough for Judge CD. She understands Bobbi’s frustration, but pore l’il ole Tax Court can’t order IRS to audit anybody.

And What They Get You

Judge Elizabeth A. (“Tex”) Copeland has a c.v. that would impress any senior managing partner. Her shoes would ace the Mark 9:3 color test. Truly, she would be a shoo-in for the Isaiah 53:12, clauses 1 and 2, stakes at any bloodbath (oops, I mean partners’ compensation meeting).

But look at what she gets for a designated hitter today.

Jaideep S. Chawla, Docket No. 2322-19, filed 10/2720*, a/k/a John Adams is up for around $27K in deficiencies, plus the odd chop. IRS moves to toss for want of prosecution, and Judge Tex Copeland gives Jaideep a/k/a John an order to show cause why not.

But Jaideep a/k/a John is willing to go all-in. Unhappily, he has a singularly poor hand, and none of flop, turn, or river will save him.

IRS sends in a status report, to which is attached “… a letter sent by petitioner…. Petitioner’s letter indicates that: petitioner’s name is now John Adams; multiple lawsuits have been filed by petitioner against the Internal Revenue Service related to the alleged tax bill; and that petitioner will not pay any debt until the Internal Revenue Service releases all federal tax filings of President Barack Obama to petitioner.” Order, at p. 1.

Judge Tex Copeland ordered Jaideep a/k/a John to respond electronically why he shouldn’t be tossed, whatever his name is. He doesn’t. He is.

Why the recipient of the American Bar Association Section of Taxation’s Janet Spragens Pro Bono Award (2009); Tax Person of the Year by Tax Analysts (2012); San Antonio Tax Lawyer of the Year (2011, 2017, 2018). Chair, State Bar of Texas Tax Section for the 2013-14 term, among other things, should have to deal with so unoriginal a wiseacre as Jaideep a/k/a John is beyond my comprehension.

See what credentials get you.

*Jaideep S Chawla 2322-19 10 27 20

I haven’t given out any Taishoff “Good Try”s lately, and today is not the day. The problem is, that Judge David Gustafson put on the brakes at the hold line with this designated hitter.

Dean Kalivas, Docket No. 25934-17, filed 10/26/20, missed the deadline last week for amending his petition, as you’ll remember from my blogpost “Judge on a Tear- Frivolite Beware!,” 10/20/20.  

Now IRS tries it on. IRS three (count ’em, three) weeks ago, tries a motion to require Dean to pony up paper or electrons for four (count ’em, four) matters at issue. Dean doesn’t respond to Judge Gustafson, although electronically enabled at Tax Court. He does send IRS a billet doux, wherein he states he has no paper for items 1, 2, and 4, and nothing beyond what he already handed over for item 3.

IRS says “requests as to items 3 and 4 are moot.” Fair enough. They also want Dean precluded from putting in any paper for any issue where he’s said he has none, except what he’s already given IRS. Judge Gustafson obliges.

“It is entirely reasonable to grant the additional relief that the Commissioner requests–i.e., to preclude Mr. Kalivas from producing at trial documents that he failed to produce during discovery.” Order, at p. 3. And he takes IRS at its word about the letter Dean sent IRS, but not to Judge Gustafson.

Item 1 involves money Dean claims is a loan, but IRS claims is income. Item 2 is Sched C and Sched E deductions.

But now IRS gets crafty.

IRS’ counsel wants Judge Gustafson to order that “…the issues to which respondent’s discovery request pertains shall be taken as established as set forth in the notice of deficiency dated September 12, 2017.” Order, at p. 3.

In other words, win your contested case without a trial, especially as to deductions that may be justified without paper; what’s a little case like Cohan among friends?

Judge Gustafson cuts IRS’ counsel down like an outfielder throwing a strike ahead of a sliding baserunner.

“…we do not ‘take as established’ (1) the taxability of the payments from R McK nor (2) Mr. Kalivas’s non-entitlement to additional Schedule C and E expense deductions.” Order, at pp. 3-4. (Name omitted).

But IRS can try again. I suggest after trial. And IRS’ counsel isn’t getting a Taishoff “Good Try,” even third class, for that one.