Archive for June, 2021|Monthly archive page


In Uncategorized on 06/22/2021 at 15:32

I am pleased to report that Ch J Maurice B (“Mighty Mo”) has taken up my plea to identify correctly the non-attorney representative who seeks to execute petitions and appear in Tax Court without first having been admitted to practice, or at least leading at the sixteenth pole in the race to admitted status. The “non-attorney representative” is so designated by a power of attorney (generally Form 2848), which is either a piece of paper or a concatenation of electrons.

See, e.g., David H. Sylvester & Erin Sylvester, Docket No. 9966-21, filed 6/22/21.

But Ch J Mighty Mo persists in demanding “wet-ink” paper petitions and amendments thereto, ignoring Rule 34(a), as amended: “A petition may be filed electronically under the electronic filing procedures established by the Court, or a petition may be filed by properly mailing or hand delivering it to the Court.”

However, I must admit that Ch J Mighty Mo is wiser than I. Aware that whatever electronic filing procedure he may craft, however foolproof and user-friendly, implementation thereof will fall to Genius Baristas who foisted upon us this DAWSON catastrophe.

That thought would scare away the most intrepid blogger, or even the utterly fearless jurist.


In Uncategorized on 06/21/2021 at 21:20

The practitioner would do well to keep a copy of the list of days which are holidays in the Stateless City. These are material; see Rule 25(a)(2).

And that may save Frank C. Cunningham, Docket No. 1233-20S, filed 6/21/21.  STJ Diana L (“The Taxpayer’s Friend”) Leyden suspects Frank is a day late and more than a dollar short with his petition.

“The petition in this case was filed on January 21, 2020. Petitioner seeks review of a notice of deficiency dated October 21, 2019, issued to him for the taxable year 2017. Attached to that petition is a copy of the October 21, 2019, deficiency notice issued to petitioner. That deficiency notice states that the date to file a timely Tax Court petition as to that notice would expire on January 20, 2020.”  Order, at p. 1.

Well, Frank’s petition was filed “…in a UPS Next Day Air envelope with a date of ‘January 21, 2020’.” Order, at p. 1. And STJ Di thinks that was late.

Well, maybe it wasn’t.

Although STJ Di wants Frank and IRS to show cause why she shouldn’t bounce the petition because not filed in January 20, 2020, maybe she and they should check the list of public holidays in The Stateless City for 2020.

January 20, 2020,  was the Dr. Martin Luther King, Jr., holiday, hence Rule 25(a)(2).

And UPS Next Day Air is one of the “blessed communion, fellowship divine” PDS of Notice 2004-83, 2004-2 C. B. 1030, 12/27/04.


In Uncategorized on 06/18/2021 at 06:31

From the USTC website.

On June 17, 2021, President Biden signed the Juneteenth National Independence Day Act establishing June 19th as a federal holiday. The Court will be closed on June 18, 2021, in observance of the holiday.


In Uncategorized on 06/17/2021 at 15:12

Back in the day when the US Tax Court website served some useful purpose, thereon appeared a statement that ran something like this: “Generally, a Tax Court Opinion is issued in a regular case when the Tax Court believes it involves a sufficiently important legal issue or principle.” “Generally, a Memorandum Opinion is issued in a regular case that does not involve a novel legal issue. A Memorandum Opinion addresses cases where the law is settled or factually driven.”  See my blogpost “One Size Fits Most,” 3/4/21.

So one expects a full-dress Tax Court Opinion to have a certain gravitas; if not an Olympian pronouncement, or one accompanied with Sinaiatical tablets, then at least an oracular quality.

Today Judge Gale decides his colleagues can dismiss a petition seeking to review denial of Section 7430(a)(1) administrative expenses, in Robert Stein & Elaine Stein, 156 T. C. 11, filed 6/17/21. Especially since IRS agrees.

It’s not as if Section 7459(d) mandatory entry of decision for IRS is in play. Rob & Elaine must have had at least some kind of claim that they prevailed in whatever throwdown they had with IRS.

