No, not what happens when one sits in an endless Zoom meeting that drones on to oblivion. This is about what happens when a Notice of Determination is invalid. And that’s the story of Guadalupe Ruiz & Maria C. Ruiz, Docket No. 21277-18L, filed 8/23/21*.

Guadalupe & Maria C. petitioned a NOD. Appeals issued a supplemental NOD, but somewhere in between Guadalupe died. Judge Courtney D. (“CD”) Jones told IRS to report.

“…in response to the Court’s order, respondent filed a status report representing that the IRS never issued Mrs. Ruiz a Notice CP90, Intent to Seize Your Assets and Notice of Your Right to a Hearing. As such, respondent’s counsel contends that the notice of determination sent to Mrs. Ruiz was not a valid notice of determination. Accordingly, respondent represented that respondent would file a motion to dismiss for lack of jurisdiction as to Mrs. Ruiz.” Order, at p. 2.

And IRS tried to find who might represent the estate of the late Guadalupe.

Well, pore l’il ol’ Tax Court is a court of limited jurisdiction, so no valid NOD, no jurisdiction, right?

Not quite. “Although the Office of Appeals’ determination need not follow a particular format, the determination must be in writing. A notice of determination ‘must specify to which taxable period, liability, and collection action it relates or, at least provide sufficient information so that the taxpayer cannot reasonably be deceived as to these items”. LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 28-29 (2016) (citing Commissioner v. Forest Glen Creamery Co., 98 F.2d 968, 971 (7th Cir.1938), rev’g and remanding 33 B.T.A. 564 (1935); Erickson v.  Commissioner, T.C. Memo.1991–97, 61 T.C.M. (CCH) 2073, 2076–2077 (1991)). For the backstory on LG Kendrick, see my blogpost “Be Careful What You Ask For – Part Deux,” 1/21/16.

So just maybe there might be jurisdiction as to Maria C., because there was a NOD specifying whatever NODs are supposed to specify. That Appeals had no jurisdiction, invalidating the NOD, because Maria C. never got the CP 90, is another story.  So let IRS’ counsel report on that angle.

There is Tax Court caselaw that says it can kick the underlying levy notice if it was improperly served. Take a look at the Order, at pp. 3-4. Although 7 Cir weighs in to state that determining IRS didn’t follow statutory requirements is “a quintessential merits analysis, not a jurisdictional ruling,” 7 Cir tossed the taxpayer in that case, saying if NOD invalid, like the Man From Mumbai said, “The door is shut…we may not look behind.” See Adolphson, 843 F.3D 478 (CA 7, 2016).

Judge CD Jones notes Adolphson is up in the air in Tax Court, as the Atlantic Pacific Management case (for which see my blogpost “The Taxpayer Bill of Goods – Part Deux,” 6/20/19) never dealt with Adolphson.

Taishoff says, anyway, the late Guadalupe & Maria C. were TX residents when they petitioned, and TX is 5 Cir, not 7 Cir.

But Judge CD Jones is the judge here, not me, so let IRS decompose some brain tissue.

Meantime, TX law does let Maria C. take up the torch for the late Guadalupe, and press ahead with her own innocent spousery. Texas Estates Code sec. 453.003.

So let IRS’ counsel discuss TX estate law, Maria C.’s innocent spousery, and maybe whether Tax Court has no jurisdiction at all.

And let the Clerk change the caption to “Guadalupe Ruiz, Deceased, Maria C. Ruiz, Surviving Spouse, & Maria C. Ruiz, Petitioners, v. Commissioner of Internal Revenue, Respondent.” Order, at p. 4.

*Guadalupe Ruiz & Maria C. 8 23 21

That’s what Judge Alina I. (“AIM”) Marshall does to IRS in John W. Jermaine, 7458-19L, filed 8/20/21*. IRS gives John a SNOD, which includes a $94 deficiency, which he pays, but also reverses the $9K withholding credit John claimed and was refunded. John petitions the SNOD, but gets tossed for want of the sixty Georges. Comes then the NITL, which John answers with a 12153, asking for OIC, lien withdrawal, and innocent spousery. He also claims he paid the deficiency.

