William Joseph Davidson, Docket No. 5849-09, filed 6/30/22 (and that docket number is no typo, this is an oldie but goodie) is back home (see my blogpost “Be Back Home in Thirty Days,” 6/27/19). But is precluded from claiming (a) he doesn’t owe north of $418K in tax for 1998, (b) he didn’t willfully evade payment of tax on $200K for 2001, and (c) he doesn’t owe Section 6651(f) add-ons in respect of the said years.

Judge Colvin has the story. And uses the old-fashioned term “collateral estoppel,” which now is translated as “claim preclusion.”

Wm Joseph copped a plea in USDCEDMO on the tax due for 1998 and the evasion in 2001. IRS wants summary J, now that Wm Joseph is out of the slammer.

“Collateral estoppel applies here because the matters at issue here are identical with the ones decided in petitioner’s criminal case, Davidson v. United States of America, U.S. District Court for the Eastern District of Missouri, docket number 4:05CR00519; a final judgment was rendered by a court of competent jurisdiction in that case; respondent is in privity with the United States; the parties actually litigated the matter at issue and the resolution of those matters was essential to the prior decision; the controlling facts and legal principles have not changed; and there are no special circumstances that would warrant making an exception to the normal rules of issue preclusion. A guilty plea is treated as the prior litigation of an issue of fact or law.” Order, at p. 4. (Citations omitted).

This isn’t like the restitution cases, where restitution is determined but the exact tax, add-ons, and chops is not, and the plea bargain says so. Here Wm Joseph copped to the exact amounts.

But whatever else IRS wants is held in abeyance. No need to rush matters.

Fur Systems, Inc., Docket No. 4099-22, filed 6/29/22, gives Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan a chance to review for us how to get a refund of overpayment of tax and interest thereon, when no SNOD or NOD has issued.

“In a deficiency case, this Court’s jurisdiction depends on the issuance of a valid notice of deficiency and a timely filed petition. Rule 13(a), (c), Tax Court Rules of Practice and Procedure; Monge v. Commissioner, 93 T.C. 22, 27 (1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988). In an interest abatement case, our jurisdiction depends, in part, on the issuance of a notice of final determination for disallowance of interest abatement claim or the IRS’ failure to make a determination within 180 days of the filing of a claim for abatement. See Internal Revenue Code (I.R.C.) sec. 6404(h).” Order, at p. 1.

The Fur have no SNOD, NOD, or claim for refund that has sat out the six month hold. IRS moves to toss The Fur.

“In petitioner’s objection to respondent’s motion to dismiss, petitioner asserts that ‘the determination of Overpayments of tax is under the jurisdiction of the Tax Court.’ Petitioner is correct—up to a point. In a case based on a notice of deficiency, in which the Court must determine the correct amount of tax,  this Court may make a determination concerning whether there has been an overpayment of tax. See I.R.C. section 6512(b). Otherwise, however, this Court does not have jurisdiction to make determinations concerning overpayments or refunds. Taxpayers generally have two years to file a lawsuit following the disallowance of a claim for refund. See I.R.C. sec. 6532(a)(1). The Tax Court, however, is not the proper court in which to file such an action. A taxpayer may seek a judicial remedy for wrongful denial of refund claims— i.e., a refund suit in compliance with I.R.C. sections 6532(a)(1) and 7422(a)—either in the United States Court of Federal Claims pursuant to 28 U.S.C. sec. 1491(a)(1), or in Federal district court pursuant to 28 U.S.C. sec. 1346(a)(1). Those statutes do not confer refund jurisdiction on the Tax Court. Accordingly, this Court cannot and does not decide whether petitioner is entitled to recover a refund for the 2019 tax year.” Order, at p. 2.

No, I’m not going to discuss any recent decisions by the Supremes; at least, not on this my blog. I’ve had a lot to say elsewhere. And there are two (count ’em, two) indocumentados issued today, but I’ll skip them also; nothing new, neither petitioner provided any documents.

