I had thought my “Stealth” series had been terminated with prejudice last February, when Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan announced the adoption of amended Rule 147, by affixing thereto the FRCP 45(a)(4) view-halloo for third party subpoenas, thereby putting paid to The Stealth Subpoena.

But when ex-STJ Eunkyong (“N’Yawk”) Choi resigned last August, unlike every other judicial departure I can remember, no public notice was given. If there was a mass reassignment of her cases, I confess I missed it.

An internet source dates her resignation at 8/11/23. Tax Court’s website shows no press release on that date or thereafter relating to STJs until the announcement of the appointments of STJs Siegel and Fried on 8/28/23; see my blogpost “Take  Two,” 8/28/23.

If any reader should have other or further particulars to share, I’d be obliged to them.

Edited to add, 1/12/24: Turns out there was a mass reassignment of ex-STJ Eunkyong (“N’Yawk”) Choi’s cases on 8/15/23, which confirms the 8/11/23 resignation date (8/11/23 was a Friday, so if the reshuffle took place on Monday 8/14/23, the orders confirming same would have issued on Tuesday). I’ve very rarely noted reassignments, as mostly they’re just load-balancing. And as I have no means of ascertaining what any judge’s load might be, the reassignment might be for any reason, for example a judge’s being on a heavy-duty trial and needing a colleague to deal with the dross, or a bunch judge’s cases (hi, Judge Holmes) unexpectedly settling out, leaving the judge free to pick up some slack.

But still, why no public notice? Following.

At the close of yesterday’s webinar, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan requested any attendee who had a suggestion for a topic or topics for future webinars to contact Tax Court’s Public Affairs Office.

Desirous as always of assisting practitioners and others, I sought out the Public Affairs Office to ascertain how one might proffer such suggestions.

I was informed that, while no Public Affairs Officer has been selected to replace now-STJ Jennifer E. (“Publius”) Siegel, suggestions should be directed to Sarah Silfies Finken, Esq., Administrative and Case Services Counsel, at publicaffairs@ustaxcourt.gov.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan led an enlightening discussion this afternoon of Rule 124, the arbitration rule that really involves mediation. It’s truly unfortunate that these webinars are neither recorded for viewing by those unable to see these presentations when scheduled, nor are they accorded 31 CFR §10.6(f)(2) CPE qualification for EAs, ERPAs, and retreps. If they were so recorded and qualified, they would get a larger viewership.

Mediation, a refined form of headbanging, does provide a most useful outlet for pro ses, and even protesters, who just want to be heard. Here echoes the lament of Linda Loman in Arthur Miller’s great tragedy: “Attention must be paid!” As Judge James S (“Big Jim”) Halpern explained, he uses pretrial conferences as a chance to hear the protester out, and to acquaint them with their nonexistent chance of prevailing. Having been heard, they settle. Sort of mediation light.

But CSTJ Lewis (“Caro Nome”) Carluzzo pointed out that formal mediation wouldn’t work with pro se litigants who generally have no idea how to prepare or evaluate a case.

Maxine Aaronson, Esq., a longtime mediator from Dallas, offered the useful point that lawyers and litigants fall in love with their case. A mediator can take off their rose-colored glasses and show the warts and blems on the beloved. And, as Tax Court cases involve multiple issues and often multiple years, mediation can serve to effect settlement of even more issues and years, potentially even years not before the Court, than a formal opinion.

Of course, it was generally agreed that expert testimony cases are the best candidates for mediation; “hottubbing” the experts (even though never so-called) is the best method of trying to reach some kind of useful consensus, or to cull the incurable expert who is playing advocate. And Judge Holmes is once more vindicated, as valuation cases are best candidates for mediation.

I found the reticence of OCC’s representative, Shawna A. Early, Esq., left me questioning to what extent, if at all, OCC wants to play in this sandbox. Is OCC afraid that mediation might lead their side to give more than they might get from a judge? Of course, OCC has no worries about legal fees and disbursements.

Howbeit, I’d really like to know what my readers have experienced. Having been a mediator myself once, I found it rewarding.

Occasionally, but more often than I’d like, a case that promised good, sustained blogfodder turns out to be a damp squib. The bifurcated trials in William M. Hefley and Aimee J. Hefley, T. C. Memo. 2024-4, filed 1/9/24, go by the board, as Aimee withdraws her petition to review denied innocent spousery (T. C. Memo. 2023-4, at p. 3, footnote 4), leaving us with the SNOD for three (count ’em, three) tax years.

It’s a bunch deductions substantiations (hi, Judge Holmes), and as Wm and Aimee put in no evidence, IRS wins on a walkover. Apparently Wm and IRS were prepared to sign to a supplemental stipulation that would have maybe allowed some of the disputed deductions. Aimee balked, so the supplemental stip can’t go in on the trial, T. C. Memo 2024-4, at p. 4. And neither Wm nor Aimee offered anything else.

When I saw the Hefleys show up on the website today, I cyberthumbed through my old blogpost “Slipped Through The Cracks?” 11/15/19, which it turns out had gotten six (count ’em, six) views in recent days. Maybe some people knew something was up; I wish they’d told me.

If you read that blogpost, you can see why I hoped for better than this.

Carl K. Klotzsche, Docket No. 11833-23S, filed 1/8/24, is a day ate and more than a dollar short, with his petition from $6800 in deficiencies over two years. He tried filing on Day 90, but claims DAWSON locked him out, so he finally filed on Day 91.