While the CDP is pending, John sues IRS and some other people in USDCMDTN. The other people get let out of the case, and John gets tossed with prejudice per FRCP 16(f); John didn’t seem to follow Court orders, which gets USDJs peevish.

Anyway, IRS wants summary J tossing John’s petition from the NOD. John wants to go back to USDCMDTN, but that’s out. He petitioned the NOD timely; that’s enough, and he isn’t asking for this case to be dismissed. And John isn’t suing for a refund per 28 USC §1346 anyway, even iof he hadn’t been tossed in USDCMDTN.

John can’t challenge the $94 deficiency, because he petitioned that and got tossed. There’s also no lien to withdraw.

But the $9K withholding refund is another story.

“The attachment to the notice of determination states: ‘[t]he taxpayer challenged the existence and amount of the liability within an attachment to the Form 12153, Request for a Collection Due Process or Equivalent Hearing. The taxpayer was precluded from raising the liability issue during this CDP hearing process due to a prior opportunity and was advised as such by the original Appeals Officer assigned the case.’

“Reading the attachment to the notice of determination in the light most favorable to the taxpayer, it might be that petitioner raised the $9,279 withholding at his IRS Appeals conference but was not permitted to provide evidence. This interpretation of the attachment to the notice of determination would not permit the Court to hold for respondent on summary judgment….

“In respondent’s motion, respondent does not address whether petitioner is entitled to raise the $9,279 withholding tax credit as a challenge to his underlying liability under section 6330(c)(2)(B). Respondent also does not address whether petitioner’s arguments with respect to this amount might be reviewed as a verification issue pursuant to section 6330(c)(1) rather than an underlying liability issue pursuant to section 6330(c)(2)(B). See Dixon v. Commissioner, 141 T.C. 173, 183-184, 184 n.6 (2013). We will not grant summary judgment on this issue….” Order, at p. 9.

For the Dixon story, see my blogpost “The Great Dissenter – Redivivus,” 9/3/13.

Did the SO check all the boxes to make sure all the requirements for sustaining the lien were met? Or did the SO just rely on the flat statement that John had had a chance to contest?

John also questioned whether a $114 levy on his Social Security, while he still had a chance to petition the NOD timely, was proper. IRS has only the excuse that the levy arose from the toss of John’s petition from the SNOD, not the NOD. Judge AIM isn’t buying.

“Based on the record before us and respondent’s failure to offer statutory, regulatory, or caselaw citations addressing the levy, we are unable to conclude as a matter of law that SO K did not abuse her discretion in determining that the requirements of any applicable law and administrative procedure have been met. Because we are unable to determine whether respondent abused his discretion in this regard, we deny respondent’s motion with respect to the issue of whether SO K abused her discretion in making the determination to sustain the proposed levy.” Order, at p. 13. (Name omitted).

So there needs to be a trial on the levy and innocent spousery.

*John W. Jermaine 7458-19L 8 20 21

No, I still forswear politics here, and will not here “fight old battles o’er.” Today Ch J Maurice B (“Mighty Mo’) Foley has a simple order that should serve as a warning in the current Petition Surge.

The blogosphere has erupted since I first raised to public view the record-breaking volume of petitions filed this year. See my blogposts “Premature,” 7/23/21, and “Draining the Swamp,” 8/17/21.

Clearly the hardlaboring intake clerks and flailing datestampers, and their coadjutors, are feeling the strain of the heavy-duty workload. As at today, 8/20/21, at noon EDT, there have been fewer than 19,500 petitions docketed (at least according to DAWSON, which I submit for the fact of that statement being made, and not for the truth thereof). Y’all will recollect that the Tax Court website itself reported receipt of more than 24,000 petitions as at 7/23/21.

