In Uncategorized on 06/28/2022 at 16:08

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.


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