Archive for January, 2022|Monthly archive page


In Uncategorized on 01/31/2022 at 16:40

Timberland, the ourtdoorsy schmattists (I have a thirty-five year old pair of their shoes that wear like steel), did the usual inversion with their IP after they merged with another sporting clothing merchant, and wanted to do a pay-as-you-go over a 20-year useful life per Section 367(d)(2)(A)(ii)(I) rather than immediate gain recognition under I.R.C. §367(d)(2)(A)(ii)(II) by reason of Timberland’s constructive transfer of intangible property.

Judge Halpern says “Nope,” in 92 (count ’em, 92) pages, in TBL Licensing LLC f.k.a. The Timberland Company, and Subsidiaries (A Consolidated Group), 158 T. C. 1, filed 1/31/22. Timberland elected nonrecognition for some of the consolidateds, hence the reorganization twist.

Timberland started with a Section 368(a)(1)(F) reorganization, which means that they have made a constructive transfer of Section 936(h)(3)(B) property, meaning an immediate pick up of gain based on expected useful life, not the Temp. Reg. Section 1.367(d) 1T(c)(3).

There’s a side fight about whether Timberland was funded with offshore cash that had never been taxed, but that plays no role in the outcome. See 158 T. C. 1, at p. 7, footnote 4.

If any of this makes sense to any of you, my condolences. Briefly, the idea that if an onshore lays off property to an offshore in a reorg, it’s taxable, even if the same deal between two onshores would result in nonrecognition of built-in gain (basis bortscht, FMV a telephone number with country, city and area codes). And here the FMV is stiped at a billion-and-a-quarter plus.

The whole story is timing: when must the onshore pay up? The NYSBA Tax Section issued a report on the subject, but Judge Halpern isn’t giving it much weight, if any.

IRS wins. I leave it to the specialists to dissect the reasoning. And I fully expect an appeal.



In Uncategorized on 01/28/2022 at 12:40

We all know Rule 123(b) is Tax Court’s 24-second rule; it lets the judge toss any petitioner who holds the basketball in the backcourt, and fails to go forward. But is it confined to delay in Tax Court, i.e., failure to comply with the Rules or orders? Or does it reach, say, to Appeals?

Judge David Gustafson says it’s confined to Tax Court proceedings, in Tameka Lavern Brown & Jamal Travin Brown, Docket No. 12931-20L, filed 1/28/22.

Tam & Jam are fighting a sustained levy out of a CDP, but IRS moved to remand after Appeals sustained, and Judge Gustafson granted the remand. The problem is, that Tam & Jam went off-screen after the remand, not replying to letters from Appeals to deal with the issues, so Appeals again sustained the levy. IRS’ counsel then filed a status report, advising of the confirmation by default.

Judge Gustafson then ordered another status report by 2/8/22, as Jam says Tam is supposed to be handling this. Tam, however, remains off-screen. So IRS moves to toss.

Judge Gustafson denies the motion without prejudice, saying IRS is offside. That would be enough to persuade me not to waste your time with this.

But wait! There’s more, as the midnight telehucksters say.

Judge Gustafson faults IRS’ counsel for conflating non-communication and non-cooperation with Appeals with same conduct with IRS.

“… the Commissioner’s motion does not ask us to grant summary judgment sustaining Appeals’ supplemental determination. Rather, it asks us to dismiss the case without addressing its merits, on the grounds that the Browns have failed to properly prosecute their case before this Court. The motion is based on (though it does not cite) Rule 123(b), which provides: ‘For failure of a petitioner properly to prosecute or to comply with these Rules or any order of the Court or for other cause which the Court deems sufficient, the Court may dismiss a case at any time and enter a decision against the petitioner.’ The ‘failure’ pertinent to this motion is a petitioner’s failure ‘ to prosecute’–i.e., a failure to prosecute the case before the Court. Failure to fulfill obligations in agency-level proceedings with the IRS is a different matter, not targeted by Rule 123(b).

“The motion cites no Tax Court rule or order with which the Browns have failed to comply since the relatively recent date on which Appeals issued its supplemental notice of determination in December 2021. The sole order issued since that date has been our order of December 14, 2021 (Doc. 11), which requires only the filing of a status report by February 8, 2022–a date still in the future.” Order, at p. 2.

Word to IRS: Note well Rule 123(b)’s exact language: “or for other cause which the Court deems sufficient.” I suggest y’all consider arguing that when a petitioner goes off-screen on a remand to Appeals, and stays there, maybe so that’s an “other cause which the Court deems sufficient” to toss. Broad discretion there. As the hockey players say, “Shoot the puck, it might go in.”


In Uncategorized on 01/28/2022 at 01:02

It’s become a hackneyed phrase, a cheap sneer easily tossed off by the uncreative. And though Judge Nega doesn’t say it in haec verba, that’s the result for E. T. Ryder, Esq., although he earns a Taishoff “Good try” for his creative approach to pushing the envelope, lowering the bar, and moving the goalposts in Patricia Jindra, Docket No. 5060-19L, filed 1/27/22.

It’s a CDP off a TFRP, and Patricia claims the IRS tab is more than she can pay. E. T. tries to use daily compounding of interest and penalties to boost Pat’s liability over her RCP, but the SO scuppers that. E.T. tries to use an adjoining (higher-priced) county’s housing costs, because Pat’s dwelling is “two steps away from the county line,” as Paul Simon sang it. That doesn’t survive summary J. “Petitioner’s representative also argued that SO S should have calculated petitioner’s future net income using a twelve-month multiplier, instead of using the length of the remaining period of limitations for collection (known as the Collection Statute Expiration Date or CSED).” Order, at p. 3. (Name omitted).

The CSED is graven in stone; once the SOL runs, game over.

E. T. also tries an illustration of housing hardship from the IRM to argue for an upward deviation from the guidelines, but the SO isn’t buying, and neither is Judge Nega.

E. T. and Pat lose, but anybody can fold and lose. The whole point of effective representation is finding arguments that pass the smile test in the case you’ve got (and not the case you wish you’d got), and urging them.

Edited to add, 1/28/22: Before any of my readers give me the Psalm 141:5 treatment, I do recall that I my own self invoked the hackneyed phrase I now virtuously decry. See my blog post “Creativity,” 8/19/19.


In Uncategorized on 01/27/2022 at 18:23

Judge Elizabeth A. (“Tex”) Copeland provides a delightful conundrum today, as she revisits all 33 (count ’em, 33) pages of her opinion in FAB Holdings, LLC, 2021 T. C. Memo 135, filed 1/27/22; this is a “Corrected” version of the 11/30/21 opinion, which I blogged as “A Preparer Is Not a Promoter,” 11/30/21.

I cross-checked the uncorrected with the corrected, and the only change I could find is at page 33. The uncorrected text reads “Decisions will be entered for respondent as to the deficiencies and for the petitioners as to the accuracy-related penalties under Section 6662(a) in docket 21971-17 and under Rule 155 in docket 22152-17.” The corrected version reads .”Decisions will be entered under Rule 155.”

Not sure why there’s a difference, and Judge Tex Copeland doesn’t tell us. Maybe because, though consolidated for trial, briefing, and opinion per Order 9/30/19 (text unavailable), 21971-17 involves the pass-through LLC and 22152-17 involves Mr. Berritto and the late Mrs. Berritto personally.

IRS conceded the Section 6662(a) accuracy chops (2021 T. C. Memo. 135, at p. 3, footnote 2), but LLCs and other pass-throughs don’t pay chops, their passcatchers do (and you should have heard two of my fellow members of the NYSBA Association-Sponsored Insurance Program committee, one from Kansas City and one from Buffalo, on the subject of passcatchers at our meeting yesterday). So maybe no need to mention the conceded chops?

