The historically-inclined might remember that Theodore Roosevelt, former NYC Police Commissioner, set up a couple tables (hi, Judge Holmes) in the Menger Hotel Bar in Santone, as the US was going to war with Spain in 1898, and started recruiting the famous US Volunteer Cavalry, a/k/a the Rough Riders.

Well, today times have changed, so Chuck Rettig and OCC have eschewed Pres. Roosevelt’s rough-tough recruiting policies. But if some of my readers relish the role of latter-day descendants and want to charge a hill or two of Southeastern strip-mined scrub, or capture some captive insurers, Chuck and the 1111 Constitution Ave, NW, types want you.

Here’s the gen.

https://www.irs.gov/newsroom/irs-chief-counsel-looking-for-200-experienced-attorneys-to-focus-on-abusive-tax-deals-job-openings-posted

You can get back a deposit you made to IRS just by asking, but a payment only comes back when there’s been an overpayment. IRS and Ram Ratan Sharma & Shakuntala Sharma, Docket No. 19466-17, filed 1/22/21, seem confused about which was the $6K Ram & Shak paid back in August, ’17. So Judge Gale man-‘splains the difference.

Ram & Shak were here before; see my blogpost “Oh MAGI, I Wish I’d Never Seen Your Face” – Part Deux, 10/29/20. Judge Gale refers today to an Order from 10/15/21 about a Notice CP21C that Ram & Shak claim lets them off the hook for any deficiency. Unhappily, I can’t find the Order (the Genius Baristas buried it so I can’t get the text online), but I’ll bet it’s the “no assessment because you petitioned,” which civilians take to mean IRS concedes everything, when in fact all it means is that the automatic stay on assessment and collection is in effect until decision or toss.

The parties are doing the Rule 155 beancount, but Ram & Shak are still claiming they’re off the hook and wanting their $6K back.

Howbeit, here’s Judge Gale’s skinny on deposit vs payment.

” The key differences between a deposit and an advance payment are that (1) deposits generally must be returned to a taxpayer on demand, whereas advance payments are subject to refund procedures, and (2) interest on an excess deposit  (when the conditions for payment of such interest have been satisfied) is paid at a lower rate than interest on any overpayment that results from an advance payment.  See §§ 6603(c), (d)(4), 6611(a), 6621(a)(1); Hill v. Commissioner, T.C. Memo. 2021-121, at *20–21. A remittance generally will not be treated as a deposit unless a taxpayer designates it as such in writing—and in particular, a remittance that is not so designated will be treated as a payment if it is made after the mailing of a notice of deficiency in full or partial satisfaction of the deficiency. See Rev. Proc. 2005-18,  §§ 4.01, 4.05(1), 2005-13 I.R.B. 798, 799–800.” Order, at p. 3.

For the story of Hill, supra, see my blogpost “Three Point Play,” 10/25/21.

Howbeit, Ram & Shak used the term “deposit” colloquially, but IRS’ papers are all over the lot. See Order, at pp. 4-5, and read all the footnotes. By the time you’re through, two Tylenols won’t be enough. Judge Gale will never have to find another way to make a living; he found eight (count ’em, eight) ambiguities in IRS’ beancount submissions, and I doubt he was even breathing hard.

So let IRS clean up its act, and tell Judge Gale if there is an overpayment, and how much, if any.

I do not know the identity of the attorney who settled and stiped out the “… total deficiency, addition to tax, and accuracy-related penalty for 2011 of $14,325, reduced from $58,094.59 as determined in the notice of deficiency. For 2012,  petitioners are liable under the Stipulated Decision for a total deficiency and accuracy-related penalty of $102,055, reduced from $381,702 as determined in the notice of deficiency….” for Hamdi Rafai and Nancy Rafai, Docket No. 10273-15, filed 1/22/21, at p. 2, but knocking out “nearly 75% of the aggregate deficiencies, addition to tax, and penalties [IRS] originally determined in the notice of deficiency,” Order, at p. 7, isn’t exactly shabby. And Judge Gale as a lot more to say about that, infra (as my expensive colleagues would say).

