Apparently the trial subpoena is the new discovery cluster bomb for Dixieland Boondockers. What was previously obscure (see my blogpost “Rule 70(g)(2),” 11/7/23) is unwrapped by Judge Goeke in Halyard Holdings, LLC, Halyard Holdings Group, LLC, Tax Matters Partner, et al. 14145-21, filed 12/12/23.

A heavy-duty real estate outfit, known to provide expert witnessing for IRS, gets third-party subpoenas from Halyarders. IRS and outfit move to quash, but outfit wants legal fees. That brings in Rule 147(d)(1).

Stand back: when an unusual request is made to Judge Goeke, the requester is often deluged with somber reasoning and copious citation of precedent. And at Order, p. 4, Judge Goeke lays it on. I counted eleven (count ’em, eleven, and I did) cases cited, not one from Tax Court. The bottom line: Judge Goeke follows FRCP 45(d)(1) learning. Attorneys’ fees are permissible, but facts-and-circumstances decide how much, if any. The key is “unduly burdensome.”

“Considering the facts of these cases, we will deny [outfit]’s request for attorney’s fees. We strongly weigh the facts that petitioners proactively clarified their requests by letter… and narrowed the subpoena by letter…. We also consider the fact that [outfit] did not clearly state that it had no responsive documents for several months. Instead, [outfit] was coy about its possession of responsive documents, and it (and respondent) made arguments and statements that petitioners could take to mean that [outfit] had responsive documents in its possession.” Order, at p.4.

But don’t put the La Grande Dame on ice yet, Halyarders.

“…we have significant concerns with petitioners’ subpoenas, as we expressed to the parties during the …conference call and the … hearing. We caution practitioners before this court that the use of subpoenas as a substitute for discovery is not favored. It is not lost on us that petitioners issued subpoenas to three parties known to act as expert witnesses for respondent in cases involving syndicated conservation easements. There is a high likelihood that future use of such subpoenas (especially those involving frequent expert witnesses) as an end run around the Tax Court’s discovery rules will result in sanctions against that practitioner. The Court will not tolerate intimidation and harassment of potential expert witnesses by quietly watching these tactics become commonplace.

“We also advise practitioners before this court to avoid unclear requests in subpoenas that could reasonably be interpreted as being extremely broad.” Order, at p. 5.

My word, attorneys trying to game the system? Making end runs around Rules? Trying to push witnesses around? Perish forbid! I’m aghast!

Seriously, folks, this “win your case at discovery” business has gone far enough.

Once again, I resort to lingo of the opposable-thumbed virtuosi, they who transmit whole volumes of stuff by thumbs alone, while hanging from subway straps and holding their smartphones at impossible angles. For the traditionally-handed, that means “shaking my head.”

Paul C. Robinson, T. C. Memo. 2023-147, filed 12/11/23, has run up three (count ’em, three) years’ worth of deficiencies aggregating $41K plus the Section 6662(a) five-and-ten substantial understatement chops. Paul folds the deficiencies post-trial, but wants to contest the chops.

However,  Paul put in no evidence on the trial of substantial authority, disclosed facts and reasonable basis, or reasonable cause and good faith. And Paul files no opening brief, so is barred from filing a post-trial brief.

Judge Courtney D (“CD”) Jones had already given Paul a chance to file.

Unless the size of the deficiencies militates against negotiating (doubtful), or unless Paul played games (and a docket search reveals nothing more than ordinary pro se ineptitude), I don’t see why it needed three (count ’em, three) lawyers for IRS to deal with this case.

That’s Judge James S. (“Big Jim”) Halpern’s directive to IRS’ counsel in Michael W. Aubin and Kerry A. Aubin, Docket No.  1814-20, filed 12/11/23. This is the ongoing Australian Outback kerfuffle (no, not a burnt Bloomin’ Onion, the hush-hush Pine Gap operation) about the Section 911(a) foreign earned income exclusion for the Pine Gappers.

For the backstory, see my blogpost “Not Even His Hairdresser Knows For Sure – Part Deux,” 6/8/23.

Remember, Section 7121(b) says that a closing agreement signed by Sec’y or delegate is final and conclusive, except fraud, malfeasance, or misrepresentation, and those have been blown away here.

This is the not-unfamiliar case of the boss running out of the office, while telling a subordinate “sign this for me and send it out.”

Mr. S, the signatory upon whom IRS relied, wasn’t in the class named in the Delegation Order. But his job description might get him in under the wire.

“While ‘[t]he development of a delegation order’ is the ‘preferred method’ for effecting a delegation of authority, other forms of delegation may be permissible. See IRM 1.11.4.3 (Oct. 10, 2008). In particular ‘[p]osition descriptions and other documents that describe an official’s duties with sufficient particularity are sufficient to provide the official with the authority necessary to carry out such duties.” Id. at 1.11.4.3.(4).” Order, at p. 2. ( Footnote omitted, but it mandates a proper Delegation Order when litigation is expected).

Mr. S’ job description says he’s “responsible for planning, developing, directing, and implementing a comprehensive, Servicewide, tax treaty administration program that enhances compliance with international tax laws and tax treaties.” Idem, as my expensive colleagues would say.

