Archive for June, 2021|Monthly archive page


In Uncategorized on 06/24/2021 at 12:51

The worker on extended assignment is like the turtle. He carries his home with him, “howe’er so far he roam.” Such is the story of Robert J. Sherman & Catherine Sherman, Docket No. 21094-17S, filed 6/24/21. Or rather, it’s Rob’s story.

Rob lives in one place, but for the year at issue, and more, works in another. Unlike the hero of my blogpost “I’m Stickin’ to th’ Union,” 9/21/11, Rob doesn’t seem to have a business affiliation with his hometown sufficient to keep it as his tax home.

Judge Buch: “The term ‘home” for these purposes means the location of a taxpayer’s principal place of employment, not the location of his personal residence. Generally, if the location of the taxpayer’s place of business changes for an extended period, so does his tax home. More specifically, if a person works in a location for more than one year, then that person is not treated as being temporarily away from home when at that location. Sec. 162(a) (flush language).” Transcript, at pp. 10-11. (Citations omitted).

Rob also got a flat per diem for his expenses from his employer, which he didn’t report for the year at issue. His substantiation was the usual back-of-the-envelope.

Another many-times-told tale. But note the word “generally” in Judge Buch’s off-the-bencher; there may be a business reason why your client needs his home to stay put while s/he wanders far and wide.


In Uncategorized on 06/23/2021 at 20:12

Unlike his Hall of Fame namesake, who was one of only five (count ’em, five) players to steal home in a World Series game, Monty Ervin, 2021 T. C. Memo. 75, filed 6/23/21, gets late filing, late paying, no estimateds and fraudulent non-filing add-ons on top of the revised deficiency that finally got paid via the restitution order bestowed upon him by USDCMDAL as part of the fall he took for tax evasion.

Monty claims he doesn’t owe add-ons, because the sale of his gold coins two years after IRS hit him with the SNOD they later revised paid his taxes in full. Anyway, now he’s back in the free world, Monty is CNC.

Judge Albert G (“Scholar Al”) Lauber points out that add-ons do not arise the moment that restitution is imposed, but only after assessment of tax. It’s our old friend “as if”; restitution is collected as if it were tax, except it isn’t. But once IRS assesses the tax, it’s oppen season for add-ons.

“It made the assessment after the restitution order became final. It subsequently commenced a civil examination of petitioner’s individual liabilities for 2002-2007 and prepared SFRs, allocating him a portion of the relevant income and deductions. It then calculated additions to tax based on the deficiencies so determined.” 2021 T. C. Memo. 75, at p. 9.

Monty agrees he owes what IRS says, but he paid it via restitution. And IRS can’t collect twice. No issue there.

But all, or almost all, the add-ons accrued prior to Monty making any restitution payment. So he neither filed nor paid when tax was assessed.

Monty’s economic woes do not help him.

“Petitioner’s second argument is no better. Inability to pay is not a defense, on the merits, to the additions to tax. Petitioner represents that the IRS has placed his…accounts in ‘currently not collectible’ status. If that should change and the IRS should seek to collect additions to tax…petitioner may request a collection due process hearing and urge inability to pay as a proper ground for a collection alternative. See sec. 6330(c)(2)(A)(iii).” 2021 T. C. Memo. 75, at p. 12.

Judge Scholar Al cruises through the add-ons, finds IRS carried BProd, and hits Monty with the full boat.

Monty is out at the plate.


In Uncategorized on 06/23/2021 at 16:35

I’m adding Sandy Lee Rowe & Sylvia Marie Rowe, Docket No. 6432-20, filed 6/23/21, to my “Don’t Ambush” series, which began with my blogpost “Don’t Ambush the Indians,” 4/7/11. They’re neither accountants nor ranchers nor yet the IRS, but Judge Buch rightly shuts down IRS when they try to wildcard in the “goofy regulation” on the trial of S&S’ unsubstantiated business deductions for their travel agency.

You can read for yourselves Judge Buch’s attempted scrape of S&S’ palimpsest of pieced-together spreadsheets and credit card slips, no two of which seem to jibe. So S&S are out on substantiation, especially since the stuff is travel and therefore Section 274 heavy-duty substantiation is needed.

On the trial, however, Sandy Lee testifies as follows: “‘The income was secondary to us, because we like to see people travel, family and other acquaintances.” He continued, ‘So it’s not to make money; it’s for the pleasure of inspiring people to travel.'” Transcript, at pp. 4-5.

One can only imagine IRS counsel’s feeling when Sandy Lee thus expatiates. Rather like watching one’s foe pause as the front sight blade lines up with the rear sight reticle, and one’s finger slowly eases the trigger back. Sandy Lee is pro se, of course, so we are spared the sweet smile of his attorney watching the case do a Coriolis.

But IRS counsel only adverts to this testimony at the very end of trial.

“Mr. Rowe’s statements suggest that the business losses may be non-deductible hobby losses. However, the Commissioner did not raise this issue in the notice of deficiency, pleadings, or pre-trial memorandum. In his closing, the Commissioner mentioned the nondeductibility of hobby losses in an apparent invitation for the Court to disallow the losses on those grounds.” Transcript, at pp. 12-13.

Tried by consent, per Rule 41? Not with a pro se, who obviously wouldn’t know Section 162 from Section 183.

“We will decline the Commissioner’s invitation.

“Our Rules are designed to give the parties fair notice of the matters in controversy. Rule 31(a). To that end, the Commissioner is required to ‘advise the petitioner * * * fully of the nature of the defense’ and provide a ‘specific admission or denial of each material allegation in the petition.’ Rule 36(b). The Commissioner may raise a new matter provided the taxpayer receives fair warning. If a previously unraised issue is tried ‘by express or implied consent’ of the parties, we will treat it as though it had been raised in the pleadings. Rule 41(b)(1). To determine whether it is appropriate to apply the principle of implied consent, we consider whether sustaining the issue would result in unfair surprise or prejudice to the opposing party and limit the evidence that party might have otherwise introduced if the issue had been timely raised.” Transcript, at p. 13. (Citations omitted.)

Of course it would surprise S&S. Hobby loss might require evidence of profitability in years other than those at issue. And bringing in hobby loss might increase the deficiency above that set forth in the SNOD, with a BoP knock-on.

So don’t ambush the travel agents, either.


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 on 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.

Edited to add, 7/19/21: Both IRS and Frank showed cause, so STJ Di folded. See Order, 7/13/21. I wonder if anybody read my blogpost.


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.