I must again sigh, and shake my head, feeling deep within me sympathy for the practitioner who will be getting The Phone Call from Dzuy Nguyen and Jessica Thai, T. C. Memo. 2023-151, filed 12/20/23.

Dzuy and Jessica got a SNOD for two years’ worth of deficiencies and Section 6663 75% fraud chops (aggregating about $4.5 million). Their petition was handed to FedEx the day before Day 90.

Long-time readers of this my blog will by now have sussed out that Dzuy’s and Jessica’s petition was tossed for want of jurisdiction, as it got to The Glasshouse on the Potomac on Day 91.

Whoever sent it used FedEx Ground, and claims “mailed-is-filed, Section 7502.”.

Judge Albert G. (“Scholar Al”) Lauber delivers the bad news.

“Petitioners did not send their Petition to the Court by U.S. mail, but rather used FedEx, a private delivery service. Section 7502(f), captioned ‘Treatment of Private Delivery Services,’ provides that ‘[a]ny reference in this section to the United States mail shall be treated as including a reference to any designated delivery service.’ Section 7502(f)(2) defines a ‘designated delivery service’ to mean a private delivery service ‘if such service is designated by the Secretary for purposes of this section.’

“The IRS has published a list of all private delivery services that have been designated by the Secretary for purposes of section 7502. See I.R.S. Notice 2016-30, 2016-18 I.R.B. 676. This list includes certain forms of delivery made available by FedEx, but not FedEx Ground, the delivery service petitioners used. Notice 2016-30, 2016-18 I.R.B. at 676, specifically states that ‘FedEx . . . [is] not designated with respect to any type of delivery service not enumerated in this list.” Because petitioners did not use a ‘designated delivery service’ as defined by section 7502, they are unable to avail themselves of the ‘timely mailed, timely filed’ rule.” T. C. Memo. 2023-151, at p. 3.

Dzuy and Jessica claim Ground equals 2 Day (a designated service). But pore l’il ol’ Tax Court has no equitable jurisdiction.

“Unfortunately we must disagree. FedEx Ground may well be substantially similar to the FedEx 2-Day delivery service. But this Court may not rely on general equitable principles to expand the statutorily prescribed time for filing a petition.” T. C. Memo. 2023-151, at p. 4.

I’ve more than once advised the following: “Practitioner, print the list direct from the IRS website (not from my blog; no representation this is accurate), and paste the list over every desk in your office, with a warning that use of any other PDS is punishable by death, or such lesser penalty as the courtmartial may direct.”

I don’t know if Judge Ronald L. (“Ingenuity”) Buch is a fan of old showtunes, or if he remembers hearing the Jerome Kern – Dorothy Fields classic upon which I based my title above set forth. I expect he was too busy pursuing his illustrious academic and professional careers to bother with such trivia (not to say frivolities).

Nevertheless, if Tax Court Judges and STJs need an anthem, I suggest the above aforementioned as a title to the Rule 155 gavotte.

Judge Buch reprises Kristen L. Quevy, T. C. Sum. Op. 2023-34, corrected version filed 12/19/23. While IRS still wins, they can’t get an outright confirmance of the SNOD, because there were a couple concessions (hi, Judge Holmes).

So instead of decision for IRS, we have “decision will be entered under Rule 155.” T. C. Sum Op. 2023-34, at p. 7.

Da capo.

Judge Emin  (“Eminent”) Toro seems to echo Kurt Vonnegut’s famous quip, “‘To be is to do’-Socrates. ‘To do is to be’ — Jean-Paul Sartre.  ‘Do be do be do be do’ — Frank Sinatra.’” Once again, he’s confronted with the discovery maneuvers of the celebrated “Attorney/Professor/Author” and Tactician Daniel S. Jacobs, Docket No. 7118-19, filed 12/18/23.

Again, we’re reminded of 9 Cir’s take on the “substantially justified” rubric. It means justified to a degree that would satisfy a reasonable person. Of course, that’s more than just enough to slide under the Section 6673 frivolity tag. But Rule 33(b)’s “reasonable inquiry” requirement is a different pair of shoes.