Howbeit, Ham & Nan want a Rule 162 vacation. Of the stipulated decision. Two (count ’em, two) years after the stiped decision was entered.

Yes, before decision becomes final (Sections 7481(a)(3), and 7483) Tax Court has broad discretion to vacate, modify, or whatever. Two years out, however, mere want of authority of attorney and failure to notify client, doesn’t get it. Ham & Nan (with new counsel) claim fraud on the court.

“In that context, the Fourth Circuit has explained that ‘not only must fraud on the court involve an intentional plot to deceive the judiciary, but it must also touch on the public interest in a way that fraud between individual parties generally does not.’ Consequently, fraud on the court is a narrow doctrine, ‘limited to situations such as ‘bribery of a judge or juror, or improper influence exerted on the court by an attorney, in which the integrity of the court and its ability to function impartially is directly impinged.’”” Order, at p. 4. (Citations omitted).

Ham & Nan are Golsenized to 4 Cir , which, though it has never dealt with Tax Court Rule 162 post-final vacations, have set a high bar for fraud-on-the-court. Fraud has to taint the system and defile its integrity.

“In this case, the allegations in petitioners’ Motion to Vacate do not suggest that their former counsel engaged in misconduct that defiled the Court or that impacts the public interest in a manner that could amount to fraud on the court. … petitioners have not alleged that their former counsel was totally unauthorized to represent one or both of them before the Tax Court. To the contrary, their Motion to Vacate concedes that they jointly retained their former counsel to file the Petition that commenced this case. Nor have petitioners alleged that their former counsel caused the Court to ratify the effects of some fraud perpetrated outside the Tax Court proceeding…. Petitioners merely contend that their former counsel acted without authority, and possibly without fully informing them, with respect to the settlement of this case. In that regard, petitioners have not alleged that respondent’s counsel, or the Court for that matter, could or should have known that their former counsel did not have full authority to act on their behalf. Furthermore, far from suggesting that petitioners’ former counsel colluded with respondent or otherwise acted against petitioners’ interests in settling this case, the Stipulated Decision reflects that petitioners’ former counsel obtained concessions from respondent of nearly 75% of the aggregate deficiencies, addition to tax, and penalties he originally determined in the notice of deficiency. The presentation of such a favorable settlement to the Court, by counsel acting with apparent authority on petitioners’ behalf, could not have deceived the Court in such a way as to preclude it from judging this case impartially.” Order, at pp. 6-7.

Btw, Judge Gale suggests “(P)etitioners’ former counsel may be liable to them in a malpractice action or may be at risk of professional discipline as a result of any negligence or ethical failures that may have occurred in the course of representing petitioners in this case, but as a matter of law such shortcomings would not amount to fraud on the court.” Order, at p. 7.

Takeaway- I hope former counsel put a litigation hold on all e-mails, sent confirmatory writings of all phone calls and face-to-faces to client, and saved copies of all correspondence. And copied clients on every communication with IRS. Their carrier will love them if they did.

.

I don’t recall if that was one of the Dick Wolf spinoffs on which one of my nearest and dearest worked as a special effects makeup artist years ago. Just now the concept is a hot one, as The Great Chieftain of The Jersey Boys is running an excellent CLE series on criminal tax prosecutions. Well worth the three hours of each segment. And, as Wolf’s opera proclaimed, Frank’s case study is “ripped from the headlines.”

Today Judge Nega deals with criminal intent as related to the Section 6663(a) civil fraud chops IRS wants to lay upon Brian Hollnagel, Docket No. 8271-19, filed 1/22/21 (Happy Palindrome Day!).

Brian’s trusty attorney moves for partial summary J, a very good tactical move, and one I’ve endorsed extensively before now. Trusty attorney wants to establish what facts IRS has to carry the “clear and convincing evidence” burden. And she gets them.

