This “representative” retooling that the Bipartisan Budget Act wrought with respect to partnership reporting and taxation has yet to be tested. But as the old TEFRA cases wind their way through the halls at 400 Second Street, NW, I wonder how they would fare under the new régime.

Will that old French cliché first written hereinabove at the head hereof (as my high-priced colleagues would say) hold true yet again? The more change, the more it stays the same.

Here’s the Buckalews yet again, on trial before Judge Christian N. (“Speedy”) Weiler. In today’s episode, we have some evidentiary rulings, Buckelew Farm, LLC f.k.a. Big K Farms LLC, Big K LLC, Tax Matters Partner, Docket No. 14273-17, filed 11/17/22.

The Buckalews object to the 1040 and the Form 8886 Reportable Transaction Disclosure Form, popularly known as the please-audit-me, filed by one of the alleged partners in the Buckalew wagon-circle.

Judge Speedy Weiler lets it in.

“Section 6103(h)(4) permits disclosure of tax returns or return information during a Federal or State judicial or administrative proceeding pertaining to tax administration only if the taxpayer is a party to such proceeding. IRC § 6103(h)(4)(A). In the context of a partnership, Rule 247 provides that a tax matters partner and any partner who satisfies the requirements of Code sections 6226(c) and (d) or 6228(a)(4)  shall be treated as parties in a case before the Tax Court.

“Section 6226(c)(1) provides that when a tax matters partner or partner files a readjustment to the Tax Court, each person who was a partner in such partnership at any time during such year shall be treated as a party to such action. This subsection shall not apply if such a partner does not have an interest in the outcome of the litigation. I.R.C. § 6226(d); see I.R.C. § 6228(a)(4).” Order, at p. 3.

Well, this alleged partner took a $740K charitable deduction on his 1040, which came off the K-1 he got from the Buckalews, and if that goes south, so does alleged partner’s wallet. That’s enough for Judge Speedy Weiler.

But the other three (count ’em, three) alleged partners are partnerships themselves. Though they each filed Forms 8886 for the same year that the one partner did, their filings also covered other years

“What remains unclear is how The Partnerships would be considered parties under 6103(h). The information sought to be disclosed are Forms 8886 from The Partnerships. Presumably, respondent seeks to introduce these Forms 8886 under the theory that section 6103(h)(4) permits the disclosure of any tax returns or return information that pertains to Mr. [alleged partner] as a partner to these partnerships and a party to the matter. However, it is unclear whether these Forms 8886 were included with (or part of) Mr. Adam’s Form 1040, or whether respondent received these forms from The Partnerships. The Court also notes how these Forms 8886 relate to tax years [year at issue and [out years].” Order, at pp. 5-6. (Footnote omitted).

Remember, any person in a reportable transaction has to file their own Form 8886.

In addition, it isn’t clear that The Partnerships are partners in the Buckalews. It might be that the filings by The Partnerships were made “in connection with” determining the tax fallout of the Buckalews’ litigation, thus satisfying the Section 6103(h)(4)(A) test. “In connection with” gets read very broadly.

But the record is too scanty to say, so Judge Speedy Weiler will await the further course of the trial.

As for IRS’ reiteration of the Buckalews’ failing to turn over papers to IRS, that might go to badges of fraud, so that can stay in.

I don’t think the new régime would bring a different result here. But I’m always willing to listen to an argument.

Those were the keywords from today’s Tax Court webinar, the first of perhaps a quarterly series of judges, LITC clinicians, OCC attorneys, and private sector pro bonos discussing matters of interest. Today it was Zoom.

Send your topic suggestions for future webinars to publicaffairs@ustaxcourt.gov, and tell ’em Taishoff sent ya.

The conquest of the Zoomosphere being accomplished, some of its benefits were catalogued. Remote calendar calls let LITCs and calendar call commandos aid taxpayers afar remote from their accustomed venues. Witnesses debarred from travel could appear at trial. Electronic document exchanges obviate the need for 18-wheelers to pull up to the courthouse door with forklifts to unload bales of paper.

