Euripedes. Haste to sustain the assault!

Dionysus. Great gods, what a number of assaults!

Aristophanes’ 405 B. C. smash hit The Frogs sums up the ongoing assaults on Section 7345, as everyone whose passport was grabbed is trying to use that enactment to get a second shot at the SNOD or NOD that set up their “seriously delinquent tax debt” ($50K or better, inflation-adjusted). This has been going on for at least four (count ’em, four) years, and I’ve blogged at least twenty (count ’em, twenty) cases.

The result is always the same: if IRS drops the certification for whatever reason, game over. The statute affords no greater, other, or further relief. Pore l’il ole Article II Tax Court can only do what Congress permits.

But the assault continues, notwithstanding.

Scott M. Fox and Rachel L. Fox, Docket No. 4663-23P, filed 9/29/23, filed MFJ for a bunch years (hi, Judge Holmes, glad to see you’re issuing a bunch SPTOs; looking forward to good blogfodder), didn’t pay, filed Ch 7, got discharged, then filed Ch 13 which got bounced. But while the 11USC§362 automatic stay was in effect in the Ch 13, IRS assessed tax for some of years at issue, and assessed tax for the remainder after the Ch 13 was bounced and stay over. IRS served NFTL, for which Scott and Rachel didn’t seek a CDP. So IRS told State to grab their passports, and Scott and Rachel petitioned the Section 7345 grab. Yes, I know the Section 7345 notice to State isn’t the grab, but it’s my shorthand.

Scott’s and Rachel’s petition claimed the assessment of taxes while the automatic stay was in effect was invalid, and therefore their debt didn’t include such taxes, add-ons, and chops.  IRS moved to dismiss for failure to state a claim.

Meantime, “… respondent filed a Motion to Dismiss on Ground of Mootness, representing that petitioners entered into an installment agreement and respondent subsequently reversed petitioners’ certification and notified the State Department of the reversal. On the same day, petitioners filed an Objection to Motion to Dismiss on Ground of Mootness, in which they again asked the Court to determine that the underlying assessments were invalid. Petitioners also asserted that they entered the installment agreement under duress.” Order, at p. 2.

Judge Travis A. (“Tag”) Greaves has this one.

“The sole relief we could grant in this case is an order directing respondent to ‘notify the Secretary of State that such certification was erroneous.’ After petitioners filed their petition, the parties entered into an installment agreement, which resulted in petitioners’ tax debt no longer being considered ‘seriously delinquent tax debt.’ As such respondent reversed the certification and notified the Secretary of State of the reversal. We do not have jurisdiction to determine the validity of the installment agreement. See Garcia, 157 T.C. at 9–10 (holding that a dispute between the parties regarding an offer-in-compromise was not properly considered in a passport case after the taxpayer’s certification was reversed). Because petitioners received all the relief the statute authorizes us to grant, we can afford them no remedy and the case is moot. See id. at 9.” Order, at p. 3.

For the Garcia story, see my blogpost “Getting the Joint,” 7/19/21.

I’ll bet Judge Tag Greaves knows how Dionysus felt.

I will make no comment here on the government shutdown. I have made plenty of comments elsewhere, but this blog remains firmly nonpartisan, although I well understand how Jeremiah felt.

Howbeit, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan will soldier on resolutely, speaking softly and carrying TBS, keeping The Glasshouse in The City of the Endless Night up and running.

Wherefore, “(A)ll ye having business before the honorable the United States Tax Court draw near and give attention, and ye shall be heard commencing Monday, October 2, 2023.”

Here’s the scoop from the Tax Court website.

“The Tax Court will open for business as usual on Monday, October 2, 2023, and we expect to continue normal operations indefinitely. All scheduled trial sessions will proceed as scheduled. The November 8, 2023, nonattorney exam will proceed as scheduled, including all associated deadlines.”