So what is likely to happen at The Glasshouse in the Stateless City?

Here’s Ch J Mighty Mo to tell you. Note the dates; they’re material. Read and heed.

“By Order dated May 6, 2021, the Court directed petitioners to pay the Court’s $60.00 filing fee. On June 23, 2021, petitioners paid the Court’s $60.00 filing fee. However, due to inadvertent clerical error, on August 12, 2021, the Court entered an Order of Dismissal for Lack of Jurisdiction on the ground that petitioners failed to pay the Court’s $60.00 filing fee.” Order, at p. 1.

The May 6 order above-referred-to did set a 6/22/21 deadline for receipt, so mailed-isn’t-filed. Petitioners were a day late. But the hardlaboring crew didn’t get around to bouncing the petitioners until 8/12/21.

Wherefore, “(O)n August 12, 2021, petitioners filed a First Amendment to Order of Dismissal for Lack of Jurisdiction. However, further review indicates that petitioners’ filing appears to be more akin to a Motion To Vacate.

“The Court will vacate the Order of Dismissal for Lack of Jurisdiction and thereby allow this case to go forward.” Order, at p.1.

Word to attorneys, USTCPs, and self-representeds: Stay on top of your cases. Monitor them even more closely than during ordinary times. The petition surge will spill over into the pool of clerical goofs and mix-ups, driving it above usual level. And jump on them quickly, to correct your record and help out the overstressed Glasshouse Gang.

Oh yes, the Order is Joseph Raimo and Rebekah Raimo, Docket No. 6277-21S, filed 8/20/21*.

*Raimo 6277-21S 8 20 21

I noted the other day that my colleague Peter Reilly CPA was seeking blogfodder in the tsunami of petitions flooding The Glasshouse in the City-NonState; see my blogpost “Draining The Swamp,” 8/17/21.

He and I spoke by telephone yesterday, and we agreed that Mark Twain was right again. “One gets such wholesale returns of conjecture out of such a trifling investment of fact.”

It could be the shutdown that preceded the roll-out of DAWSON. It could be the early days of DAWSON. It could be the economic effects of the pandemic, as the only relief accorded was some permissible delays in filing, but not in paying. It could be something “between Heaven and earth, not dreamt of in your philosophy,” or mine.

I’m offering no prizes for the most imaginative guess, or even the correct answer.

It’s entirely possible we may never have an answer.

But I do know this much. Once the petitions are all logged in and docket numbers assigned, we will still have petitioners like Anthony Andrews, Docket No. 14029-17*, filed 8/19/21. And deploying what few resources Tax Court may have on such as this.

“Throughout this case, petitioner has failed to directly address his entitlement to the EIC that he claimed for 2015, which in part depends on whether he had qualified dependents during 2015. He has claimed that his constitutional rights have been violated, that the EIC issue was settled, and that respondent’s counsel was guilty of misconduct. His claims have been analyzed and rejected in the Court Order dated May 2, 2018, denying petitioner’s Motion for Summary Judgment filed October 30, 2017, and Court’s Order dated April 10, 2019, denying petitioner’s Motion to Seal Documents filed January 28, 2019. Petitioner refuses to accept the Orders of the Court, instead filing repetitive documents and motions and attempting a premature appeal.” Order, at pp.1-2.

Oh, and are you surprised by this?

“Petitioner has been incarcerated during the pendency of this case and apparently will be for some time. On August 4, 2021, he filed a notice of change of address indicated that he is now in a Federal Correctional facility in Florida. By maintaining only previously rejected positions, he has failed to pursue reasonable means of resolving this case. Unless he indicates an intention to abandon his meritless arguments and address the EIC issue in this case, the Motion to Dismiss for Lack of Prosecution is well taken and may be granted. See Rules 123 and 149(b).” Order, at p. 2

Judge Nega, I agree that everyone is entitled to his or her day in Court. But it’s a “day in court,” not four years.

