Archive for June, 2021|Monthly archive page


In Uncategorized on 06/30/2021 at 21:05

Please believe me when I say I’m not piling on to Monique D. Long, 2021 T. C. Memo. 81, filed 6/30/21. I’m arguing once again for the establishment of an Office for the Self-Represented in US Tax Court, and her case provides a good example of the need therefor. See my blogpost “The Self-Represented,” 5/30/17.

I know the LITCs and the calendar call commandos are providing yeoman service with stringently limited resources, but the evidence shows that upwards of 90% of the self-representeds who seek solutions in The Glasshouse on Second Street, NW, haven’t the foggiest. As I said four years ago, the calendar call commandos are in the position of emergency room trauma surgeons assigned to rehabilitative medicine; this assumes the patients have a chance of survival by the time they get finally get there.

And they only find out the rules of the process too late.

Monique had two separate SNODs, six months apart. Both sent certified mail, neither collected, although addressed to the same address shown on the returns at issue, the papers submitted to Appeals in response to the NFTL Monique got after she didn’t petition the SNODs, and her petition and subsequent correspondence. Monique claims her used her grandmother’s address, and sometimes didn’t get her mail there. IRS claims Monique ducked, but as IRS wants summary J, Judge Albert G (“Scholar Al”) Lauber is willing to give Monique the benefit of the doubt.

Except that when he does so, Monique has already been to Appeals.

“In her CDP hearing request petitioner stated that she did not know why she had outstanding tax liabilities, and she repeated that question at the start of the conference call. But after the SO explained the background and summarized the notices of deficiency, petitioner withdrew any challenge to her underlying liabilities. Indeed, she stated that she intended to pay those liabilities in full and asked for an extension of time to do so. At no time did petitioner submit any evidence to the SO regarding her entitlement to a dependency exemption (or any other issue relevant to her…tax liability).”2021 T. C. Memo. 81, at p. 10. (Citations omitted).

It would be cheap to ask rhetorically what Monique expected Judge Scholar Al to do to help her with this record. But my point is that whatever she expected, it wasn’t going to happen. And I strongly suspect she had no way of knowing that.

I submit that the overwhelming majority of self-represented Tax Court cases are lost long before the petition is filed. In proof thereof, look at how many cases are dismissed for want of prosecution. Today there were issued no fewer than three hundred sixty nine (count ’em, three hundred sixty nine) Standing Pretrial Orders. How many of these will actually go to trial?

A simple explanation that all IRS correspondence gets top priority, that SNODs are serious, and that usually when you get a NFTL or NITL the real trial will take place at Appeals so get your papers together and show up, would help. And someone to tell these self-representeds so.



In Uncategorized on 06/30/2021 at 16:35

Cynthia Pragias didn’t tell enough about the $4 million capital gain she got when the partnership of which she was a partner sold some stock options, so 6SOL is on tap. Since Cindy wants summary J that 3SOL applies and has run out, Judge Travis A. (“Tag”) Greaves, giving IRS (non-movant) every faviorabkle inference, assumes that $4 million is more than 25% of Cindy’s AGI (and it certainly would be more than 25% of mine).

But there were only six individual partners in Cindy’s partnership, and they were all onshore, so too small for TEFRA, unless they elected in per Section 6231(a)(1)(B)(ii), as it was in effect for year at issue, and they didn’t. So no need for FPAA, wherefore Tax Court has jurisdiction in Athanasios Pragias and Cynthia Pragias, 2021 T. C. Memo. 82, filed 6/30/21.

Cindy did disclose about $1 million capital gain, but never specified whence it came, and never mentioned any gain from the partnership that sold the options. Cindy claims she just understated the gain, but that doesn’t convince Judge Tag Greaves.

“Their return did not apprise the IRS of the amount of the gain. Adequate disclosure is a question of fact, and the taxpayer bears the burden of proving that the return adequately disclosed the nature and amount of the determined omitted income. In a quintessential case of adequate disclosure, the taxpayer errs in computing gross income but fully discloses the amounts underlying the error elsewhere in the return.” 2021 T. C. Memo. 82, at p. 11. (Citation and footnote omitted, but the footnote says that the capital gain reported didn’t identify the partnership that generated the gain).

