No, not the 1914 20-episode thriller that the Libe of Congress designated “culturally, historically, or aesthetically significant” in 2008. This one is none of the foregoing.

Rather, today’s perils fall not upon Pauline, but upon her trusty attorneys, whom I’ll call Jeff and Ken. Jeff and Ken are attorneys in a law firm called MIJS.

Captive microinsurance dodges are the latest clay pigeons in IRS’ trapshooter. I’ve blogged a bunch of these, a list of which you can find in Footnote 1 of Judge Gale’s order today in  Pauline W. Liu, et al., Docket No. 3101-20, filed 9/22/21* (a special day at our house).

I’ll defer to Judge Gale for the story.

“The record indicates that MIJS wholly owns the entity MIJS Captive Management, LLC (MIJS Captive), which in turn wholly owns the entity Patriotic RE Insurance Company, Inc. (Patriotic RE). The record also indicates that both MIJS Captive and Patriotic RE were connected to the primary issue in these cases; that is, both were involved in the purported captive insurance arrangement at issue. Moreover, in certain filings with the Court, MIJS Captive and Patriotic RE have both made broad, general assertions of attorney-client privilege, raising questions as to the degree of MIJS’s involvement in the planning or promoting of the aforementioned purported captive insurance arrangement.” Order, at p. 2.

This triggers a Rule 24(g)(1) show-and-tell, whereby Jeff and Ken can hand in a sworn statement dishing as follows: “(1) whether he was involved, directly or indirectly, in the planning or promoting of the purported captive insurance arrangement at issue in these cases, including any involvement in the provision of legal advice or opinions by MIJS to MIJS Captive or Patriotic RE regarding such arrangement, such as opinion letters upon which MIJS Captive, Patriotic RE, or petitioners may have relied in planning or promoting such arrangement; and (2) the extent, if any, to which he was involved, directly or indirectly, in the operations of MIJS Captive or Patriotic RE.” Order, at pp. 2-3.

If the answer is “yes” to any thereof, Jeff and Ken can also “(1) secure petitioners’ informed written consent, if he has not already done so; (2) withdraw from this case; or (3) take whatever other steps are necessary to obviate any conflict of interest or other violation of the ABA Model Rules of Professional Conduct. If Messrs. [Jeff and Ken] obtain (or have already obtained) petitioners’ informed written consent, then they shall attach such to the statement filed with the Court.” Order, at p. 3.

Taishoff’s addition: Jeff and Ken, be prepared for The Phone Call.  And the Perils of Pauline.

*Pauline Liu 3101-20 9 22 21

The Bipartisan Budget Act of 2015 obliterated TEFRA, the 1983 multi-level litigation breeder, so complex that Congress had to insert a provision (Section 6231(g)(2)) in case IRS couldn’t figure out what was subject to TEFRA and what wasn’t. See my blogpost “Bamboozle Your Way to Victory,” 4/27/20.

But the demise of TEFRA (albeit to thunderous applause from all non-bamboozlers) via bipartisanship left us, in one respect at least, with the same problem we had before: the AWOL tax matterer (now representative). I told the story in my blogpost “The Case of the Missing Tax Matterer,” 7/26/21.

And the adventure continues. Today, Judge Alina I. (“AIM”) Marshall must again grapple with the attempt of GM Investments III, LLC (and its managing member, whom I’ll call Gerry) to sub in for the missing John Sfondrini, in Colorado Land and Holdings LLC, John Sfondrini, Tax Matters Partner, Docket No. 11875-20, filed 9/21/21*.

Counsel (exactly for whom is still unclear) wants to substitute parties and amend the caption, so as to get a stiped decision filed and the case closed. He must want it very much, as my sources tell me Gerry is his senior law partner, known as a visionary; “your wish is my command” is a very feeble description of what counsel must be going through.

But counsel needs more time to assemble the partnership paraphernalia to establish that Gerry’s LLC is in fact the new tax matterer for the CO landholders. So Judge AIM holds the motion in abeyance while counsel scrambles.

At the risk of being Captain Obvious, I suggest that drafters of LLC operating agreements (or partnership agreements, or their equivalents in your jurisdiction) provide clear paths of succession for their tax representatives, as well as certification procedures, all as simple as necessary.

*Colorado Land 11875-20 9 21 21

Spelled “barracking,” it means crowd abuse or heckling.  As used here, it means abusing the tax review system with frivolities. Today we have the author of the term, David C. Barrick, Docket No. 18912-19P, filed 9/20/21.

Barrick ran up $70K plus in unpaid tax liabilities. He wishes to litigate or relitigate same; some he failed to litigate because he either failed to petition or petitioned too late. To those for which he claimed he never got SNOD or NOD, Judge Buch puts paid comprehensively.

“Mr. Barrick’s claims must fail for multiple reasons. First and foremost, his claims are not properly before us in this case. As we held in Ruesch v. Commissioner, nothing in the text of section 7345 authorizes us to redetermine the underlying liability. Moreover, his claims are either unsupported or without merit. The liabilities underlying his passport revocation are a combination of self-assessed tax and assessable penalties, neither of which is subject to deficiency procedures. Thus, Mr. Barrick’s claim that no notice of deficiency was issued is without merit; the Commissioner was not required to issue a notice of deficiency. Lastly, Mr. Barrick claims that the Commissioner did not send him notices of determination. A notice of determination is issued at the conclusion of a collection proceeding, which is initiated by making a timely request following either a notice of intent to levy or a notice of federal tax lien. But Mr. Barrick never made a timely request challenging either of these collection actions, so he was never entitled to receive a notice of determination.” Order, at p. 5. (Footnotes omitted, but Judge Buch must have been on law review, as he was up to 21 (count ’em, 21) footnotes in fewer than five pages).

When I was a near-flunky On The Hill Far Above in a previous millennium, I used to say that law review authors, from whose ranks judges are recruited, measure success by the number of footnotes in their literary productions, much as certain generals measure success by body counts.

Howbeit, the only relief pore l’il ol’ Tax Court can afford under the Section 7435 passport-grab-certification is to order Treasury to tell State to back off. And here Treasury is right.

And I’ll go Nassau

A long time ago, I suggested to trusty attorneys for Celia Mazzei, Docket No. 16702-09, filed 9/20/21, that they forget about the useless Rules 161 and 162 vacation and reconsideration, and go for a direct appeal to 9 Cir. Tax Court routinely slugged those who played the now-defunct DISC-FSC Rothstuffer gambit.

For those who’ve forgotten or arrived late, see my blogpost “The Third Favorite Indoor Sport, 5/24/18.”

This last July, 9 Cir laid a whuppin’ on Tax Court, as Judge Mark V Holmes suggested (see my blogpost “Caligula in Tax Court?” 3/25/18) and I concurred two (count ’em two) months later.

Well, today Celia and trusty attorneys are looking for Section 7430 admins and legals, but ex-Ch J Michael B (“Iron Mike”) Thornton has to clean up the record first.

Emboldened as I am by these developments, I’ll go Nassau (double my bet on the back nine), and wager ex-Ch J Iron Mike finds enough to justify IRS and toss Celia and trusty attorneys.

I’m always trying to suss out the latest hacks, hints and kinks in the wrinkled skin of our tax law and procedure, specifically in and around The Glasshouse in The City Stateless. Now I can’t say with reasonable certainty, but there might could be one worth trying in an off-the-bencher today from Judge Buch, Martin J. Levins & Janet C. Levins, Docket No. 21853-19, filed 9/17/21.*

One good result among the very few that followed that shambolic schemozzle known as DAWSON is the posting of off-the-benchers on Fridays, formerly a day upon which no opinions or decisions appeared. Of course, the docket is sealed on this one, hence the PDF at the foot hereof, rather than a direct link; maybe one document was sealed, sealing all. The Genius Baristas, or is it the mysterious 18F, still haven’t fixed that glitch, among others.

