In Mikel P. Kunza & Tanya R. Kunza, Docket No. 15726-21S, filed 9/22/23 (a very special day in my house), Judge Ingenuity Buch revives Judge David Gustafson’s answer to my long-expressed need for a structure for judges and STJs to follow, and guide for petitioners and practitioners, in dealing with the Section 6673 delay-of-game chops. In parsing past orders and opinions, with unexplained or semi-explained variations in whether to impose, and how much to impose, I suggested that the process was arbitrary, and that thereby contumacious litigants might contest or avoid impositions on reconsideration or at USCCA. I won’t try to collate all my blogposts; this would only weary me and my readers. But Judge Gustafson had the answer back in 2015; see my blogpost “Another Rounders’ Day,” 6/3/15.

Mik & Tan are long-time rounders, going back fourteen (count ’em, fourteen) years. IRS moves to toss their latest visit to The Glasshouse on Second Street, NW, for lack of prosecution. Judge Buch, sua sponte (that means on his own, for you who didn’t go to expensive law schools), tells Mik & Tan that Section 6673 is in play.

First, Judge Ingenuity Buch goes through IRS’ and his attempts to move the case. It’s a third-party reporting joust, so Mik’s & Tan’s claim they didn’t get the cash isn’t per se frivolous. But Mik’s & Tan’s interactions with IRS were less than cooperative.

“While the Court perhaps does not have the full array of communications between the parties, the Commissioner provided email correspondence between his counsel and Mr. Kunza. Those communications show polite inquiries, suggestions, and overtures from the Commissioner’s counsel. They also show profanity-laced tirades directed at the Commissioner’s counsel, his paralegal, government lawyers in general, and the Court. Mr. Kunza raises issues of race, politics, and COVID vaccines, none of which bear on the tax issues in this case.” Order, at p. 2.

Now under the usual procedure, that would be enough to qualify Mik & Tan for the Section 6673 finals, and assure them a place on the chopping block. But this is Judge Ingenuity Buch; remember his often-quoted 63 (count ’em, 63) page takedown of Stephen T. Waltner. Well, if you don’t, see my blogpost “Cracking Up,” 2/27/14.

So Judge Ingenuity Buch gives Mik & Tan the Waltner treatment, first itemizing every attempt to get this case moving. Next, he goes back to 2009 and gives a précis of each of Mik’s & Tan’s four (count ’em, four) previous visits to Tax Court (and, in fairness, one of them did settle out) and whether a Section 6673 chop or warning followed.

But the tour de force comes at pp. 3-4, as Judge Ingenuity Buch revives Judge David Gustafson’s twelve-point checklist from Leyshon and runs it, item by item, with citations to specific supporting incidents.

It doesn’t matter that the deficiency is $1100; a $500 chop is a stinger.

If making imposition of Section 6673 chops appeal-proof is your aim, Judges Gustafson and Buch will show you how.

Third time is distinctly unlucky for Clair R. Couturier, Jr., Docket No. 19714-16, filed 9/21/23, as Judge Albert G. (“Scholar Al”) Lauber kicks Clair’s expert witness SJS into touch. You’ll remember that Clair was fighting over a busted IRA (ten years’ worth of 6% per annum Section 4973(a) excess contributions tax).

Clair and an outfit called The Employee Ownership Holding Company, Inc. (TEOHC) did a give-and-go rollover, and canceled a bunch agreements (hi, Judge Holmes), which gave rise to some $26 million of cash and a note. But no separate allocation between rolled and canceled (unrolled) was made at the time, so it remains to do so now, so that the worth of the unrolled can be determined, and the 6% excise tax applied (plus chops).

This is Clair’s third appearance in this my blog. See my blogpost “Foolish Consistency – One Mo’ Time,” 7/6/22 for the rest.

SJS opines that the canceled agreements violate ERISA, so they’re worthless. Yes, don’t yell, it’s a conclusion of law, which is the province of the judge, so whatever SJS has to say about that is out.

