The YouTube car guru whose call appears first written at the head hereof, and others of that ilk, are wont to lament the required motor vehicle inspection régimes of the several States. Their plea is that antipollution and like requirements necessitate expensive repairs, whereas those who live in States where no such laws and regulations obtain can drive their vehicles for decades.

This being a nonpolitical blog, I take neither side here. But I am sure Timothy J. Goumas & Meredith E. Goumas, Docket No. 29100-21, filed 7/31/23, lament they live in a State which requires such inspections. Their car and truck expenses get thoroughly trashed when IRS gets the State inspection data from the Department of Motor Vehicles (DMV). The inspectors recorded the mileage driven between inspections for the four (count ’em, four) vehicles claimed to be driven in Timothy’s consulting business. See Transcript, at p. 9.

That plug-in under the dashboard is the On Board Diagnostic (OBD) port. The car gurus hook up expensive computers, which see all, know all, and tell all. And the State inspectors have them too, and share with IRS.

Judge Emin (“Eminent”) Toro Judge-‘splains: “The DMV maintains records from vehicle inspections. These records include, among other information, the vehicle’s identification number (VIN), the registration number, the vehicle’s make and model, the inspection date, and information from the OBD program, including a current odometer reading. In the inspection records, the figures shown for the odometer readings represent the inspected vehicle’s mileage in thousands of miles.” Transcript, at p. 8.

Judge Eminent  compares those miles with Timothy’s reconstructions of records lost in multiple floodings of his basement. The reconstructions do not come out of the comparison well.

“To summarize, although we believe Mr. Goumas did drive to some of his appointments, in light of the numerous discrepancies in the testimony and records, we simply cannot conclude that the Goumases have satisfied their burden of proof with respect to the claimed deductions for car and truck expenses.” Transcript, at p. 26.

Timothy’s meals and entertainment deductions fare no better.

I point out that relatively inexpensive devices can read the OBD information. Another tool in IRS’ kit.

Judges love settlements, wherever and however they originate. I’ve noted before that judges may act as catalysts in bringing the parties together, whether by sitting them down (either physically or electronically)  and banging heads, or by subtler means, like telling them to go try the case, which they are loath to do.

Judge Mark V. (“Vittorio Emanuele”) Holmes has done this before (see my blogpost “Prolegomena to a Settlement,”11/23/20), and he does it again with Hugo S. Bernal & Paula Bernal, Docket No. 11566-20L, filed 7/28/23. Hugo & Paula want to joust about their liability for the three (count ’em, three) years at issue. Problem is, they’re petitioning a CDP, they’re Golsenized to 1 Cir, and 1 Cir is strictly record rule from a CDP, no trials, just abuse-of-discretion.

Hugo & Paula and IRS want a third continuance (that’s an “adjournment,” if you’re a State courtier), but Judge Holmes thinks it’s time to stop waltzing. So he set up a phoneathon.

“It is apparent that petitioners want very much to contest their liability for the three tax years… at issue. Because our review is limited to the administrative record, that may be difficult, as we explained. Settlements are nevertheless to be encouraged, and the parties had already set up a meeting in late August.” Order, at p. 1. (Nudge nudge, wink wink).

“To keep the case moving to a conclusion, we will not grant a third general continuance, but we will allow the parties to propose a briefing schedule that will give them some time to try to negotiate a settlement whose terms might not be achievable through litigation.” Order, at p. 1.

Word to Hugo & Paula: the deal you make with IRS may be a lot better than what Judge Holmes can give you (and what 1 Cir would buy).

I’ve often written (in fact just now) about the variety of interesting cases that come before the US Tax Court. No Federal enactment touches “every living heart and hearthstone all over this broad land,” like the Internal Revenue Code. 

But alas, for every such interesting case, be it worthy of a full-dress T. C. or Memo, or only a humble Sum. Op., off-the-bencher, or order, there are dozens of protesters, dodgers without even an interesting dodge, or run-of-the-mine indocumentados featuring post-event ballpark guesstimates, ginned-up post-Exam spreadsheets, or just witness stand performance art. Nothing worth noting.

So when Judge Alina I. (“AIM”) Marshall filed her opinion in Robert R. Doggart, T. C. Sum. Op. 2023-25, of even date herewith (as my already-on-their second-Grey-Goose-Gibson colleagues would say), a cursory glance would have persuaded me to call a truce to my labors, especially after Judge David Gustafson’s magnificent mathematical marriage earlier today of hog farming and lumberjacking.

But Bob Doggart showed an original streak worthy of note here.

Yes, the lapsed insurance policies paid off the accumulated loans and generated income, even if he got no cash. Yes, his rental real estate deductions crater because he lived in the premises for more than the Section 280A(d) 14-day free kick during year at issue. And yes, Bob Doggart owes tax and add-ons even though he was in the slammer during years at issue.