It’s thirteen (count ’em, thirteen) years and more since I first suggested that something was less than perfect about automatic admission to practice before the United States Tax Court. “The attorney need show no proficiency in Federal practice (to say nothing of Tax Court practice), or even the vaguest acquaintance with the IRC.” See my blogpost “A Book and a Modest Proposal,” 5/22/12.

US Tax Court practice is a minefield; even the adept come a cropper. Attorneys of vast reputation in other areas of the law receive comeuppances. After more than fourteen (count ’em, fourteen) years of almost daily coverage, and 4,766 blogposts, 95% of which relate to Tax Court cases, law and practice, I cannot claim expertise.

So I feel for Mr. Hawkins, Esq., as he tries to rescue Afsaneh E. Hawkins, Docket No. 10443-20L, filed 9/28/23, his spouse. Appeals had given Afsaneh a NOD sustaining a NITL, which Afsaneh petitioned. IRS predictably moved for summary J after an attempt by Afsaneh to get an OIC failed.

“…the day answering briefs were due, we got a motion to continue for one day from Ms. Hawkins. [The next day], we got a motion to continue more generally in a document signed by Mr. Hawkins who, though a lawyer, is not admitted to practice in Tax Court. Accompanying this was a contract that he had signed back in 2020 with a firm that is not a law firm but calls itself ‘American Tax Solutions.'” Order, at p. 1.

Maybe Mr. H, Esq., was going to try for another OIC; sounds like one of those midnight television commercials pitching “get rid of your tax debt,” but rather gets rid of your money, but I can’t tell.

But that’s beside the point. The general idea is, when you get a summary J motion, you answer it. At least in Judge Mark V (“Vittorio Emanuele”) Holmes’ courtroom.

“This suggested that there was some confusion on the part of the Hawkins as to what we were requiring. We spoke with them … to try to clarify that all we need is a response to the IRS’s motion that we can also consider Ms. Hawkins’ own motion. We also explained to Mr. Hawkins that, until and unless he becomes a member of the Tax Court bar, he may not file anything on his wife’s behalf.” Order, at p. 1.

I am sure Judge Holmes told Mr H, Esq., that fifty Georges, a certificate of good standing, no more than 90 days old, from any Rule 200 Court to which he is admitted, and a completed application form (Form 30, nowhere to be found on the Court’s website, but here’s a link) would get him admitted.

So Judge Holmes resets the briefing schedule, seriatim instead of simultaneous.

Two words to Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan: Automatic admission is a mistake. And please put Form 30 on the website.

Even STJ Diana L. (“Sidewalks of New York”) Leyden, in her Zoomiegram today, counseled pro bonos and LITCs that utmost diligence when reviewing figures after settling a case may not be enough. She suggested getting a CPA or an EA to doublecheck the numbers, as even IRS gets it wrong, and “Lawyers can’t add.”

Proof positive comes from her colleague STJ Peter (“Headbanger”) Panuthos in Raymond S. Edwards, T. C. Sum. Op. 2023-29, filed 9/27/23. Ray failed to file a year’s worth of FICA/FUTA/ITW, as he kept paying his personnel while his daycare operation’s license was suspended. Ray is fighting over add-ons (late filing, late paying), and how IRS applied his payment to include add-ons, when he directed his payment be applied to tax only.

Ray’s excuses that IRS was late with the PIN he needed to set up his EFTPS account, and he had to pay his personnel to keep from losing them even though he made no money, don’t get it.

But for one quarter, IRS claims late filing, but the SO’s notes shows he did timely file. “On the basis of respondent’s own records and notes, we are not satisfied petitioner was correctly assessed an addition to tax for failure to timely file his Form 941 for the period ending March 31, 2015.” T. C. Sum. Op. 2023-29, at p. 7. Everything else is sustained.

But IRS did misapply Ray’s payment. However, rather than unscramble that frittata, STJ Panuthos merely notes that an appropriate order and decision will be entered.

Word to Ray and his trusty financial consultant (and everybody else): Triple check that order and decision.