Next, “…he opines that their value should be capped at 15% of ‘the total equity value of the company [i.e., TEOHC].’ He bases this opinion on a ‘rule of thumb that many ESOP trustees use when negotiating executive compensation agreements that dilute the ownership rights of the ESOP.’ This supposed ‘rule of thumb’ is that ‘no more than 15% of the equity value can be used for executive compensation.’ His report supplies no facts or data to support this statement; it is simply an assertion discussed in a single paragraph on page 14 of his report. He acknowledges that his supposed rule of thumb ‘is not a hard rule’ and that he has ‘seen ESOP-owned companies with more . . . equity compensation to management than 15%.’” Order, at p. 2.

Do you hear echoes of the infamous “Primoli memo,” which birthed the much-derided 15% diminution for façade easements? Judge Scholar Al hears echoes of vitamin pill scion Mitch Skolnick, whose unhorsing I chronicled in my blogpost “Horsefeathers,” 6/3/19.

“SJS’s second opinion must be excluded because he supplies absolutely no facts or data to support his 15% number, but only his bare assertion that this is a ‘rule of thumb that many ESOP trustees use.’ In Skolnick v. Commissioner, T.C. Memo. 2019-64, 117 T.C.M. (CCH) 1319, 1322, we rejected expert testimony from an appraiser for similar reasons, ruling that an expert must ‘explain how he got to his results, which requires that he show the data he considered, the methodology he applied, and the manner in which he applied his methodology.’ ‘Without that information,’ we noted, ‘the Court has no means of examining whether the report ‘rests on a reliable foundation and is relevant to the task at hand.’ Id.” Order, at p. 2. (Citation omitted).

Besides, the issue is not what a hypothetical ESOP trustee may have done, but what the parties to the deal (Clair and TEOHC) agreed was the value of what Clair got.

So Judge Scholar Al gives “thumbs down” to SJS’ report and his rule of thumb.

While I have often railed against TEFRA’s complexities and boobytraps, here’s a couple cases (hi, Judge Holmes) where perhaps the single-track approach of the Bipartisan Budget Act of 2015 (was it that recently we had bipartisanship? Seems like a lot longer…but this is a nonpolitical blog) doesn’t suit as well.

First, Silver Moss Properties, LLC, Silas Mine Investments, LLC, Tax Matters Partner, Docket No. 10646-21, filed 9/20/23. The Mosstroopers gave IRS a document dump, whereupon IRS moves to amend to add Section 6663 fraud chops to the FPAA.

The Mosstroopers claim bad faith, prejudice, and futility, so Rule 41 and its cognate, FRCP 15(a) don’t serve to permit this late amendment.

Judge Pugh: “Petitioner takes issue with respondent not explaining which specific documents provide the factual basis for his Motion. Petitioner believes that respondent needs to supplement his Motion with citations to documents so that it can determine whether respondent based his Motion on documents discovered years ago (which might support an argument of undue delay) or produced in [the recent dump].

“We do not think respondent has to supplement his Motion with citations to specific documents as that would go against Rule 41(a)’s liberal standard …  that leave be given freely.” Order, at p. 3.

As for prejudice, “(T)he standard is not whether the addition of the civil fraud penalty would make the case harder or more expensive for petitioner, but whether petitioner would suffer an unfair disadvantage because of the addition of the civil fraud penalty. See Ax v. Commissioner, 146 T.C. 153, 168–69 (2016). Here, respondent bears the burden of proving the alleged fraud by clear and convincing evidence.  And this case has been continued only once before, is not calendared for trial, and discovery is ongoing. Petitioner will have ample time to respond to the amended Answer, conduct further discovery, and prepare a defense.” Order, at p. 3.

For the Ax case, see my blogpost “A Retrieved Reformation,” 4/11/16.

Finally, futility is a nonstarter, because IRS’ amended answer pleads enough facts to sink the Mosstroopers, if IRS can prove them all by clear and convincing evidence. An amendment is futile only if, were the proponent to establish everything pled therein, the proponent still loses.

But here’s the parties of the second part, Robert T. Ervin, IV & Sandra Landry Ervin, Docket No. 14500-19, filed 9/20/23. Rob & Sandra are partners of the Mosstroopers, fighting a SNOD that includes some spillover from the Mosstrooper fight above set forth, but also includes some non-Mosstrooper stuff, that Rob & Sandra settled out last year.