But Bob Doggart’s real estate depreciation deduction is a true original.

“In calculating the loss on Schedule E, petitioner claimed deductions for … $73,593 for depreciation that petitioner calculated using the appraised value of the property and a seven year cost-recovery table, which he selected because it corresponded to the length of his remaining prison sentence.” T. C. Sum. Op. 2023-25, at p. 3.

I want to award Bob Doggart a Taishoff “Clessic”, and that’s no typo.

I’ve often commented that US Tax Court does more and different valuation cases than any other. Many courts value real property for ad valorem tax and inheritance tax purposes, Tax Court among them. But Tax Court values the worth of a Brand Ambassador and a Brand Icon for golfclub sellers. Tax Court values the worth of the remaining intellectual property of a dead King of Pop also accused of dire crimes against children. Tax Court can tell you more about Dixieland Boondockery and New York granite quarries than you’d want to know. And of course there’s the fair market rent of the Plentywood Drug Store in Plentywood, MT, a frontier town, population density 2/sq. mi., for which see my blogpost “How The West Was Won,” 4/26/21.

But you ain’t seen nuttin’ yet.

That Obliging Jurist, Judge David Gustafson, goes deep into the tall timber in Murfam Enterprises LLC, Wendell Murphy, Jr., Tax Matters Partner, Docket No. 8039-16, filed 7/27/23, to evaluate and unobfuscate the worth of swine Certificates of Coverage.

Before you ask “Didn’t we just dispose of this long-running extravaganza?” yes, we did. See my blogpost “Obliging Meets Concurring,” 6/15/23. But the Murfams want Rule 161 reconsideration. They claim Judge Gustafson got the pig numbers wrong.

No, I didn’t says Judge Gustafson, you misstate what your appraiser (upon whom Judge Gustafson relied) said. He took out a number that you are trying to put back in to bolster your write-off. Now it’s true that even the Murfam’s appraiser missed the impact of pig raising on timbering and recreation.

“One can imagine a more exacting analysis that might demonstrate defects in Mr. [appaiser]’s approach. Perhaps it would have been better to separately value the 1,115-acre easement portion and the 5,056-acre non-easement portion, with attention to the timber and recreation values and with a more precise assessment of the effect of the hog farm operation on those values. However, neither party put in evidence of such an analysis, and if Mr. [appraiser]’s method is imprecise, it nonetheless does avoid the defects of the approach that petitioner asks us to take. Petitioner had the burden of proof, so it is appropriate that we accept their expert’s method in the absence of a better one.” Order, at p. 4. (Name omitted).

Lest this blogpost be as long as Judge Gustafson’s order, I omit Judge Gustafson’s excursion into “such rarefied heights of pure mathematics” to separate the pigs from the woods. But I recommend this Order to all who think Tax Court is a barren waste of arcana.

The undergrowth of TEFRA bedevils IRS and petitioners to the end. Fears Drive Henry 58, LLC, Fears Drive Manager, LLC, Tax Matters Partner, Docket No. 13235-21, filed 7/26/23, incorporated in GA (where else?) 12/15/17. Should’a waited the two weeks, guys. When the FPAA hit, and FDM petitioned, FDM had already been dissolved by GA DoS.

So Judge Travis A. (“Tag”) Greaves has to bash through the boondocks of GA corporate law to find if Henry 58 or somebody else can ratify FDM’s petition.

You’d expect a David Dung Le here, and IRS doesn’t disappoint. For the backstory, see my blogpost “Being and Nothingness,” 5/7/13.

FDM tries the nunc pro tunc reinstatement language GA DoS used when they revived FDM 309 days late, saying FDM was reinstated back to the day of dissolution. IRS has GA caselaw that says that doesn’t help, but FDM has a GA case that says it does.

Judge Tag Greaves has the right view; though State law governs capacity to sue (or petition), Rule 60(a) allows for ratification when the wrong party sues on behalf of another. There’s a three-step process: “(1) the person who attempted to file the petition thought he was authorized, and (2) those who ratified were authorized to file or approve the filing of the petition, and (3) ratification was expressly attempted or possible.” Order, at p. 6.

This is extremely fact-bound, so let FDM or Henry 85 or whoever show who, if anyone, ratified, and when, if ever. Remember the now-extinct Section 6226(b)(1) notice partners and five-percenters.

Taishoff says it’s a toughie, as if the notice partners and five-percenters were unaware that FDM was dead (a) when the 90-day door slammed on the TMP, and (b) when the 150-day door slammed on them, what could they have done to ratify? Should the notice partners and five-percenters have filed their own petitions, even if they didn’t know FDM was dead? Offside petitioners get bounced. See my blogpost “Tax Smatterer,” 3/12/15.