After a lengthy exposition that summary J is unsuited to cases where good faith and intent are on the menu, Judge Nega states “Because respondent has sufficiently alleged facts from which fraudulent intent can be inferred, this is not the extraordinary case in which summary judgment would be appropriate.” (Order, at p. 4)

OK, I doubt trusty attorney expected a clear win. But she gets what she wants at pp. 4-5, three (count ’em, three) paragraphs laying out exactly what IRS’ counsel claims are necessary and sufficient to lay the 75% chops on Brian. And anything else is “irrelevant, moot, or without merit.” Order, at p. 5.

True, Brian is not your model citizen. He went down on a bunch counts (hi, Judge Holmes) of wire fraud, obstruction, and filing a false amended return (Section 7206(1)) in USDCNDIL. (Order, at pp. 2-3)

But Judge Nega is not convinced. And IRS didn’t move for summary J (can’t cross-move in Tax Court, although I don’t understand the reason why not).

So here’s another example of summary J as discovery. And as courts have said for years, it narrows issues, makes the parties marshal and lay bare their proofs, and expedites litigation.

Brian’s trusty attorney gets a Taishoff “Good Move.”

You know there’s gonna be a couple wee kerfuffles when a trio of lawyers get involved. Judge Alina I. (“AIM”) Marshal has got a trio in Eric J. Geppert & Mary L. Geppert, Docket No. 946-20L, filed 1/20/21. If my sources have it right, Eric is a white-shoe alum from the mergers and acquisitions side. He is represented by a FL criminal appeals specialist, and a fellow tax blogger from OH. So you know this is gonna be good.

Here’s a wee sample.

IRS wants summary J. Eric gets three (count ’em, three) extensions, then replies. Then Eric’s FL counsel and his OH counsel both seek to stall consideration of the summary J motion. But Eric isn’t finished. Judge AIM Marshall gets assigned to the case, and here’s what she finds.

“On September 15, 2020, petitioner Mr. Geppert filed a motion to depose pursuant to Rule 74. On August 13, 2021, respondent filed a notice of objection to motion to depose pursuant to Rule 74. On September 18, 2020, petitioner Mr. Geppert filed a motion for recusal of judge.  On September 20, 2021, respondent filed a notice of objection to motion for recusal of judge. On September 23, 2020, petitioner Mr. Geppert filed a motion to remand. On July 20, 2021, petitioner Mr. Geppert filed a supplemental brief to motion to remand.  On September 20, 2021, respondent filed an objection to motion to remand, as supplemented.

“On September 24, 2020, petitioner Mr. Geppert filed a motion to declare IRS independent office of appeals unconstitutional as violating separation of powers and set aside IRS independent office of appeals actions. On August 12, 2021, petitioner Mr. Geppert filed a second supplemental brief to motion to declare IRS independent office of appeals unconstitutional as violating separation of powers and set aside IRS independent office of appeals actions. On October 15, 2021, respondent filed an objection to motion to declare IRS independent office of appeals unconstitutional as violating separation of powers and set aside IRS independent office of appeals actions,  as supplemented.” Order, at pp. 1-2. (Footnote omitted, but all it says is that citations to Rules are to Tax Court Rules.)

I need not point out that seeking remand to an administrative tribunal you are seeking to have declared unconstitutional four days later is a trifle odd.

Judge AIM has set a hearing for March 14 on the Louisville remote. I hope this gets livestreamed. It should be a doozy.

Judge Travis A. (“Tag”) Greaves deals with a bunch of “highly contestable” readings of clauses in a conservation easement deed in Malibu Valley Land, LLC, Spectrum Development, Inc., Tax Matters Partner, Docket No. 20442-19, filed 1/19/21.

We go coast to coast, as the Malibus stuck a $32 million easement on some 298 acres of CA. The big deal seems to be over the Malibus’ reservation of ” five ‘equestrian areas’, including ‘pipe corrals and other structures’ within the property without specification as to where those areas were to be located or how large the areas were to be (reserved equestrian rights). Only the exercise of the reserved equestrian rights required advance notice and approval by[501(c)(3) protector], but did not require this notice to be in writing.” Order, at p. 2. (Footnote omitted, but read the notice provision; exactly how do you mail oral notice?).

