Section 6015(e)(7) is as fine an example of How Not To Do It as might be devised by Charles Dickens’ Circumlocution Office on steroids. An issue is to be faced, and ignored; a problem is to be solved, and not solved; something is to be changed, and nothing is changed.

Y’all will recall that Section 6015(e)(7) promised an innocent spousery trial de novo in Tax Court.

Except.

The “trial” is limited to the administrative record when IRS granted (or refused) innocent spousery, plus “any additional newly discovered or previously unavailable evidence.” In the case of Keri A. deGuzman and Brian deGuzman, Docket No. 13230-20, filed 6/2/23, there ain’t no newly discovered evidence.

And Judge Emin (“Eminent”) Toro can’t ascertain from the record of what deficiencies of unreported income and improper deductions Keri was supposed to have actual knowledge, sufficient to defeat Section 6015(c) apportioned relief.

Doc DeG was a business whiz as well as a cardiopulmonary surgeon. Keri “holds a college degree, performed at a high level as an intensive care unit nurse before her marriage, and is now pursuing a Master’s degree.  She understands financial matters and is able to track and analyze complicated transactions.  She is capable of distinguishing between personal and business transactions.” Transcript, at p. 8.

Notwithstanding the foregoing, IRS was willing to let Keri off the hook on a combination of 6015(b) and 6015(c). But Judge Eminent lets her off entirely on Section 6015(c), even though she flunked the Section 6015(b) “no reason not to know of the understatements of tax” test in the four (count ’em, four) years at issue, and the inequitable test.  Shortly before trial, Keri traded in the $31K Mercedes Benz she got when she shed Doc DeG for a $78K Merc. “She testified that she decided to purchase the new Mercedes-Benz rather than a Kia Telluride that would also have accommodated her family because the transaction afforded her a better trade-in value for the existing car and the financing was more attractive.  Regardless of whether one agrees with Ms. DeGuzman’s economic analysis here (and it is difficult not to view it skeptically), these are not the actions of a taxpayer experiencing economic hardship.” Transcript, at pp. 17-18.

But the BoP shifts to IRS under Section 6015(c) to prove Keri had actual knowledge.  IRS never tried to prove that; only Doc DeG intervened to do so. Fortunately, Judge Eminent can duck BoP, because the record.

“…the record lacks sufficient evidence to permit us to conclude that it is more likely than not that Ms. DeGuzman had actual knowledge of the understatements.” Transcript, at p. 20.

“Applying these standards, most of the erroneous return items… were related to Dr. DeGuzman’s various businesses.  For several of them, the record lacks sufficient specificity as to what the error was. Furthermore, the record does not demonstrate that Ms. DeGuzman had any special knowledge of Dr. DeGuzman’s businesses, including any specific items of income derived from them or expenses that Dr. DeGuzman incurred.  And apart from the parties’ contradictory and general testimony, there is no evidence that Ms. DeGuzman accessed accounts or account statements where the items were reflected or that she discussed the items with Dr. DeGuzman or [trusty CPA].  As a result, we cannot conclude that Ms. DeGuzman had actual knowledge of the items related to Dr. DeGuzman’s businesses.

“With regard to interest expense reflected on the Schedules A for the years at issue, the record does contain a few indications that Ms. DeGuzman was aware of one or more of the loans that gave rise to the disallowed amounts. But again, apart from inconsistent and general testimony, the parties introduced little evidence of what the expenses actually consisted of, let alone evidence that Ms. DeGuzman was aware of sufficient facts (for example, the balances of the loans and the amount of interest paid annually) to constitute actual knowledge.” Transcript, at pp. 21-22. (Name omitted),

Doc DeG was pro se, of course.

So despite her shared living-the-dream lifestyle with Doc DeG (check out Transcript, at p. 7), Keri drives into the sunset in her new $78K Merc and none of Doc DeG’s tax bill.

I used to see this more often, but after a hiatus, the missing year-before-first-year-at-issue has come back to bail out Ann Dunlap, Docket No. 3729-22, filed 6/1/23.

There are two (count ’em, two) years at issue before Judge Elizabeth A. (“Tex”) Copeland, and Ann frivols both. Judge Tex Copeland gives Ann enough somber reasoning and copious citation of precedent to justify the sixty Georges Ann paid for this.