Practice tip- When representing an entity, make sure it still exists. Representing a lender, I found two (count ’em, two) mortgagors who had ceased to exist, and saved their counsel from malpractice by having them get straight with NY DoS and the tax people.

How often have I heard that phrase delivered in lugubrious tones, to lament the unworthy expenditure of the aforementioned on the dubious (not to say frivolous) claims of an ignorant or piratical litigant, be the litigant plaintiff or defendant.

Now I don’t wish anyone to suppose I abate one jot of respect for the distinguished schoolmate of my colleague Peter Reilly, CPA, Judge Albert G. (“Scholar Al”) Lauber. Mr. Reilly’s account of Judge Scholar Al’s exalted rank at the old schoolhouse was almost as impressive as Judge Scholar Al’s resumé.

But Judge, was it really necessary to expend eighteen (count ’em, eighteen) pages of your pellucid prose on Lawrence James Saccato, T. C. Memo. 2023-96, filed 7/25/23? Larry ran a miniwarehouse operation through a bunch of entities and trusts without any beneficiary but himself, hiding the money and not filing. As usual, he had a bunch bank accounts (hi,  Judge Holmes) and a girlfriend and a dodger-specializing sidekick to help him run the various stashes.

Of course Larry has no records, just lots of self-serving testimony, like he’s trustee of trusts and doesn’t know who the beneficiaries are. So bank deposits are the spécialité du jour, and they serve Larry up on toast. The deficiencies (four years’ worth, plus chops) rain down.

IRS does concede $44K of COD for which they haven’t evidence, but they win all the rest.

But Judge Scholar Al does recognize what a waste this all has been.

“Although petitioner maintains that ‘[he] is not a tax protestor,’ his filings in this Court belie that contention. His persistent filing of frivolous papers has wasted the Government’s time and ours. We will accordingly require that he pay to the United States a penalty of $10,000.” T. C. Memo. 2023-96, at p. 18.

Footnote to the foregoing: Reynold Harvey, T. C. Memo. 2023-95, filed 7/25/23 must be a kindred spirit to Larry, although they reside a continent apart. Rey resides in my old stamping grounds and boyhood home, The Bronx.

And Rey claims he’s gonna take his argument “all the way to the Supreme Court,” T. C. 2023-95, at p. 8. Apparently because he wasted fewer scarce judicial resources than Larry, Rey gets only a $1K Section 6673 frivolity chop.

Judge Scholar Al apparently collects ’em. “The assertion that wages are not income is a time-worn tax-protester argument. Variations on this theme have been compiled by the IRS in The Truth About Frivolous Tax Arguments, a compendium of frivolous positions and the caselaw refuting them. See Internal Revenue Serv., The Truth About Frivolous Tax Arguments 9–13 (Mar. 2022), https://www.irs.gov/pub/irs-utl/2022-the-truth-about-frivolous-tax-arguments.pdf. In plain English, this document characterizes as frivolous the arguments that ‘wages . . . and other compensation received for personal services are not income’ and that ‘there is no taxable gain when a person ‘exchanges’ labor for money.” See id. at 10. Although petitioner is not a lawyer, had he made even a modest inquiry using an internet search engine he would have found the copious authorities refuting his stance.” T. C. Memo. 2023-95, at pp. 7-8.

Rey did get a warning, but went ahead, with his eye on the Supremes.

I make the morning line 6 to 5 that Rey doesn’t get to the Supreme Court.

Section 6751(b), the famous Boss Hoss chickenscratch delivered whenever, is a gift that never stops giving. Ever since Chai, the fight over when said chickenscratch need be obtained has embroiled the CCAs and kept Tax Court forever on the twinkle.

And the Dixieland Boondockery tsunami has added the partial summary J for chops both simple and enhanced to the menu.

Necessity is the mother of cliché, and this red-hot Mama has given birth to the implacable scorched-Boondocks defensive style of such as Vivian D. Hoard, Esq. Ms. H. exhibits a fighting spirit that evokes admiration in Dorchester Farms Property, LLC, Dorchester Farms Manager, LLC, Tax Matters Partner, T. C. Memo. 2023-93, filed 7/24/23.

Judge Albert G. (“Scholar Al”) Lauber must yearn for the calm of Hatchard’s of  Petty Curry at dear old Cambridge (and luncheon at the Garden Inn; yes, I’ll have just a spot more of the Old Landed), as Ms. H. delves into the deep background of who suggested what to whom, and who supervised, and when supervisory authority ceased. Confronted with six (count ’em, six) OCC minions, and with but a single associate, Ms. H. turns Liberty County, Georgia, into the French Foreign Legion at Camarone, and earns a Taishoff “Good Try, First Class.”