You can read the opinion for yourselves. Martin’s IC-vs-EE argument has more holes than the PGA Tour. I won’t waste your time or mine abstracting Judge Buch’s prose.

The hack, hint or kink is that IRS folded the chops. Judge Buch doesn’t tell us if Martin had reasonable cause. He’d been an IC for years before signing on with a company that gave him several pounds of paper stating he was an employee, and he had his return prepared by a CPA, qualifications unstated, as was whatever Martin told him.

Based on the scanty facts Judge Buch gave us, it was at least worth IRS’ while to try the chops. So maybe if you petition your losing exams as small-claimers, and your client isn’t a total wit, wag or wiseacre, maybe IRS will fold the chops.

*Levins 21853-19 9 17 21

All y’all will recall Donna M. Sutherland, who dodged retroactivity of the Section 6015(e)(7) record-rule amendment. What, no? Well, then, see my blogpost “Comfortable Words,” 9/8/20.

Unhappily, the rope Judge Albert G (“Scholar Al”) Lauber threw Donna last year, in the form of a trial de novo, only hangs Donna in 2021 T. C. Memo. 110, filed 9/18/21.

Donna did enough of the bookkeeping for husband Scott’s beertapping business for her to know that the FICA/FUTA/ITW taken from the employees thereof for the years at issue weren’t going to be paid.

Donna’s health claims were insufficiently substantiated.

Judge Scholar Al conducts the obligatory trudge through the Seven Pillars of Equity (as Donna is still married to Scott, streamliner and apportionment are off the table). Only one of the seven is not neutral, but Judge Scholar Al finds two additional factors.

“The revenue procedure notes that the seven factors discussed above are ‘not intended to comprise an exclusive list’ and that ‘[o]ther factors relevant to a specific claim for relief may also be taken into account.’ Rev. Proc. 2013-34, sec. 4.03(2); see sec. 6015(f)(1)(A) (requiring ‘all the facts and circumstances’ to be considered).” 2021 T. C. Memo. 110, at p. 20.

“When signing the returns petitioner knew that she would receive a sizable inheritance from her mother’s estate. When she submitted her Form 8857…, she had more than $400,000 in bank accounts. She could have easily used a portion of this money to pay off the…joint liability, which totaled about $40,000. We can understand why petitioner might have preferred to use this money for some other purpose. But that does not mean it would be inequitable for the IRS to collect the tax from her.” 2021 T. C. Memo. 110, at p. 21. (Citation omitted).

Donna’s performance on the stand wasn’t of the best, and the RA who nailed Scott won the credibility stakes.

But Taishoff says that the cash stash is what decided this case.

I was going to blog Kenneth Jay Flynn, Docket No. 11381-19L, filed 9/16/21, largely because Judge Buch devoted fourteen (count ’em, fourteen) pages to sustaining the NITLs, which IRS bestowed upon KJ. But the tale mirrors so many others, where the petitioner loses the case at Appeals before it ever gets to The Glasshouse. KJ told Appeals he’d pay in full. He had the assets, and was expecting a large personal injury settlement. He saved his tale of multiple injuries to oppose summary J, but Appeals can’t consider what petitioner never told them.

It’s really frustrating to this blogger to write what those who will read it don’t need it, and those who need it will not read it.

More than once have I had occasion to proclaim that I will not mourn TEFRA. The separation of partnership-level items from partner-level items from computational items, the scrambling of inside basis and outside basis, the bankruptcy collapse, all provided blogfodder. But they increased my consumption of headache remedies.

Whether the PATH Act protected anyone from tax hikes remains to be seen. But one thing its buddy the Bipartisan Budget Act of 2015 did accomplish was to end such frittatas as we find in Todd D. Graham & Traci R. Graham, Docket No. 22933-19, filed 9/15/21.