Or maybe because the late Mrs. Berritto became the late Mrs. Berritto in medias res, whereby the POA she gave Mr. Berritto automatically terminated eo instante. So any SOL extension thereafter purportedly agreed to by Mr. Berritto as representative was without effect. Though married couples may file jointly and become a single taxing unit, each is still a separate taxpayer. So deficiencies are subject to last lifetime SOL extension, thus freeing the late Mrs. Berritto’s estate from any liability therefor after expiry of said extension.

Am I right? Did I miss something? I seek enlightenment; if my readers cannot help, perhaps Judge Tex Copeland might be willing to expatiate.


In Uncategorized on 01/26/2022 at 20:47

My colleague Peter Reilly, CPA, is in the thick of the current refund fray. While Tax Court can order a refund in a deficiency case, the Court has no such jurisdiction in a CDP. 4 Cir just affirmed this conclusion in McClane v. Com’r, No. 20-1074, decided 1/25/22.

Brian McClane has been here before, of course. See my blogposts “SOL on SOL – Redux,” 9/11/18, and “Judge Halpern’s Conundrums,” 3/13/18.

Unhappily for Brian, who admittedly overpaid for the long-ago year at issue, the de novo review he got in his CDP (Brian never got the SNOD) never got to the SOL fence, because Tax Court can’t order a refund out of a CDP once it finds that the collection activity complained of is without basis.

I see the Great Chieftain of the Jersey Boys is on brief as amicus, along with the American College of Tax Counsel (to which august body I do not belong), and the Tax Freedom Institute, Inc. Brian’s case was argued by the FL criminal tax expert, who appeared in my blogpost “When Lawyers Get Involved,” 1/20/22.

But the result is the same.

“We cannot read the phrase ‘underlying tax liability’ in isolation, but instead must read it in ‘the specific context in which that language is used.’ Here, the ‘specific context’ is the IRS’s attempt to collect via lien or levy. (‘The relevant term, ‘underlying tax liability”, is clear and unambiguous and is read easily to mean the tax liability underlying the proposed levy.’). The phrase ‘underlying tax liability’ does not provide the Tax Court jurisdiction over independent overpayment claims when the collection action no longer exists. The Commissioner is correct that the ‘taxpayer was permitted to challenge the amount of his underlying liability in the [collection due process] hearing … only in the context of determining whether the collection action could proceed.’ Appellee’s Br. at 15– 16 (emphasis added) (‘Section 6330 provides a set of procedural safeguards for taxpayers facing a potential levy action by the IRS …” (emphasis added)). McLane no longer faces such an action.” Last paragraph of decision; citations and footnote omitted, but the footnote is a drill-down on Greene-Thapedi.

This needs Congressional action. I refrain from any political comment.


In Uncategorized on 01/26/2022 at 16:07

I’m sure Judge Patrick J (“Scholar At”) Urda stands by those words, and I’m also sure he strongly believes others should do likewise. And when it comes to extensions of time to file an opening brief after trial, he certainly applies those words in Russell E. Barrios, Docket No. 19089-17, filed 1/26/22.

Russ went to trial back in November, IRS filed its simultaneous opening brief a week ago, but Russ’ trusty attorney, claiming health issues, asked for more time.

Judge Scholar Pat gives him until Valentine’s Day. ” No further extensions will be granted.” Order, at p.1.

So whether or not you pledged your Valentine in those famous old words, when Judge Scholar Pat is on the case after four years percolating through the system, your brief is due “in sickness and in health.”


In Uncategorized on 01/26/2022 at 15:43

The voice of COVID being heard in the land, Tax Court is once again trenching on the Rule Against Perpetuities, by going remote for February’s show-ups, except Chicago alone, which is shunted off until June.

I wouldn’t want to go to Chicago in February either.

Here’s the schedule.


In Uncategorized on 01/26/2022 at 01:14

My colleague, Peter Reilly, CPA, always on the lookout for blogfodder, asked me yesterday if I had seen Charlie Sheen, Docket No. 25980-21L, filed 1/24/21. I replied I hadn’t, and the link Mr. Reilly sent me to the order was the usual scrambled eggs served up by the Genius Baristas. So I utilized the new, improved, jim-handy Tax Court search function, and found what seemed like a routine remand to Appeals.