Well, the US-Australia tax treaty is certainly in play here.

OK, so Mr. S is in. Except he isn’t. He never signed nuttin’. Ms. P. signed. (Names omitted).

IRS “relies on Delegation Order 1-2, IRM 1.2.40.3 (Aug. 29, 1996), which grants to ‘[a]ll supervisory officials’ the authority ‘[t]o designate acting supervisory officials in the Internal Revenue Service.” Respondent argues that Mr. S, ‘[i]n his position as Assistant Deputy Commissioner (International) . . . was a supervisory official.’” Order, at p. 3.

Not good enough for Judge Big Jim, no way.

“Even if we were to accept that Mr. S was a supervisory official, he could not have delegated to Ms. P the authority to exercise the responsibilities of his position if he had received his own authority as Acting Assistant Deputy Commissioner (International) by delegation from another supervisory official under Delegation Order 1-2. The authority granted by Delegation Order 1-2 cannot be redelegated. IRM 1.2.40.3(4) (Aug. 29, 1996). And respondent’s motion does not address the question of how Mr. S received the authority to act as the Assistant Deputy Commissioner (International).” Order, at p. 3.

Formerly, delegation orders were a fave of protesters, but they went out of style when Boss Hossery came along. Guess they’re back.

Even when it doesn’t force settlement (see my blogpost “Why I Love Summary J,” 11/13/23), summary J takes away the nonessentials, the makeweights, and the hopers that we lawyers have been trained to plead lest we overlook anything that might be construed as a winning argument.

Judge Christian N. (“Speedy”) Weiler shows us how it’s done in Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner et. al. Docket No. 12235-20, filed 12/8/23. Both sides move for partial summary J.

The Jacksons go 6-for-8 on their motion.

IRS first, as it’s easiest. IRS wants Boss Hossery confirmed. The Jacksons don’t fight it, and anyway this is Dixieland Boondockery Golsenized to the Elevenses, who’ve eviscerated Section 6751(b) in Kroner. IRS could Boss Hoss it tomorrow.

IRS attacks the appraisals and appraisers, and Judge Speedy Weiler finds enough facts in dispute to put these matters over for trial. Turns out the Jacksons’ companions named the wrong appraiser as being qualified in their partial summary J motion. Order, at p. 10. That’s what happens when you clone pleadings on the wordprocessor; no substitute for hand-tailoring.

Now it’s the Jacksons’ (and their companions’) turn. There was a (a) a non-cash (easement deed) contribution (b) in year at issue. IRS only claims quid pro quo, but other than the tax break IRS shows none, and Congress intended a tax break.

The interest conveyed is a qualified real property interest. That there are already 15-year Forest Land Protection Act restrictive covenants in place is irrelevant; they’re not perpetual, and will expire by their own terms.

The deed sufficiently states the conservation purposes. “Congress did not determine to incentivize only the preservation of ‘natural’ or ‘high-quality’ areas but rather to allow a charitable contribution deduction for the donation of an easement that has, as its ‘conservation purpose,’ ‘the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem.” I.R.C. §170(h)(4)(A)(ii) (emphasis added).” Order, at p. 9. The Jacksons are “relatively natural.”

Oh yes, the 501(c)(3) is OK, and the Contemporaneous Written Acknowledgment passes muster.

Again, Judge Holmes’ Oakbrook dissent is justified: try the valuation, not the peripherals.

He’s back! Immunologist James (“Little Jim”) Haber wins one, in The Diversified Group Incorporated, et al., Docket No. 17038-18L, filed 12/7/23. He’s going to get to eyeball two (count ’em, two) of three memos IRS personnel prepared in connection with review of this case. One of the three involves an unrelated taxpayer, and so Section 6103 bars production.

But the other two step beyond the bounds of deliberative privilege, and go to the process itself. I’d love to quote Judge Emin (“Eminent”) Toro’s drilldown into the underpinnings of deliberative privilege; somber reasoning and copious citation of precedent abound, worthy of being dragged-and-dropped into every practitioner’s memo of law files.

Unhappily, the Genius Baristas have posted the order in a variant of PDF such that I cannot drag-and-drop. If this were merely a disservice to me, individually, it would be worth, perhaps, a shrug of the shoulders.

But it is a disservice to practitioners generally. Courts, both State and Federal, have held again and again that the right to inspect a document must include the right to abstract and copy. I know an order is not precedent and may not be cited as authority, except in the case to which it pertains and even then only for limited purposes. But the reasoning and cases cited in support thereof should be easily available to all.

If Section 7461 has any meaning, not only should decisions, opinions, and orders be made public, but they should be made public in usable format.

How ’bout it, Judge? You told IRS to play nice. Tell the Genius Baristas to play nice.

For those keeping score at home, we have reached Docket No. 19279-23, as at 12/6/23.  At the current rate of filing, we can expect further 1500 petitions through 12/31/23. The tsunamis of previous years, when 35,000 petitions were filed in a single year, are now of interest only to historians. And of this year’s crop of 20,000 petitions, fewer than one in a hundred will result in a T. C. Memo. Barely one in 600 will feature in a T. C. Sum. Op.