And the partnership didn’t file Form 1065 nor a K-1, until way after the audit for year at issue had commenced. Way too late.

Cindy doesn’t get summary J on 3SOL. 6SOL is in play.


In Uncategorized on 06/30/2021 at 16:03

Engen Robert Nurumbi, 2021 T. C. Memo. 79, filed 6/30/21, showed a real entrepreneurial spirit; he signed on with Uber, got the IT hook-ups, and subcontracted the driving to friends and relations, using a couple cars (hi, Judge Holmes) registered to him and stored at his residence. Uber gave Engen a 1099-K for $546K, which didn’t make it onto Engen’s late-filed 1040.

Engen had set up an LLC, but he never filed Form 8832, Entity Classification Election, or filed Form 1065 and K-1s. So The LLC is disregarded, and the money belongs to Engen. Engen paid his drivers with checks and cash, but has no records, so he gets no greater allowance than IRS allows for wages to his driver-employees.

Engen tries to reopen the record to put in more evidence post-trial, but Judge Pugh won’t have it.

“The character of the evidence petitioner attached to his motion is that of hearsay and impermissible summary. See Fed . R. Evid. 802, 1006. He offers it to prove facts that were foreseeably at issue at trial, namely the substantiation of business expenses and how he organized his Uber driving operation. And to the extent petitioner does not use it to prove relevant facts, he uses it to impeach the credibility of the revenue agent who testified at trial. Petitioner cites his medical history as reason for failure to produce evidence at trial, and respondent does not object to certain medical history documents petitioner attached to his motion. We are sympathetic to petitioner’s health issues, but to the extent the documents discuss petitioner’s health, they cover periods…before respondent issued the notice of deficiency and well before the trial in this case. And petitioner understood the issues to be addressed at trial, even bringing a supporting witness to testify. Finally, and most importantly, respondent could not examine this evidence at or before trial. In his response to petitioner’s motion, respondent lists relevant questions he would have asked on cross-examination had he been given the opportunity; the effect of granting petitioner’s motion would be to deny respondent that opportunity.” 2021 T. C. Memo. 79, at p. 10.

Engen flunks the Section 274 strict substantiation for his vehicles, even though he’s transporting unrelated persons and property for hire; See Section 280F(d)(4)(c). Except Engen’s vehicles are “SUVs or passenger trucks.” 2021 T. C. Memo. 79, at p. 17. I’m not sure what a “passenger truck” is. Howbeit, since such can be used for personal, rather than business purposes, and as Engen has no reliable records as to what was, or was not, business, vehicle deductions are out. He never documented his deals with his drivers as to what was permissible use of his vehicles.

But as Engen was a year late with his return, he does get a late-filing add-on.

“Petitioner argues that we should apply the reasonable cause exception because he believed he had already timely filed a …Form 1040 before filing the late-filed return. Whether a taxpayer has ‘reasonable cause’ within the meaning of section 6651(a)(1) depends on whether the taxpayer ‘exercised “ordinary business care and prudence” but nevertheless was “unable to file the return within the prescribed time.’ Petitioner’s mistaken belief that he had already filed a return within the prescribed time does not constitute reasonable cause.” 2021 T. C. Memo. 79, at pp. 19-20. (Citations omitted). And sincerity of the mistaken belief doesn’t count.

Uber and out.



In Uncategorized on 06/29/2021 at 16:00

Judge Albert G (“Scholar Al”) Lauber adheres to the old saying when it comes to frivolite Jamillah Kamillah Muhammad, 2021 T. C. Memo. 77, filed 6/29/21.

Jamillah Kamillah tries the hackneyed protester jive about Sections 3104 and 3121, the FICA tax, rather than the income tax. And she otherwise strews the usual gibberish.

“Petitioner admitted at trial that she had received payments from the University during [year at issue] but insisted that these payments were not ‘wages.’ When asked whether she had performed services for the University during [year at issue], she refused to answer. When asked what kind of payment the University had made to her, if not wages, she refused to answer. When asked why she did not report the payments as taxable income, she replied that nothing she did in connection with the University was the ‘exercise of Federal privileges.’ When asked why that mattered in determining whether she had received taxable income, she professed reliance on sections 3401 and 3121.” 2021 T. C. Memo. 77, at p. 5.