IRS moves to strike the partnership stuff, and Rob & Sandra are down with that. Judge Goeke agrees, and suggests a stipulated decision dealing with the non-TEFRA stuff. He even will help the parties draft their stiped decision. “The Court suggests that the parties add the following sentence to the decision: The parties stipulate that the issues arising from Silver Moss Properties, LLC v. Commissioner including additions to tax are not at issue in this docket.” Order, at p. 1. I’d suggest “not at issue in this case,” rather than “docket”.

But the point (and I can hear my readers, those that are still here, saying “There’s a point? How quaint!”) is that in a post-BBA 2015 one-size-fits-all environment, with multiple partners fighting multiple SNODs, each perhaps involving different years for different non-partnership items, with multiple stipulations and multiplicitous decisions as to each partner but with the partnership-level issues pertaining to all, it will become almost impossible to sort out what pertains to whom. While separating partnership items from partner items in different cases often ambushed the unwary partner, who discovered too late in their individual case that they should have been watching the FPAA case, it let the diligent and savvy partner work out their individual deal without the clutter of the FPAA.

Once again, the Law of Unintended Consequences stirs the silt.

It was either a sorority famed on The Hill Far Above in my youth for its parties (ah, my misspent youth! I spent it studying law), or my shorthand for subpoena duces tecum (which I called by a rude, schoolboy name). But it was well to know that discovery device, and Judge Christian N. (“Speedy”) Weiler has a short course in how to respond, and what happens if you don’t.

Of course, Green Valley Investors, LLC, Bobby A. Branch, Tax Matters Partner, et. al., Docket No. 17379-19, filed 9/19/23, are back to illustrate, bringing with them those well-known appraisers V and W (names omitted), who’ve often appeared in this my blog when Dixieland Boondockery is on the menu.

V and W each was served with a SDT, and neither moved to quash nor asserted defenses. But IRS claims they didn’t cough up. So Judge Speedy Weiler lays down the law.

Let each provide “proof that he has produced the documents requested by respondent in accordance with the subpoena… or with an explanation for why he has failed to respond or otherwise does not have possession, custody, or control of the requested documents.” Order, at p. 2.

But if contumacious, “failure to adequately respond to this order may cause the Court to exercise its power to compel his deposition or hold him in contempt of court. See I.R.C. § 7456(c).” Order, at p. 2.

Now both Messrs. V and W are represented by counsel, upon whom Judge Speedy Weiler directs service of this order.

And whom else would you want when confronted with “ten runs to make and a match to win, a bumping pitch and a blinding light, an hour to play and the last man in”? The Jersey Boys, of course. And Frantic Frank Agostino, Esq., the last man in.

Just his kind of case.

Sarah S. O’Nan, T. C. Memo. 2023-117, filed 9/18/23, was denied a refund of the $123K net proceeds from the non-short sale of the house she and deceased spouse held in a OH “survivorship tenancy.” For non-dirt lawyers, that means survivor takes all. But there was a NFTL for the $123K in unpaid taxes. Sarah filed innocent spousery, got Section 6015(f) equitable partial relief for Year One and total relief for Year Two, but IRS held on to the $123K that came out of the sale (obviously to release the lien).

I want to start with a Taishoff “Good Job, First Class,” to Sarah’s trusty attorney, whom I’ll call Louie.

Sarah was widowed when spouse died suddenly at age 43, leaving her broke and owing taxes. There were two (count ’em, two) mortgages on their home, on which Sarah stopped paying. Sarah signed both mortgage deeds (OH is apparently a conveyance state), but deceased spouse only signed the senior mortgage note; unclear whether Sarah signed the junior mortgage note. While the senior mortgagee was foreclosing, Sarah sold, paid off both mortgages, and the tax lien.

When the dust cleared, Sarah owed IRS $3340 for Year One, and zero for Year Two. IRS would not give back the $123K, claiming Sarah flunks the Section 6015(g)(1) payment-from-own-funds test. While there can be a refund for an innocent spouse to the extent the relieved liability arises from nonrequestor, the innocent spouse must have paid the tax from which s/he is now relieved.

