Archive for October, 2020|Monthly archive page


In Uncategorized on 10/26/2020 at 12:46

Maybe Greg Alan Rubstello, Docket No. 13598-19, filed 9/26/20, got beat a distended nostril by Amazon Prime, but he sure ran a great race. Last Friday, my blogpost “The Status Report,” 10/23/20 featured Judge David Gustafson’s admonition to Greg Alan and IRS for a big-hearted stretch run. Judge Gustafson ordered that every status report must show progress.

Today, Greg Alan and IRS produce the “…parties’ stipulation of settled issues (Doc. 9) filed October 21, 2020, that resolves all of the income issues in this case, and the Commissioner’s status report filed October 20, 2020.” Order, at p. 1.

Wherefore and whence, I reiterate my suggestion to Judge Gustafson’s colleagues that they in like manner festoon their orders for status reports. Might work wonders clearing the docket.


In Uncategorized on 10/23/2020 at 16:33

It’s one of the very few things you can fax to Tax Court. It’s probably The Glasshouse’s most-filed document. Crafty counsel use it to try to get extensions of time (no, must use motion), wildcard in evidence, arguments, and Boss Hossery (among other improper things). And Judges use it as a judicial alarm clock to keep litigants awake and up to date with discovery, trial prep, and stipulations.

Every day’s orders pages are littered with directions to submit joint Status Reports (or separate ones, if jointure is inexpedient), always with due dates, and sometimes with sequential due dates.

Today, Judge David Gustafson has a new twist to bestir the somnolent litigant, and it’s worth his colleagues’ emulation. Here’s Greg Alan Rubstello, Docket No. 13598-19, filed 10/23/20. I don’t know if it’s Greg Alan or IRS or both who’s waltzing, but it doesn’t matter.

“ORDERED that, no later than November 16, 2020, and every 60 days thereafter, the parties file shall [sic: has Yoda joined the Tax Court typing pool?] a joint status report (or, if that is not expedient, then separate reports) giving the status of the case and recommending a schedule for further proceedings. Each report shall include a paragraph that explicitly states what has occurred since the filing of the previous status report.” Order, at p. 2. (Emphasis by the Court).

I’d place additional emphasis on the last sentence thereof: “Each report shall include a paragraph that explicitly states what has occurred since the filing of the previous status report.”

“All Quiet on the Western Front” should not be an acceptable statement.


In Uncategorized on 10/22/2020 at 18:16

Judges tend to be intimidating. Maybe it’s the black robe, or the deus ex machina aura that comes from the judicial power of the jurisdiction.

But sometimes Judges can be human. Especially when dealing with the window of a decedent, whose case has had “a long and difficult history,” and must now navigate the whitewater twists and turns of Dawson’s Creek.

Here’s Winston Tease, Docket No. 15466–07L, filed 10/22/20, thirteen (count ’em, thirteen) years old and not even in the bottle yet. But if, like me, the late Winston Sr. echoes “through the smoke rings of my mind” as a recent Nobel laureate put it, check out my blogpost “David Hume and Bishop Berkeley,” 9/8/20.

Howbeit, the widow of the late Winston Sr. (whose demise, Judge Holmes acknowledges, has not been greatly exaggerated) “… sent a letter to the Court asking for permission to retain Mr. JS (who was Mr. Tease’s former lawyer) to help her in this case. The Court filed this as a ‘response to order….”

“Mrs. Tease doesn’t need to ask the Court’s permission to hire a lawyer, but her lawyer does need to file a short form called ‘an entry of appearance.’ Mr. JS is sure to know how to do so. We encourage him to do so.” Order, at p. 1. (Name omitted).

But here’s classic Holmes. ” Because the Court usually speaks to parties in the form of opinions and orders, it is ORDERED that on or before January 8, 2021, Mrs. Tease’s lawyer may file an entry of appearance.” Order, at pp. 1-2.


In Uncategorized on 10/22/2020 at 17:38

So often we practitioners hear how flat, dull, stale, and maybe even unprofitable is the tax practice. But taxation covers every part of everyone’s life. Today we see a specialist in the economics of gambling with the Runyonesque moniker of Mark C. Nicely, coming to the aid of now-reformed compulsive gambler John M. Coleman, 2020 T. C. Memo. 146, filed 10/22/20.