Jo Ann Sharp, Docket No. 7077-19, filed 6/28/22, doesn’t provide any documents either, but she has a lot of Constitutional arguing why she shouldn’t, and why IRS should have BoP. Jo Ann was “a limited partner in High Mountain Medz LLC,” Order, at p. 1. I thought LLCs, though taxed as partnerships, had members and managers, not partners general or limited, even in CO. And HMM is a pottery.

Howbeit, IRS wanted back-ups for HMM’s COGS and deductions, but all HMM gave them was redacted, so IRS says they can’t determine if the numbers HMM claims are okay.

Jo An says IRS is taking her right against self-incrimination by requiring her to pony up unredacted stuff. Remember, Sixteenth Amendment says Congress taxes income, not gross receipts.

Judge Elizabeth A. (“Tex”) Copeland: “Viewing Mrs. Sharp as an individual, the Fifth Amendment protects only against compelled self-incrimination. The privilege against self-incrimination has never been thought to be in itself a substitute for evidence that would assist a party in meeting their burden. See United States v. Rylander, 460 U.S. 752, 758 (1983). Thus, where a party is required to maintain adequate records to establish the correct amount of taxable income, using the privilege to escape that requirement would impermissibly convert the privilege ‘from the shield against compulsory self-incrimination which it was intended to be into a sword whereby a claimant asserting the privilege would be freed from adducing proof in support of a burden which would otherwise have been his.’ Id. Rylander teaches that Mrs. Sharp’s ‘possible failure of proof on an issue on which [she] bear[s] the burden is not “compulsion” for purposes of the Fifth Amendment.” Feinberg v. Commissioner, 916 F.3d 1330, 1337 (10th Cir. 2019) (citing United States v. Goodman, 527 F. App’x 697, 700 (10th Cir. 2013)), aff’g on other grounds T.C. Memo. 2017-211. Mrs. Sharp is not under a compulsion to produce records related to HMM’s COGS exclusion. She was required to maintain those records in the ordinary course of her business under section 6001 and Treas. Reg. §1.6001-1. She is free to choose whether she wants to produce those records to substantiate HMM’s COGS exclusion and she bears the consequences of her choice,  including the possibility that she will not have met her burden of proving that Respondent erred in disallowing HMM’s COGS exclusion from gross income. See id.  As such, from an individual perspective, the Fifth Amendment accords Mrs. Sharp no protection since there is no compulsion.” Order, at p. 4.

And HMM as an entity fares no better.

Note that the Feinberg case above-cited is an appeal from a Tax Court opinion I blogged; see my blogpost “Cohan and COGS,” 10/23/17.

Jo Ann next claims she’s denied due process, but (a) Fourteenth Amendment due process applies to States, not the Federal Government, and (b) HMM had the obligation to keep records, which Jo Ann can still provide, as this is a de novo from a SNOD.

Jo Ann next claims Section 280E,  no-deductions-for-illegal-business, is a penalty, hence IRS should have BoP.  In a move that earns him a Taishoff “Good Try, Guts Move,” Jo Ann’s trusty attorney cites Judge Tex Copeland her own self saying it is a penalty.

“This Division of the Court partially dissented in N. Cal. Small Bus. Assistants, 153 T.C. at 90-94 (Copeland, J., concurring in part and dissenting in part). In that side opinion, this Division of the Court observed that ‘even if section 280E was not written as a penalty provision, it operates as such.’ Id. at 93. Mrs. Sharp is seemingly advancing that observation as her argument. But we will not depart from the majority’s precedential holding that section 280E is not a penalty, id. at 72, in this case.” Order, at p. 6, footnote 6.

“Settled precedent”? Yeah, most F affirmative, roger that. Sorry, guys, I said I wouldn’t.

Btw, the N. Cals were the subject of my blogpost “Through the Vegetation,”  10/23/19. See my remarks in that blogpost. If it stings like a penalty, it ain’t a butterfly. Judge Tex Copeland got it right.

Jo Ann claims IRS was arbitrary and capricious, and attaches to her seriatim opening brief the lead sheets Exam used to show HMM didn’t provide complete documentation. But she doesn’t show anything to contradict.

Judge David Gustafson is a great one for conundrums. You’ll doubtless recall Hendrieka Fitzpatrick, Docket No. 12797-21P, filed 6/28/22, from her previous appearance in this my blog. A fine batch of conundrums appeared then; see my blog “Lien On Me,” 3/8/22.