“… the [Tax] Court expressed reservations concerning petitioner’s view that Rule 33(b)’s requirement that parties make ‘reasonable inquiry’ when preparing their pleadings affects the analysis with respect to the ‘substantially justified’ standard under section 7430. The former is directed towards the parties’ conduct during the litigation before our Court, and violations of the rule may cause the Court, in its discretion, to apply appropriate sanctions. The latter is a statutory rule that entitles a prevailing party to attorney’s fees as a matter of law if, among other things, the government’s position (as opposed to its conduct) is not substantially justified. Given that petitioner has moved for fees under the latter, the Court fails to see why respondent’s obligations under Rule 33(b) affect the analysis in these proceedings.” Order, at p. 2. (Emphasis by the Court).

Again, the issue is whether what IRS actually learned in the administrative proceedings, or would have learned if considered by a reasonable person (that quintessential legal fiction), would have altered, if at all, IRS’ answer to the petition.

“But our task does not include determining whether the administrative proceedings should have been conducted differently than they were. Nor does our task include deciding what the Commissioner might or might not have learned if the administrative proceeding had been conducted differently. The focus of the remand proceedings, based on the Ninth Circuit’s direction, is on the information Mr. Jacobs had already provided and the Commissioner had already received at the time the Commissioner filed the Answer.” Order, at p. 2.

So Judge Toro goes through interrogatories and document requests, and Dan goes 5 for 17, getting IRS to come up with more.

This is a useful template for seekers after admins and legals.

“I’ll try pottery for $253,741,” says Victor Attisha and Josephine Attisha, T. C. Memo. 2023-150, filed 12/18/23. It’s Vic’s story. Besides his legitimate credit card processing operation and ATM standalones, Vic and his partners were flogging boo and allegedly running the boodle through his Holy Moly Donut Shop (really; ya can’t make this stuff up). Enter the DEA and its Oakland County, MI anti-drug task force, who raid Vic’s operations with search warrants and haul away enough to cause Vic to cop to one count of Conspiracy to Manufacture, Possess with Intent to Distribute, and Distribute Marijuana in USDCEDMI. The Federales also grab $500K in cash from the Donut store and various bank accounts and safe deposits. Vic also gets a Section 6861 jeopardy assessment, which means no SNOD, but a ticket to Tax Court anyway per Section 6213(a).

There’s no records (Vic had some ledger sheets, but not specific), and almost no bank deposits. Vic claims IRS has no basis for the deficiency, but Judge Alina I. (“AIM”) Marshall finds Vic’s plea and the stuff DEA grabbed connects him to the potfloggery.  And the search warrants, plea, and whatever paper IRS was able to get from DEA was enough to support the assessment. Even hearsay or other inadmissible evidence can support a deficiency, lest clever crooks escape taxation.

Finally, Vic’s and his partners’ testimony vary widely. His explanation that he sold his credit card operation to his partners (hence the $500K in cash he got) founders when compared with the sale agreement. Now I’ve seen deals renegotiated at the closing to a point where the contract of sale bears zero relationship to the actual deal; but we’re always careful to document the variances, for ease of the CPAs and to enable our malpractice insurers to sleep soundly. Vic has no paper.

Vic loses.

Need I add that the sovereign State of Michigan legalized possession and use of marijuana (even for recreational purposes) the year after the year at issue?

I will spare my readers the political rant.

Edited to add, 10/3/25: Per Stipulated Decision filed May 5, 2021, it has been stipulated and agreed between IRS and all parties as follows: TO THE EXTENT IT IS DETERMINED THAT THERE IS A DEFICIENCY IN INCOME TAX AS WELL AS ANY PENALTIES DUE FROM PETITIONERS FOR THE 2017 TAXABLE YEAR, THE PARTIES AGREE THAT PETITIONER JOSEPHINE ATTISHA IS ENTITLED TO RELIEF FROM JOINT AND SEVERAL LIABILITY FOR THE 2017 TAXABLE YEAR PURSUANT TO I.R.C. §6015 (C).

This means that only her ex-spouse is liable for anything. AS I SAID IN MY ORIGINAL BLOGPOST, “THIS IS VIC’S STORY,” NOT JOSEPHINE’S.

