“…the law is a ass — a idiot.” Thus spake Charles Dickens, in the voice of Mr. Bumble in Oliver Twist (1838). Current expert opinion is that the phrase is certainly not original with Dickens, and probably dates earlier than 1620, in a work much less famous.

Howbeit, we find again that, when Tax Court discovery takes the field, the relevance objection to a demand for documents is irrelevant. Counterintuitive (to be polite), but there it is. See Green Valley Investors, LLC,, Bobby A. Branch, Tax Matters Partner, et. al. , Docket No. 17319-19, filed 10/23/23.

Bobby’s trusty attorneys have been adept at playing the “win your case at discovery” gambit, and here they persuade Judge Christian N. (“Speedy”) Weiler, not conspicuously a fan of such tactics, to give them one out of 34 (count ’em, 34) challenged IRS discovery responses.

Bobby wants copies of all drafts of the FPAAs “issued to the Partnership.” Order, at p. 3. I’m not sure who the “Partnership” is, as we have three (count ’em, three) LLCs consolidated here, and no showing that any or all of the three were partners one with another.

Whatever, IRS claims Greenberg’s Express says the past isn’t even prologue; FPAAs are TEFRA SNODs, so trial is de novo.

But Judge Speedy Weiler lets it in.

“In Request 25, petitioner seeks all drafts of the FPAAs issued to the Partnership. Respondent objected to the Request in his response on the grounds of relevancy, citing Greenberg [sic] Express. However, the Court finds respondent’s relevancy objection to this Request to improper [sic; I think you meant “to be improper”, Judge]. Accordingly, the Court overrules respondent’s objection and will order respondent to provide a supplemental response to this Request.” Order, at p.3.

I wish we had more enlightenment. Is it because this “response appears reasonably calculated to lead to discovery of admissible evidence,” per Rule 70(b)(2)? If so, is that admissible evidence related to the Section 6751(b) Boss Hoss sign-off?

I suggest this because of a sentence at Order, p. 1. “The Interrogatories and Requests primarily relate to respondent’s burden of production and the IRS’s compliance with section 6751(b).” (Footnote omitted, because it’s missing from the text of the Order as it appears on the Tax Court website). At Order, p. 2,  IRS says they can’t find the Form 5701 Notice of Proposed Adjustment they issued, so can’t establish the magic first time penalties asserted.

Now Bobby sought trial in Birmingham, AL, which is 11 Cir. And all y’all will recall that 11 Cir followed 9 Cir, holding in Kroner v. Com’r, No. 20-13902, filed 9/13/22 that Boss-Hoss-anytime-before-assessment is the rule. And here the petition stayed assessment per Section 6213(a).

So IRS could end this kerfuffle by Boss Hossing the whole shebang right now.

And that would definitely make relevance irrelevant.

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.

Judge Elizabeth A. (“Tex”) Copeland dismissed the plea of Marc Alessandro, Docket No. 1099-23L, filed 10/20/23, that  “[a]ny tax lien or levy would cause [Mr. Alessandro] to lose his license [as a financial planner] and would then [cause him to] lose his ability to earn income.” Order, at p. 4.

Judge Tex Copeland gave as her reason “so far as we can discern, FINRA does not require licensed financial planners to report tax levies….” Order, at p. 5.

May I most respectfully suggest that the Court look at FINRA Form U4, at pp. 14 and 33? A source tells me that the judgment and lien information from the Form U4 as to any registrant may be released to the public, per FINRA Rule 8312. This may negatively impact employment of the registrant.

My information may be a wee bit rusty, as I never served as a FINRA arbitrator, since in 1998 FINRA took over arbitration proceedings from the old Municipal Securities Rulemaking Board. So any reader with fresher information, please weigh in.

Howbeit, as Mr. Alessandro did not submit Form 433-A and backups, all this may be moot, and not worth a motion for reconsideration.

Martin G. Plotkin, T. C. Memo. 2023-125, filed 10/19/23, is back for Appearance No. 4 (count ’em, four) on this my blog. Judge Morrison can walk you through the procedural mish-mash that concludes today. I’ll not try; Martin’s ingenuity and Appeals’ missteps would defy even Campbell’s ability to condense.

At the end of the trail, Appeals issues a second supplemental NOD on the sole issue whether Martin is eligible for CNC. He isn’t, because he did not submit Form 433-A and backups.