Well, maybe IRS sorted out that set of conundrums, because they’re back with a motion for summary J, tossing Hendrieka (that’s Doc Hendrieka). But before letting IRS and Doc Hendrieka sort out whether Doc Hendrieka underreported $195K or $60K for year at issue, Judge Gustafson can’t resist throwing a couple new conundra (hi, Judge Holmes, and Judges Scholars Al and Pat) into the mix.

“We assume, for purposes of this motion, that Dr. Fitzpatrick has a colorable argument that this determination [the $195K] is excessive. On the foregoing facts, one might conclude that her gross receipts totaled $195,736 (the amounts that the third parties had reported), that the $135,624 she reported on Schedule C was included in that total and was not in addition to it, and that therefore she had failed to report only $60,000 (not $194,868), so that her additional tax liability was much less than the $58,000 that the IRS determined. In addition, for all we know, she might have a ‘reasonable dispute’, see § 6201(d), that she did not in fact receive all of the $195,868 that the third parties reported to the IRS. On the other hand, she might not be able to substantiate all of the $134,507 of business expenses that she claimed on Schedule C. An adjudication of her 2013 liability (which we do not undertake,  for reasons explained below) would presumably look into all these matters.” Order, at p. 2.

This is a Section 7345(e)(1) passport grab case; the only issue is whether IRS reported a qualifying tax debt, not whether Doc Hendrieka actually owes same. That she can sort out administratively in an audit reconsideration (but no appeal to Tax Court), or “…petitioner may file a claim for refund. If her administrative claim for refund is denied, petitioner may pay the full assessed liability and then file a refund suit in Federal District Court or the U.S. Court of Federal Claims.” Order, at p. 7.

I don’t know if Judge Patrick J (“Scholar Pat”) Urda adds an understanding of Nineteenth Century French political philosophy to his many accomplishments, but it wouldn’t surprise me if he did. And certainly the anonymous SO who applies the doctrine in Alejandro Serna, T. C. Memo. 2022-66, filed 6/27/22 is a strong partisan thereof, knowing or unknowing.

Al took a big draw from his 401-whatever in year at issue, to buy a house in the appropriate school district, so that his four children, two of whom are developmentally-disabled, can attend the right school. Also his ex-wife resides therein. Also Al only claims one of the four as a dependent on year-at-issue return; filing status not stated. Return is late and $68K self-reported short. Al claims he didn’t know about the Section 72(t) youth add-on (tax? chop? Pick ’em), and always paid on time. Al wants an OIC, but the equity in said house is north of $150K, so he doesn’t get the $10K OIC he wants even though his expenses for his disabled son are big (and the SO recognizes this). But Al does get a NFTL with CNC thrown in at no extra charge.

And Judge Scholar Pat is down with that.

Al’s trusty attorney petitions the NOD on the NFTL and CNC, and throws in much “somber reasoning and copious citation of precedent.” Judge Scholar Pat finds none of it on point. The SO looked at all the facts and circumstances Al and trusty attorney put before her, and, like Billy Yeates’ Irish fighter pilot “balanced all, brought all to mind.”

Trusty attorney seems to think NFTL means IRS will grab on the spot, tossing disabled kids to the cliché. Judge Scholar Pat: “As an initial matter, Mr. Serna insinuates over and again that the collection action at issue, i.e., the NFTL filing, will necessarily result in an immediate sale of the house. An NFTL filing, however, principally protects the IRS’s interest in a property against other creditors. Had the IRS sought to collect the tax liability by levy against the house, Mr. Serna would have had an opportunity to request a CDP hearing to challenge such action as improper. See § 6330(a), (b).” T. C. Memo. 2022-66, at p. 12. (Citation omitted).

And while filing late or not at all in the past and currently will defeat an OIC and maybe other CAlts, filing and paying on time in all other years doesn’t guarantee a free pass on an OIC. “Mr. Serna additionally emphasizes his prior tax compliance in arguing the settlement officer abused her discretion. While we have no reason to doubt his history of compliance, lack of tax compliance is a bar to acceptance of an offer on effective-tax-administration grounds; compliance, conversely, does not alone justify acceptance. See Treas. Reg. § 301.7122-1(b)(3)(ii)–(iii), (c).” T. C. Memo. 2022-66, at p. 10, footnote 8.