Jamillah Kamillah also moved in limine to exclude the SNOD IRS gave her, and the wage and tax statement from the W-2 Samuel Merritt University gave her. “Petitioner filed a motion in limine seeking to exclude the first two documents from evidence on the grounds of ‘[h]earsay, lack of foundation, lack of personal knowledge, no opportunity to cross-examine, declaration not signed under penalty of perjury, declaration not dated, irrelevant, [and] calls for speculation.’ She asserted that the notice of deficiency was inadmissible as ‘needlessly presenting cumulative evidence.’ She asserted that her own Form 1040X should be excluded from evidence on the grounds of ‘[i]rrelevan[ce], unfair prejudice, confusing the issues, undue delay, wasting time, and needlessly presenting cumulative evidence.’” 2021 T. C. Memo. 77, at pp. 4-5.

Judge Scholar Al denied the motion. Surprise, surprise. He also spends time on “somber reasoning and copious citation of precedent,” perhaps to convince Jamillah Kamillah that it’s one thing to play the lawyer, but quite another to play the fool. Because anyone who does minimal investigation will discover that her argument is “a time-worn tax-protestor argument that no court has ever accepted.” 2021 T. C. Memo. 77, at p. 8.

 Of course, Jamillah Kamillah was shown the yellow card more than once. “We warned petitioner during the calendar call that she risked a penalty if she advanced frivolous arguments and that ‘wages are not income’ is a frivolous argument. Despite this warning, petitioner persisted throughout the trial on the path on which she had embarked. Counsel for respondent urged that a section 6673 penalty was appropriate, representing that she had repeatedly advised petitioner in pretrial communications that she was advancing a frivolous position.” 2021 T. C. Memo. 77, at p. 11.

So Judge Scholar Al is about to hand Jamillah Kamillah the Section 6673 frivolity chop, when she pleads poverty. And Judge Scholar Al tempers the wind to the allegedly shorn lamb.

“When we advised petitioner at trial that we would consider imposing such a penalty, she stated that she was now unemployed and that a penalty would cause her financial hardship. Taking her at her word, we will impose a modest penalty of $250. But we warn petitioner that she will risk a much more severe penalty if she advances frivolous positions in any future appearance before this Court.” 2021 T. C. Memo. 77, at p. 11.

Far be it from me to seek to curb Judge Scholar Al’s (or any judge’s) charitable impulses.

But there should be a level of consistency in the Section 6673 mulcts. I suggested a year ago that “let’s have a sliding scale. I propose one free kick, then a grand for each succeeding kick, cumulative. With an automatic press after four (Nassau, as the golfers say: bet doubles on the back nine).” See my blogpost “One Free Bite,” 8/28/20.

After all, we have Federal and State sentencing guidelines, whatever their faults (and I’m not going there; my last criminal case was more than thirty years ago, and it can stay that way). Anything else runs the risk of arbitrary-and-capricious or excessive-fines-and-penalties.

Here’s another item for Ch J Maurice B (“Mighty Mo”) Foley’s to-do list.


In Uncategorized on 06/29/2021 at 07:36

The review of a NOD from a CDP is always, or almost always, a recap of the record made at the CDP hearing. For that reason, a short but comprehensive checklist is a useful article in the practitioner’s toolkit.

Judge Mark V Holmes has a one-pager in Alan Courtney Preston, Docket No. 4050-20L, filed 6/29/21.

First, parties should stip to the contents of the record (s/a/k/a the “administrative record”). If they can’t, IRS should prepare an index of the documents they assert comprise the record, with a typical Judge Holmes addition: “The Court urges the IRS to make this index comprehensible to a nonlawyer.” Order, at p. 1.

Good luck with that one, Judge. Remember your eminent predecessor, the English Lord Chief Justice Campbell, writing in 1850: “There is nothing so dangerous as for one not of the craft to tamper with our freemasonry.”

Howbeit, once IRS delivers its index, petitioner has to “(1) provide the IRS with any evidence that he thinks should be added to the administrative record but is not in the IRS index and (2) list any documents in the IRS index that he thinks should not be in the administrative record.” Order, at p. 1.