The Zooming of Tax Court also gave rise to the circumvention of Rule 147 and the Stealth Subpoena by the subpoena hearing. Looks like the 8/6/20 press release has materially aided the discovery and stipulation processes, and will continue even post-pandemic.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan noted that now 35% of petitions are e-filed; more e-filing is encouraged. It was not so very long ago that then Ch J Maurice B (“Mighty Mo”) Foley was tossing e-filed petitions even as the pandemic raged and Tax Court itself was closed. I’m glad the someone’s continuous advocacy for e-filing has now paid off.

On the downside, trial tactics needed rethinks. the “Hollywood Squares” format Zoom imposes put some practitioners off: too many places to look, ordinary body movement in a courtroom, unnoticed in the open, are magnified on the small screen. The nervous witness looks evasive; how can counsel correct the impression? Flipping from screened documents to looking at witness and judge takes some learning.

For many self-representeds, the informality of television impairs their cause. They don’t realize that this is a real court. Trying your case while driving around town does not add weight to your arguments.

But, all in all, it’s working.

Edited to add: A Taishoff shout-out to the Villanova LITC boss for pointing out how Tax Court staff worked to calm and encourage camera-shy pro ses, and did a great job keeping the Court going. Well done, staff.

Judge Albert G. (“Scholar Al”) Lauber restricts the testimony of two proffered experts in Oconee Landing Property, LLC, Oconee Landing Investors, LLC, Tax Matters Partner, Docket No. 11814-19, filed 11/15/22. IRS, of course, wants both tossed utterly; but Judge Scholar Al won’t eviscerate the Oconees case just yet.

One expert both sides agree is an expert, but whose report IRS claims refers to another Tax Court case (and thus is irrelevant), and is argumentative. Judge Scholar Al deals with that.

“We agree that Mr. F’s discussion of another pending Tax Court case, if not improper, is gratuitous and unnecessary to the analysis he seeks to present. See Fed. R. Evid. 401 and 402 (stating that evidence is irrelevant, and thereby inadmissible, if the evidence fails to have any tendency to make a relevant fact more or less probable). We also agree that a few sentences in his report are argumentative and essentially embrace petitioner’s litigating position. On balance, however, we find that his discussion of legal matters is relevant to his valuation analysis and does not invade the province of the Court. We will therefore deny respondent’s Motion, but we will ignore all of Mr. F’s references to another pending Tax Court case and those portions of his report that we regard as improperly argumentative.” Order, at p. 4 (Name and citation omitted).

The next expert is a real estate consultant, who did a bunch market research (hi, Judge Holmes) of the Oconees’ home turf, to show what a high-class, high-priced community might have been founded upon the Oconees’ conservation-easement-encumbered boondocks. Trouble is, a lot of this research was done post-year-at-issue, and some sources were “confidential and unidentified” (Order, at p. 2).

The Oconees object that this expert was greenlighted by none other than Judge Christian N. (“Speedy”) Weiler, just a week ago; see my blogpost “Percipient and Admissible,” 11/7/22. But Judge Scholar Al is not giving the expert, Ms. Belinda Sward, free rein to opine in extenso. He confines her within a holding pen, the outside limit of which is end-of-year-at-issue. Anything later is auf’d.

If the parties can agree what part of Ms. Sward’s report can come in, Judge Scholar Al is down with that. If they cannot agree, he will rule at trial.

Taishoff says the parties should remember, when Judge Scholar Al puts a witness in a holding pen, the pen is mightier than the Sward. (Sorry, guys, the devil made me do it).

For Innocent Spousery

Haywood Earl Parker, Jr., Petitioner, and Jacqueline Ann Parker, Intervenor, T. C. Memo. 2022-110, filed 11/15/22, agree with IRS that the tax due for the year at issue is $39K more than their 1040 MFJ showed.