John was a 71-year old licensed insurance agent who retired from the DC Department of Insurance, Securities and Banking. His wife of 47 (count ’em, 47) years also worked, but isn’t in on this. John neither filed, estimated nor paid for the year at issue, but IRS ultimately bought the numbers John had put on the 1040 he offered after Exam got through.

Except IRS claimed John had $350K in undeclared gambling winnings. From almost exclusively playing the slots. I do hope and trust my readers are sufficiently worldly-wise to know that not only horseplayers (as apostrophized by Runyon), but all gamblers, die broke. Especially the slotniks. Casinos are not charities. They make money by paying off below the true mathematical odds. The take-out from the parimutuels is no different from the slot payout, or that of any table game.

John has two certified hotshots from a major law firm doing a pro bono gig and thinking outside the Bockius (sorry, guys). So they put John, his wife and his adult daughter on the stand, who tell how John’s compulsion caused the tax sale of their house, the turnoff of the electricity therein for nonpayment, and the shutdown of his cellphone.

Said wife did buy him a computer, but he fails the Section 274 documentation test for business use (he does have a small insurance hustle going).

But the pro bonos find Nicely, who saves the day, besting two (count ’em, two) IRS attempts to disqualify him as an expert.

“The Court also heard testimony from Mark C. Nicely, whom we recognized as an expert in mathematics, the casino gaming industry, and casino gaming equipment, particularly slot machines.

“Mr. Nicely has a bachelor’s degree from Rensselear Polytechnic Institute, where he concentrated in electrical, computer, and systems engineering. He has taken postgraduate classes at Stanford University and the University of California (Berkeley) in software, software technology, and mathematics (including statistics, probability, and financial analysis). Before working in casino gaming, Mr. Nicely had more than ten years’ experience as a computer software engineer specializing in algorithm development. At the time of trial Mr. Nicely had worked in the gaming industry for 20 years. He has been recognized as an expert witness in more than a dozen litigated cases involving gambling. In Gagliardi v. Commissioner, T.C. Memo. 2008-10, 95 T.C.M. (CCH) 1044, 1052 (2008), we recognized Mr. Nicely as a gaming industry expert with expertise in mathematics and slot machines.” 2020 T. C. Memo. 146, at pp. 10-11.

Mr Nicely does the statistics, but Judge Lauber checks out all John’s accounts, and finds he blew his way through a $150K nontaxable PI payout, the $71K he made from insurance dealings, and his retirement account, gambling in DE and MD. Casino gambling is illegal in the Stateless City.

“Mr. Nicely explained that, if a player gambles long enough and does not win any prizes that are exceptionally large relative to the size of the wager, it would be virtually impossible for that player to have annual net gambling winnings. The Maryland and Delaware casinos at which petitioner gambled configured their slot machines so that the average ‘return to player’ percentages ranged from 87% to 95%. By statute the average ‘return to player’ percentage could not exceed 95% without written permission from each State lottery. Mr. Nicely opined that the odds against petitioner’s having enjoyed even $1 of net gambling profit, for the entirety of [year at issue], were at least 140 million to 1.” 2020 T. C. Memo. 146, at pp. 11-12. (Citations omitted).

Even the States conspire to make sure gamblers die broke. But IRS goes down fighting.

“Respondent seeks to portray Mr. Nicely’s conclusions as implausible by extrapolating his results to future years, urging that petitioner could not have sustained annual net gambling losses of $151,690 indefinitely. But Mr. Nicely’s conclusions were based on the frequency of petitioner’s gambling during [year at issue] and the amounts of money he gambled. Petitioner credibly testified that his gambling varied from year to year depending chiefly on how much cash he had available. In [year at issue] he received an insurance settlement of $150,000, and he appears to have lost almost all that money gambling. Because petitioner’s income during [year at issue] was unusually large–the one-time insurance settlement was almost 200% of his regular income for [year at issue]–his gambling losses in [year at issue] were unusually large. The broader point of Mr. Nicely’s report is that, in a game with odds that disfavor the gambler, the law of large numbers means that a gambler who plays long enough is virtually guaranteed to have net losses. And there is no doubt that petitioner played long enough.” 2020 T. C. Memo. 146, at pp. 18-19. (Footnote omitted, but see infra, as high-priced pro bonos say).