Review in this case is de novo. Before every reader yells “Section 6015(e)(7),” Sarah petitioned before the Taxpayer First Act came into effect, so she gets a real trial, but with BoP attached. She’s already innocent, which nobody denies.

State law determines whether the NFTL attaches to the interest she automatically inherited at her late spouse’s death; and there’s caselaw that says it does.

Comes Section 6015(f) to the rescue. Judge Elizabeth A. (“Tax”) Copeland judge-‘splains.

“…when a requesting spouse is granted section 6015(f) relief, we recalculate her federal tax liability as if she and her spouse (or deceased spouse) had filed married-filing-separately returns for the relevant years. If Mr. and Mrs. O’Nan had filed married-filing-separately returns for the years in issue, then for [Year One] Mrs. O’Nan would have had a liability of $3,340 (the amount for which she was denied section 6015(f) relief) and for [Year Two] she would have had no liability (as she was granted full relief for that year). We therefore hold that although the IRS retained a lien on the family home in the full amount of the liabilities for the years in issue, that lien did not encumber Mrs. O’Nan’s original one-half interest except to the extent of $3,340 plus interest.” T. C. Memo. 2023-117, at p. 8.

Judge Tex Copeland whacks up the sales proceeds from deceased spouse’s half first. Closing costs come out off the top; most of that is State and local tax, she assumes without deciding (as those total only $14K, it probably doesn’t matter). Only deceased spouse signed the first mortgage note; Sarah signing the mortgage is at best a surety, and since deceased spouse’s share of the proceeds is more than enough to pay off the first mortgage, Sarah’s share is untouched; likewise, the first mortgage was perfected before the NFTL, so it has Section 6323  priority.

As for the junior mortgage, the record doesn’t show who signed the mortgage note, but deceased spouse was primary breadwinner and junior mortgage was made only about a year after the first. Howbeit, that mortgage was senior to the NFTL also. And whatever was left of deceased spouse’s half of the proceeds went to pay the junior mortgage.

So as IRS is low totem on the pole, and as Sarah is adjudicated innocent except for the $3340, and there’s nothing left of deceased spouse’s half, whatever paid off the lien must have come from Sarah’s half, hence her money.

IRS argues deceased spouse’s death has nothing to do with the lien. True, but Sarah was given innocent spousery for all but $3340. Sarah wants back the whole $123K, but IRS gets to keep the $3340.

Going for innocent spousery first with a young, broke, sympathetic widow was a good move. Not putting in the second mortgage note was brilliant; well done, Louie. I’m surprised the lenders didn’t insist on both parties signing both note and mortgage; I always did when I represented lenders. The Little League catchers’ rule: Tag ’em all, baserunner, batter, umpire and yourself.

Takeaway: Post Section 6015(e)(7), when you have a stand-alone innocent spousery, Appeals is your trial. Put everything in the administrative record. You won’t get a second chance. And tell ’em Louie sent ya.

Judge Mark V. (“Vittorio Emanuele”) Holmes blunts the efforts of Alice Perkins & Fredrick Perkins, Docket No. 28215-14, filed 9/15/23 to revive their claim to untaxed gravel. Readers with long memories will recall Judge Holmes’ digging into Seneca Nation’s lands and the history of Indian treaty obligations from my blogpost “Indians Not Taxed – But They Are,” 3/1/18.

Despite Judge Holmes’ dubious excursion into NY dirt law (see my blogpost aforesaid and ex-Ch J Maurice B (“Mighty Mo”) Foley’s dissent in 150 T. C. 6, at pp. 29-30), 2 Cir affirmed the denial of tax exemption, which was all Alice & Fred raised. And the Supremes denied cert two (count ’em, two) years ago.

So why are they back in Tax Court? Well, 2 Cir affirmed, but remanded for further proceedings. Exactly what “further proceedings” were required neither IRS nor Alice & Fred could tell. There had been a decision entered after the Tax Court’s opinion affirming the SNOD, so no Rule 155 beancount needed.

But Alice & Fred got new trusty attorneys, and here’s the story.