The usual improvements-in-or-out argy-bargy runs aground on what is the valuation date of  the proportionate share of extinguishment proceeds. The deed doesn’t state, which Judge Tag Greaves finds ambiguous, and so evidence is needed. Hence no summary J for IRS. Judge Tag Greaves proves once again that a lawyer who can’t find an ambiguity in any document needs to find another way to make a living.

Of course the Malibus are arguing Hewitt and Oakbrook, and has other and further arguments to slug poor old Reg. Section 1.170A-14(g)(6)(ii), but Judge Tag Greaves holds off on those. Cain’t hardly wait to see what those are.

IRS claims that the clauses requiring notice, 501(c)(3) to give notice before entering property to make sure conservation is going on, and Malibus to give notice before doing anything to the servient tenement (that’s the property encumbered by the easement, not a crash pad for extras from Fifty Shades of Grey) lets the Malibus get away with too much, but that doesn’t fly for summary J. No problem with notice by the 501(c)(3); they can enter and do their thing the minute they give notice. As for notice to the 501(c)(3), there’s a fact question whether whatever the Malibus could do would adversely impact the conservation.

Finally, the horsing around. Horseback riding is a permitted use, so pipe corrals are OK even if. not located in the deed, where housebuilding, land-swapping, and Swiss cheesing aren’t.

No summary J, but IRS don’t look so good in this horserace.

For most of us, which legal paths we trod over the years were determined by chance or inclination quite early in our careers; as the specialist superseded the generalist we most of us stuck to the well-trodden paths.

So I am sure CSTJ Lewis (“That Man Sure Can Spell!”) Carluzzo, whose career began as clerk to a State Court judge before migrating to distinguished roles at IRS, never expected the grist that came to his judicial mill would include the psychodrama and histrionics associated with divorce court.

But today Joseph Francis Farmer, Docket No. 1117-20S, filed 1/19/21, provides that. Joe objects to loved-once’s innocent spousery.

Except.

When IRS hit Joe and loved-once with SNODs for the two (count ’em, two) years at issue, they never petitioned. And the deficiencies concerned Joe’s unreporteds, nothing for loved-once. And the AZ divorce court decree said tax for Year One Joe and loved-once “…’shall abide by federal jurisdiction due to [petitioner’s former spouse] claiming innocent spouse.’ According to the decree, along with many other provisions that it includes, petitioner and his former spouse ‘reached a full agreement on the issues.'” Transcript, at pp. 4-5.

Yeah, roger that, says STJ Lew. “The position advanced by petitioner in this case, and his presentation at trial suggests that the divorce proceedings and his relationship with his former spouse were less than cordial.” Transcript, at p. 5. I can almost hear CSTJ Lew’s sigh, as he had to try this mess, with Joe pro se (natch).

Joe says he never got loved-once’s Form 8857 application for innocent spousery, but CSTJ Lew gleans from Joe’s testimony that he sure would have done. So Joe applied his own self, IRS’ innocent spousers said negatory, these were all Joe’s items, so Joe petitions.

CSTJ Lew gives us a really good rundown on the three (count ’em, three) varieties of innocent spousery. Useful checklist for the practitioner, at pp. 6-9.

But it availeth Joe naught.

“Although petitioner did not expressly concede that he is not entitled to section 6015 relief for either year in issue, at trial he did not dispute any of the facts relied upon by respondent in the denial of his requests for section 6015 relief, and he did not argue that the Court should allow him the relief that respondent denied. Instead, he challenged the section 6015 relief that respondent has already allowed to his former spouse. According to petitioner, for various reasons including the lack of opportunity to challenge her request at the administrative level, it would be unfair to allow his former spouse to escape the joint and several liability that resulted from assessments made on the basis of the joint Federal income tax returns and subsequently determined deficiencies. Apparently, he would not consider it “unfair” to hold his former spouse responsible for the Federal income taxes attributable to his income, the technical consequences that result from the filing of a joint return, notwithstanding.” Transcript, at pp. 9-10.