So after plowing through Wagner, Davidson, Jacobson, and Mainstay Business Solutions, all of which I’ve blogged, he decides they can. Now all we need are worker classifications and 501(c)(3) knockouts.  

Or maybe Tax Court should adopt its own version of FRCP 41.

“Because there is no Rule that governs motions for voluntary dismissal, we look to the Federal Rules of Civil Procedure to guide our consideration of such motions. See Rule 1(b), (d). Under rule 41(a)(1)(A) of the Federal Rules of Civil Procedure, a plaintiff may voluntarily dismiss a civil action without a court order either by filing a notice of dismissal before the opposing party serves an answer or a motion for summary judgment or by filing a stipulation of dismissal signed by all parties who have appeared. Otherwise, a case may be dismissed at a plaintiff’s request only by court order. See Fed. R. Civ. P. 41(a)(2). A court ‘enjoys broad discretion in determining whether to allow a voluntary dismissal’ pursuant to rule 41(a)(2) of the Federal Rules of Civil Procedure, and such a dismissal should generally be granted ‘unless the defendant will suffer clear legal prejudice, other than the mere prospect of a subsequent lawsuit, as a result.’ When a court issues an order granting a voluntary dismissal, the dismissal is deemed to be without prejudice and the lawsuit is treated as if it had never been filed.” 156 T. C. 11, at pp. 4-5. (Citations omitted).  

Judge, you just wrote the Rule. Now just ask Ch J Maurice B (“Mighty Mo”) Foley to adopt it.



In Uncategorized on 06/17/2021 at 10:58

Judge David Gustafson obliges us today with a playbook entry on Section 6651(a)(1) and (a)(3), the late-filing and late-paying add-ons, in Adalius Thomas, Docket No. 7724-20L, filed 6/17/21, an off-the-bencher.

Adalius, ex-Baltimore Raven and NE Patriot, was swindled in the Green Gas alternate fuel tax credit dodge., the dénoument of which I did not blog for some unaccountable reason. He got tackled with $584K in tax, plus the 20% negligence chop and the aforesaid add-ons. IRS drops the negligence chops, as Adalius was well and truly swindled. But the fact he was swindled doesn’t excuse that he filed three weeks late, nor paid up nearly four (count ’em, four) years late.

Adalius never got the NITL, so the enhanced 1% per month add-on didn’t hit when IRS claimed, but only after Appeals was finished with Adalius’ case. So Adalius gets to contest de novo in Tax Court. The add-ons came after the FPAA demolished the Green Gassers, and there was no SNOD.

Judge Gustafson explains how Section 6651(a)(1) and (a)(3) work together, at Transcript, pp. 21-22. I cannot copy the language, as the text of the transcript is in a PDF format that is not capable of being copied-and-pasted. Once again, DAWSON proves its uselessness.


In Uncategorized on 06/16/2021 at 14:58

Better yet, Judge Silt

All y’all will recall that Judge Mark V. Holmes called down the Rachegötter when ex-Ch J Michael B (“Iron Mike”) Thornton extended the reach of Chai to “every living heart and hearthstone, all over this broad land.” What, no? Then see my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

Today Judge Holmes is stirring that silt with a vim, in CFM Insurance, Inc., Docket No. 10703-19, filed 6/16/21. Like today’s honoree Poldy Bloom, Judge Holmes is on a voyage through IRS’ multifarious papers. IRS is trying to pin chops on CFM, a micro-captive insurance dodger, via summary J.

Judge Holmes doesn’t even need to draw inferences in favor of the non-movant. IRS has an RA recommendation with Section 6751(b) Boss Hoss sign-off, which CFM got with the 30-day letter. Problem is, the recommendation and sign-off are for 40% chops, but the SNOD which followed the 30-day letter only mentions 20%.

OK, but the 30-day letter came first: what did that say?