Ultimately, if there’s no settlement, a trial will be limited to ascertaining the proper contents of the record, whether that shows IRS abused its discretion in sustaining the collection action, or whether to send it back to Appeals (“remand”) “because of new evidence or a change in circumstance since the collection due process hearing was held.” Order, at p. 1.

And not a dissed partitive genitive in sight.


In Uncategorized on 06/28/2021 at 16:33

Sometimes the wheeler-dealer’s long-established practice of treating all his controlled entities, even those co-owned with others, as different pockets in the same suit of clothes, while possibly fraud on his creditors, isn’t fraud on the IRS. Judge Goeke thus rings down the curtain on a couple years’ worth of tax troubles (hi, Judge Holmes) for Michael R. Kelly, 2021 T. C. Memo. 76, filed 6/28/21.

It takes 45 (count ’em, 45) pages of Judge Goeke’s prose to set forth some of Mike’s wheeling-dealing, from his start as a bad-debt stripminer (buying bad secured loans to foreclose and strip the collateral), to buying and selling business as diverse as linen rental and yacht-chartering. He used a plethora of SPEs (Single Purpose Entities), each of whose integrity he safeguarded to keep from being rolled up if any one business failed (as Joe Hooker should have done at Chancellorsville). But he reported all but his one publicly-held corporation on his own 1040, as they were all disregardeds. And he flipped cash back and forth with fine abandon, until The Black ’08.

IRS claims Mike missed filing two Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations (Mike’s yacht SPE was Cayman Islands-based), and that means substantial understatement 6SOL sinks him, unless Section 6501(c)(8)(B) good-faith reliance on experts saves him.

And it does. Mike’s CPAs were pros, with no adverse disciplinary history. Mike, or his staff, told them everything (and Mike cooperated with IRS during the audit). “Respondent contends that it was not enough for Mr. Kelly to inform [CPAs] that [Yacht] was a foreign entity, and he implies that Mr. Kelly should have advised Mr. S [preparer] that Form 5471 was required. The failure to file the Forms 5471 does not present an obvious tax obligation which was negligently omitted from information that a taxpayer provided to the return preparer. Mr. Kelly, through his staff, provided the necessary information to [CPAs], identified [Yacht] as a foreign corporation, and stated that he was unsure of the reporting requirements. Having done this, Mr. Kelly reasonably relied on [CPAs] to prepare his returns properly. While it could be argued that [CPAs] should have done more to ascertain Mr. Kelly’s filing obligations, it was reasonable for Mr. Kelly to rely on [CPAs] do so. A taxpayer need not question the advice provided, obtain a second opinion, or monitor the advice received from the professional.” 2021 T. C. Memo. 76, at p. 50 (Citation and name omitted).

“Respondent’s list [of badges of fraud] depends totally on the premise that Mr. Kelly’s intercompany transfers or withdrawals recorded as loans were not properly treated as loans and were concealed with intent to defraud the United States. While we do not presume the accounting by Mr. Kelly and his companies is always accurate regarding the ‘loans’, we do not believe the record establishes by clear and convincing evidence that the ‘loans’ were the basis of a fraudulent tax scheme; rather they were the products of two decades of Mr. Kelly’s business practices. As we discuss later herein, we agree with respondent that by 2008 there was no reasonable expectation the ‘loans’ would be repaid when incurred, and they should be treated as distributions. This conclusion does not in itself lead to a finding of fraud.” 2021 T. C. Memo. 76, at p. 55.

Howbeit, maybe some pre-Black ’08 transfers were loans, but after the subprime meltdown, game over.

So a major league Rule 155 bangers-and-mashed to follow.


In Uncategorized on 06/28/2021 at 08:57

I’ve often blogged Judge David Gustafson’s obliging nature; see, e.g., my blogposts “Obliging? This Beats All,” 3/6/19, and “Obliging – Even Though He’s Only Passing Through,” 8/10/18. Today, however, Judge Courtney D. (“CD”) Jones is much less obliging.

Unlike Judge Gustafson, she won’t help out IRS’ counsel, as IRS’ summary J motion prevails only in part, in Paul Edwin Johnson, Docket No. 16077-19, filed 6/28/21. Paul Edwin is a candidate for a Section 6673 chop, but his petition is timely and he loses the deficiency. So he only gets the yellow card.