So justifying the headline first set forth at the head hereof (as my already-on-their-third-Grey-Goose-Gibson colleagues would say), Judge Scholar Pat gives the anonymous SO a gold star.

“The settlement officer here, acting of her own volition, put Mr. Serna’s account in currently-not-collectible status, effectively ending further collection efforts unless his income increases substantially. Her decision to do so was not required in light of Mr. Serna’s equity in the house. See Am. Limousines, Inc. v. Commissioner, T.C. Memo. 2021-36, at *15 (‘[A] settlement officer’s denial of currently not collectible status is not an abuse of discretion where the taxpayer lacks sufficient income to pay its tax debts but owns assets that could be liquidated to provide funds to satisfy that debt.’). We see her action in sustaining the NFTL filing, while placing the account in currently-not-collectible status, as striking a sensible balance between the IRS’s need to efficiently collect the liability and Mr. Serna’s concern that any collection action be no more intrusive than necessary.” T. C. Memo. 2022-66, at pp. 12-13.

For the Am. Limousines story, see my blogpost “When You’re Down and Out – Part Deux,” 3/25/21.

WordPress, the business that sponsors this my blog, is once again inserting advertisements on each of my blogposts, past, present, and (I assume) future, as I refuse to pay protection money to prevent this.

That is of course their right, as their cyberspace is private property. WordPress can rent out their spaces on such terms as they see fit, and unhappy lessees can always go elsewhere.

That is, until some Musk Ox moves in and imposes his own régime.

So, wedded as I am to “the same old stand,” as Justice Cardozo defined the basis of good will, I again warn my readers that I have no control over what advertisers or what advertising content WordPress permits or excludes; I receive no compensation from any advertiser. I make no guarantee, warranty, representation, or undertaking, with respect to any advertisement or anything in any thereof contained. Anyone who deals with, purchases, leases, subleases, licenses, acquires (whether by purchase, sale, exchange, disposition or otherwise) anything or service, tangible or intangible, from any advertiser, does so strictly and exclusively at their own risk. I expressly disclaim any obligation or liability in respect of any thereof.

Anyone reading anything on my site, by the mere act of visiting the same, consents and agrees to all the foregoing without reservation.

I gave Gina E. Lewis’, Docket No. 12930-18, filed 6/24/22, trusty attorney a Taishoff “Good Try, First Class,” for his cannily and craftily drafted Section 7430(g) qualified offer, in my blogpost “Innocence Disqualified,” 3/3/22. Trusty attorney allowed assessment of the whole boat set forth in the SNOD, but reserved rights to claim OIC, innocent spousery, and whatever else he could think of. IRS folded, Gina sought 7430 admins and legals, but Judge Pugh shoots down the QO because it never specified the dollar amount conceded, only that assessment was conceded.

Now trusty attorney wants vacation. He starts by claiming no jurisdiction, as SNOD not sent to Gina’s last known address.

Nonstarter. “A notice of deficiency not mailed to the taxpayer’s last known address can still be valid. If the mailing results in the taxpayer actually receiving notice with ample time remaining to timely file a petition, it meets the conditions of section 6212(a) ‘no matter to what address the notice successfully was sent.’ In a limited but established line of cases, incorrectly addressed notices have resulted in our jurisdiction where the taxpayer receives ‘actual notice [of the contents of the deficiency notice] without prejudicial delay.’ By providing the safe harbor of section 6212(b), Congress did not intend to invalidate actual rather than constructive methods of communicating respondent’s determination.” Order, at pp. 3-4. (Citations omitted). And Gina’s petition was timely, even though she only heard a “rumor” that a SNOD had issued, so filed a “protective” petition, Order, at p. 4.

Well, SOL had run when SNOD issued.

Except.