“Respondent advances a complex argument in an effort to show that Mr. Nicely, an expert in statistics, improperly computed standard deviation. Because respondent offered no expert testimony to counter Mr. Nicely’s report, we decline to consider this argument. Standard deviation was an important element of Mr. Nicely’s calculations in Gagliardi, and we found his report there persuasive.” 2020 T. C. Memo, 146, at p. 19, footnote 6.

Take Damon Runyon’s advice about his character Nicely Nicely Jones: don’t bet against Nicely.


In Uncategorized on 10/21/2020 at 16:19

That is the question for Don R. Means, Docket No. 2078-17L, filed 10/21/20. But whatever Don’s answer might be, Judge James S (“Big Jim”) Halpern doesn’t stay for an answer. According to his designated hitter, “…we issued to petitioner an order to show cause in writing on or before September 24, 2020, why this case should not be dismissed and a decision entered for respondent. In that order and in our orders of April 29, 2019, June 13, 2019, and March 10, 2020, we recited petitioner’s history of noncompliance with the Court’s orders regarding the filing of briefs in this case.” Order, at p.1.

The years at issue begin with 1984. Don R. seems to have been part of the legendary Kersting dodgeucopeia, the longest running show on Broadway (or anywhere else). Don R.’s defense to Judge Big Jim’s recitation of his missing briefs is “…that the case has been going on too long–‘for over 40 years’– and, from day one, he has ‘never done anything illegal or been late in this case.'” Order, at p. 1.

No, says Judge Big Jim, Don R. has definitely blown it this time.

“The last claim concerning tardiness is clearly wrong. We see no reason to spend more time addressing petitioner’s case when he fails to obey our orders to assist us by filing briefs.” Order, at p. 1. (Citation omitted).

See Rule 123(b). Plenty of discretion for a judge to toss your case. So the right answer is “to brief.”


In Uncategorized on 10/20/2020 at 17:35

That Obliging Jurist, Judge David Gustafson, is on another tear. This one takes the form of two (count ’em, two) designated hitters. One target is a frivolite, and the other a trifle casual with amending his petition. Judge Gustafson has scant patience for either.

Leonard William Tobin, Docket No. 19687-19, filed 10/20/20, wants IRS to admit “… largely purported statements of law. Moreover, they–like the contentions in his petition–are frivolous statements to the effect that his income is not subject to income tax because it is not ‘federally privileged’.” Order, at p. 1.

Remember, “Rule 90(a) permits requests for admission ‘only if such matters … relate to statements … of fact or of the application of law to fact.'” Order, at p.1.

So IRS gets the protective order it wants, and need not respond to Leonard William’s frivolities.

Of course, Leonard William is an old-time rounder, with no fewer than fourteen (count ’em, fourteen) orders to his debit. So Judge Gustafson shows Leonard William the Section 6673 yellow card, and politely suggests Leonard William eschew frivolity and “… prepare instead to present any non-frivolous arguments that he can present in good faith, such as proving his entitlement to deductions or credits not allowed in the IRS’s notice of deficiency.” Order, at p. 2.

Judge, don’t hang by anything sensitive until he does.  

Next is Dean Kalivas, Docket No. 25934-17, filed 10/20/20, and at first blush it looks like Dean may have a valid point. Dean is on for trial next month, but 49 (count ’em, 49) days before trial, Dean files a document styled “Petitioner’s Motion to Allow Evidence at Trial of Net Operating Losses as Offsets to Alleged Tax Liabilities for Years 2008-2013″ (Doc. 54).” Order, at p. 1.

As I can’t see the papers, I don’t know if this is like the famous Status Report with Attachments in the Nature of Evidence, unknown to the Tax Court Rules but nevertheless beloved by IRS, but barred from petitioners, some of whom actually pay IRS’ salaries. See my blogpost “‘Discussion, Deliberation,”‘ 9/24/20.

But Judge Gustafson did read it. “Because the motion was in the nature of a motion for leave to file an amendment to the petition stating an additional issue, we issued our order dated October 1, 2020 (Doc. 58), directing the Clerk of the Court to recharacterize petitioner’s filing as a motion for leave to file an amendment to the petition.” Order, at p. 1.

But said Order did more. Judge Gustafson gave Dean a scheduling order, when to lodge his proposed amendment, and when and how to serve it (overnight PDS, with an electronic boost). But no delays allowed, IRS having a scant ten days to respond.