The above-written well-known admonition from the literate to the post-huked-on-fonixes has fallen short in many places. Today it avails not Carla J. Chavez & Maynor G. Chavez, Docket No. 12250-23, filed 12/15/23. Carla & Maynor are a day late, and a lot more than a dollar short, with their petition. Again, electronic filing, but it doesn’t matter, since the filing didn’t hit until 6:34 p.m., on Day 91.

Carla maintains IRS spelled her name wrong repeatedly. I entirely sympathize; mine has been mangled beyond description. It took our family genealogist (the Girl of My Dreams) several years to find my paternal grandma in a census, so wretchedly was our name inscribed.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan is also sympathetic with Carla’s & Maynor’s attempts to get her name spelled right.

In their response to IRS’ motion to toss, they “highlighted repeated and ongoing errors by the IRS in the spelling of petitioner Carla J. Chavez’s first name, attaching voluminous correspondence in support thereof, which they indicated hindered their communications with the agency. Such correspondence, and petitioners’ responses thereto…continued on a regular basis….” Order, at p. 2.

Alas, doesn’t help.

“…the repeated errors by IRS personnel in the spelling of Carla J. Chavez’s first name throughout the administrative process are highly regrettable, but they cannot alter the legal outcome. Critically, the notice of deficiency on which this case is based reflects a proper spelling.” Order, at p. 3.

Taishoff says this is yet another reason why there has to be a standard form of SNOD, clearly stating that anyone wanting Tax Court must immediately petition Tax Court, not IRS. Congress will have to prescribe the form by statute, as IRS won’t.

As for proper English spelling, it’s a lost cause.

Judge Albert G. (“Scholar Al”) Lauber ordered the parties in Royalty Management Insurance Company, Ltd., et al., Docket No. 3823-19, filed 12/14/23, to do just what James Joyce said. Examine the facts and set forth what facts you want Judge Scholar Al to find, based upon the trial record, but belay the legal argy-bargy.

IRS does just that, but the Royals’ attorneys don’t. Twice.

You can read for yourselves how to irritate and antagonize the judge of your case. If you think you’ve benefited your client thereby, have your explanation ready when you get The Phone Call.

Oh, btw, have your checking account handy when you get the sanctions.

That’s the message from Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan. Particulars will follow in a webinar scheduled for High Noon Eastern on 1/10/24.

Slated to join Ch J TBS on the panel are Judge James S. (“Big Jim”) Halpern, CSTJ Lewis (“It’s That Name Again”) Carluzzo, IRS Strategic Bomber Shawna A. Early, Esq., and Maxine Aaronson, Esq., of Dallas, TX.

Here’s the skinny. https://ustaxcourt.gov/resources/outreach/January_2024_Webinar_Flyer.pdf

See ya there.

Some might think Immunologist Edward Francis Bachner, IV (EFB4) more than a bit of a rogue, if they read Judge Morrison’s account of EFB4’s doings in Edward Francis Bachner, IV and Rebecca Gay Bachner, T. C. Memo. 2023-148, filed 12/13/23, or my blogpost “On Information and Belief,” 10/4/23..

Besides EFB4’s talent for fictional W-2s, life insurance applications, and Forms 1040 MFJ, it is alleged he sought to knock off Rebecca Gay for the $20 million insurance policy he placed on her life.

Judge Morrison deals with jurisdiction. The SNOD is addressed to both EFB4 and Rebecca Gay, although Rebecca Gay gets total innocent spousery; innocent spousery of one party doesn’t efface Tax Court jurisdiction on a timely filed petition.

Likewise, fraud chops alone are enough for deficiency jurisdiction. “A notice of deficiency that determines a fraud penalty under section 6663, but no deficiency, is a valid basis for the Court to take jurisdiction (upon the filing of a timely petition) to determine the amount of the underpayment and the amount of the underpayment due to fraud.” T. C. Memo. 2023-148, at p. 25. (Citations omitted).

As for jurisdiction over Rebecca Gay, deficiency jurisdiction includes possible overpayment, so an innocent spouse may still be in the money.

And even when jurisdiction is lacking for one spouse, that does not let the other off the hook.

As for fraud, you can read for yourself, T. C. Memo. 2023-148, at pp. 29-35.

EFB4 bought tetrodotoxin, wherewith allegedly to dispose of Rebecca Gay. This is a neurotoxin, which in tiny, almost undetectable, amounts is deadly. It’s found in puffer fish, a Japanese delicacy, preparation of which is restricted to chefs of grandmaster status because of the risk to the gourmet. It features in the late mystery writer and champion jockey Dick Francis’ 1991 thriller “Comeback.”

So what could EFB4’s “redeeming quality” be?

I am a great fan of the late Dick Francis’ work. If EFB4 is too, that may be his only redeeming quality.

I didn’t blog John Thomas Minemyer, T. C. Memo. 2020-99, filed 7/1/20 when it came out; it was just another blown Boss Hoss (mention of fraud penalty before Boss Hoss sign-off). But then 10 Cir filled the inside straight that 9 Cir and the Elevenses are playing, picking up on Kroner and Laidlaw’s Harley Davidson (whenever, as long as supe is still supe). 10 Cir affirmed the deficiencies but reversed on the chops, reinstating same per ex-Ch J. Michael B (“Iron Mike”) Thornton’s monumental dictionary chaw (see my blogpost “Money-Back Guarantee Meets the Boss Hoss,” 11/30/16).

Judge David Gustafson and I ain’t doin’ so well.

So Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan has to decide if civil fraud chops should be applied to JT’s offshoring of substantial cash from his underground activities (his partnership sold “a molded polymer coupler—a device that connects pipes that hold underground fiber optic cables—to the telecommunications industry.”). T. C. Memo. 2023-149, filed 12/13/23, at p. 2.

JT ran cash through Malaysia and Nevis (a charming island; the old sugarcane steam train ride is fun), and ultimately pled out in USDCDCO to one count of tax evasion.

Ch J TBS finds JT understated, underpaid, concealed, gave implausible and inconsistent statements, filed false returns, and pled to tax evasion, a criminal offense. Enough badges of fraud for Eagle Scout.

Section 6751(b) is the Dead Hoss.

If the injured petitioner is likely to invoke the Section 104 exclusion for personal physical injury, the wise practitioner needs to start with the demand letter. Remediation rarely succeeds. Judge Ronald L. (“Ingenuity”) Buch teaches the lesson in Kristen L. Quevy, T. C. Sum. Op. 2023-34, filed 12/12/23.

Kristen had physical and emotional problems, ran up big medical expenses, which she deducted prior to year at issue, was terminated by her employer, and sued.

“The first demand letter set forth Ms. Quevy’s potential claims ‘of discrimination and retaliation on the basis of her disabilities and requests for reasonable accommodation and wrongful termination.’ The second demand letter further elaborated on Ms. Quevy’s claims of discrimination and wrongful termination. The demand letters expressed her intent to sue for damages for wrongful termination on account of [employer]’s failure to accommodate her disabilities.” T. C. Sum. Op. 2023-34, at p. 3.

Of course, the employer’s counsel were careful to draw a broad release; every settling defendant wants to make sure that plaintiff will not be coming back.

“Under the terms of the settlement agreement, [employer] compensated Ms. Quevy for a broad release of claims, both known and unknown. The agreement characterizes the payment as ‘severance compensation.’ It was intended to ‘resolve all issues between them, including but not limited to Employee’s employment and the termination of that employment.’ The terms state that payment is ‘for [Ms. Quevy’s] alleged damages, which includes alleged injuries incident to her employment with Employer, including those related to both her purported personal injury and employment.’ Although the agreement mentions ‘personal injuries,’ nothing in the agreement indicates that it is for physical injuries. Ms. Quevy contends that [employer] was well aware that she suffered an assault in the workplace, and that it was ‘against that backdrop that they use the word personal injury.’ However, the record does not support Ms. Quevy’s reading of the agreement.” T. C. Sum. Op. 2023-34, at p. 6.

Whatever demands and settlement agreement say, Kristen deducted her medicals. So even if her emotional and physical injuries were treated by physicians, and reimbursement for those expenses thus eligible for Section 104 exclusion, Kristen didn’t clear the Section 111 tax benefit rule bar. She can’t exclude recompense for the medical expenses for which she’d previously gotten a tax benefit. And Kristen put in no evidence of eligible expenses for which she received no tax benefit.

The calculus for plaintiffs’ counsel is far from simple. And does the tax tail end up wagging the payout dog?