It was all due to Jacqueline’s settlement of an employment discrimination lawsuit. She and Haywood claim they got bogus advice from IRS and the forms were confusing, so IRS folded the chops. But tax is owed, and Haywood knew the amount of the settlement Jacqueline got and that it never made it onto the 1040 MFJ.

Judge Elizabeth Crewson Paris has this one, and wastes no time blowing off Sections 6015(b) and (c), and the streamliner. Haywood knew the income and the nonreporting.

Haywood’s trusty attorneys from the Kansas City (Mo.) LITC community (Jacqueline properly is not represented by them), whom I’ll call Lee and Mike and award a Taishoff “Good Job,” play up Haywood’s illness.

“Petitioner’s health condition prevents him from holding full-time employment, and his only source of income is Social Security disability payments. His annual income of $28,300 is below 250% of the federal poverty guidelines.” T. C. Memo. 2022-110, at p. 7. (Footnote omitted).

And while the divorce decree placed the tax burden on both parties equally, therefore neutral, that doesn’t seem to carry much weight with Judge Paris.

At close of play, poor health overcomes guilty knowledge.

“Petitioner’s poor physical health has left him disabled to the point that he is unable to work. His only source of income is Social Security disability payments, which allow him to meet his monthly expenses, but little else. Payment of the deficiency would create financial hardship. Although he did have knowledge of the income that gave rise to the deficiency in this case, petitioner credibly testified that he made a good-faith effort, despite confusing advice and reporting documents, to comply with the tax law but erroneously believed that the settlement funds were not taxable. He has remained in compliance with the federal income tax laws in subsequent years. On consideration of all of the relevant facts and circumstances, the Court concludes that petitioner is entitled to complete relief.” T. C. Memo. 2022-110, at p. 9.

Note that there’s testimony here, because the petition was filed pre-7/1/19, hence Section 6015(e)(7) plays no part, T. C. Memo. 2022-110, at p. 4, footnote 4.

I find it interesting that Judge Paris mentions that, when the parties divorced two (count ’em, two) years after the year at issue, Haywood sold Jacqueline his interest in the marital domicile for $50K cash, T. C. Memo. 2022-110, at p. 2. No suggestion that the funds came from settlement proceeds, or that this deal was in the works during year at issue; but from wherever the cash came, where did it go? We know that changed circumstances can result in remand to Appeals in CDP cases; see my blogpost “Back to the Future,” 8/1/11. Is this a signal from Judge Paris?

Further to my blogpost “Roll On, Silt, Roll On,” 11/14/22, I sent an e-mail to the Genius Baristas to inform them of the missing printable docket in Organic Cannabis Foundation, Inc., Docket No. 381-22.

Here is their reply, in its entirety, unedited.

“DAWSON Support (U.S. Tax Court)

Nov 14, 2022, 18:09 EST

Mr. Taishoff,

The Court has confirmed the issue you identified, and we are working to address it.

Thank you,

DAWSON Support Team”

As at 10:00 a.m. EDT, 11/15/22, it remains unaddressed.

The latest silt-stir, equitable tolling, is rolling on. Today Judge Goeke has to consider whether equitable tolling applies to a late Letter 12153 request for a CDP on a NFTL, as well as the petition from a CDP.

See my blogpost “Toll the Lien and Save the House,” 5/13/20, in the last sentence of which I raised that same question.

Organic Cannabis Foundation, LLC, Docket No. 381-22L, filed 11/14/22, raises the question after its other attempts to slide under the “day late and dollar short” barrier thrown up by IRS. There are three (count ’em, three) years at issue. The NFTL for Year Three was issued after that for Years One and Two; the Organ Pipesmokers were clearly timely for Years One and Two, got a NOD, and timely petitioned same. They were a day late for Year Three, but all three were heard together. Appeals issued a single NOD denying all, but the heading of the NOD indicated Year Three as “EH,” equivalent hearing, the IRM-created consolation from which there is no review by Tax Court. The rest of Appeals’ paperwork is sketchy; see Order at pp. 2-3. However, Judge Goeke salvages enough to knock out the Organ Pipesmokers.

