Jamie Lee Hicks, Jr., T. C. Memo. 2022-10, filed 2/23/22,looked like an also-ran for sure, but as he came to the head of the stretch, the Shared Parenting Plan (SPP) he tendered post-exam saved the tax treatment of one of his two (count ’em, two) kids, even though he was noncustodial and the kid was not a qualifying child.

Jamie Lee lived apart from Oddimissia for the whole of the year at issue, but the minors they had produced lived with Oddimissia and her mom, Juanita. Jamie Lee did provide more than half both kids’ support, and they didn’t provide more than half of their own. Oddimissia claimed the kids as dependents; the SPP said she and Jamie Lee each could take one. IRS bounced Oidmissia’s return.

Although Jamie Lee never attached the SPP to his return, and of course there was no Form 8332 or written equivalent. And the year at issue is post-2008, so the divorce decree or separation agreement can’t satisfy Reg. Section 1.152-4(e)(1)(ii), (h).

But Judge Nega finds the SPP can fill the bill.

Jamie Lee can wild-card in the SPP. The 2017 proposed regs. (Prop. Reg. Section 1.152-5(e)(2)(i), 82 Fed. Reg. at 6387) say until they become final, the taxpayer can put in a Form 8332 or substitute as long as the year is open. And since the year at issue is open, per Section 6503(a)(1), by stiping in the SPP IRS has waived attachment to Jamie Lee’s return.

“Our precedents make clear that this provision imposes several requirements on any document that a taxpayer offers as a written declaration for purposes of section 152(e). First, it must be signed by the custodial parent. Second, it must not place any conditions on the custodial parent’s declaration that he or she will not claim a child as a dependent. And third, it must otherwise meet the manner and form requirements the Secretary has prescribed by regulation.

“The Shared Parenting Plan meets all of these requirements. In addition to bearing Oddimissia’s signature, it grants petitioner the unconditional right to ‘claim’ one child ‘every year for tax purposes unless [the] parties reach another agreement in writing.’ We are aware of no written agreement between Oddimissia and petitioner that limits this right. Although the state court modified the Shared Parenting Plan in its [subsequent] order (which neither Oddimissia nor petitioner signed, though the order represents that they both agreed with its terms), those modifications did not diminish, for federal income tax purposes, the right that Oddimissia granted to petitioner in the Shared Parenting Plan. Rather, the [subsequent] order purported to expand that right by allowing petitioner to claim both children instead of just one. The agreement reflected in the Shared Parenting Plan therefore remains in effect, regardless of the later state court order purporting to expand on that agreement.” T. C. Memo. 2022-10, at p. 8 (Citations omitted.) (Footnotes omitted, but one says because neither Jamie Lee nor Oddimissia signed the subsequent order, Jamie Lee can deduct only one kid).

Word to the family law bar: This may be a template for saving qualifying relative status for noncustodial children. Note that the law and regs are subject to change, so YMMV.

I’ve described more than once the process we called in my young day “head-banging.” See my blogposts “Old-Time Head-Banging,” 6/5/15, and “Old-Time Head-Banging – Part Deux,” 9/4/20.

Judge David Gustafson, ever obliging, has migrated the process from robing room to telephone. See Christopher S. Pascucci & Silvana B. Pascucci, Docket No. 2966-19, filed 2/22/22.

Judge Gustafson wants a phoneathon to discuss trial prep, and lists six (count ’em, six) items to discuss. These deal with experts, stips, exhibits, pre-trial memos (and the hope that maybe an off-the-bencher might obviate the need for post-trial memos), the schedule for the week of trial (a week? Must be quite a case; there’s some high-priced counsel here), and whether to do a dry-run of dealing with exhibits, equipment, and housekeeping.

But there’s an item 7 to which I want to draw attention. “Whether the parties have exhausted all reasonable possibilities of settling this case.” Order, at p. 1.

Taishoff’s Translation: “Hey guys, y’all sure you want me to try this case?”

As by ukase Presidents Washington and Lincoln are conclusively presumed to have been born again on the third Monday in February, and as same is celebrated as a public holiday in the City Taxed but Unrepresented, the United States Tax Court is closed today.

So am I.

Don’t Step in It

I note the Tax Court announcement of the death of Judge Ruwe today, and it brought to mind the recent death of a highschool classmate, whose urbane sense of humor was a delight so many years ago. The title of today’s blogpost is in his memory.

Judge Albert G (“Scholar Al”) Lauber finds a welcome bifurcation in Heinrich C. Schweizer, Docket No. 3679-18, filed 2/18/22.

The fight is over valuation of a donation of artwork. Heinrich never provided a qualified appraisal and attached same, and a summary thereof, to his return for the year at issue. IRS won partial summary J on disallowance, but Heinrich interposed the reasonable cause defense, a question of fact.