Dean lodges and serves nothing and today is DD-Day. Wherefore, “petitioner’s motion for leave to file an amendment to the petition (Doc. 54) is denied, (a) for the reason that petitioner failed to comply with our order (Doc. 54), Rule 41(a), and Rule 34(b)(4), and (b) for the additional reasons stated in respondent’s response (Doc. 65).” Order, at p. 2.


In Uncategorized on 10/20/2020 at 09:39

Months ago I floated the notion of a United States Tax Court Bar Association; see my blogpost “A Rock in Svithjod,” 5/18/20. The silence is deafening. Were such an organization ever to be formed, it might offer continuing education courses. It might even venture so far as to provide basic instruction in Tax Court Law and Practice to both private-practice and pro bono members of the fifty-buck battalion that surges postally and electronically through the COVID-barred doors of The Glasshouse.

Two cases, or rather, orders. I post these not to embarrass the practitioners, but as part of the res gestæ in support of my case for a USTC Bar Ass’n.

Armando Miranda Ornelas & Clara Estrada Quiroz, Docket No. 010735-20, filed 10/20/20, are represented by a pro bono, pure of heart but seemingly unaware that an Entry of Appearance does not cure the want of a wet-ink petition from the hands of the petitioners.

Same, Cole Equipment Inc., Docket No. 3039-20, filed 10/2020. Here the private practitioner gets the Form 6 Ownership Disclosure in as soon as he gets onboard, so he knows the hawks from the handsaws, wherever the wind may blow. But there is no wet-ink from his client, and he didn’t sign the petition either.

Now I’m not launching another cockleshell into Dawson’s Creek. My solo proposals to buoy and chart that legal whitewater have run on the rocks before they’ve fairly wetted their lapstrakes.

But maybe, just maybe, an association of ordinary types, like me, a “general practitioner with very limited experience and mediocre qualifications”, as a much finer writer put it, might furnish a seasonable word or two even to such hotshots as are permitted to comment on the oracular pronouncements from the headwaters of Dawson’s Creek.

Like perhaps electronic filing of petitions. Like maybe Entry of Appearance countersigned by petitioners to serve as ratifications; or even Entry of Appearance for law firms. Like (oh, audacious one!) the end of The Stealth Subpoena.

I can dream, can’t I?


In Uncategorized on 10/19/2020 at 15:58

Michael Giambrone, 2020 T. C. Memo. 145, filed 10/19/20, was robbed; so was his brother Will. The perp, one Farkas, was sentenced to thirty years for conspiracy and bank, wire, and securities fraud. 2020 T. C. Memo. 145, at p. 4. Farkas plundered the impounds at Mike’s and Will’s mortgage company.

Mike and Will claim Rev. Proc. 2009-20, 2009-14 I.R.B. (4/6/09) provides them a safe harbor to take heavy-duty Section 165 theft losses; IRS says no.

Judge Patrick J. (“Scholar Pat”) Urda sides with IRS. No facts disputed. They wuz robbed. And Section 165 takes in everything from Criminal Law 101: larceny, robbery, embezzlement, trick or device, criminal fraud, and statutory crimes.

But Mike and Will can’t marry Rev. Proc. 2009-20 to Section 165.

“As a preliminary matter, we note that revenue procedures are not binding on this Court. Nor do they, as a general matter, confer substantive rights on taxpayers. Courts ‘have refused to invalidate the Commissioner’s determinations arising out of his failure to abide’ by revenue procedures. Thus, even if the Giambrones were to establish that the IRS had erred in its application of Rev. Proc. 2009-20, supra, we would not be required to conclude that they are entitled to the claimed theft loss deductions.” 2020 T. C. Memo. 145, at p. 9. (Citations omitted).

Of course, if IRS induces reliance on a Rev. Proc. and then reneges, that’s abuse of discretion (see 2020 T. C. Memo. 145, at p. 11, footnote 7); but that didn’t happen here.

To get to the Rev. Proc. 2009-20 safe harbor, one must report the “qualified loss” in the tax return “for the discovery year”, which is defined as the year in which an indictment, information, or criminal complaint is filed against the lead figure. 2020 T. C. Memo. 145, at p. 10. Mike and Will didn’t. The reported two, three, and four years after Farkas was indicted.

“The Giambrones do not dispute that they failed to request safe harbor treatment on their 2010 Federal tax returns. They assert, however, that the definition of discovery year set forth in Rev. Proc. 2009-20, supra, is incompatible with section 165(e) and section 1.165-1(d)(3), Income Tax Regs., and that they qualify for the safe harbor under the broader terms of the Code and the accompanying regulation.” 2020 T. C. Memo. 145, at p. 10.