*Anthony Andrews 8 19 21

I asked the Genius Baristas how I might link to an opinion reported on the day it was issued, but thereafter disappeared when the entire docket was blocked.

Here is the reply: “The docket record is available to the public.

“You appear to be receiving an error message because you are trying to link to a particular document.  DAWSON generally does not create permanent links.   The one exception to this is the docket record.  If you would like to create a permanent link to a Tax Court document, you will need to download the document and create your own permalink.”

Except the docket record is not available to the public when the docket record is sealed, notwithstanding the fact that orders and the opinion have appeared on the day(s) issued in plain sight on the Tax Court website.

And I have no intention of creating a library of Tax Court orders and opinions that should be available to the public for review, and is mandated by statute to be made available to the public (Section 7461).

That is, creating for free. If Tax Court wants to pay me my hourly billing rate to do it, let’s talk.

My colleague Peter Reilly, CPA, must be back from his summer vacation, because he’s looking for blogfodder. He asked me about the 5/29/20 press release announcing the return of the online document photocopy service from the Tax Court Records Department.

He asked what had been done before. I emailed him that one had to visit The Glasshouse in the Stateless City, and petition the clerks for a quick peek at the file, glancing at the same while immured within the Glasshouse walls.

I ought to have referred him to my blogpost “Copycats,” 12/3/20, wherein I stated  “(C)heaper than PACER, given the three-buck cap. Any document you want, for the price of a bottle of Trader Joe’s famous plonk.”

Edited to add, 8/18/21: Y’know, maybe sealing a lot of files and charging for copies of orders and opinions that were made public for just one day is a fundraiser for Tax Court. I wonder.

No, I’ve not become  a foreign correspondent. Rather, this is the account of the tax court trial of Deborah C. Wood, 2021 T. C. Memo. 103, filed 8/18/21*. Deb and seven (count ’em, seven) of her US contractor witnesses testified back in February at the Albuquerque NM trial session, live from Kandahar, 2021 T. C. Memo. 103, at p. 10. I’ve said it before: why have mobile trial sessions, when Zoom covers the world?

Deb is an ex-GI who tried the free world, didn’t like it, and signed up for Afghanistan. Until this week there were plenty of jobs for qualified personnel there. Deb was a logistics specialist right out of high school, a specialty in high demand.

Deb stayed in Afghanistan. She couldn’t leave the base, didn’t learn the local languages because the few locals on base didn’t talk to foreign women, couldn’t open a local bank account or invest locally. She never rented the house she owned in TX; she let her TX car registration lapse but kept her driver license because her job required it.

Judge Albert G (“Scholar Al”) Lauber: “She had a U.S. bank account, but that was necessary to enable her employer to make direct deposit of her paychecks. Opening a local bank account or buying property in Afghanistan would have been impracticable if not impossible, given the requirements of her security clearance and the ban on leaving the base. Petitioner worked 12 hours a day in Afghanistan, with a half-day off every 14 days. Despite the strenuous demands of her work, she managed to have a full social life, including visiting restaurants and shops on the boardwalk, cooking with friends, and pursuing her weightlifting hobby.

“Petitioner had limited family and personal ties to the United States. She was unmarried and had no children; although she visited her parents in Boston occasionally, she spent a significant amount of her vacation time traveling to other foreign countries.” 2021 T. C. Memo. 103, at p. 22.

The “boardwalk” was apparently an on-base area “which consisted of shops and restaurants surrounding a soccer field and encircled by a running track. The boardwalk had a cigar club and a beauty parlor, as well as American chain restaurants, including Popeye’s and TGI Fridays. As petitioner explained, this was a popular place to ‘hang out.’” 2021 T. C. Memo. 103, at p. 6.

I doubt too many grunts hung out there.

But Deb apparently had what we used to call “a good war.” When friends offered her onshore employment, she turned them all down.

“She credibly testified–and we find–that she planned to continue working as an overseas contractor as long as these jobs continue to be available to her.” 2021 T. C. Memo. 103, at p. 9.