It takes Judge Goeke 31 (count ’em, 31) pages to decide that Organic Cannabis Foundation, LLC,, 161 T. C. 4, filed  9/27/23, is entitled to equitable tolling on its Letter 12153 for Year Three of the Section 6320 NFTLs it got.

For the backstory, see my blogpost “Roll On, Silt, Roll On,” 11/14/22.

Section 6320(a)(3)(B) doesn’t bar Appeals from hearing a late-filed Letter 12153 request for a CDP. Legislative history, the intent, purpose, and language of the statute are gone over in depth, and Boechler, P. C., gets a real workout.

But at close of play, “Taxpayers must pursue a CDP hearing before they can seek judicial review. A categorical prohibition of equitable tolling of the filing deadline for Appeals’ review of collection actions would be contrary to Congressional intent. It would mean that we would protect a taxpayer’s ability to seek judicial review through equitable tolling of the section 6330(d) deadline for filing a petition while denying taxpayers the possibility of equitable tolling to obtain Appeals’ review and a determination for this Court to review. Although the Supreme Court did not address the 30-day period for requesting a CDP hearing in Boechler, we will not apply a stricter standard to the administrative filing deadline. Congress allowed for equitable tolling of the judicial filing deadline in section 6330(d)(1). Boechler, P.C. v. Commissioner, 142 S. Ct. at 1500–01. It would not have intended to place a separate procedural obstacle to access this Court by precluding tolling of the 30-day period for requesting a CDP hearing.” 161 T. C. 4, at p. 30.

Judges Kerrigan, Gale, Paris, Morrison, Nega, Pugh, Ashford, Urda, Copeland, Toro, Greaves, Marshall, and Weiler, are OK with this.

Judge Courtney D (“CD”) Jones agrees that Appeals can hold the CDP on a late Letter 12153 if equitable considerations so dictate, but dissents as to Reg. Section § 301.6320-1. The majority says the Reg doesn’t bar equitable tolling of the thirty-day period to petition from a NOD. Judge CD Jones says the statute is ambiguous, so she wants a Chevron part two analysis whether the Reg falls foul of the statute. The majority breezes past the Reg.

Judges Foley and Buch agree.

Time for a trip to 9 Cir, and beyond?

STJ Diana L. (“Sidewalks of New York”) Leyden, erstwhile Taxpayer Advocate for Our Fair City, presided over a distinguished Zoomiegram panel of LITC and pro bono attorneys, bringing to the fore the need for volunteers and the valuable training this provides practitioners.

Of course, those who read this my blog know all that. I am sure many of you are calendar call commandos and helpers of the helpless.

I did find interesting reference to Rule 151.1, Brief of An Amicus Curiæ. It seems that, when a novel legal question of far-reaching impact may arise in a self-represented case, Tax Court will reach out to ABA Tax Section, and even various organs of the blogosphere, to solicit motions for leave to file briefs amicus. Shares of Mandy Mobley Li! Of course, those not deemed sufficiently important will hear nothing. I suggest the Tax Court Bar generally should be notified; if we are not sufficiently important to be notified and perhaps allowed to seek leave (which is not automatic, of course), why are we allowed inside the Glasshouse at all?

If any suspect I have a pony in this horserace, they’re quite right. Who else has covered USTC on a daily basis for twelve (count ’em, twelve) years?

I do want to thank the LITCs for pairing rookies with established players in pro bono teams. The only way to learn one’s craft is on the job with those who know. Young lawyers too often are out on their own with no role models.

Judge Morrison’s exposition in John Peter Zaimes, T. C. Memo. 2023-118, filed 9/26/23, is more formal than the title first set forth at the head hereof would imply. But I recommend it as a comprehensive essay on reasonable cause for failure to file and pay timely, a drilldown into Section 6651 and Section 7502.

Judge Morrison believes JP when he says he mailed his return and a check for part (but not all) of the tax he owed. JP was rushing to the airport, and his trusty CPA gave him the return, but did not e-file it until a year later, after JP discovered his mailed return was never received nor his check cashed.