Martin says Appeals abused its discretion because he never asked for CNC status. But he got this remand because he had told the AO that all his income was Social Security so he couldn’t pay, hence Appeals failed to balance intrusiveness of levy with ability to pay.

“… petitioner argued that the determination by Appeals regarding the balancing test was inconsistent with the proposition that ‘[p]etitioner’s only income came from his Social Security Benefits, which were insufficient to provide for any payment of the liability.’ We agreed with petitioner’s argument inasmuch as we withdrew the portions of the April 2019 Memorandum Opinion holding that Appeals did not err in applying the balancing test of section 6330(c)(3)(C) because of petitioner’s failure to submit the requested financial information.” T. C. Memo. 2023-125, at p. 6.

But the sole issue on remand is whether Martin’s only income is Social Security. Hence IRM 5.16.1.2.9(1)–(5) (May 22,2012), which says, if petitioner can show this, where only income is from Social Security, that means hardship, .

Since Martin said several times he couldn’t pay, CNC consideration was appropriate.

“The corollary to petitioner’s argument that financial information should be required only for taxpayers who request CNC status is that no such information should be required for Appeals to apply the balancing test under section 6330(c)(3)(C). This argument is unavailing. Looking at the second supplemental notice of determination through the lens of section 6330(c)(3)(C), we discern no abuse of discretion by Appeals. The second supplemental notice of determination concluded that petitioner refused ‘to provide the information required’ and that therefore it was Appeals’ judgment that ‘the Notice of Intent to Levy balances the efficient collection of taxes with your legitimate concern that the collection action be no more intrusive than necessary.’” T. C. Memo. 2023-125, at pp. 15-16.

If you claim hardship, you must prove hardship. Whether your avowed remedy is CNC or not, CNC is your remedy. The back taxes don’t go away.

That is the question, the answer for which Judge Christian N. (“Speedy”) Weiler needs a trial, in A.C.M.E., Docket No. 3327-22, filed 10/19/23.

IRS wants summary J, of course. Problem is, A.C.M.E. claims that what IRS calls prepayments, and therefore taxable in year of receipt even though prepaid services aren’t delivered until later, are really deposits. It comes down to who controls the money once the recipient gets it: has the payor a present right to get it back, or has the recipient got complete domination?

The guiding light is Indianapolis P&L, 490 US 203 (1990). And it looks like IRS is leading on paper, but A.C.M.E. points to some givebacks.

“…factors such as control over deposits (i.e., absence of a trust fund), unrestricted use, nonpayment of interest, and later application of the moneys to services are probative but not dispositive in evaluating the existence of complete dominion.” Order, at p. 5. (Citation omitted).

A.C M.E. never raised equitable recoupment in its pleadings, bur raises it for the first time in its opposition papers. That’s a Rule 39 no-no.

“The doctrine requires a party to prove the following elements: (1) the overpayment or deficiency for which recoupment is sought by way of offset is barred by an expired period of limitation, (2) the time-barred overpayment or deficiency arose out of the same transaction, item, or taxable event as the overpayment or deficiency before the Court, (3) the transaction, item, or taxable event has been inconsistently subjected to two taxes, and (4) if the transaction, item, or taxable event involves two or more taxpayers, there is sufficient identity of interest between the taxpayers subject to the two taxes that the taxpayers should be treated as one. ” Order, at pp. 5-6.

More to the point, IRS hasn’t convinced Judge Speedy Weiler that complete dominion over the money has gone from the cherrypickers who deal with A.C.M.E. to A.C.M.E.

“We have reservations ruling on the disallowance of these prepayment accounts of $4.8 million and $2 million in 2015 and 2016, respectively, as well as the inclusion of the entire beginning accounts payable credit balance of $34 million as income for 2015, through summary judgment and without understanding the full impact of these adjustments to other taxable periods. Petitioner now seeks to raise the issue of equitable recoupment and furnished a sworn statement indicating how these adjustments would result in the inclusion of some $38 million in income reported in tax years 2018 and 2019, which are now closed. Although the issue of equitable recoupment is not properly before us; at a minimum, petitioner has created a material issue of fact, precluding summary adjudication of these ‘prepayment’ issues.” Order, at p. 6. (Footnote omitted).

IRS wanted either a five-and-ten substantial understatement chop, or a straight negligence chop,  but furnished no Boss Hossery, so no summary J on chops.