“Answering petitioner’s amended petition, respondent stated that petitioner executed a Form 872, Consent to Extend Time to Assess Tax, extending the statute of limitations for the years in issue to May 11, 2018. Petitioner acknowledges that she extended the statute of limitation to this date, but averred in her petition that it was under duress. It is the taxpayer’s burden to affirmatively show the written consent is not valid. Petitioner has not carried this burden, and does not appear to dispute that the statute of limitations expired on May 11, 2018, in her motion to vacate. Respondent mailed the notice of deficiency on March 28, 2018, before the period of limitations for assessment of tax for the years is [sic; should be “in”] issue expired.” Order, at pp. 2-3. (Citation omitted).

Remember, Gina and trusty attorney refused to sign a stip of settlement, despite Judge Pugh’s pushing them. So IRS folded (maybe former spouse did stump up the deficiencies).

“Petitioner may have adopted her strategy (of refusing to agree to a settlement stipulation) to ensure she could avail herself of the qualified offer provision in section 7430(c)(4)(E)(i), as we discussed in our opinion, see Lewis, 158 T.C., slip op. at 6 n.6,  but having done so to preserve that argument she must accept the consequences of the failure to reach an agreement. We agree with respondent’s characterization that ‘[p]etitioner effectively is arguing both sides. On one hand, [p]etitioner has argued that all issues were resolved (by filing the motion for litigation costs) and on the other hand, [p]etitioner argues that certain matters were not resolved in the Motion [to vacate or revise].’” Order, at p. 8.

Whatever, no vacation.  But trusty attorney put on a good show, and he did get Gina off the hook on the SNOD.

Alfred Christopher Morgan, T. C. Sum. Op. 2022-10, filed 6/22/23, caps a busy day for this blogger with his successful defense of his Section 911 foreign earned income exclusion. Alf spent the year at issue in The Kingdom, controlling the quality of the Saudi Arabian National Guard’s chopperjockies as employee of a US contractor. And Alf put in the requisite 330 days outside the Land of the Free, although his testimony and his belated Form 2555 didn’t precisely jibe.

Alf kept his home in GA, but his adult,  non-dependent daughter lived there. He kept his US bank account, because that’s how he got paid. He had US health insurance (as retired military), but also got Saudi coverage.

He and his fellow contractors did travel a wee bit. “On the weekends, which are Fridays and Saturdays, he typically traveled with other contractors to places including South Africa, Bahrain, and Dubai to partake in recreational activities that are otherwise forbidden in Saudi Arabia.” T. C. Sum. Op.2022-10, at p. 3. Roger that.

But for the rest, he rarely visited The Land of the Free, and his activities were extensively local in The Kingdom.

Judge Wells: ” On the basis of the record before us, we conclude that petitioner had stronger domestic ties to Saudi Arabia than he did to the United States in[year at issue]. His community involvement and recreational activities in Saudi Arabia were relatively significant in comparison with those in the United States, and overall, most of his time had been spent in Saudi Arabia. He dedicated much of his free time in Saudi Arabia to serving as the president of a local social club and organizing charitable events such as food and clothing drives in order to benefit the local community.  These charitable events benefited local orphanages, homeless shelters, and members of the local community who worked at the compound. He also spent his free time frequenting local grocery stores and restaurants,  using the recreational amenities at the residence, and traveling with other contractors from the compound to nearby foreign countries. He had obtained an Iqama, which is a Saudi Arabian resident alien card or visa indicating proof of his legal residence; Saudi Arabian medical insurance; and a Saudi Arabian driver’s license. He also did not seek work in any country outside of Saudi Arabia. Taken together, these facts evidence an effort to create a domestic life for himself in Saudi Arabia. See, e.g., Linde v. Commissioner, T.C. Memo. 2017-180.” T. C. Sum. Op. 2022-10, at p. 8.

For the story of Jesse A. Linde, see my blogpost “The Helicopter Pilot and the Virgin,” 9/18/17.

True, Alf paid no taxes in The Kingdom, but that’s because there’s no income tax; everything is VAT. And he owned no realty in The Kingdom, but that’s because his housing was employer-furnished, just like the military. Alf was engaged to a lady who’d lived thirty (count ’em, thirty) years in The Kingdom, and who ran a local beauty parlor. And his employer deemed him valuable and essential.