“Ordinarily, an Examination Report and 30-day letter is sufficient to clear the 6751(b)(1) hurdle. But in this case, there was no mention of a 20% penalty’s being asserted in the 30-day letter or any of the documents listed as enclosures; the Examination Report and Agreement Form both mention 40% penalties for each year pursuant to section 6662, but section 6662 allows for 40% penalties in only three instances: when an underpayment is due to a ‘gross misvaluation misstatement,’ § 6662(h), a ‘nondisclosed noneconomic substance transaction,’ § 6662(i), or an ‘undisclosed foreign financial asset understatement,’ §6662(j). The 20% penalties under section 6662(b)(1) for negligence or disregard of rules or regulations (or substantial understatement) are distinct from each of these 40% penalties and must receive separate supervisory approval to cross over the section 6751(b) threshold. ‘Formal notice’ requires that the penalty be described with sufficient particularity so a taxpayer knows what he is accused of…. An Examination Report and 30-day letter that mention only a 40% penalty do not provide notice of a 20% penalty. As a matter of law, then, neither the 30-day letter nor any of the documents listed as enclosures provided CFM with formal notice of the 20% penalties under section 6662(b)(1).” Order, at p. 3. (Citations omitted).

So IRS loses, right?

Not yet. Judge Holmes delves into the murky depths of the enclosures with the 30-day letter, specifically the Form 886-A Explanation of Items, and it’s SOP for that form to accompany a 30-day letter.


“…the Form 886-A that CFM got was not standard. It first lists as an issue ‘[w]hether Taxpayer is liable for the [a]ccuracy[-]related penalty under IRC § 6662(a) and (b) for the taxable years 2012, 2013, 2014, and 2015 in an amount that is 40% of the amount of the underpayment.’ But it then asserts in its conclusion that ‘the Taxpayer is subject to the penalty under IRC §§ 6662(b)(1) and (2) for negligence, disregard of rules and regulations, and substantial understatement with the primary position being IRC [§] 6662(b)(1) and the secondary position IRC § 6662(b)(2).’ That is the only mention of the 20% penalty in the package CFM got.” Order, at pp. 3-4.

And the document itself looks like a draft. Judge Holmes points to the typographical discrepancies between the Form 886-A that CFM got, and the standard issue version, and concludes it’s only a draft.

So what? It was notice, wasn’t it?

“The form itself doesn’t have any names on it. We have the Examining Officer’s Activity Record, which shows that three separate revenue agents worked on it over the course of four years: RA F from August 2014 to November 2017, an unnamed RA from November 2017 to January 2018, and RA N from January 2018 to the examination’s completion. The parties agree that RA S, who signed the 30-day letter, was RA N’s immediate supervisor. There is nothing in the record on this motion to show who supervised RA F or the secret agent man. We also can’t tell from the Activity Record when the decision was made to impose the 20% penalties on CFM or who made that decision. But we can tell that RA F had begun working on the Form 886-A by October 2015, and it was ‘[a]lmost as complete as it will be’ by December 2017. And even if one assumes that RA N was the one who made the ‘initial determination’ to impose the penalty, the evidence does not definitively show that RA S approved that determination in writing. It is true that RA S signed the 30-day letter and that the Form 886-A was sent to CFM with that letter. But we must infer on this motion that the Form 886-A was in an incomplete state. That it was not mentioned as an enclosure on the 30-day letter also supports as a plausible inference at this point that RA S never saw the Form before signing the letter.” Order, at pp. 4-5. (Footnote omitted, but it quotes the P. F. Stone – Peter Barri 1966 theme song that Johnny Rivers made famous, to honor the “secret agent man.”)

OK, so now everybody is thoroughly confused, but Judge Holmes is only warmed up. If the 30-day letter is not the first notice CFM got, what was? Well, CFM’s trusty attorney called RA S and RA N when she got the 30-day letter, and they told her they didn’t know why the 40% chop; OCC told them just do it. So maybe the IRS counsel with whom RA N traded e-mails did the recommending.

But who was IRS counsel’s Boss Hoss, and did s/he sign off?

No summary J. Plenty of silt.


In Uncategorized on 06/15/2021 at 12:38

You’d think that Andrea Finegan-Bryan, Docket No. 17566-18, filed 6/15/21, or more appropriately her trusty attorneys, would have figured out that, to get Section 7430 legals and admins, it would be best to follow the one-hit wonder above referred to in the title first set forth at the head hereof, as my about-to-have-their-two-Martini-lunch colleagues would say. But there may be contrary strategic considerations; see infra, as the aforesaid colleagues would say.

Andrea and trusty attorneys hold back, so Judge Patrick J. (“Scholar Pat”) Urda sends them down with nothing, even though IRS folds when Andrea’s trusty attorneys unload the hardship info they’d discussed at Appeals but never showed until ready for trial of Andrea’s innocent spousery.

“…the Commissioner’s decision to concede came only after Ms. Finegan-Bryan provided updated financial information (after ignoring multiple opportunities to do so in both the Office of Appeals and this Court) that supported her position on economic hardship, which had previously weighed against her.” Order, at p. 6. (Footnote omitted, but it says since IRS was justified, Judge Scholar Pat won’t discuss failure to exhaust administrative remedies or unreasonably protracting the proceedings).

All IRS had on Andrea’s plus side at Appeals was that she was divorced. The economic hardship info swung the pointer her way after Appeals was done. Turns out the case might have been mooted out, because Andrea’s loved-once ponied up the three (count ’em, three) years’ worth of missing returns and paid up what was at issue, while trusty attorneys were playing tag at Appeals.

But trusty attorneys wanted Andrea adjudged innocent, because part of those payments might have been credited to Andrea in the ongoing equitable distribution split-up fight; maybe they held off nailing down innocent spousery until after loved-once paid up, lest he condition payment on Andrea acknowledging credit for her piece. Yeah, I’m speculating, but that’s a blogger’s prerogative.

I wonder if Scholar Pat beat me to it, and wasn’t giving Andrea’s trusty attorneys a Federal payday on top of their canny maneuvering.


In Uncategorized on 06/14/2021 at 15:53

Successors to the late Ron H. Bell’s interest in Bell Capital Management, Inc., 2021 T. C. Memo. 74, filed 6/14/21, the corporation the late Bell founded and 100% of whose shares he owned, find the corp facing unpaid FICA/FUTA plus fraud chops, as a result of the late Bell’s offshore employee leasing games.

These dodges involved an onshore highroller with a one-man-band operation causing his wholly-owned to rent him from an offshore dummy. The wholly-owned supposedly avoids payroll taxes, which the offshore dummy surreptitiously funnels back to the highroller.

The late Bell came unglued before my blogging days back in 2009 in Foxworthy, Inc., 2009 T. C. Memo. 203, and affirmed by 11 Cir. in 2012. IRS claims collateral estoppel (issue preclusion). Judge Wells unwraps the factors and finds for IRS.

The corp’s claim that the late Bell’s guilty knowledge cannot be imputed to it because there was another corporate officer besides the last Bell collapses, as it came out in Foxworthy that the other officer would sign whatever the late Bell put in front of him.

“We find that for each period in issue, petitioner’s withholding form and Forms 941 and 940 were false or fraudulent returns because its officers intentionally omitted payments made for Mr. Bell’s benefit with the specific purpose to evade tax believed to be owing. Petitioner properly reported Mr. Bell’s wages before 1996. For the periods in issue, petitioner’s officers entered into leasing contracts which were part of an overall scheme of offshore transactions. Mr. Bell’s already established fraud as to those offshore transactions is evidence we can consider in finding petitioner’s fraudulent intent. Mr. Bell acted in his capacity as petitioner’s officer when he designed and implemented the OEL transaction with Mr. R. Mr. C, another individual acting in his capacity as an officer, assisted by signing petitioner’s lease agreements. We find that as a result of the scheme to understate Mr. Bell’s Federal income, petitioner evaded its employment tax obligations. Whether this was by design or implementation is irrelevant. Any employment tax fraud was part and parcel of an overall intent to defraud the Government. Petitioner had to avoid the employment taxes due respondent for either it or Mr. Bell to evade responsibility. The reporting of one would almost certainly have led respondent to challenge the omission of the other.” 2021 T. C. 74, at pp. 15-16. (Names and citations omitted).