Appeals can hear both Tax Court-reviewable years and non-reviewables together. Tax Court can look behind the ambiguous NOD for jurisdiction, and if it finds the Letter 12153 was late, reject that year. Although the Organ Pipesmokers claim the NOD is valid on its face, Judge Goeke looks at all the paperwork that came with the NOD, and finds it ambiguous.

I’ve said it so many times: Any lawyer who can’t find an ambiguity should find another way to make a living.

So on to equitable tolling.

“Petitioner argues that the 30-day period for a CDP hearing request is subject to equitable tolling under the principles set forth in Boechler, P.C. v. Commissioner,  142 S. Ct. 1493, 1497 (2022). In Boechler, the Supreme Court held that the 30-day period to file a petition with the Court for review of a CDP determination in section 6330(d)(1) is a nonjurisdictional deadline subject to equitable tolling. Respondent argues that Boechler does not apply. Boechler did not expressly address the 30-day period for requesting a CDP hearing. However, the Court believes that the concepts discussed therein may equally apply to the 30-day period for submitting a CDP hearing request. Accordingly, we will provide petitioner with an opportunity to respond to the arguments raised by respondent in his Response with respect to whether the doctrine of equitable tolling should apply to administrative hearing requests, including the statutory provisions creating a taxpayer’s right to a hearing summarized below, the Treasury regulations that establish equivalent hearings, and caselaw that has construed the 30-day period as a fixed deadline.” Order, at p. 7.

The Organ Pipesmokers have been late before, but that was pre-Boechler; see my blogpost “Katie, Bar the Door,” 7/25/17.

Alas, because the new, improved, jim-handy (yeah, right, roger that) DAWSON website won’t let me get a printable docket wherewith to find out the identity of the Organ Pipesmokers’ trusty attorney, I can’t give her/him a Taishoff “Good Job” by name. So I ask him/her to let the will stand for the deed.

Edited to add, 11/17/22: Although the Genius Baristas’ efforts, if any, to post a printable docket sheet for this case have yet to succeed, I managed to locate Christian Speck, Esq., the petitioner’s trusty attorney, so I can now give him his Taishoff “Good Job” by name.

As I stood at the corner of 23rd Street and Fifth Avenue shortly before 11:11 a.m., this morning, waiting for the bus to arrive with the members of my American Legion Post, an Austrian tourist asked me what was going on. Some little time thereafter, an Israeli tourist asked me the same.

While there is no reason why a casual visitor should know what days are legal holidays in the District of Columbia (or anywhere else in Our Fair Land), Austria suffered the loss of a generation of her young men in the ’14 – ’18 massacre. I do not know what history is taught in Israeli schools, so whether World War I (from which today’s observance arose) figures at all I cannot say. And where military service is obligatory, as it is both in Austria and Israel, a veterans’ day parade would involve so many of the population as to comprise more marchers than spectators. So my answer was explanatory (gently).

Howbeit, I was marching again, and attending the wreath-laying ceremony on the Intrepid Air, Sea and Space Museum.

Hence, no tax today.

Some gave little, some gave much, some gave all.

But if this country is to remain free, no one has the right to give nothing.

Jennifer Joy Fields, T. C. Sum. Op. 2022-22, filed 11/10/22, claims the write-off of the $73K her employer carried on its books as owed to her employer when she left her employer, was a gift.

According to STJ Peter (“HB”) Panuthos, “(D)uring the time of petitioner’s employment,  the chief executive officer of [employer] was [Scott]. Text messages and emails between petitioner and [Scott] reflect a relationship between the two outside the workplace.” T. C. Sum. Op. 2022-22, at p. 2. (Footnote and name omitted).