T&T petition a SNOD that combines (or perhaps better put, conflates) “adjustments from or related to Superox Holding, LLC, Graham Family Partnership LP, and Firsthird Capital Partners (the ‘Partnerships’).” Order, at p. 1. The said adjustments amount to $162K in one year at issue, and $115K in the other.

Problem is, none of the Partnerships is small by TEFRA standards, as each has a partnership as a partner, thus the fewer-than-ten-partners out is out.

IRS moves to drop the whole partnership story. Looks to me like there never were FPAAs, and maybe so it might could be that SOL has run on those years. Even if no SOL, IRS has a Section 6212(c)(1) one-SNOD-per-tax-year problem.

IRS folds. “The Court does not have jurisdiction in this partner-level proceeding to determine or redetermine the partnership items of the Partnerships for the tax years…. The erroneous inclusion of those partnership items in the notice of deficiency issued to Petitioners does not give the Court jurisdiction to redetermine them.” Order, at p. 2.

But T&T had better keep the Pol Roger Cuvée Winston Churchill in the Eurocave.

“Although the notice of deficiency is invalid to the extent it determines adjustments to taxable income attributable to TEFRA partnership items, the notice of deficiency is valid to the extent it determines adjustments to nonpartnership items. The adjustments to royalty income of $4,019.00 and $2,673.00 for the tax years [at issue], respectively, the related computational adjustments to the self-employment tax and the self-employment tax deduction, and the related penalties and additions to the tax with respect to the nonpartnership items in the notice of deficiency are not related to TEFRA partnership items.” Order, at p. 2.

Judge Emin (“Eminent”) Toro agrees. Since the parties want to put off the trial, he puts them on status report track, so they can fight about the six grand remaining at issue.

I wonder who will mourn TEFRA.

The government travel slogan applies to practitioners entering Tax Court practice. A tour of the Tax Court website can provide helpful tips before you send out that engagement or retainer letter, or fire off that last-minute Form 2 as the sun nears the landline on Day 30 (or 90).

Even better, you might spare Ch J Maurice B (“Mighty Mo”) Foley the labor he expended on Samuel Sanders, Docket No. 21831-21, filed 9/14/21. It’s not Sam’s doing, but rather that of his trusty attorney, Jonathan McCormick, Esq.

“The petition filed to commence this case…lists the name of an individual who purportedly is petitioner’s counsel. The Petition bears the original signature of petitioner’s counsel, however, counsel is a practitioner who has not been admitted to practice before the Court, as required by the Tax Court Rules of Practice and Procedure. If petitioner’s counsel wishes to be recognized as counsel of record in this case, it will be necessary at this juncture to electronically file an entry of appearance upon meeting all admission requirements pursuant to the Tax Court Rules of Practice and Procedure. An entry of appearance may only be filed by a practitioner who has been admitted to practice before the Court. The Court has prepared Q&A’s on the subject ‘Representing a Taxpayer Before the U.S. Tax Court[‘]. A copy of these Q&A’s are attached to this order. The Court also encourages practitioners and non-attorneys’ seeking admission to practice before the Court to consult ‘Guidance for Practitioners’ on the Court’s website at http://www.ustaxcourt.gov/practitioners.html.” Order, at p. 1.

Attorney Advertising: Indeed, the practitioner might even pick up a useful tip or two, or perhaps learn what to avoid, by a casual perusal of this my blog.

The pilots say landings are the most hazardous part of any flight: long flight or short, the pilot is tired, stressed, and wants to get on the ground. So it is with counsel settling a litigation. When your client has finally gotten to “yes,” and the adversary has finally found some bucks in the file, the boilerplate stip of discontinuance (or whatever its equivalent in your jurisdiction) and the equally routine stip of settlement is the sight of the runway looming up just before your wheels touch.