Of course, Alf filed and paid late on whatever income he had that wasn’t excludable, so he gets chopped for that.

Alf wins the 911 joust.

Btw, Alf’s social club in The Kingdom, of which he had been president, was the WorldWide Fraternity of Turtles. You know, the amphibian dudes whose home is wherever they are.

David Gilmartin, T. C. Memo. 2022-64, filed 6/23/22, holds a Ph.D. degree in economics. He also consulted for, among others, “General Electric Capital Corp., Pfizer, Inc., WCI Financial Corp., NU Skin International, Inc., the Builders Association, Inc.,  National Economic Research Associates, Allegiance Group, and Atlantic Search Group, Inc.” T. C. Memo.2022-64, at p. 3. In addition, he was from time to time employed by “Klein Management Systems, Software Guidance & Assistance, Inc., Trans Action Information, Aerotek, Inc., Network Integration, and Eliassen Group, LLC.” Idem, as my expensive colleagues would say. All the foregoing supplied Dr. Gilmartin (hereinafter “Doc Dave”) with Forms 1099-MISC or W-2, as appropriate, over the twelve (count ’em, twelve) years at issue.

Except.

Doc Dave never filed or paid, and frivoled when on trial in USDCSDNY, and again before 2 Cir when he appealed the three-year stretch his frivolity earned him.

IRS gave Doc Dave SFRs when he finished the stretch, which he petitioned and frivoled.

Now Judge Vasquez is a pleasant gentleman. His courteous, almost courtly, manner is well-known. But Doc Dave seems to be a wee bit much.

“At the conclusion of trial, respondent made an oral motion to impose a section 6673(a)(1) penalty against petitioner. The Court told petitioner that there was extensive caselaw rejecting his arguments and sanctioning taxpayers who made similar arguments. The Court also read the text of section 6673(a)(1) to petitioner before taking respondent’s Motion under advisement.

“Petitioner subsequently filed a 147-page Simultaneous Opening Brief expounding the frivolous arguments he had raised at trial.” T. C. Memo. 2022-64, at p. 6.

I’ll spare you Judge Vasquez’s trudge through the governing statutes and regs that impose and sustain Doc Dave’s manifold liabilities.

” Petitioner was aware that the arguments he advanced in this case have been universally rejected by this and other courts. Before trial he was convicted of, among other things, tax evasion under section 7201.  In a summary order affirming his conviction, the Second Circuit stated that it has ‘consistently rejected’ petitioner’s arguments. After petitioner advanced the same arguments at trial, this Court advised him of our longstanding caselaw rejecting his arguments. The Court also read the text of section 6673(a)(1) to petitioner. Despite our warning, petitioner filed a 147-page brief expounding his frivolous arguments. We will therefore impose a penalty of $5,000 against petitioner pursuant to section 6673(a)(1).” T. C. Memo. 2022-64, at p. 11. (Footnote omitted, but it’s a cite to 2 Cir’s stitching up of Doc Dave.).

Judge Patrick J. (“Scholar Pat”) Urda sets forth is policy with respect to frivolites. In this case it’s Louis U. Giannini and Dawn M. Giannini, T. C. Memo. 2022-65, filed 6/23/22, but Lou does fess up to his USPS salary and wages, even though he doesn’t spell all that well. It’s Dawn, whose IT wages from the private sector the Gianninis claim is non-taxable, with the usual protester jive.

Lou and Dawn get four (count ’em, four) pages of “somber reasoning and copious citation of precedent,” apparently because they’re newbies to frivolity.

Notwithstanding their rookie status, Lou and Dawn get the yellow card from Scholar Pat.

“Pursuant to section 6673(a)(1), we have the authority to impose a penalty of up to $25,000 on a taxpayer who pursues a position that is frivolous or groundless. The Gianninis seem to be relatively recent converts to the false faith of frivolous tax positions; we have seen no other case in which they have made these types of arguments. We thus choose not to impose a penalty at this time. We caution the Gianninis, however, that should they again profess these or similar arguments, they will face unhappy consequences.” T. C. Memo. 65, at p. 5.