But both Heinrich’s trusty attorneys and IRS counsel agree that only two (count ’em, two) issues need to be tried: did Heinrich have reasonable cause to omit the appraisals, and, even if he didn’t and loses the deduction, was his faith good enough to avoid the Section 6662(a) chops?

Judge Scholar Al is down with that, because if IRS wins the first point, they needn’t try the valuation issue.

And I’ll wager that Heinrich and his attorneys are hoping a good showing on the trial will get them a good settlement of the case, without expensive dueling experts.

Bifurcation may be a useful addition to the toolchest.

The CLE-mongers haven’t yet picked up on “win your case with a motion in limine”, but IRS has them in their toolchest for every job. Here’s Judge Elizabeth A. (“Tex”) Copeland to show us how proffered expert testimony may survive exclusion, but suffer substantial weight reduction, in Estate of Anne Milner Fields, Deceased, Bryan K. Milner, Executor, Docket No. 1285, filed 2/17/22, part of a coupled entry.

Bryan wants to put in the expert reports of a doctor and some unspecified financial person, to what end is unclear, but IRS’ objections certainly are.

“Respondent does not appear to dispute that Dr. M is a qualified physician. And while we agree that the treating physician would likely provide a more robust and credible account of Ms. Milner Fields’ medical condition…, these challenges go to the weight and credibility that we should give to the expert report and not its admissibility. We do however note that attached to Dr. M’s expert report as Exhibit D is a declaration of Ms. Milner Fields’ treating physician, Dr. G, which declaration is clearly hearsay. However, under Federal Rule of Evidence 703, such a declaration can be used to explain the basis of Dr. M’s expert opinion. Exhibit D will not be received for the truth of its contents at trial but may be considered for the purposes of understanding or explaining Dr. M’s opinion. Based on the foregoing, we will deny the Motion in Limine that relates to Dr. M’s report.” Order, at p. 3. (Names omitted). (Citations omitted, but get them for your briefs file).

As for the financial person, IRS claims she only used ordinary methods, and that no specialized knowledge was necessary. IRS also objected that her numbers were wrong, but she pointed out that IRS’ rebuttal numbers were also wrong.

“Finally, Respondent argues that Ms. B’s opinion as to whether Ms. Milner Fields retained sufficient assets for her support outside of the assets contributed to [partnership] is a legal issue. We disagree as this issue relates to a factual dispute relevant to a legal issue in this case. Respondent’s challenges, other than Ms. B’s qualifications as an expert with specialized knowledge, go to the weight and credibility that we should give the expert report’s conclusions and not its admissibility. Because there remains an issue of specialized knowledge better addressed at trial, we will hold the Motion in Limine that relates to Ms. B’s report in abeyance.” Order, at p. 5. (Name omitted).

So the Doc weighs in, but in the lightweight category. The financial expert may not make the weight.

Yesterday the New York State Academy of Trial Lawyers provided us with an engrossing lecture on Our Fair State’s fifth shot at producing a short form (“short” being only eight (count ’em, eight) pages long) Power of Attorney. Nevertheless, our General Obligations Law Section 5-1513 thus entitles it; “and my unhallowed hands shall not disturb it, or the Country’s done for.”

The learned presenter dwelt on the difficulty many agents had encountered when seeking to get the statutory short form accepted by banks, brokerages, and other financial institutions. They were met with objections that the principal must establish current competence, even though the power of attorney expressly provided that it survived incompetence. There were demands that the principal show up in person. And the old standby, “just use our form.”

Now of course, the latest and greatest enactment’s exclusive remedy, a special proceeding to compel acceptance, comes with a garnish of actual damages and legal fees.

I wish Judge Elizabeth A. (“Tex”) Copeland had issued her order in Estate of Anne Milner Fields, Deceased, Bryan K. Milner, Executor, Docket No. 1285-20, filed 2/17/22, in time for me to show how they do it better in Judge Tex Copeland’s home State of Texas.

Bryan, principal beneficiary of estate of the late AMF, was also her agent per a power of attorney given him by the late AMF years before she became the late AMF. He used same to manage her assets, although the greatest part thereof were publicly-traded securities managed by Wells Fargo. Yesterday’s presenter stated that Wells Fargo was among the best of the banks that honored the statutory short form. How well they deserve that praise can be seen from how Bryan used the power of attorney.

Bryan set up various entities in the thirteen months prior to the late AMF’s demise. He transferred much, though not all, of AMF’s assets among these, and created partnerships ostensibly to manage same, using the power of attorney to sign both for AMF and himself.

Bryan says Section 2036 doesn’t claw back said assets into the late AMF’s taxable estate, and wants summary J. Among other reasons, he says he needed a new entity because banks didn’t honor his power of attorney.