See above. The Rev. Proc. don’t need no Section 165 comportment.

“The Giambrones are laboring under a fundamental misconception: Rev. Proc. 2009-20, supra, is not required to comport with the terms of section 165 (or the accompanying regulation). It is an exercise of administrative discretion on the part of the IRS, offering beneficial treatment for categories of theft losses meeting certain well-defined conditions. The Giambrones cannot gain the benefit of it without adhering to its conditions the IRS imposed.” 2020 T. C. Memo. 145, at p 11.

But all is not lost. Judge Scholar Pat only rules that Rev. Proc. 2009-20 doesn’t apply. “We leave all other questions, including whether the Giambrones qualify for the section 165 theft loss deductions, to be decided by further proceedings in these cases.” 2020 T. C. Memo. 145, at p. 11.

Readers with exceptionally long memories may remember Greg and Sue Raifman tried a variation on Rev. Proc. 2009-20 when they got gazumphed in the ClassicStar horseshow. See my blogpost “Too True to Be Good,” 7/3/18.

The real aim of Rev. Proc. 2009-20 was to throw a lifeline to the victims of Ponzis and Madoffs.


In Uncategorized on 10/19/2020 at 10:56

If you’re an attorney at law admitted in any State or territory, and want to swim in Dawson’s Creek, ante up the fifty George small blind and a certificate from the clerk of the court to which you are admitted, and fill in the new, improved, online-fillable, handy-dandy Application for Admission.

Particulars here.

Unlike petitions and amendments thereto, all your stuff can be e-filed, and the small blind anted through

Now how about filing petitions and amendments thereto online, like a little Rule 34(a)(1) action?


In Uncategorized on 10/16/2020 at 17:29

Fridays are usually humdrum at The Glasshouse in the Stateless City; today only one designated hitter, one leg-before-wicket I note only as a procedural refresher, and a belated tip of the battered Stetson to CSTJ Lewis Carluzzo, DSM (which I man-‘splain infra).

First up, Judge Courtney D (“CD”) Jones delivers a quick-kick designated hitter worthy of Ch J Maurice B (“Mighty Mo”) Foley. While Angela Claire Connor, Docket No. 10477-19, filed 10/16/20, seems to have gone off-radar back in July and remained so in September, at least according to a quick docket search showing a bunch of returned mail, IRS was also less than swift, only applying for leave to move out of time yesterday to toss Angela Claire for want of prosecution. But Judge CD Jones makes up for the absence of petitioner and somnolence of respondent, by ordering Angela Clare to respond by this coming Wednesday. How Angela Claire is to do that, unless she’s either online or has an F-35 doubleparked outside her door in Philly, is nowhere stated. But the hearing isn’t until 11/2, so maybe all is not lost. I wonder about quick-kicks, otherwise when directed at premier league rounders.

Next, leg-before-wicket. Or maybe “too soon arrives as tardy as too late.” Robert J. Spenlinhauer Bankruptcy Estate, Robert J. Spenlinhauer, Trustee, Docket No. 21577-19, filed 10/16/20, unlike any number of petitioners who have to be coaxed or cajoled, files his pretrial memorandum. There’s a hitch, and Ch J Mighty Mo will explain. “…(s)uch filing is premature and not in conformity with the Tax Court Rules of Practice and Procedure, as this case has not yet been calendared for trial.” Order, at p. 1. Don’t you mean the standing pre-trial order, Judge?

Finally, CSTJ Lewis Carluzzo, DSM. The decoration DSM, Distinguished Service Medal, the J Edward Murdock Distinguished Service Award, was awarded to CSTJ Lew last month. Henceforth, I shall recognize CSTJ Lew’s distinguished status. But today he seems to be relegated to six (count ’em, six) cases, in each of which he encounters a “… petition shows that nothing in it gives rise to a justiciable issue.” While such petitions are no rarities, six in one day is a bit much. And when one comes from a rounder like Fritz Schwager, Docket No.  11981-20, filed 10/16/20, I might just maybe so suspect a new gambit is being played. I wish CSTJ Lew DSM would give me a tipoff as to what it is. Fritz, of course, has been here before. See my blogposts “End Taxation Without Representation,” 5/31/19, and “A Full Opportunity to Be Heard,” 6/15/20.