So don’t be surprised, dear reader, when there are days with nothing new in United States Tax Court,

Judge Nega gives IRS summary J tossing both of his last blows, thereby bringing to an end the ten (count ’em, ten) year saga of Estate of Joseph A. Insinga, Deceased, By Amanda Gilmore, Personal Representative, Docket No. 9011-13W, filed 12/5/23. The case outlasted Fighting Joe, but his memory will be fresh in these columns, as he furnished no fewer than 18 (count ’em, 18) blogposts.

The OS bucked Fighting Joe’s materials over to Exam, which was already pursuing the targets. Fighting Joe’s stuff and a face-to-face with IRS’ sleuths only confirmed the economic substance tack they’d already taken.

“The administrative record in this case amply supports the WBO’s ultimate findings that: (1) the issues identified in petitioner’s claim were already known to the examination teams, (2) the examination teams made the same adjustments after petitioner’s claim that they were planning to make before petitioner’s claim; and (3) petitioner’s claim information did not lead to any additional adjustments being made.

“Put another way, the WBO found (and the record so supports) that the IRS did not proceed based on petitioner’s information because petitioner’s information did not substantially contribute to any IRS action.” Order, at p. 20.

I wish Judge Nega had given Fighting Joe a T. C. Memo. rather than an undesignated order. It’s a paltry send-off; his memory deserves better.

Judge Morrison has to deal with a complicated intrafamily freeze-out of the children of the founder of a closely-held C Corp. It even caused me to give Judge Morrison a Taishoff “Good Job,” a year ago. So here’s all 140 (count ’em, 140) pages of Charles G. Berwind Trust for David M. Berwind, David M. Berwind, D. Michael Berwind, Jr.; Gail B. Warden, Linda B. Shappy and Valerie L. Pawson, Trustees, et al., T.C. Memo. 2023-146, filed 12/4/23.

It’s an old story: one son took control of the business, did some merger maneuvers, and redeemed out the siblings’ shareholdings when they objected. Apparently that was the gravamen of the litigation in USDCEDPA referred to in my above-cited blogpost. There is much argy-bargy in Judge Morrison’s opinion about PA law of corporate merger, which I leave to PA practitioners. And petitioners try to relitigate the USDCEDPA case, but get nowhere.

The question here is computation of the interest on the cash payment for the redeemed stock when it was released from escrow. Section 483 imposes built-in (unstated) interest when the price for a sale or exchange is paid out over a period greater than one year, to prevent gameplaying. But intent plays no part in the statutory language.

“The text of section 483 does not require that the person who exchanges or sells property be a party to the contract for the sale or exchange of property. By its terms, section 483 operates when there is ‘a property.’ § 483(a)(1). It does not require the parties to the ‘contract for the sale or exchange . . . of the property’ to include the person who sells or exchanges the property.” T. C. Memo. 2023-144, at pp. 136-137.

Although redemption took place when the final merger was consummated in 1999, payout was deferred to 2002 because of the litigation aforesaid.

The dissenters claimed the whole payout was capital gain effective at date of merger. And they argue origin-of-claim for the buyout settlement, but the claim originated with the disputed merger.

Of course, the buyer-out claimed an interest deduction per Section 483, got rejected by IRS, sued and won in USCFC. Hence the SNODs to the dissenters, although not preclusive.

Section 483(c) controls. As there’s a one-shot payment, Section 1272(a) allocation of payments doesn’t apply.

And of course the stipulation of settlement sinks the petitioners. T. C. 2023-144, at p. 140.

And That Goes For Women, Too

My longer-term readers will recall that ever since 12/28/20 I was laying blasts upon the DAWSON rollout: “shambolic schemozzle” about sums it up. See, e.g., as my expensive colleagues would say, my blogpost “I’d Rather Not Be Right,” 12/31/20.

But while we approach the third anniversary of that best-forgotten episode, I note Judge Elizabeth A. (“Tex”) Copeland must still deal with the fallout therefrom.

In proof of The Bard’s famous quotation first written at the head hereof, check out Jeremy Berenblatt, Docket No. 7208-17W, filed 12/1/23.

Yup, the same Jeremy Brerenblatt who starred in my blogpost “The Bialystok Blower,” 5/24/23.

Now Jeremy wants his new attorney to peruse the admin record and check out some misnumbered pagination. Except same has been sealed from the world and is lodged somewhere in DAWSON’s impenetrable bosom, inaccessible alike to parties and counsel.

Judge Tex Copeland to the rescue.

“…the Court held a conference call with the parties. The Court explained to the parties that during the transition from the Blackstone system to the DAWSON system, it appears the documents were sealed from both the parties and the public. The Court informed the parties that the Court will unseal the documents so that only the parties may view them. There was no objection from either party. The Court also explained to the parties that the discrepancy in page count noted by petitioner is due to the number of title pages each filing has.” Order, at p. 1.

So Judge Tex Copeland orders the Genius Baristas to let parties and counsel check it all out, but nobody else.

DAWSON’s creek rolls on.