Judge Tex Copeland finds a bunch questions material fact (hi, l Judge Holmes), which you can read for yourself, but the one I like best is “If Mr. Milner had issues with financial institutions accepting his power of attorney, then how did he transfer securities managed by Wells Fargo and shares of North Dallas Bank & Trust Co. to [new entity] so quickly?” Order, at p. 5 (Footnote omitted, but I’ll print it).

“Mr. Milner’s ability to use his power of attorney to direct financial institutions to transfer millions of dollars in assets to a newly-formed partnership potentially contravenes his assertion that he has had issues with financial institutions accepting his power of attorney.” Order, at p. 5, footnote 6.

No, Judge, it potentially contradicts, that is, asserts the opposite, not contravenes, that is, violates, his assertion.

But maybe Wells Fargo truly is one of the better banks that honors statutory forms of power of attorney.

Bobby Branch, mining and real estate expert, has his hands full, as IRS is playing the stealth hand, trying to set up little tête-à-têtes with individual partners in Green Valley Investors, LLC, Bobby A. Branch, Tax Matters Partner, et. al., Docket No. 17379-19, filed 2/16/22. And maybe so quick peek some documents and stuff.

Judge Christian N. (“Speedy”) Weiler granted Bobby’s crew a protective order, but IRS wanted reconsideration, and gets it.

First, IRS “…will initiate no further communications with the individual partners/investors of the donor partnerships until petitioner’s motions for protective orders are resolved, and … temporarily sequester any information received from an individual partners/investors or their attorneys pending resolution of petitioners’ motions for protective orders. Order, at pp. 1-2.

But then comes the good stuff.

“…petitioners and respondent are to jointly (or separately if preferred) advise the Court on the following issues: (1) how many of the individual partners/investors are represented by their own counsel (wholly separate from the TMP’s counsel); (2) to the extent respondent seeks to contact individual partners/investors who are not separately represented by an attorney, how respondent would handle any inadvertent disclosures of privileged information; (3) if respondent receives documents from individual partners/investors or their counsel, when and how would respondent be obligated to share those documents with petitioners’ counsel; and (4) what showing petitioners can make that the individual partners/investors, who are admittedly ‘constituents of the organization,’ and either ‘supervise[], direct[] or regularly consult[] with the TMP and/or organization’s lawyer concerning the matter, ha[ve] authority to obligate the organization with respect to the matter, or whose act or omission in connection with the matter may be imputed to the organization’ as contemplated by comment [7] to ABA Model Rule 4.2.” Order, at p. 2.

And for those of my readers who haven’t memorized the comments to the Model Rules, here is comment [7] to ABA Model Rule 4.2.

“In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who supervises, directs or regularly consults with the organization’s lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Consent of the organization’s lawyer is not required for communication with a former constituent. If a constituent of the organization is represented in the matter by his or her own counsel, the consent by that counsel to a communication will be sufficient for purposes of this Rule. Compare Rule 3.4(f). In communicating with a current or former constituent of an organization, a lawyer must not use methods of obtaining evidence that violate the legal rights of the organization. See Rule 4.4.”

IRS’ counsel has until March 14 to tiptoe through those tulips.

No, it’s not my horn I’m tooting. I’m calling once again for reform of standards for admission to practice before United States Tax Court. There should be an examination for attorneys, wherever else they may be admitted and however highly spoken of they might be in other venues. It’s going on ten (count ’em, ten) years since my “modest proposal” pancaked onto deaf ears. See my blogpost “A Book and a Modest Proposal,” 5/22/12.

I’m not going to go over STJ Eunkyong (“N’Yawk”) Choi’s Order in Isobel Berry Culp and David Culp, Docket No. 14054-21, filed 2/15/22. My sources tell me that Ms. and Mr. Culp are lawyers in the Philadelphia area. For that reason, they are entitled to automatic admission to the Tax Court Bar.

STJ N’Yawk Choi makes my point far better than I could. I most respectfully direct your attention to Her Honor’s Order.

Judge Patrick J. (“Scholar Pat”) Urda looks deep into the craft of steamfitter in James P. Harwood and Connie J. Harwood, T. C. Memo. 2022-8, filed 2/15/22.

“According to the U.S. Bureau of Labor Statistics, steamfitters ‘specialize in systems that are designed for the flow of liquids or gases at high pressure.’ What Plumbers, Pipefitters, and Steamfitters Do, Occupational Outlook Handbook, U.S.  Bureau of Lab. Stat., https://www.bls.gov/ooh/construction-and-extraction/plumbers-pipefitters-and-steamfitters.htm#tab-2 (last visited Feb. 10, 2022)” T. C. Memo. 2022-8, at p. 2, footnote 2.