All Judge Scholar Al can do is riposte with “but the chickenscratch.”

Of course, lost in this farrago is the real issue: Is Exam brandishing chops to bludgeon settlements out of terrified taxpayers with meritorious claims they cannot afford to pursue?

Not to be outdone by Judge Pugh, who just mulcted Lou & Dawn Giannini a grand for frivolizing (see my blogpost “A Section 6673 Template,” of even date herewith, as my expensive colleagues say), Judge Christian N. (“Speedy”) Weiler raises to $5K for second-offenders Arlin G. Hatfield III and Jennifer W. Hatfield, T. C. Memo. 2023-93, filed 7/24/23.

That’s Doc Arlin the radiologist, and unlike Dawn the investment specialist who omitted just $100K of income, Doc Arlin the radiologist left out $300K. Both, of course, omitted no frivolity.

Doc Arlin the radiologist’s last outing was T. C. Memo. 2022-59, aff’d w/o op. by 5 Cir. I didn’t blog the case; apparently 5 Cir didn’t find it interesting enough to write about it either.

But it serves as the predicate warning for the Section 6673 chop.

Maybe somebody does read this blog, maybe so.

I’ve had a lot to say about apparently arbitrary Section 6673 frivolity chops. For the most recent, see my blogpost “Every Dog Gets One Bite,” 5/2/23.

I then suggested one free bite for the frivolite, to be followed by a chop for recidivism.

Judge Pugh seems to adopt that view in Louis Giannini & Dawn Giannini, Docket 4623-22, filed 7/24/23. Lou & Dawn were prior contestants in T. C. Memo 2022-65, which I blogged under the title “Scholar Pat on Frivolites,” 6/23/22.

While ostensibly eschewing somber reasoning and copious citation of precedent, Judge Pugh lays a bunch on Lou & Dawn, who frivol away notwithstanding.

I have to award Lou & Dawn something for the following. “…respondent filed a Motion for Summary Judgment…. We directed petitioners to file a response by May 15, 2023, but they missed that deadline. And, after petitioners did not respond timely we entered an Order on May 24, 2023, setting respondent’s Motion for hearing at the June 12, 2023, calendar call. Instead of appearing, on June 2, 2023, petitioners filed a Complaint against the U.S. Department of Justice in the U.S. District Court for the Eastern District of Wisconsin (Civil Action No. 23-C-0693), concerning this case and the tax year at issue. On June 8, 2023, the Court received from petitioners a copy of their Complaint which we filed as their response to respondent’s Motion.” Order, at p. 1.

How ’bout a nomination for The Rounders’ Hall of Fame?

Judge Pugh, of course, is not amused. She amerces Lou & Dawn a $1K Section 6673 chop, and throws in the following at no  extra charge: “We again warn petitioners that if they do not abandon their misguided positions—e.g., that wages received for services are not taxable income, even though reported to them as such, and they are not subject to tax—a greater penalty may be imposed in future cases before this Court.” Order, at p. 4.

Few provisions of US Code Title 26 befog pro se petitioners like Subtitle F, Chapter 65, Section 6404(h). Michael Thurston, Docket No. 7070-23, filed 7/21/23, is one such.

Mike timely petitions a SNOD. But he has neither NOD from a CDP where he raised Section 6404(e), nor IRS shootdown on a standalone, nor has he alleged the lapse of the 180-actionless-days-since-filing-claim.

When IRS moves to blow off Mike’s abatement of interest claim for want of jurisdiction, Mike responds thus.

“The present dispute concerns the Respondent’s final determination to disallow the Petitioner’s claim for head of household status and their failure to rectify the error of a stimulus check being issued to the wrong person. These issues fall within the subject matter of the suit and warrant the court’s consideration.” Order, at p. 3.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan says “No, it don’t,” only she says so much more elegantly.

“…even beyond the controlling jurisdictional parameters quoted above, insofar as these claims would appear to fall within the purview of the of the deficiency litigation properly before the Court, and would not appear to relate to interest abatement, no meaningful difference or perceptible harm has been identified.” Order, at p. 3.

Ch J TBS provides the checklist of the bases for specific Tax Court jurisdiction, all of which are absent here, and remarks on the basis for declaratory judgment.

“Similarly absent is any suggestion that the perquisites have been met to support one of the statutorily described declaratory judgment actions that may be undertaken by the Court.” Order, at pp 2-3.

I think you meant “prerequisites”, Judge, “a prior condition for something else to happen or exist.” Perquisites are “special rights or privileges enjoyed as a result of one’s position”; what our UK cousins call “perks,” like exclusive access for Judges and STJs to the Judges’ Cafeteria.