“They want to amend their petition to introduce—for the very first time—the issue of whether they had business-expense deductions that would reduce the mining income that we and the Second Circuit have held to be taxable. Their reason for this delay is that they believed the mining income was tax-exempt which, they argue, would have made claiming business expenses on that income an inappropriate and unlawful duplicative deduction. The obvious problem here is that Tax Court has no prohibition on making an argument in the alternative, which might well have made good sense in this case.

“But that’s not what they did.” Order, at p. 1. They want a Rule 162 vacation a couple years late (this is Judge Holmes, after all). The only reasons that a decision can be vacated after it becomes final (and this one is final beyond possibility of successful appeal or further appeal) are want of jurisdiction, fraud on the court, or mutual mistake of fact. None of these apply.

But trusty attorneys (no, not The Jersey Boys, but cast in the same mould; never say die) claim Rule 1(a) lets them go on a FRCP 60(b)(6) vacation “for any other reason that justifies relief.”

Though this is worthy of a Taishoff “Good Try, Second Class,” Judge Holmes isn’t buying.

“Such justification may be found during ‘extraordinary circumstances, or where the judgment may work an extreme and undue hardship.’

“While we don’t doubt that the Perkinses’ inability to raise the issue of their eligibility for business-expense deductions works some financial injury, we cannot find that it rises to the level of an extraordinary circumstance or an extreme and undue hardship. If anything, it would hardship for respondent to litigate a new issue raised one-and-a-half years after the decision became final.” Order, at p. 2. (Citation omitted).

No, not another radical terrorist group; sad to say we’ve too many of those. This is the Section 6721(e) chop imposed when an employer fails to file timely the annual Forms W-2 with the Social Security Administration (SSA). And no, I didn’t know about that chop either.

But ex-Ch J Maurice B (“Mighty Mo”) Foley knows all about it, and tells us all in Piper Trucking & Leasing, LLC, 160 T. C. 3, filed 9/14/23.

If one is an employer with FICA/FUTA/ITW obligations , one must file W-2s with Form W-3 transmittal with SSA; nonfilers wind up in IRS’ Combined Annual Wage Reporting (CAWR) computer database. Ex-Ch J. Mighty Mo tells the story.

“The SSA sends two warning letters to employers that fail to file these forms. The first letter informs the employer to either respond or file the missing forms. The second letter warns the employer that the matter will be referred to the Internal Revenue Service (IRS) to determine whether penalties are applicable. If an employer fails to respond to both letters, their name is added to a database. Every year the SSA transfers this database to the IRS. Following the transfer of the database, the CAWR computer program automatically sends the employers in the database a Letter 98C asserting a section 6721(e) penalty. If the employer does not respond to the Letter 98C, the IRS, through the CAWR computer program and without any human intervention, assesses the section 6721(e) penalty.” 160 T. C. 3, at p. 2.

Well, Piper didn’t file, so got the 98C, and went to Appeals. Do we hear the thundering hoofbeats of the Boss Hoss?

Appeals didn’t, and issued a NOD sustaining the NFTL. Piper did, opposed the NOD alleging want of Boss Hossery, and petitioned the NOD. Summary J for IRS denied for want of Boss Hossery. IRS tries again, and this time gets it right.

Section 6751(b)(2)(B) stables the Boss Hoss when the chop is automatically calculated through electronic means.

Ex-Ch J Mighty Mo: “Because petitioner failed to respond to the Letter 98C, the underlying section 6721(e) penalty was determined through respondent’s CAWR computer program and did not involve human intervention. Therefore, the underlying section 6721(e) penalty was ‘automatically calculated through electronic means.’ See Walquist v. Commissioner, 152 T.C. 61, 70 (2019)(concluding that an accuracy-related penalty issued without human intervention through the IRS’s Correspondence Examination Automated Support computer program was automatically calculated through electronic means). Thus, section 6751(b)(2) dictates, and we hold, that a section 6721(e) penalty assessed through respondent’s CAWR computer program is not subject to the section 6751(b)(1) supervisory approval requirement.” 160 T. C. 3, at pp. 3-4.

For the Walquist story, see my blogpost “I Sing the Penalty Electronic – Part Deux,” 2/25/19.