Judge Scholar Pat must have a good deal of fellow-feeling for Jim, as each in his own way plies similar crafts. Jim deals with high-pressure gasses in industrial settings; Judge Scholar Pat gets his high-pressure gas delivered by counsel at trial or oral argument. And we need both steamfitters and judges, else neither pipes nor precedents would stand up under continuous high pressure.

Jim’s contretemps with IRS stems from his now-mothballed unreimbursed employee travel expenses travel, which were live issues back in the day. Jim wandered “far and wee” but mostly through the jurisdiction of Plumbers and Steamfitters Union Local 598, whence came Jim’s work assignments; and when he wandered outside the 598 swath, he got his “travel card” ticket to work where other locals ruled.

But his heart, hearth and home were in Yakima, WA, where he and Ms Connie raised their family. When he wandered from job to job (that being the steamfitter’s life), he kept a log. Hard-hearted IRS said the Yakima homestead was for Jim’s convenience; as all Jim’s jobs for years at issue were short and of uncertain duration (lasting less than a year), Jim had no permanent tax home, so he had no travel expenses.

Judge Scholar Pat holds otherwise.

“We consider whether the taxpayer (1) incurs duplicate living expenses while traveling and maintaining the home, (2) has personal and historical connections to the home, and (3) has a business justification for maintaining the home.” T. C. Memo. 2022-8, at p. 10. (Citations omitted).

Jim definitely has two of the above. It’s the third that divides the parties.

“We are satisfied that Mr. Harwood had a sufficient business reason for living in Yakima. He was a member of a union local with a geographically disparate territory. Although he had not worked jobs in Yakima since 2005, almost all of his work during 2015–17 was within the Local’s footprint, with some assignments closer to his house than the hall in Pasco… and some further away…. We believe that his union membership, which gave him access to jobs within the union’s expansive territory, provided an adequate business justification for continuing to live in Yakima.” Order, at p. 11. (Citations omitted, but see my blogpost “I’m Stickin’ to th’ Union,” 9/21/11).

Judge Scholar Pat even judicially notices the map of Local 598’s territory, and includes same in T. C. Memo. 2022-8, at p. 2.

But there’s a noteworthy wrinkle here.

“…a taxpayer may deduct travel expenses between his or her residence and temporary work locations outside of the “metropolitan area” where the taxpayer lives and normally works. Thus, if a taxpayer usually works in Chicago, she may be entitled to deduct expenses if she drove back and forth to a worksite in Springfield. Although Mr. Harwood lives in Yakima, he does not normally work there, instead working throughout the disparate territorial jurisdiction of the Local. His travel accordingly does not qualify for this exception.” T. C. Memo. 2022-8, at p. 15, footnote 9. (Citations omitted).

Judge Albert G (“Scholar Al”) Lauber has acquired that sobriquet through much labor. My colleague Peter Reilly, CPA, a schoolmate of Judge Lauber’s at an elite boys’ high school (one of my nephews is also an alumnus), has remarked on Judge Scholar Al’s stand-out academics at the old school. But he must be echoing Sherlock Holmes’ famous remark “I am somewhat exhausted; I wonder how a battery feels when it pours electricity into a non-conductor?” after dealing with Gregory J. Podlucky & Karla S. Podlucky, Docket No. 453-17, filed 2/14/22.

Greg moves Judge Scholar Al to recuse himself.

“On June 21, 2021, he filed a 244-page motion asserting (among other things) that respondent has ‘perpetrat[ed] fraud [on] this Court by proceeding with the prosecution of the void Notice of Deficiency by and through a want of subject-matter jurisdiction.’ Later that day he filed a 199-page motion asserting that ‘the Federal Tax Statutes are clearly in derogation of personal rights and property rights.’ We denied both motions and reiterated our warning about frivolous arguments. Undeterred, petitioner husband filed on July 12, 2021, a 545-page document asserting (among other things) that there is no ‘enforcement clause in the 16th Amendment’ and that ‘the citing . . . of any statutes in Title 26 . . . [is] both unconstitutional and fraudulent.’” Order, at p. 2.

Judge Scholar Al, patiently: “At trial we reasonably characterized these positions as ‘frivolous.’” Order, idem., as my expensive colleagues would say.

But Greg is just warming up.

“Petitioners also assert that the Court showed bias by embracing respondent’s position on the central question in the case, namely, whether assets from petitioners’ corporation were diverted to them personally. In this passage the Court was urging Mr. Podlucky to use his time at trial to present testimony and evidence that were relevant to the issues the Court had to decide. The Court summarized respondent’s position and urged Mr. Podlucky to address it forthrightly rather than digress into facts that did not matter. In so doing the Court was attempting to help Mr. Podlucky, a pro se litigant, present his case more effectively.” Order, at p. 2.

Judge, it’s an old saw that should really be pensioned-off: “To present a case, you need to have a case.”