Tax owed is not an issue; JP concedes. The issue is the late-filing and late-paying add-ons.

Section 7502, and its regs, get a workout. Judge Morrison prints it in extenso at pp. 12-20. JP fails to prove he put adequate postage on the envelope, or that he properly addressed the envelope. And IRS says they never got it; getting it within the time when mail ordinarily gets from sender to proper IRS processing office is also required. Nonreceipt nullifies JP’s credible testimony that he put a private postage meter mark with the magic date on the envelope. And 9 Cir, whence JP is Golsenized, says extrinsic evidence can’t prove timely mailing if the return was never received.

And reliance on CPA doesn’t work, unless advice given was legal advice, but all JP has it that his CPA never told him to file certified. Relying on the instructions to Form 1040 doesn’t work, especially if you can’t testify that you read said instructions. If JP could prove USPS lost the return, he might have reasonable cause, but he can’t prove that.

As for failure to pay, reasonable cause must exist at due date without regard to extensions. Reasonable cause that arises later, say at a subsequent month, does not excuse the 0.5% add on for that month. And partial payment doesn’t excuse, only reduce the amount of tax due on which the add-on is computed. IRS gave JP credit for his partial payments when they computed the add-on.

In short, file certified, registered or IRS-approved PDS if filing paper. Otherwise, e-file. And tell ’em JP sent ya.

Turns out that Joseph Michael Balint, T. C. Memo. 2023-118, filed 9/25/23, was grousing about someone grabbing his IRA and other stuff, as I surmised back in 2019; see my blogpost “Common Sense in Tax Court,” 10/2/19. Likewise turns out that it was his loved-once Jacqueline, to whom Joe gave POA whilst in the FL slammer. Jacqueline proceeded to grab north of $130K therewith, and skedaddle for KY, filing for divorce as she went.

Joe didn’t know that Jacqueline grabbed his gelt and scarpered until he got served with divorce papers while he was still in jail.

Judge Gale recollects the sad tale of Andy Roberts, referred to in the aforementioned blogpost, and lets Joe off the hook for whatever didn’t benefit him. Now this comes up in a CDP, so before y’all yell “prior opportunity to contest,” Joe self-reported the income even though he claimed he never got it, as he was scared that, if he didn’t, the FL authorities would revoke his parole. Hence self-reported. So he gets a chance to contest, and does.

Joe sued for divorce his own self after Jacqueline’s case didn’t result in judgment. FL State court found Joe didn’t owe tax on what Jacqueline took, but no issue preclusion, as IRS wasn’t a party to State court proceeding. And nonmutual preclusion generally only bars a claim defensively. Nonmutual offensive collateral estoppel doesn’t apply against the government.

Joe wasn’t the distributee of Joe’s IRA money per Section 408(d)(1), as Jacqueline took same in breach of her fiduciary duty under the POA.

“… although a taxpayer is generally treated as the recipient of any income received by his or her agent, that rule does not apply ‘where the agent receives and misappropriates funds for his own use, where the principal had no knowledge of such misappropriation, and where the principal received no economic benefit from the misappropriated funds.’” T. C. Memo 2023-118, at p. 12.

True, the POA provided for dispositions of property and giving of gifts, which might otherwise be adverse to principal’s interest, but only for tax, estate, and public assistance planning purposes, to benefit Joe. It wasn’t an open-ended license to grab. Judge Gale has plenty of FL somber reasoning and copious citation of precedent for that. And Joe had made it clear to Jacqueline while he was in jail what he wanted…protection of his assets.

Joe’s off the hook.

Ain’t Nobody Happy

This was my lodestar from childhood’s earliest hour, and remains so. And it clearly obtains forcefully in Judge Ronald L. (“Ingenuity”) Buch’s court, as he denies summary J to IRS in Jeffrey D. Hoyal and Lori D. Hoyal, Docket No. 6791-20, filed 9/25/23.