A.C.M.E. didn’t contest disallowance of some outside services deductions, or disallowance of an NOL carryforward, but IRS doesn’t get those either. “In denying the principal relief sought by respondent, it is unclear whether the purpose of summary judgment would be accomplished here, by us ruling on these additional issues in a piece meal fashion. Accordingly, we refrain from ruling on these remaining issues.” Order, at p. 7. (Citation omitted).

A.C.M.E’s trusty attorney should applaud Judge Speedy Weiler’s goalmouth saves, worthy of Vladislav Aleksandrovich Tretiak at the top of his form; the dollar amounts those deductions were worth are not stated, but they can’t have been pennies.

He wasn’t Michael, but he’ll always live in memory as Sonny. Unhappily, once again the Corleone gambit is played out, with a $1.5 million unrollable IRA distribution from one of the two (count ’em, two) IRAs which held what Judge Elizabeth A. (“Tex”) Copeland discreetly calls “a portion of the late actor’s wealth”. Estate of James E. Caan, Deceased, Jacaan Administrative Trust, Scott Caan, Trustee, Special Administrator, 161 T. C. 6,  filed 10/18/23, at p. 3.

The IRA trustee was UBS, s/a/k/a Banco Unione Svizzera, and the IRA included membership in a hedge fund.

Judge Tex Copeland judge-‘splains: “IRAs are not limited to holding traditional assets such as cash, bonds, and publicly traded securities; they can still qualify for tax advantages while holding alternative assets, such as non-publicly traded partnership interests like the [hedge fund interest]. However, in that case the Internal Revenue Service (IRS) requires that the IRA’s trustee or custodian report the fair market value of the alternative assets yearly, valued as of December 31 of the preceding year (yearend fair market value).” 161 T. C. 6, at p. 3.

Naturally, neither UBS nor any trustee with a brain will take the risk of guessing what a hedge fund interest is worth, so their deal with the late Sonny required him to tell them. Except he didn’t, so UBS, after a barrage of notices, bailed as trustee and sent the not-then-late Sonny a notice that they bailed, plus a 1099-R, stating FMV of the hedge fund interest based on the prior year’s number, at no extra charge.  UBS claims Treasury regs require this, but Judge Tex Copeland says they don’t, 161 T. C. 6, at p. 9, and gives a run-down on what the IRC and regs do require.

Meantime, the not-yet-late Sonny’s adviser at UBS bailed and went to Merrill Lynch, so the IRAs followed him there. Said adviser cashed out the hedge fund interest, because Merrill’s computer gets indigestion from hedge fund transfers, and deposited the proceeds in the IRA. The then-not-late Sonny seeks a PLR per Section 408(d)(3)(I), extending his 60-day rollover grace period, but only after his return for year at issue is filed and IRS gives him a SNOD.

Judge Tex Copeland says the record does not reflect the late Sonny’s date of death nor domicile, but my sources tell me 7/6/22, in LA CA. And she appoints the trustee of Sonny’s administrative trust as Special Administrator for this case. Might be a good tactic to try for Special Administrator status where State probate is tough and expensive.

IRS bounced the waiver because the hedge fund interest and the cash were not “same property” per Reg section 408(d)(3)(A)(I) and (D).

Special Administrator (SA) wants a BoP shift for unreported income, except UBS issued a 1099-R and the late Sonny’s return for year at issue reported the distribution as nontaxable. And IRS reasonably relies on the 1099-R, so Section 6201(d) is satisfied.

There are trust IRAs (with the financial institution acting as trustee with fiduciary duties to beneficiary) and custodial (hold the loot but the beneficiary decides what to do with it). The parties are free to contract how they want within broad limits. Sonny’s was custodial.

But here it appears to Judge Tex Copeland that the professionals managing Sonny’s affairs miscommunicated, and their testimony they never got UBS’ letters falls flat.

The rollover argument fails because the hedge fund portion (a partial rollover) was done more than a year after the hedge fund interest was constructively received (a notice from UBS that Sonny could do whatever he wanted with the interest). And there were three (count ’em, three) wire transfers of the net hedge fund proceeds. And the transfer was cash, not the interest itself. Only rollovers from 401s (like 401ks) can do a sell-and-fund.

There’s a jumpball over the value of the distributed interest, but IRS took the number from the hedge fund’s K-1 capital account, and the trustee said nothing.

OK, so why a full-dress T. C.?

Well, does Tax Court have jurisdiction to review IRS’ denial of a Section 408(d)(3)(I) waiver? Yes, we do, says Judge Tex Copeland. See my blogpost “The Guys from the Hood,” 4/20/17 for more.