As Piper had no CA, summary J for IRS.

Oh, the inhumanity!

They taught us in the law school on The Hill Far Above, in the last millennium, that “expressio unius exclusio alterius.” I need not, of course, translate. But Section 7701(c) puts paid to this concept, and Judge Nega reinforces the lesson in Rock Cliff Reserve, LLC, Five Rivers Conservation Group, LLC, Tax Matters Partner, et al., Docket No. 12472-20, filed 9/13/23.

The Rock Cliffs object that IRS want to claim that what the Rock Cliffs donated was inventory property, and therefore limited by Section 170(e), and that the entities involved in this Dixieland Boondockery were not bona fide partnerships for tax purposes. So the Rock Cliffs want IRS precluded from arguing same.

“Petitioners cannot claim surprise that respondent’s July 19, 2023 letter raised the issue of limitations to charitable contribution deductions imposed by section 170(e) because respondent issued to each petitioner a Final Partnership Administrative Adjustment (FPAA) in 2020 identifying violation of the requirements of section 170 to support the deficiency determination. Complying with section 170(e) is one of the requirements of section 170 and is directly implicated by the language in the FPAAs that respondent issued to petitioners. Similarly, the breadth of the FPAA encompasses the validity of the transactions. All information regarding whether the entities involved in the transactions were bona fide partnerships is readily available to petitioners who will thus not be prejudiced by the presentation of such a theory at trial.” Order, at pp. 1-2.

Mentioning a Code provision brings in the entire provision.

I do have to ask why Judge Nega left the question of shifting BoP for trial. If he means to play the “preponderance of evidence” gambit, he should say so. But looking at the seven (count ’em, seven) trusty, high-priced, and battle-hardened attorneys for the Rock Cliffs shown in the printable docket search, I doubt very much they would be surprised.

Johnny Johnson (not the UK’s WWII ace of aces, rather the AK real estate wheeler-dealer) likes class lives. He likes them so much that, rather than deconstruct the entire Best Western and Extended Stay hotels he owned, he depreciated both buildings over seven years MACRIS, rather than the commercial building useful life of 39 (count  ’em, 39) years.

Now there’s nothing wrong with deconstructing; longtime readers of this my blog will recollect Ruel Hamilton, the disappearing TX deconstructor, who depreciated the kitchen sink (literally), as more particularly bounded and described in my blogpost “The Sum of Its Parts,” 3/12/12.

But Johnny didn’t follow Logic or Tears for Fears, and break it down. He depreciated the whole shebang in a lump.

Johnny couldn’t be bothered with minutiae, like getting an appraisal when he gave a building to an OR opera house, or a CWA from the opera company or for some fencing he have to a rehab center in HI.

Arriving at The Glasshouse in the Unstated City sub nom. John R. Johnson and Estate of Judith E. Johnson, Deceased, John R. Johnson, Personal Representative, T. C. Memo. 2023-116, filed 9/13/23, Johnny’s trusty attorneys fold the deficiencies. They’re fighting only about the Section 6664(c)(1) good faith reasonable cause out to the Section 6662(a) negligence or disregard 20% chop.

Unhappily for Johnny, it’s another case of trusty well-credentialed CPA who swears she never told Johnny to file a six-figure Form 8283 without an appraisal, or passed on his other shenanigans.

“Petitioners presented no evidence that their CPA told them that the seven-year depreciation schedule was applicable to commercial buildings or that the mortgage interest deduction could be claimed twice. Petitioners also failed to show that their CPA advised them that the county assessor’s valuation would suffice instead of a qualified appraisal for the building donated to the… Opera House. When asked whether she advised Mr. Johnson that the charitable contribution deduction could be claimed using the county assessor’s valuation instead of a qualified appraisal, petitioners’ CPA testified that she ‘never had that discussion with [Mr. Johnson.]’ Petitioners cannot claim to have reasonably relied on advice which was never given. In addition, Mr. Johnson was not credible when he definitively stated: ‘We thoroughly discussed the tests’ related to the donation of the building to the … Opera House. This was decidedly in contrast with his immediately following statement that details about the donation were ‘[t]oo far to remember.’” T. C. Memo. 2023-115, at p. 7. (Name omitted).

One wonders how much Johnny’s trusty attorneys sweated trusty CPA in trial prep. Hearing such testimony from a key witness might induce serious settlement negotiations before going to trial.

Step Lightly on the Bedrock

I said it back five (count ’em, five) years ago: “Stipulations are the IEDs of litigation; they look so innocent, until they go off, taking your case with them.” See my blogpost “Baked,” 7/12/18, the story of Marty Washburn’s Baltic bakery fiasco. Judge Ronald I. (“Ingenuity”) Buch has a lot to say about “the bedrock of Tax Court practice,” citing Washburn, in Noel M. Parducci & Kenneth L. Parducci, et al. Docket No. 20894-19, filed 9/12/23.

Amongst the als is the irrepressible Dennis Lee Simpson, making his fourth (count ’em, fourth) appearance on this my blog. As I said in my blogpost “Inadmissible Admissions,” 2/27/23, Dennis Lee is the inventor of “Bamboozle Your Way to Victory at Discovery,” and a leading candidate for Wag of the Year honors.

IRS has five (count ’em, five) separate proposed stipulations of fact, supported by two USDCs, which found for Federal Trade Commission against Dennis Lee and the als. The Branerton play-nice elicited no joy, but Dennis Lee did put in two of his own proposed stips, so Judge Buch puts all seven in play with a Rule 91(f) deemed-agreed OSC.

First of all, relevance of the fact is off the table. If any responding party admits, the fact is admitted, relevance thereof to be determined at trial.

Second, want of knowledge is not a valid objection, if the fact at issue is otherwise supported by the proponent. Some of the USDC opinions are sufficient to support some asserted facts, but not all.

“The Commissioner cites the Findings of Fact in an FTC case as the primary source for most of the paragraphs contained in each Rule 91(f) Motion’s proposed stipulation. But a fact having been found in one proceeding does not mean that the parties are automatically bound by that fact in another proceeding. See Estate of Reis v. Commissioner, 87 T.C. 1016, 1028–29 (1986) (‘[t]he mere fact that a court in one opinion makes findings of fact is not a basis for the same or another court in another proceeding to . . . deem them to be indisputably established for purposes of the pending litigation.”). Therefore, the parties are not bound by these facts and are free to dispute the facts in the paragraphs that rely on the FTC Findings of Fact. In addition to the Findings of Fact in the FTC case, the Commissioner cites to Mr. Simpson’s informal discovery response, transcripts of individuals taken for purposes of the FTC case, and trial exhibits from the FTC case as support for his proposed stipulations. However, because the Court was not provided with copies of these sources with these motions, we cannot ascertain the accuracy of these statements. Therefore, the parties are not bound by these facts and are free to dispute the proposed stipulations that rely on these sources. Because [some als] and Mr. Simpson dispute the facts contained in these paragraphs, and the sources cited do not indisputably establish these facts, the parties are not deemed to have admitted these paragraphs.” Order, at p. 5. (Citation and names omitted). Remember, issue preclusion requires more than just a party’s presence in another judicial proceeding.

Third, Dennis Lee’s two proposed stips, one to IRS and one to one of the als, contain different facts. But these are consolidated cases; separate checks are a no-no. And Dennis Lee restates documents; these speak for themselves.

“Because these are consolidated cases, every party has to agree to the same set of facts for us to deem a fact admitted. Mr. Simpson’s proposed stipulations contained in his Rule 91(f) motions fail to provide the parties with the same set of facts, therefore we cannot deem any of the facts admitted. Furthermore, many of Mr. Simpson’s paragraphs simply restate the contents of documents, and the stipulation process is not to be used to stipulate to contents contained in documents. Documents speak for themselves. Therefore, we will deny both of Mr. Simpson’s Rule 91(f) Motions for order to show cause and not deem admitted any of the paragraphs contained in them.” Order, at p. 5.

But since Judge Buch has to mix-and-match IRS’ five stips to conform the pleadings to the proof, so to speak, we have a seven (count ’em, seven) page appendix with the facts Judge Buch deems admitted.