But that’s when the tax troubles start. Here’s Judge Travis A. (“Tag”) Greaves to tell you all about it, in Rebecca A. Tressler, 2021 T. C. Sum. Op. 33, filed 9/13/21*. Rebecca was an Amtrak engineer and road foreman, who sued Amtrak for various delictions, involving assault, hostile work environment, injuring her ankle when exiting a train, and retaliatory employment practices. Amtrak won summary J in USDCDC, but Rebecca appealed, and Amtrak settled.

Rebecca never filed for year at issue, so the SNOD here is from a SFR. Rebecca doesn’t contest the portion of the settlement Amtrak treated as lost wages. But she contests the rest, saying she needed psychotherapy to recover from the PTSD caused by the evil deeds visited upon her.

Unfortunately, the sitp of settlement boilerplate knocks out all but $6900 of the $55K Rebecca claims.

“The plain text of section 2.2 [of the stip] establishes that the $55,000 payment represents ‘settlement of Ms. Tressler’s claim for emotional distress damages related to her allegations’ in the lawsuit. Petitioner points to section 2.5, which provides that the $82,500 payment ‘is inclusive of all claims by Ms. Tressler for any alleged damages against Amtrak, including, but not limited to, any alleged claims for physical injuries, emotional distress, attorneys’ fees, and costs’. We recognize that petitioner’s complaint in District Court included allegations of physical injuries, but section 2.5 does not state that any part of the $55,000 payment is attributable to the settlement of a physical injury claim. Section 2.5 is a general exculpatory provision whereby petitioner relinquishes the right to further sue Amtrak. This Court has held that a general liability release does not supersede explicit contractual text providing a settlement payment for emotional distress. We simply cannot accept petitioner’s request to allocate the $55,000 payment among her claims for ‘physical injuries, emotional distress, attorneys’ fees, and costs’ when section 2.2 attributes the whole $55,000 to her claim for emotional distress damages related to her claims in the lawsuit.” 2021 T. C. Memo. 33, at p. 8 (Citation omitted).

And extrinsic evidence that Amtrak knew about the assault doesn’t vary the stip of settlement provisions that lump all the nonwage money together.

As for Rebecca’s payments for psychotherapy after the year at issue, that’s for another day.

Takeaway- Practitioner, watch the boilerplate. As long as the other side can deduct the settlement payment, they shouldn’t make it hard for you to get whatever you reasonably can for your client.

And I’ll give Rebecca’s trusty trial attorney a Taishoff “Good Job,” for getting a good settlement out of losing summary J.

*Rebecca A Tressler 2021 T C Sum Op 33 9 13 21

If your gigworker on-the-road client wants to claim that her/his tax home is where s/he lives, not works, heed Judge Vasquez.

Today he takes a leaf from The Silhouettes’ 1957 smash hit to admonish Avito M. Vasquez, 2021 T. C. Sum. Op. 32, filed 9/13/21, that if he wants to claim his residence as his tax home between on-the-road gigs as an electrician with a high-voltage TX outfit, he should look for work when he’s laid off by the high-voltagers and goes back home until the next gig. Remember, home may be where the heart is, but a business connection is necessary for it to be your client’s tax home.

“The record does not establish that petitioner had any business connections in the vicinity of [hometown]. While unemployed in the summer of [year at issue], he did not attempt to find work near his residence. As petitioner acknowledged at trial, job opportunities in his field were scarce in and around [hometown]. On the record before us, petitioner’s only tie to [hometown] was familial, which is a personal and not a business connection. We therefore find that petitioner’s choice to maintain a home in [hometown] was for personal rather than business reasons. Accordingly, petitioner was not ‘away from home’ while working [on the road].” 2021 T. C. Sum. Op. 32, at p. 10.

So keep good records, gig roadster, but remember Rick Lewis’ immortal words. When you get on the stand, say as follows: “And when I get the paper, I read it through and through, And my girl never fails to say If there is any work for me, And when I go back to the house I hear the woman’s mouth Preaching and a crying, Tell me that I’m lying ’bout a job, That I never could find.” Just leave out the sha na na na.