Scope? Abuse of discretion. Result? “Same property” requirement not waivable, and appeals to do equity go nowhere in pore l’il ol’ Tax Court.

I get the feeling some of the late Sonny’s advisers will be getting The Phone Call.

Full disclosure- Merrill Lynch is custodian of my IRA. Needless to say, it holds ever so much less than the late Sonny’s, and no interests in hedge funds.

Abdul Khaliq Mustafa Muhammad, T. C. Memo. 2023-124, filed 10/17/23, “…previously worked as a tax return preparer. He holds five educational degrees, including a master’s in business administration and a Juris Doctor with an alleged specialty in international taxation.” T. C. Memo. 2023-124, at p 2.

Impressive. And Abdul also has fifteen (count ’em, fifteen) years in as an employee of IRS.

Trouble is, Abdul also has heavy-duty Schedule C losses with no substantiating documentation. He claims water damage and computer crashes wiped them out, but Judge Albert G (“Scholar Al”) Lauber, though he has only three (count ’em, three) educational degrees, isn’t buying any of Abdul’s stories why the Rule 37(a) deemed-admitted order should be set aside, or that the unreported income IRS alleges he got was not taxable.

But although Abdul has accumulated some demerit badges of fraud, they’re not enough for Judge Scholar Al to award IRS summary J on the Section 6663 chops.

“We have deemed petitioner to have admitted certain affirmative allegations relating to possible ‘badges of fraud,’ e.g., that he was uncooperative with the RA during the examination, that he failed to supply accurate books and records of his Schedule C business, and that (as an IRS employee and former return preparer) he was aware of the requirement that he keep books and records. However, we do not think that these admissions alone are sufficient to satisfy respondent’s burden of proving fraud by clear and convincing evidence. Petitioner alleges (for example) that he was unable to supply books and records to the RA because those records had been destroyed by water damage. Such a fact, if true, could tend to support petitioner’s contention that he lacked the subjective intent to commit fraud.” T. C. Memo. 2023-124, at p. 8.

But before Abdul puts the appropriate beverage on ice, “(T)hose penalties remain for trial, as do respondent’s disallowance of Schedule C and other deductions and his alternative assertion of accuracy-related penalties under section 6662(a).” T. C. Memo. 2023-124, at pp. 8-9.

Btw, Abdul, allegations that what the RA did at exam invalidates the SNOD don’t fly in a de novo deficiency trial. T. C. Memo. 2023-124, at p. 9, footnote 2.

Edited to add, 7/15/25: Abdul goes down for Section 6663 fraud chops for two (count ’em, two years at issue, T. C. Memo. 2025-77, 7/15/25.

Whistleblower 8391-18W, 161 T. C. 5, filed 10/16/23, claims the Ogden Sunseteers short-changed him on one of his blows. 1-18W got 30% on a couple blows (hi, Judge Holmes), wherein he blew up US institutions for dodging withholding on dividends from onshore corporations to offshore shareholders. But on his latest blow, he only got 22%. He claims these were all the same offense.

The OS say yes, but that’s not enough. The Preliminary Award Recommendation Letter (PARL) didn’t identify why they were cutting 1-18W’s take, but the DARL (Detailed Award Recommendation Letter) Sunset-‘splained.

“The [IRS] field team had already identified REDACTED 2’s withholding tax issues prior to receiving the PSI/whistleblower information for consideration. They had opened the taxpayers 200312-200512 F-1042 withholding tax returns for exam and they had identified the TRS-dividend withholding issue prior to receiving the information. However, the PSI/whistleblower information did assist the field team in developing the withholding tax issues. The information helped the team identify connections between the lending and swap transactions which enabled them to better understand the withholding tax implications. The field team used thePSI/whistleblower information to request information from REDACTED 2 through IDRs. Therefore, the award amount is increased to 22%.” 161 T. C. 5, at p. 10.

That’s enough for Judge Nega. After plowing through (and plowing under) Reg. Section 301.7623-4 and its plethora of factors positive and negative (nonexclusive, none weightier than any other, although one may outweigh all the others, and no mere numerical weigh-up), he finds the Ogden Sunseteers did not abuse their discretion. In this case, IRS was already looking at this stuff.