Sure, she got paid well over US rates tax free, since Judge Scholar Al gives her almost all her Foreign Earned Income exclusions.

Well, today she can join with the Man from Mumbai: “Kabul town’ll go to hell –Blow the bugle, draw the sword….”

Does somebody at Tax Court actually have a sense of humor?

But this is a nonpolitical blog.

*Deborah C Wood 2021 T. C. Memo 103

Except it usually is in an innocent spouse Section 6015(f) equity case. Jessica Lynn Grady, a/k/a Jessica Lynn Gans, 2021 T. C. Sum. Op. 29, filed 8/17/21* surely knew her deadbeat ex would never cough up for the five (count ’em, five) years at issue. He specialized in nonfiling and busted IAs. And the IRS’ CCISO, the Cincinnati Bengals, chewed up Jessica’s application. Her timely submitted Form 12509, Statement of Disagreement requesting a hearing with the IRS Office of Appeals (Appeals Office) met no better fate.

“After its review the Appeals Office agreed with the preliminary determination to deny Ms. Gans’ request for innocent spouse relief and issued a final determination letter…stating: ‘Our review of the facts and circumstances of your claim didn’t show it would be unfair to hold you jointly responsible. You didn’t have a reasonable expectation that the person you filed the joint return with would or could pay the tax.’ 2021 T. C. Sum. Op. 29, at p. 11.

But the Bengals and Appeals didn’t reckon with two savvy ladies, Cynthia S. Agostini, EA, USTCP, whose website boasts that she holds a “a distinction held by fewer than 100 tax professionals nationwide,” and STJ Diana L (“The Taxpayer’s Friend”) Leyden.

Cindy and STJ Di review Jessica’s sad tale of ignorance, oppression, poverty, disease, miscarriages, substance abusing son, deadbeat ex, and retiring new spouse, and give Jessica the full boat, leaving IRS with guilty knowledge and nothing else, as Jessica grabs every brass ring for streamliner for one year, and scores equity everywhere else.

Happy ending.

*Jessica Lynn Grady 2021 T. C. Sum. Op. 29

Doesn’t Help a Whistleblower

Michael Lissack, 157 T. C. 5, filed 8/17/21, turned IRS onto a $60 million adjustment, except not quite. Mr L. claimed the target failed to report income on certain membership fees. The Ogden Sunseteers took Mr L. seriously, and the RA to whom they bucked Mr L.’s claim checked it out. The RA, though, declared the fees to be non-taxable deposits, so the target was OK.

Except.

The RA kept looking, and found some sketchy deductions, whence came the $60 million hit.

Mr L. claims he gave IRS a piece of the action, wherefore he wants a piece of the action. Ogden says no, IRS says no, and Judge Albert G (“Scholar Al) Lauber says no.

The case goes off on Reg. Section sec. 301.7623-2. To begin with Section 7623(b)(1) requires that IRS collect “as the result of the action,” that is, following what the blower told them. But Mr L. told them about deposits, not deductions.

“Among the terms defined by the regulations is the verb phrase ‘proceeds based on.’ Id. para. (b). The IRS ‘proceeds based on’ the whistleblower’s information when his information ‘substantially contributes to an [administrative or judicial] action against a person identified by the whistleblower.’ Id. para. (b)(1). That is true when the IRS ‘initiates a new action, expands the scope of an ongoing action, or continues to pursue an ongoing action, that the IRS would not have initiated, expanded the scope of, or continued to pursue, but for the information provided.’ Ibid. On the other hand the IRS does not ‘proceed based on’ the whistleblower’s information when it merely ‘analyzes the information provided or investigates a matter raised by the information provided.’ Ibid.” 157 T. C. 5, at p. 9.

“In short, the regulation concludes that the portion of the examination that is unrelated to the facts and issue identified by the whistleblower is a separate ‘administrative action.’ See id. para. (a)(2) (defining ‘administrative action’ as ‘all or a portion’ of an IRS examination).” 157 T. C. 5, at p. 10.