During Ms. Fields’ tenure with employer, there were a couple wire transfers (hi, Judge Holmes) to her or for her benefit, aggregating $73K, which the employer carried in its books as employee advances. When Ms. Fields terminated her employment, the severance agreement provided she needn’t repay, but would get a Form 1099 and would owe whatever taxes were due. She got the 1099, but didn’t report or pay tax.

Ms. Fields had an unsigned version of the severance agreement which didn’t mention forgiveness or 1099s, but STJ Panuthos isn’t buying it.

“While petitioner and [Scott] corresponded after her separation from [employer], their communications do not demonstrate that the payments were intended to be a gift. While petitioner and [Scott] reached an oral compromise regarding the terms of separation, the second, revised draft severance agreement was not signed. Even considering the revised agreement and a relevant provision, it is ambiguous at best. The text of the revised draft severance agreement does not necessarily support petitioner’s position that the employer intended a gift to petitioner. At best, it reflects petitioner’s attempt to recharacterize the payments as a gift, which apparently neither [Scott] nor [employer] agreed to. There is no evidence in the record from which the Court could conclude that [Scott] or [employer] intended to make a gift to petitioner. The payments were made from [employer] to petitioner and recorded as accounts receivables in [employer]’s accounting records. [Employer]’s inclusion of the disputed amount in the signed and executed severance agreement and the subsequent issuance of a Form 1099–MISC indicates that the payments were not intended to be a gift.

“We find petitioner’s testimony that she had a personal relationship with [Scott] is insufficient to support her contention that the payments were a gift.” T. C. Sum. Op. 2022-22, at pp. 5-6. (Names omitted).

Chops follow.

Judge Alina I. (“AIM”) Marshall devotes ten (count ’em, ten) pages of her order in Janice A. Wieslander, Docket No. 18546-19, filed 11/10/22, to a comprehensive pretrial outline, establishing a well-marked pathway to resolution of Janice’s furniture business and horsing around. Judge AIM has devoted great insight and energy to keep both IRS and Janice on the straight-and-narrow.

Here’s an example.

The parties shall “(2) explain their views on the following deductions with respect to petitioner’s horse activity for the taxable year 2010:

(a) schedule C legal and professional services,

(b) schedule C travel,

(c) schedule C utilities;

(d) schedule C meals and entertainment;

(e) schedule C rent/lease – otherbusiness property;

(f) schedule C supplies;

(g) schedule C car and truck expenses;

(h) schedule C office expense;

(i) any other items the party believes to be at issue with respect to the horse activity for taxable year 2010. The parties shall include the following items:

i. the amount reported in petitioner’s return;

ii. the amount of the adjustment made in the notice of deficiency upon which this case is based;

iii. the amount, if any, conceded by either party;

iv. each party’s views as to whether they have the burden of proof with respect to part or all of the item;

v. the legal theories upon which the party intends to proceed with respect to the issue;

vi. specific items of substantiation or other evidence that the party intends to offer at trial to support this item (including number of pages for documents).” Order, at pp. 2-3.

And in case the parties get discursive or otherwise wander from the path, “(T)he parties shall label each item pursuant to the numbering system used herein (e.g., when addressing the deduction for schedule C legal and professional service expenses related to taxable year 2010 for the horse activity reported on petitioner’s return, the heading of the section shall be marked (2)(a)(i)).” Order, at p. 3.

I’ve known 20-year drill sergeants who were less precise.

So says Judge Christian N. (“Speedy”) Weiler in Green Valley Investors, LLC, et al., Bobby A. Branch, Tax Matters Partner, 159 T. C. 5, filed 11/9/22. In Judge Speedy Weiler’s crosshairs is Notice 2017-10, 2017-4, I.R.B. 544. Bobby’s boys want partial summary J that said notice is invalid for want of notice-and-comment, hence the Section 6662A reportability chops on top of the understatement, underpayment, overvaluation, and whatever else IRS can think of are a no-go.

Of course, this is more Dixieland syndicated boondockery. And Bobby’s boys are represented by The Golden Hoard, the Peach State’s answer to The Jersey Boys.

