In Uncategorized on 03/13/2023 at 19:55

Judge James S (“Big Jim”) Halpern is a stickler for the Rules, and I don’t fault that. But I wonder today that he might have been too quick to give an OSC to the trusty attorney for Alberto Delgado and Virginia Delgado, T.C. Sum. Op. 2023-8, filed 3/13/23, why he shouldn’t get the Section 6673 chop.

True, Alberto’s unreported income came from the same source as his reported income, so any Section 6201 claim about the 1099-MISC fails. Both Alberto and IRS got confused about what Alberto reported, $49K or zero, but at close of play the parties agree on $25K, apparently an employment discrimination recovery net of legal fees (this is pre-TCJA, so deductions for production of income are still on the table).

Alberto’s trusty attorney argues defective SNOD, but that fails. IRS complied with Section 7522(a): basis for deficiency, year, amount(s) of tax, interest, add-ons, and chops. Even if they didn’t comply, it’s good enough. Judge Big Jim says the concept of what it takes to notify a taxpayer of a deficiency is “evolving.” T. C. Sum. Op. 8, at p. 9. Judge Big Jim goes into the evolutionary process. I’m still confused.

Apparently there was some epistolary volleying between Alberto and IRS. Judge Big Jim finds Alberto’s (and maybe trusty attorney’s) reluctance to put this “intercourse” into the record shows nefarious intent. I’m not so sure, but I didn’t see the parties.

“Petitioners have no arguments on the merits to respondent’s adjustments resulting in a deficiency in income tax. Their grounds for this lawsuit are process related, and we have rejected all of those grounds. The course of respondent’s determination of a deficiency in petitioners’ … income tax is fairly clear. There is, however, one opaque chapter, i.e., petitioners’ intercourse with respondent in response to the May CP 2000 Notice. Petitioners have not volunteered that information, and they have objected to respondent’s attempts to inform us. Petitioners’ response to the May CP 2000 Notice may well have resolved the confusion resulting from the improbable statement both in the December CP 2000 Notice and in the Statutory Notice that petitioners had reported $49,062 on the … Return. Petitioners’ failure to be forthright and their lack of arguments on the merits lead us to suspect that perhaps they have little or no reason for bringing this lawsuit other than to delay collection of a tax rightfully owing.” T. C. Sum. Op. 8, at pp. 15-16.

Judge, I thought deficiency cases were de novo. What happened at exam is not even prologue. Greenberg’s Express sums it up. If Alberto’s (and trusty attorney’s) arguments are spider-web thin, they aren’t frivolous. And IRS didn’t exactly cover itself with glory here either. It takes two to have “intercourse;”  IRS could have put in the writings, if relevant.

So why the OSC  for the chop? Besides the lack of “intercourse”?

  1. You missed the part about the trial being conducted in March 2021 — one of the last before the Covid Era. And all the briefs were filed by May 2021.
    Attorney fees are still deductible in employment discrimination cases.


  2. Mr Kamman, I saw when the trial took place. The tax year at issue was 2016, and the deduction would have been taken in that year. You are right, that Section 62(a)(20) would have allowed the deduction for years after 1/1/2018.


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