So Mr L. attacks the regulation, which means a Chevron pitstop.

IRS says since Congress didn’t define the term “action” in Section 7623(b)(1), it left a gap for the Reg definition. Mr L. says the statute is unambiguous, that “any action” means “any action.”

Judge Scholar Al once again proves my assertion that any lawyer who can’t find an ambiguity should find another way to make a living.

“We disagree with petitioner’s submission that the statute is unambiguous. Subsection (b)(1) refers to any administrative or judicial action ‘described in subsection (a).’ Sec. 7623(b)(1). But subsection (a) does not describe or define an ‘administrative or judicial action.’ Subsection (a) does not even refer to that term. It speaks only of paying an award ‘from the proceeds of amounts collected by reason of the information provided.’ Sec. 7623(a) (flush language).

“Subsection (b) thus refers to a description in subsection (a) that does not exist.” 157 T. C. 5, at p. 15.

That’s Congress for ya.

But it’s necessary that the blower furnish more than the name of the target. If not actually lead IRS to the skullduggery, the blower must tell the IRS where to find the scene of the crime and where to find the smoking cliché.

And the Reg is rational. An IRS examination may include more than one action. And the blower must have substantially contributed to the specific action that yielded the happy result.

“Paragraphs (a)(2) and (b)(1), coupled with Example 2, [in the Regs] work together to ensure that a whistleblower is rewarded only for providing information that substantially contributes to a distinct ‘administrative action.’ Otherwise whistleblowers would be incentivized to file innumerable claims as mere fishing expeditions, hoping that the IRS will find something wrong with those taxpayers’ returns (related to the information they supplied or not). There is no evidence that Congress wished to encourage this sort of behavior.” 157 T. C. 5, at p. 21.

And Mr L.’s action isn’t “related” to the sketchy deductions. His claim had nothing to do with deductions.

Mr L. wants discovery, but Van Bemmelen and the record rule sink that one.

“The administrative record that is before us may not contain exhaustive information about ‘how and when’ the RA identified the bad debt issue, e.g., which line entries on which returns caught his attention, or the date(s) on which he gleaned these insights. But the record provides more than enough evidence to confirm that petitioner is not eligible for a mandatory award. The record contains all of petitioner’s submissions to the Office: None of these submissions includes any information about Target’s intercompany debt, Target’s reporting of a bad debt deduction, or the facts that would be relevant in assessing the propriety of such a deduction. In response to Ms. [OS]’s specific question whether the ‘whistleblower submission contribute[d] to any of the adjusted issues,’ the RA replied (with emphasis) that petitioner had not ‘provided any information for the adjusted issues.’ Because petitioner did not supply any information about the bad debt issue (or about the other issue that generated an adjustment), he is not entitled to an award under section 7623(b). No amount of discovery will change this fact.” 157 T. C. 5, at p. 25.

IRS wins.

Disclosure: I represented Mr. Lissack once, many years ago, in an entirely unrelated matter.

Comment: Of course I can’t link to Judge Scholar Al’s opinion, as the Genius Baristas have blocked the whole docket. But as soon as the online services pick this up, I’ll link to them. If I’m late or forget, just google 157 T. C. 5, and it’ll pop. So much for these Stealth Geniuses.

Edited to add, 8/25/21: See link at the head hereof. The Stealth Genius Baristas are once again shown up.

No, this is not a political comment. This is a non-political blog; like Rick Blaine, I run a cyber-saloon, so let the political types take their politics elsewhere.

Tax Court confessed that it is currently swamped with petitions. See my blogpost “Premature,” 7/23/21.

So now it is announced that Tax Court met with the favored few (journos excluded, of course; they don’t want us nosy types asking questions), the net result of which may be found here.

Tax Court will try to drain the swamp. To what extent DAWSON has anything to do with the swamp is yet unanswered.