Taishoff asks if they were already looking because 1-18W had told them years before what kind of game these dudes were playing, and the US Senate Permanent Subcommittee on Investigations had been nosing around this dodge based on what 1-18W had told them. Nudge nudge, wink wink, say no more.

Likewise, IRS doesn’t have to pay up until either the blower has accepted the offer and waived all appeals rights, or final order disposing of any appeals is entered. Here, 1-18W petitioned, so 1-18W can wait.

1-18W objects to the sequester take-out, but that was a lost cause long ago.

Finally, 1-18W gets no interest on his/her award, and neither will anyone else. Sovereign immunity bars interest on awards and judgments, unless specifically waived by statute, and here Section 7623 is silent.

If you want to know why whistleblower awards take so long, read this opinion.

Edited to add, 11/19/25 Looks like DC Circuit asked the same questions Taishoff did.

But Take the Reasoning

Maureen Robinson, Docket No.12800-22L, filed 10/16/23, deals with the remand from 3 Cir of the  9/22/22 order tossing Maureen’s petition from the NOD in her CDP.

I don’t cover the Article III courts, for want of resources. Anyway, 3 Cir’s non-precedential order got a full airing in the trade press, and I didn’t blog the 9/22/22 Tax Court toss, as it was in line with the previous leg-before-wicket cases where petitions were served post-CDP but before the NOD issued. 3 Cir waxed rapturous about Tax Court’s “leaning backwards” to  dig up jurisdiction to bail out hapless self-representeds, drowning in the ripcurrents of Tax Court law and  practice.

3 Cir said nothing about equitable tolling, but the doctrine hovers over every petition from a CDP.

Howbeit,  Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan shows us how Maureen gets back on track, as 3 Cir suggested. Treat objection as petition.

The old petition at Docket No. 12800-22L is dismissed as jurisdictionally defective. A new docket, No. 28077-22L, is opened as of date of Maureen’s objection to IRS’ motion to dismiss 12800-22L, her objection becomes the petition therein, she is free to raise anything else she could have raised in 12800-22L, IRS need file no answer as Ch J TBS Kerrigan deems all assignments of error, statements of fact, and any allegations Maureen raises in 28077-22L, denied by IRS.

Now go try the case on Our Outlying Island off the coast of North America.

Takeaway- Even on non-CDPs, 3 Cir’s nonprecedential discourse can be cut-and-pasted into your memo of law (without citation, of course, as direct citation is barred) when jurisdiction is sketchy but your client is sympatico. And Ch J TBS Kerrigan’s procedural solution is a template.

I can’t conclude without a Taishoff award. I can’t find any attorney listed for Maureen; if she was represented, her trusty attorney gets a Taishoff “Good Job, First Class.” If Maureen was self-represented throughout, she gets a Taishoff “Good Job, First Class, with Diamonds.”

Unhappily, this situation cannot invoke the unexpansive jurisdiction of US Tax Court. This Paul James Kline, Docket No. 27241-22, filed 10/13/23 discovers, as Ch J Kathleen (“TBS = The Big Shilleagh”) Kerrigan provides the boilerplate recitation of what limits Congress has set upon Tax Court.

Needless to say, ordering IRS to issue PJ a stimulus check doesn’t fall thereunder, despite the fact that PJ’s” (R)epresentations in the petition also emphasized petitioner’s incarcerated status.” Order, at p. 1.

It was a long time until I could remember the analog to PJ’s difficulties in getting stimulus in his situation, but memory and a prolonged search of old files brought Kevin DeWitt Skaggs back. If you don’t remember Kevin DeWitt Skaggs, don’t feel alone. Rather, see my blogpost “Oversoon,” 4/26/17. Kevin DeWitt’s bœuf involved EITC for his paid work in the prison hospital.

PJ meets the same fate.

“Suffice it to say that no IRS communication supplied or referenced by petitioner to date constitutes, or can substitute for, a notice of deficiency issued pursuant to 6212, I.R.C., a notice of determination issued pursuant to sections 6320 and/or 6330, I.R.C., or any other of the narrow class of specified determinations by the IRS that can open the door to the Tax Court for purposes of this case. To the contrary, petitioner’s apparently expansive view of the Court’s authority fails to comport with the limited nature of the jurisdiction set forth in the statutory parameters set forth above. Stated otherwise, the Tax Court has no role or authority in the administration of the so-called economic stimulus payments.” Order, at p. 3.

PJ, like me, is a fan of summary J, but to get it, you need a court with subject matter jurisdiction.