Attorney-at-Law

DON’T SPARE THE FACTS

In Uncategorized on 09/02/2021 at 12:04

That’s Judge David Gustafson’s direction to IRS in Estate of Lois Horvitz, Deceased, Michael Horvitz, Executor, Docket No. 20409-19, filed 9/2/21.* The 706 was filed five years ago, and the SNOD issued three (count ’em, three) years ago. But IRS forgot the chops both in the SNOD and their answer to the petition. So IRS now wants to assert Section 6662(a) and (c) negligence and understatement chops by way of an amendment to the answer.

And they want to do it after trial has been set.

Turns out that the understatement IRS alleges isn’t the only understatement in this case. I’ll let that Obliging Jurist tell his own plain tale.

“…the sole fact on which the assertion of negligence is based seems to be: ‘If the adjustments set forth in the notice of deficiency are sustained, then petitioner will have been determined to have underreported the value of its taxable estate by $19,521,052. Thus, the underpayment in estate tax determined by respondent will be attributable to petitioner’s negligence or disregard of rule or regulations in underreporting the value of its taxable estate.’” Order, at p. 1, quoting par. 7(e) of proposed amended answer.

Judge Gustafson rightly notes that this is new matter, not mentioned in SNOD, so let IRS tell Judge Gustafson if IRS has BoP and BProd. Note that petitioner is not an individual, so check out Section 7491(c).

The ex’r claims that IRS is using the chops to bully him into waiving client-attorney privilege. Though Judge Gustafson says the Estate so claims, there is no such thing as a talking or writing Estate; there is an ex’r or adm’r. Here it’s a human being, but even where it’s a corporate ex’r or adm’r, they’re the ones who do the talking or writing.

Judge Gustafson: “Rule 36(b) requires that ‘the answer shall contain a clear and concise statement of every ground, together with the facts in support thereof on which the Commissioner relies and has the burden of proof.” (Emphasis added.) The facts in paragraph 7(e) of the proposed amendment seem spare.” Order, at pp. 1-2.

“Spare,” Judge? I’d say malnourished. And Judge Gustafson notices that IRS trots out no Section 6751(b) Boss Hoss for the chops they seek, so he asks them to dish thereupon.

There also argy-bargy about a subpoena to a nonparty, the trustee of mutual QTIPs between decedent and even-earlier-deceased spouse. Since such depositions are extraordinary measures under Rule 74, IRS’ excuse that this is a big-ticket case doesn’t convince Judge Gustafson, so IRS had better bukh with more particulars about that, too.

IRS wants the subpoena to get testimony about Decanting [sic] said trusts under OH law.

The ex’r claims such testimony would violate client-attorney privilege, but I’m sure my astute, battle-hardened readers have already twigged to what Judge Gustafson saw.

“We do not see how testimony on that subject would be proper. It would seem that instead we should examine the documents for their objective import and that subjective testimony about the settlor’s intentions would be irrelevant.” Order, at p. 2.

Taishoff says that Tax Court Judges don’t need expert testimony on points of law. They are experts on interpreting the law. Judge Gustafson says if this testimony is to do with the chops, they haven’t yet been allowed to plead chops. Taishoff’s morning line on whether IRS gets to plead chops has IRS as a wee bit of a longshot.

Howbeit, if what IRS wants is documents the trustee holds as a fiduciary for the Estate, IRS can serve a document request on the ex’r to tell the trustee to hand ’em over.

So let the ex’r object to whatever IRS says, and get on with it.

*Est Horvitz 20409-19 9 2 21

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