As for challenging IRS’ proof, the successors are playing the Michael Corleone gambit.

And Judge Wells isn’t buying the Eighth Amendment excessive fines argument about the Section 6663 fraud chop. Gotta protect the fisc, y’know.


In Uncategorized on 06/14/2021 at 10:43

Today in the Virtual Windy City, Judge Kathleen Kerrigan, chastened by 8 Cir (see my blogpost “CUT Uncut,” 8/17/18), is trying what’s left of Medtronic, Inc., and Consolidated Subsidiaries, Docket No. 17488-08.

The brigade of experts is being paraded again, ostensibly to fine-tune Judge Kerrigan’s analysis of the IP licensing agreement between Medtronic US and Medtronic Puerto Rico, but actually to fight to the death. Comparable Uncontrolled Transaction takes the stage.

As I listen to counsels’ opening statements (fortunately not being able to see the slides the parties produce), I really pity poor Judge Kerrigan. Once again, she will produce dozens of pages of well-wrought analysis, only to face another second-guess from 8 Cir.


In Uncategorized on 06/11/2021 at 17:42

The famous remark of the Boston Theosophist to William James echoes today in Montgomery-Alabama River, LLC, Parkway South, LLC, Tax Matters Partner, Docket No. 9254-19, filed 6/11/21. I’d adverted to that case in my most recent blogpost.

The turkeys in this case are the National Wild Turkey Federation Research Foundation, a 501(c)(3) specializing in the wild turkeys that fly, as opposed to the variety that swim on the rocks with the Cinzano Rosso and a couple Luxardos (hi, Judge Holmes). Howbeit, the story has a twist on the usual conservation easements, because a week after the Monty-Als grant the conservation easement to the Turkeys-at-issue, they convey the fee (with the usual cutouts for improvements) to a wholly-Turkey-owned LLC pass-through.

Both sides want partial summary J.

The Monty-Als claim perpetuity is off the table, because if extinguishment is on the table, the Turkeys get it all anyway.

IRS claims the intervening week puts perpetuity back on the table, because “perpetuity” means “forever from the getgo.”

Judge Albert G (“Scholar Al”) Lauber, apparently Tax Court’s conservation honcho, isn’t ready to give anybody summary J.

“Respondent urges that the fee simple donation is irrelevant because it was not made simultaneously with the donation of the easement, but a week later. He asserts that the value of the donor’s and donee’s interests must be analyzed ‘at the time of the gift.’ Sec. 1.170A-14(g)(6)(ii), Income Tax Regs…. Petitioner counters that both donations were made pursuant to a ‘unified plan’ and should be considered to have been made simultaneously. Respondent alternatively contends that the fee simple donation caused violation of the Code’s perpetuity requirement ‘by terminating the easement through the state law merger of estates,’ reserving the right to present evidence at trial on this point.

“We conclude that genuine disputes of material fact dictate that we deny both motions for partial summary judgment. The question whether Montgomery made both donations as part of a ‘unified plan’ presents factual questions that are ill-suited to summary disposition. And we do not believe that respondent should be foreclosed from showing at trial that the subsequent fee simple donation terminated the easement through a ‘merger of estates.’” Order, at p. 6. (Citation omitted, but it’s our old pal PBBM-Rose Hill; see my blogpost “Stirring Times  – Enter the Supremes?” 5/15/20).

Anyway, if the easement disappears, whether because non-perpetual or merged, there are two (count ’em, two) grants forming one conveyance of certain property, for which the Monty-Als paid $3.4 million, but claimed an aggregate tax break of $16.9 million ($12.675 million for the easement and $4.225 for the fee).

IRS claims the whole turkey-shoot is worth $543K.

Ah, Judge Holmes, looks as if Judge Scholar Al, like you, prefers a valuation trial to highly contestable readings of documents concerning events so remote as to be negligible.