CSTJ Lew’s forbearing nature shines through.

“Domestic disputes can have a tendency to blur reason, and we suspect that, at least in part, influenced petitioner’s approach to the situation he has found himself in with respect to his income tax liabilities for the years at issue and the position he has taken in this case.” Transcript, at pp. 10-11.

CSTJ Lew gently man’splains to Joe that he’s not getting anywhere.

“… as we explained at trial, although we expect the explanation was not well-received, the Court is without authority to reverse or adjust the section 6015 relief respondent allowed to his former spouse.” Transcript, at p. 11.

Great speller, learned jurist, and master of understatement, that’s CSTJ Lew.

What have Erin M. Collins, NTA, and Francisa Fontanez, Docket No. 10154-21, filed 1/18/21, in common? Erin M. is the National Taxpayer Advocate, whose Purple Book, issued 1/14/21, mentions the issue that beset Francisa, whose untimely petition from a SNOD touches upon an issue that Erin M. also finds compelling.

Telling Francisa’s tale is Ch J Maurice B (“Mighty Mo”) Foley. Francisa is three (count ’em, three) weeks late with her petition. IRS shows up with dated SNOD and PS3877 showing last known address same as on petition, seeks and gets summary J tossing Francisa.

But Francisa wanted something else., and thereby hangs the cliché.

“Petitioner’s Objection does not deny the jurisdictional allegations set forth in respondent’s Motion to Dismiss; rather, the Objection is generally directed toward requesting that the Court send petitioner a tax refund or stimulus payment to which she believes she is entitled.” Order, at p. 3.

Now of course pore l’il ole Tax Court has no jurisdiction over refunds, and stimuli are a far remove from The Glasshouse That Vic Built.

But I’ll let Erin M., whose role in preparing Purple Book I have named the Annual Weep, the equivalent of Niobe, or Rachel getting the Jeremiah 31:15 treatment, tell her story.

“Under current law, taxpayers who owe tax and wish to litigate a dispute with the IRS must go to the U.S. Tax Court, while taxpayers who have paid their tax and are seeking a refund must file suit in a U.S. district court or the U.S. Court of Federal Claims. Although this dichotomy between deficiency cases and refund cases has existed for decades, we recommend Congress give all taxpayers the option to litigate their tax disputes in the U.S. Tax Court. Due to the tax expertise of its judges, the Tax Court is often better equipped to consider tax controversies than other courts. It is also more accessible to less knowledgeable and unrepresented taxpayers than other courts because it uses informal procedures, particularly in certain disputes that do not exceed $50,000 for one tax year or period.” Purple Book, 2021, Introduction at p. vii.

My colleague Peter Reilly, CPA, picked up on this, and we completely agree.

Moreover, were only a refund and not a deficiency or other collection matter at issue, I submit there is no need for the 90-day cutoff; there is no automatic stay on collection, as there is with a petition from a Section 6213 SNOD or a Section 6330 levy CDP. Myers equitable tolling should be in play.

All of us who were lucky to have as a colleague and a mentor Joel E. Miller, Esq., will mourn him now and miss him always.

We are only tall because we stand on the shoulders of giants.

The foregoing is a lament from a fictional real estate lawyer many years ago, when Congress rearranged our national holidays to give citizens three-day holiday weekends, to avoid the disruptions caused by midweek or weekend celebrations of national figures. G. Washington and A. Lincoln suffered a hostile merger in the process, but Thanksgiving and Christmas survived.

So today Dr Martin Luther King, Jr., is commemorated, although he was born on January 15.

Wherefore, The Glasshouse in the District of Columbia, locked down for COVID, is doubly locked today, invoking Rule 25(a)(2),(b).

In consequence whereof, I regret to inform my readers that I, too, am out of action today.