“Implicit in the statements relied upon by [the petitioner] to the effect that the system is based upon voluntary compliance is the known fact that, in spite of its extensive bureaucracy and technical equipment, the manpower and facilities of the IRS for policing compliance by every taxpayer are limited and that the effectiveness of the system depends upon the taxpayer’s voluntary obedience to the law. These statements certainly were never intended to suggest that the internal revenue laws were self-destructive. Yet, this is precisely what petitioner’s argument comes down to, for if [the petitioner was] correct,  Congress has supplied every taxpayer with a facile device for totally avoiding all liability by simply declaring that he does not choose to comply. We cannot find that Congress ever intended any such absurd result.

“The result would be absurd, and the very argument is absurd. Waltner, T.C. Memo. 2014-35, at *56–57 (footnote omitted).” Transcript, at pp. 9-10.

Ann is obviously a Hendrickson follower. For the Waltner story, see my blogpost “Cracking Up,” 2/27/14.

So Ann gets hit with tax, and the two Section 6651(a) add-ons, failure to file and failure to pay. But she only gets one Section 6654 adsd-on, failure to file ES, for nonfiling and nonpaying ES in Year Two. Now Ann had income beside salary and wages. She had nonemployee income (1099-MISC), interest, and royalties in both years. But IRS can prove only one year.

“However, section 6654(e)(2) exempts a taxpayer from the section 6654 addition to tax if the taxpayer did not have a tax liability in the preceding 12-month tax year and was a citizen or resident of the United States.  For this case, we will focus on subparagraph (B) of this exception, which requires Ms. Dunlap to not have a tax liability in tax years [Year Minus One] and [Year One] (the preceding tax years for the years in issue). The record is devoid of any evidence showing that Ms. Dunlap had a tax liability in [Year Minus One]. She does have a tax liability for [Year One]. Thus, respondent has met his burden of production as to tax year [Two], but not as to tax year [One]. We accordingly hold that Ms.Dunlap is not liable for the section 6654 addition to tax for tax year [One], but is liable for such addition to taxfor tax year [Two].” Transcript, at p. 17.

Lest Ann grow too elated, Judge Tex Copeland gives her a Section 6673 yellow card, at no extra charge.

Taishoff says it should be simple enough, even with the post-COVID logjams, for IRS’ counsel to pull a transcript of Ann’s Year Minus One. And 3SOL is nothing to the point; IRS wouldn’t be contesting any tax incident of that year, only that there was a liability reported.

Yes, I know, you can spare me the comments and e-mails: I know Bogie never said that line. Notwithstanding anything therein or elsewhere to the contrary or at material variance therewith (as my paid-by-the-word colleagues would say), that line has gone down as part of the canon, and my unhallowed hands shall not disturb it, or the country’s done for.

Come to think of it, the country may well…but this is a nonpolitical blog.

Anyway, coming to the point (and I can hear my readers saying “There is one? How quaint.”), yesterday’s Zoomstravaganza, under the masterful guidance of Judge Ronald L. (“Ingenuity”) Buch, was well worth the time spent by the panel and audience. In addition to a thorough discussion of the variations between USTC discovery and FRCP in the Art. IIIs, we got to hear the viewpoints of OCC, a white shoe, and LITC. The facial expressions of Golden Gopher LITC honcho Caleb (“The”) Smith alone were worth the time. I’d only suggest that The Smith not play poker, even with friends.

But seriously folks, I asked whether these webinars could be recorded and made available on the USTC website for future viewing, for the benefit of those unable to attend at this time. I inquired using the Q&A function while the program was going on. Ms. Siegel, the czar of Public Affairs, replied that the program was not being recorded.

True, but it should have been. The remote mock trials run on the website during COVID by CSTJ Lewis (“It’s That Name Again”) Carluzzo were an enormous help. They should be continued.

As for discovery, it’s an area where even seasoned attorneys have come seriously unglued; to say nothing of self-representeds who never heard of Branerton but have watched one CLE about “win your case at discovery” and blast off all kinds of impermissible demands ten seconds after they file their petition.

Anything that might educate the parties coming to The Glasshouse in The City That Avoided Default, to save even a few of the endless wasted replies and orders in response to endless wasted discovery motions, must be greeted with loud cheers. Especially by Tax  Court’s hardlaboring intake clerks and flailing datestampers.

Surely recording and making available these useful guides on the USTC website is not beyond the capacity of the Genius Baristas and 18Fs.

So how ’bout it, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan?