Judge Patrick J (“Scholar Pat”) Urda adds yet another entry to my “Don’t Ambush” series, an ongoing project. Here, it’s the Dixieland Boondockers of Meriwether County, GA, (and no, I don’t know where that is, either) Rock Bottom BBS, LLC, Barnett Properties, Tax Matters Partner, Docket No. 9145-21, filed 10/20/23.

IRS wants to amend their pleadings less than 90 days before trial to “…allege (1) ‘disguised sales of Rock Bottom’s property, upon which Rock Bottom’s conservation easement was placed,’ and (2) ‘that the transfer of property by Hill Creek LLC to Rock Bottom was not, in substance, a bona fide transfer, failing to transfer the benefits and burdens of ownership.” Order, at p. 1.

Except IRS claims that the amendment is unnecessary, since the FPAA is sufficient notice. Judge Scholar Pat blows that one off.

“In short, it was incumbent on the Commissioner to determine at a much earlier stage (e.g., in the March 2021 FPAA, or the October 2021 answer, or the January 2023 interrogatory response, or unequivocally in the May 2023 letter along with a either a motion to amend or a supplement to contention interrogatories) if he wished to assert these new contentions, so that the parties could properly contest them at trial.” Order, at p. 5.

Back in December, Judge Scholar Pat ordered IRS to identify the legal and factual bases whereupon they rested the FPAA, and to give the Rockers full, complete and responsive answers to their interrogatories, within two (count ’em, two) weeks. But it wasn’t until May this year that IRS’ counsel sent the Rockers’ counsel a letter saying IRS might maybe so could be raising something or other.

“…the letter did not reference the bona fide transaction issue whatsoever, and we struggle to see how it could be seen to apprise Rock Bottom of the Commissioner’s intention to raise it. More significantly, the letter sounded an uncertain trumpet; it did not state that the Commissioner would raise the identified issues, but merely that he may raise such issues. This point is underscored by the fact that the Commissioner ultimately decided not to raise two of the three issues referenced in that letter. Further, the Commissioner indicated in the letter that he ‘plan[ned] to file motions for leave to file amendments to . . . answer to raise these issues’…, but did not do so for an additional four months. Order, at p. 5.

But Judge Scholar Pat really lays it out, in language practitioners can relate to.

“In these circumstances, we do not believe that Rock Bottom could be fairly expected to reserve some of the last precious weeks before trial to prepare for issues that were not yet before the Court—and perhaps never would be.” Order, at p. 5.

And, Taishoff adds, either eat the billables for that (possibly useless) prep work, or bill the client therefor, which would be unjust. And all that while I’m preflighting and woodshedding my witnesses, and triple-checking the trial notebook.

But Judge Scholar Pat served as counsel to the Deputy Assistant Attorney General in DOJ Tax Division, litigated over eighty (count ‘em, eighty) tax appeals, appearing in all CCAs, appeared before the Supremes, and was a five-time winner of DOJ Tax Division’s distinguished attorney award. He received IRS’ Michael Rogovin award.

So, while you can take the lawyer out of DOJ, you can’t take DOJ out of the lawyer.

“Before concluding, we note that the allegations the Commissioner seeks to raise are intertwined with issues properly before us. If, in the trial of those properly raised issues, evidence was to come out that might support the Commissioner’s contentions, then our current denial of his motion to file an amendment would not preclude him from seeking to conform the pleadings to the evidence at trial as appropriate.” Order, at p. 5.

Fortunately, the trusty attorneys for the Rockers are a canny squad, and I expect many objections to IRS’ attempt to wild-card in this stuff on the trial.