Judge CD faults IRS counsel on misplaying the Boss Hoss underpinning of the Section 6662 accuracy chop they bestowed on Paul Edwin.

The AUR issued a CP2000 to Paul Edwin, when his retirement drawdown hit IRS’ computer but missed Paul Edwin’s 1040. Paul Edwin replied to the CP2000.

…the AUR program received a response to the CP2000 Notice from Mr. Johnson in which he appeared to agree with the changes but argued that he should be eligible for increased credits. … CW, an AUR Tax Examiner, considered Mr. Johnson’s response to the AUR and found that he was eligible for increased credits but determined that the IRS should impose a penalty. JB was CW’s immediate supervisor and approved, in writing, CW’s initial determination of the penalty….” Order, at p. 7. (Names and dates omitted).

So the AUR issued the SNOD with the accuracy chop in it.

Now comes a silt-stir that would gladden Judge Holmes’ heart.

“Respondent contends that respondent obtained supervisory approval prior to the issuance of the notice of deficiency…and the record seems to support this conclusion. But it appears to the Court that the CP2000 Notice… was the IRS’ first formal communication of the initial determination to assert penalties pursuant to section 6662(a). Therefore, respondent has the burden of production with respect to its compliance with section 6751(b)(1) regarding the CP2000 Notice, not the notice of deficiency. As there is no evidence in the record to support that written supervisory approval was obtained prior to the issuance of the CP2000 Notice, we hold that there is a genuine dispute of material fact regarding whether respondent carried respondent’s burden of production pursuant to 6751(b)(1) with regard to the section 6662(a) penalties for this case.” Order, at p. 6 (Citation and footnote omitted, but the footnote says it all).

OK, so my ultra-sophisticated readers all just shouted “Section 6751(b)(2)! AUR untouched by human hands! Boss Hoss irrelevant!”

Now for everybody else, here’s Judge CD being unobliging.

“We note that it appears that the CP2000 Notice was issued through the AUR program. Managerial approval pursuant to sec. 6751(b)(1) is not required for penalties calculated through electronic means. See sec. 6751(b)(2)(B); It is curious that respondent did not address the potential application of sec. 6751(b)(2)(B) to this case, but we will not argue it for him. See Rule 151(e)(5). As we have said before, our job is to consider the issues advanced by the parties, not to craft alternative arguments never raised.” Order, at p. 6, footnote 5. (Citations omitted).

Takeaway- As IRS’ resources are stretched without further Congressional appropriations, expect more computerization to replace humanity, and perhaps unhorse the Boss Hoss.


In Uncategorized on 06/25/2021 at 10:48

In the current roster of Tax Court rounders (frequent litigators with specious or frivolous arguments), Gregory J. Podlucky, lead in Gregory J. Podlucky & Karla S. Podlucky, Docket No. 453-17, filed 6/25/21, has earned the coveted (?) Rounder First Class With Oak Leaf Cluster award.

Greg has appeared so often in this my blog that I no longer catalogue these. And today’s efforts show Greg has lost none of the moves and maneuvers that have brought him to the heights of rounderdom.

Here’s that patient jurist, Judge Albert G. (“Scholar Al”) Lauber to explain. Greg wants summary J and IRS’ papers stricken. And his trial continued (that’s “adjourned,” for us State courtiers).

“In their Motions petitioners urge that respondent ‘has perpetrated fraud upon this Court by alleging that the Petitioners have evaded taxes for the years 2003, 2004, and 2006.’ They ask us to strike ‘all briefs, documents, and other papers’ relating to those tax years and to dismiss the case with respect to those years.” Order, at p. 1.

Judge Scholar Al isn’t even looking, much less buying.

“We will deny both Motions. Petitioners’ assertion that respondent has ‘perpetrated fraud upon this Court’ is frivolous. Petitioners appear to contend that they cannot be liable for tax deficiencies for 2003, 2004, or 2006 because the Government, in petitioner husband’s criminal case, withdrew the counts that alleged tax evasion under I.R.C. sec. 7201 for those years, in exchange for a guilty plea by petitioner husband with respect to 2005.” Order, at p. 1.

So just maybe Greg was playing the Fiore gambit, for which see my blogpost “Lawyers Can’t Add,” 1/17/13, by copping to one year only so as to duck issue preclusion for “pattern of fraud” to support civil fraud chops per Section 6663. I told you Greg is a top-drawer rounder.