The issue is whether Notice 2017-10, requiring highlighting of syndicated conservation easements, is legislative or interpretative.

“Legislative rules impose new rights or duties and change the legal status of regulated parties.” 159 T. C. 5, at p. 8. (Citations omitted).

OTOH, “Interpretative rules merely advise the public of an agency’s construction of the statutes it administers. Unlike interpretative rules, legislative rules have the force and effect of law.” 159 T. C. 5, at p. 9. (Citations omitted).

In the case of Bobby’s boys’ tax dodges, their returns were already filed for years at issue when the notice was issued. But Judge Speedy Weiler isn’t going to decide retroactivity here.

So which is it?

Spoiler alert, it’s legislative.

“The act of identifying a transaction as a listed transaction by the IRS, by its very nature, is the creation of a substantive (i.e., legislative)  rule and not merely an interpretative rule. See 5 USC §533. Identifying a transaction as a listed transaction does not merely provide the IRS’s interpretation of the law or remind taxpayers of preexisting duties. Rather, and as we will detail below, identifying a transaction as a listed transaction imposes new duties in the form of reporting obligations and recordkeeping requirements on both taxpayers and their advisors. Notice 2017-10 exposes these individuals to additional reporting obligations and penalties to which they would not otherwise be exposed but for the notice. Creating new substantive duties and exposing taxpayers to penalties for noncompliance ‘are hallmarks of a legislative, not an interpretive, rule.’” 159 T. C. 5, at pp. 9-10 (Citations and footnote omitted).

My diligent readers can, if they wish, read the remaining 14 (count ’em, 14) pages of Judge Speedy Weiler’s opinion. Judges Foley, Gustafson, Morrison, Buch, Ashford, Urda, Copeland, Jones, Greaves, and Marshall did, and they agree.

Judge Pugh agrees with the result, but digs into whether the enactment of Section 6707A, where Congress tried to hit the moving target of the ever-more-inventive manœuvres  of ever-more-inventive dodgefloggers, repealed or otherwise suppressed 5 USC §533. And she finds it doesn’t; and anyway, if IRS needs further weapons, there’s the “good cause” exception (5 USC §553(b) among others.

There’s always an exception somewhere, guys. Once again, IRS must decompose a little more brain tissue before taking a quick-and-easy approach. Judges Paris, Ashford, Copeland, and Ch J Kerrigan agree.

Judge Toro also concurs in result, going back over the American Jobs Creation Act, whence spring Section 6707A. Notice-and-comment is an attempt to democratize an otherwise autocratic and bureaucratic ipse dixit. And Judge Copeland agrees with this, too; she’s becoming the Tax Court bench’s successor to Tevye the Dairyman.

Judge Gale thinks that noticed dodgery is exempt from the APA, because Section 6707A says “by notice,” tout court.

Judge Nega says this kind of highroller dodgery damages the core of our voluntary compliance system, beyond the loss of revenue. Congress, he says, knew that, and adopted a rapid response régime.

“I disagree that Congress failed to ‘expressly’ override the application of the APA to the IRS process incorporated into law by the AJCA. The nature of the legislation as well as the legislative history associated with it that the opinion of the Court finds unpersuasive leads me to the conclusion that Congress did not intend to enact the AJCA penalty regime subject to the time-consuming notice-and-comment procedures of the APA. In the light of congressional knowledge of the existence of the APA when enacting the AJCA, I cannot agree that Congress added a penalty regime to enforce the existing IRS rulemaking without addressing an obvious APA vulnerability, at least, to the then-listed transactions.” 159 T. C. 5, at p. 46.

Lest I be misunderstood, I am not saying that IRS can ride roughshod over due process. There is still judicial review of the transaction itself. There has yet to be a trial, wherein confrontation, rules of evidence, cross-examination, appellate review, and representation of the parties by able counsel of their sole choice, play their full and essential roles. Justice must be done, and be seen to be done.

Click to access n-17-10.pdf