Jeff and Lori ran their businesses through various vehicles, but we’re concerned with Crater Lake Trust, an irrevocable. During years at issue, Jeff was trustee, and beneficiary was Jeff’s Momma, Dawna. IRS wants to collapse the trust and send all tax incidents though to Jeff per Section 671, on an assignment of income theory: the trust really belonged to Jeff. IRS claims, per Section 674, Jeff could do what he wanted with trust corpus and income, there being no party adverse to Jeff or any nonadverse party.

IRS relies on the provisions of the trust instrument. Jeff and Lori claim questions of fact: was Momma Dawna an adverse party; did she provide “approval or consent” to what Jeff did or didn’t do, per Section 674(a); did Jeff part with command and control over the trust property or income; and was Momma Dawna the sole beneficiary of the trust?

“The Hoyals and Crater Lake Trust argue that Dawna Hoyal is an adverse party that had approval power and used that power. They contend that she is an adverse party because she was the beneficiary of Crater Lake Trust during the years in issue. And they contend that she had approval power because she approved all major decisions about Crater Lake Trust’s investments and sale of property, and she reviewed and signed its tax returns. The Hoyals and Crater Lake Trust rely on the deposition of Dawna Hoyal…. and the deposition of Jeffrey Hoyal… as support for their argument that Dawna Hoyal had approval power.” Order, at pp. 3-4.

That’s enough for Judge Ingenuity Buch. Just relying on the written word of the trust instrument isn’t enough.

No summary J.

I was surprised when Judge Patrick J. (“Scholar Pat”) Urda cited, apparently as authority, two (count ’em, two) orders from wholly-unrelated cases in Beaverdam Creek Holdings, LLC, Beaverdam Creek Investors, LLC, Tax Matters Partner, Docket No. 12362-21, filed 9/22/23.

Before going off to celebrate this date, I gave one last look for blogfodder to close out the rather slim pickings this week afforded. Here’s IRS playing the Boss Hoss summary J gambit with extra caution after the Lakepoint drubbing. Order, at p. 4, footnote 4.

The Dammed were fighting over whether the declarations by supervisor and supervised were inadmissible hearsay, but Judge Scholar Pat gave that short shrift. Hearsay that can be reduced to admissible evidence on the trial can be used to support summary J in 11 Cir; supervisor and supervised could both testify under oath on a trial, and the Dammed are in 11 Cir.

“These declarations, together with RA S’s declaration, confirm SRA P’s explicit statement on the penalty lead sheet that she was RA S’s immediate supervisor at the time she approved the penalties. See e.g., Order, Elbow Creek Aggregates, LLC v. Commissioner, No. 14702-21 (T.C. Mar. 21, 2023) (‘[a]ll three individuals ha[d] supplied Declarations confirming that Messrs. V and S supervised Ms. G during the Elbow Creek assignment.’); Order, Sunfish Cove, LLC v. Commissioner, No. 14163-21 (T.C. Mar. 23, 2023) (‘RA P and Mr. G ha[d] submitted Declarations . . . averring Mr. G was RA P’s immediate supervisor).’ Order, at p. 5. (Names omitted).

I didn’t blog Elbow Creek because Judge Albert G (“Scholar Al”) Lauber gave a beautiful and much more blogworthy dissection of Section 86 Social Security taxation that day in Lin, T. C. Memo. 2023-37. Anyway, Elbow Creek is just a rehash of Kroner any-time-before-assessment Boss Hossery. I did blog Sunfish Cove (see my blogpost “That’s the Word – Part Deux,” 3/23/23).

But the point of all this (OK, y’all can yell “There is?” I can take it) is that Judge Scholar Pat, who has tried some eighty Tax Court cases before ascending the bench, forgot Rule 50(f): “Orders shall not be treated as precedent, except as may be relevant for purposes of establishing the law of the case, res judicata, collateral estoppel, or other similar doctrine.” None of those are in play here, as I can find no connection among the Dammed, the Sunfish, or the Elbows, such as would invoke law of the case, issue preclusion, claim preclusion, “or other similar doctrine.”

This merits a Taishoff “Huh?”