Judge Scholar Al plays what I will call the Scholar’s countergambit to the Fiore gambit.

“Needless to say, a taxpayer need not have been convicted of a tax crime in order to be liable for a tax deficiency. Respondent does not allege that either petitioner ‘evaded taxes’ for 2003, 2004, 2006, the gravamen of a criminal offense under I.R.C. sec. 7201. Rather, respondent contends that petitioners underpaid their income tax for those years and that petitioner husband is liable for civil fraud penalties under I.R.C. sec. 6663(a).” Order, at pp. 1-2.

But la partie continue, because Greg isn’t done yet. As the COVID reshuffle caused trials to go remote, Greg’s trial was first set for Los Angeles, then moved at Greg’s request to Denver, and then moved for administrative purposes only back to Los Angeles.

“Petitioners now assert ‘that the place of trial is improper’ and that they ‘cannot proceed until this egregious occurrence is corrected.’ To the extent petitioners are seeking a continuance of their October 4 trial date, that request is denied. Because the calendar call and any ensuing trial during that session will be conducted remotely, it is immaterial whether petitioners are physically located in Denver, Los Angeles, or some other city in which they happen to be.” Order, at p. 2.

I regret I cannot furnish an actual decoration for Greg to pin on his battledress. He certainly earned Rounder First Class With Oak Leaf Cluster.


In Uncategorized on 06/24/2021 at 16:42

Periodic real estate meltdowns furnish the grittier grist that comes to the practitioner’s mill. Even those with thirty (count ‘erm, thirty) years’ experience can get it wrong. Witness Richard S. Hussey, 156 T. C. 12, filed 6/24/21, and his highly-credentialed adviser, whom I’ll call Mike the K.

Richard had twenty-seven (count ’em, twenty-seven) investment properties, and had to unload most of them. He short sold a bunch over a couple years (hi, Judge Holmes).

A “short sale” is one where the purchaser pays less than the outstanding balance of the mortgage for the property, also known as “underwater” property. All the mortgages on the properties were held by the same lender, who issued 1099-Cs for some, but charged off others and treated those unpaid balances as a loan loss reserve. Maybe Richard was personally liable on the notes as restated, and deficiency judgments were possible, hence the reserve. But that reserve was created in Year Two, so no discharge of debt in that year. Also no 1099-Cs for Year Two, although that isn’t necessarily dispositive.

Richard and Mike the K want to throw the basis adjustment to offset immediate CoD taxable gain one year forward into Year Two, using Section 1017(a). There’s no doubt Section 108(c)(2)(B) allows the treatment, if Section 1017(b)(3)(f)(iii) doesn’t anchor it to year of sale.

Judge Colvin finds that it does.

“Petitioner points out that section 1017(a) states generally that  basis reductions resulting from the discharge of QRPBI [Qualified Real Property Busines Indebtedness, and this is] are made the year after the debt is discharged. If section 1017(a) applies here, the basis adjustments at issue would, as petitioner contends, be made in [Year One]. However, section 1017(b)(3)(F) provides three additional rules which govern reduction of basis following discharge of QRPBI. First, real property, the aggregate bases of which are considered under section 108(c)(2)(B), includes only depreciable real property. Sec. 1017(b)(3)(F)(i). Second, the depreciable real property may not be held as inventory. Sec. 1017(b)(3)(F)(ii).” 156 T. C. 12, at pp. 10-11. (Footnote omitted, but it says specifics override generals).

OK so far.

But when Richard sold the properties, the debt was discharged. And that’s what Section 1017(b)(3(F)(iii) says mandates basis reduction in year of sale.

Judge Colvin checks out the House Report, to make sure.

If the taxpayer disposes of real property (in the transaction that gave rise to the discharge or otherwise) prior to the first day of the next taxable year, then the reduction in basis of such property is made as of the time immediately before the disposition. 15-H.R. Rept. No. 103-111, at 623-624 (1993), 1993 U.S.C.C.A.N. 378, 854-855 (emphasis added).” 156 T. C. 12, at pp. 14-15. (Footnotes omitted).