Mr. Reilly’s comment was that this seemed a quick turnaround for a petition filed back last November. I checked out some details, and concluded that Mr. Sheen’s counsel, a CPA, had been around the block a couple times (as we say on this Minor US Outlying Island, and hi, Judge Holmes), and knew t’other from which. Said counsel is a USTCP, not an attorney.

As I discovered many years ago, it’s not necessarily that some animals are more equal than others, as George Orwell put it. Sometimes it’s more important to know what to say to your adversary and how to say it. Getting a teletubbying IRS counsel to drop one of the cascading files confronting him/her back to Appeals depends more upon petitioner’s counsel than on petitioner’s IMDb listing.


In Uncategorized on 01/25/2022 at 19:29

Just now we’ve seen all kinds of pullbacks from COVID-induced orders, directives, emergency measures, the politics of which I leave to other voices, other rooms. I’ll chew no such cabbage here even once, much less twicet.

Lastisha J. Redman, Docket No. 12758-20, filed 1/25/21, is late with her petition, and Mnuchin’s Treasury Munchkins’ Quinzième Juillet ipse dixit avails her naught. Neither is Guralnik of any use. See my blogpost “Neither Equity Nor Designation,” 6/2/16, for the happy story of Felix Guralnik.

What saves Felix is FCRP 6(a)(3). We all know the Supremes promulgate the FRCP, but Congress has seven (count ’em, seven) months to veto them. I forbear to comment on Congress’ chances of doing so. Of course, Tax Court makes its own rules, giving particular weight to FRCP when their own rules don’t cover.

I’ve advocated for an Octavia rule to cover situations like COVID, where Tax Court is shut down for more than a day. I cannot think COVID will be the last such instance when Our Nation’s Capitol will be under siege, from whatever source.

Of course, we have in Sections 6213 and 6330 explicit Congressional mandates. Again Ch J Maurice B (“Mighty Mo”) Foley intones the unalterable mantra “(I)n order to be timely, a petition generally must be filed within 90 days of the date on which the Commissioner mails a valid notice of deficiency. See I.R.C. § 6213(a); Brown v.  Commissioner, 78 T.C. 215, 220 (1982). We have no authority to extend this 90-day period. See Joannou v. Commissioner, 33 T.C. 868, 869 (1960); see also Organic Cannabis Found., LLC v. Commissioner, 962 F.3d 1082, 1093-1095 (9th Cir. 2020).” Order, at p. 2 (Footnote omitted, but it’s the 150-day stretch for offshoreniks).

Maybe the Congressional solution is the only proper one, rather than a cobbled-together, jury-rigged Execu-Judicial nullification. How about statute providing filing deadlines in stated emergencies extended by Presidential executive order, subject to Congressional veto?


In Uncategorized on 01/24/2022 at 18:37

Not recommended, when it comes to Form 6, the Ownership Disclosure Statement. I’ve pointed this out numerous times before now. One sample is my blogpost “Even Good Accountants,” 3/25/19.

The form itself is useful in a tiny fraction of cases. Most of the corporate and partnership grist coming to the judicial mill at 400 Second St, NW, was not harvested in the fields of Fortune 500 or multinational conglomerates. Most are mom-and-pops, and even the big-ticket ones are syndicates of individuals, disregardeds, and passthroughs.

Howbeit, the rules have sanctified the requirement to file, and “my unhallowed hands shall not disturb it.”

But as the vast majority of those who are told to fill out the form haven’t a clue what it requires of them, make it easy. Instead of “if none, so state,” how about “YOU CANNOT LEAVE THIS SPACE BLANK; IF NONE, WRITE “NONE”.

Then we wouldn’t have such timewasters as R. Finn Enterprises, Ltd., Docket No. 29721-21L, filed 1/24/22.