Note the cited House Report is online behind some kind of subscription wall. Here’s the link; use at your own risk. I make no guaranty, warranty, or representation of any kind whatsoever, however denominated, as to safety, accuracy, adequacy, fitness for purpose, merchantability, quality, or anything else. Sue them, not me.

No forwarding of basis reduction for Richard. And IRS wants accuracy chops.

Richard claims he knows nothing of tax or accounting, and Judge Colvin buys it. He didn’t like the return his usual preparer did, so found a CPA who turned him onto to Mike the K, thirty-year veteran tax attorney. And he gave Mike the K everything he asked for. So Richard claims good faith reliance.

IRS claims Mike the K was less than spectacular.

“Respondent points out that there are errors on petitioner’s returns prepared by the K Firm. For example, the bases in real properties retained by petitioner in 2013 had not been reduced on petitioner’s 2013 return even though they should have been under Mr. K’s analysis. Respondent also points out that petitioner’s home was erroneously listed as an investment property sold in 2013 and then recorded that it had been sold again in 2014 when reporting debt cancellation on a Form 982. Respondent contends these errors show that petitioner was not acting in good faith. We disagree. We do not believe petitioner is responsible for detecting errors of this nature in the reporting of complicated tax transactions.” 156 T. C. 12, at p. 23.

And IRS argues, with no basis in the record, that Richard went shopping for tax advice to suit, and that Richard should have realized that Mike the K’s advice was too good to be true. Yes, but; the latter assumes Richard was sharp enough to know about Section 1017(b)(3)(f)(iii), which he wasn’t.

No chops for Richard.


In Uncategorized on 06/24/2021 at 14:44

To get the picture here, see my blogpost “Old-Time Head-Banging – Part Deux” 9/4/20. To save your time, here’s what I said: “When I was a young man (and had, contrary to the late great Pete Seeger, been kissed), there were old-school judges, men (sorry ladies, this was in the Bad Old Days) who dragged into chambers and robing rooms recalcitrant litigants and badgered settlements out of them.

“We called it ‘banging heads.’”

Today STJ Peter (“HB”) Panuthos follows up on the story told in my blogpost hereinabove particularly bounded and described, with Peter Brancovich Turek, Docket No. 15447-19S, filed 6/24/21. Although pro se, PB is “highly educated (Dr. Turek is a psychiatrist and psychoanalyst)”. Order, at p. 4.

PB, refusing STJ Panuthos’ suggestion that he settle with IRS, ripostes with a “Motion to Concede Deficit Assessment”. Order, at p. 2. Problem is, IRS wants to raise the deficiency for the second of the two (count ’em, two) years at issue, and PB isn’t buying.

So IRS moves out of time to amend the answer to assert an increased deficiency. STJ Panuthos goes through the Rule 41 foxtrot, continuing the trial so that PB has time to deal with the amended answer, and grants the motion to amend the answer.

“In his motion for leave respondent indicates that the bases for seeking an increased deficiency were not evident at the time of filing his answer. Respondent also asserts that there is a voluminous administrative file, available only in paper and that shortly after March 13, 2020, it was no longer available because of the closure of offices due to COVID-19. Finally, respondent asserts that the files did not become available until about July 13, 2020, when restrictions were eased allowing access to the documents and opportunity for review and analysis.” Order, at p. 4.

Since PB knew that the higher deficiency was in the cards for some time, he isn’t ambushed. And STJ Panuthos allows for further discovery on the increased deficiency, so the parties can talk.

Translated from Judgespeak, that means “PB, settle this case. Please settle this case.”

And to move matters along, STJ HB Panuthos kicks PB’s S.

“As noted above, petitioner elected, and the Court granted, small tax case status. The deficiencies and penalties determined in the notice of deficiency for each of the tax years [X] and [Y] did not exceed $50,000 and thus this case qualified for small tax case procedures. See sec. 7463(a); Rules 170-174. Considering the claim made by respondent in his First Amendment to Answer, the deficiency and penalty in issue for [Y] exceed $50,000. It is thus clear that this case no longer qualifies for small tax case status. Sec. 7463(d)…. Accordingly, the Court will strike the ‘S’ designation from the docket in this case and this matter will be proceed on the regular docket of the Court.” Order, at p. 5. (Citation and dates omitted).

Now that’s what I call old-time head-banging.