“This contention arguably raises section 7451(b)(1), which provides that when a ‘filing location is inaccessible or otherwise unavailable to the general public on the date a petition is due, the relevant time period for filing such petition shall be tolled for the number of days within the period of inaccessibility plus an additional 14 days.’ DAWSON is a ‘filing location’ under this provision. Sanders, 160 T.C., slip op. at 9; see § 7451(b)(2)(B).

‘To determine whether the tolling period under section 7451(b)(1) applies to an electronically filed petition, the Court distinguishes ‘between the availability of the Court’s system and user-specific issues.’ Sanders, 160 T.C., slip op. at 10. A DAWSON outage that affects the public’s ability to file petitions renders DAWSON ‘inaccessible or otherwise unavailable to the general public,’ thereby triggering the tolling period. See id. at 11. Conversely, problems that an individual filer experiences while DAWSON is operational do not trigger the section 7451(b)(1) tolling period. See id.

“In his Response petitioner acknowledges that he could access DAWSON on [Day 90], but alleges that he could not upload his Petition onto the system despite several attempts. However, the Court’s own records show DAWSON was operational at all relevant times. The Court’s website allows users to view DAWSON’s system status. See United States Tax Court, https://status.ustaxcourt.gov/. The system recorded no downtime on [Day 90].” Order, at p. 4.

Sanders, of course, is poor Antawn Jamal Sanders, 160 T. C. 16, filed 6/20/23, whose sad tale I told in my blogpost “In The Midnight Hour,” 6/20/23. Antawn was eleven ( count ’em, eleven) seconds late with his filing.

Carl shares his fate, and Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan tosses him.

Taishoff says it might be well, despite all the encouraging words on the Tax Court website, that if you’re going to file electronically, you have a fourteen-year-old IT wizard handy (unless you’re a fourteen-year-old IT wizard yourself) as you log on and prepare to file. And have a prepaid envelope from an approved PDS addressed to The Glasshouse on DAWSON’s Creek ready to send off with a duplicate original petition in it, in case the new, improved, jim-handy (ya sure, ya betcha) DAWSON website leaves you up DAWSON’s creek.

No, not CA, LA. William E. Frazier and Mary A. Frazier, et al., T. C. Memo. 2024-3, filed 1/8/24, own LHDC, a C Corp that administered for years at issue the Federal Section 8 rent subsidy program for Shreveport and Jefferson Parish. One of its ex-employees opened her own operation in Plaquemines Parish, but needed back-office back-up, and would pay to use LHDC’s employees and knowhow.

Problem was Gary Lala. When LHDC’s contract with Jefferson Parish was up for renewal, Lala, former chair of the Public Housing Agency that oversaw the operation,  threatened to call his friend, the current chair, and get the contract unless paid off. William and Mary did, making Lala a no-show VP of LHDC. When the ex-employee asked to pay LHDC for the aforesaid back-up, William and Mary tried to cut out Lala (the “leech,” T.C. Memo. 2024-3, at p. 19) from his piece of that action. The deal was LHDC was to acquire 50% of the ex-employee’s operation in exchange for services, but the partnership interest was put in William’s name.

So for years at issue William reported the income from the partnership, with a “dummy deduction,” as all the cash went to LHDC. IRS claims substantial underreporting.

Judge Morrison gets this mess, and unscrambles it in 173 (count ’em, 173) pages. IRS leans on the late-filed returns claiming ownership in William, but William and Mary have enough evidence to get around Danielson. William and Mary aren’t disavowing the deal they made with ex-employee. And tax reporting isn’t dispositive of the real deal.

LHDC has some heavy unreported income, William and Mary don’t.

There’s also 1030 stock trades, with short-term and long-term capital gains to unscramble, and partnership taxation of cash distributions in excess of outside basis. And both sides’ trial prep isn’t of the highest order, as copies of 1040s as filed never make it into the record.

William and Mary dodge a big bullet, and William’s dementia helps knock out some add-ons.

LA skullduggery is no worse than in Excelsiorland.

The CLEfloggers haven’t homed in on this one yet, but I offer it to them free, gratis, and for nothing, as Judge Christian N. (“Speedy”) Weiler has a bombardment of motions in limine (to exclude or preclude) both sides’ experts.

Both IRS and Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner et al., Docket No. 12235-20, filed 1/5/24, are sniping at each other’s experts, and Judge Speedy Weiler has to clean up the battlefield.

To begin with, Judge Speedy Weiler invokes FRE, Daubert and Kumho Tire. So he’s “gatekeeper,” or more accurately goalkeeper, as the shots just keep on comin’. The expert must furnish a written report as his/her direct testimony (Rule 143), whereby to enlighten the trier of fact on matters of fact outside common knowledge.  Relevant, reliable, well-supported, and untainted by wholly speculative opinion are the signposts.

One report is a collaboration, the expert relying upon and adopting the conclusions of various other experts who were in on the tackle. That’s OK; adoption let them in.

A cover letter is sufficient signature to satisfy Rule 143(g), and again the results of others are adopted, although the word “adopted” is not used. Order, at p. 3.

Another petitioner’s expert is faulted for filing “…a two-page letter from Mr. H, which spoke about a ‘Permit and Compliance Synthesis Report’ written by him, a resume, and what respondent calls ‘589 pages of attachments.’ Additionally, respondent asserts that Mr. H’s compensation for his testimony was listed, but his compensation for authoring his report was not listed, which is another, independent failure to meet the requirements of Rule 143(g). The Court finds that respondent’s objections to Mr. H’s report and proposed testimony goes more to weight, rather than compliance (or lack thereof) with Rule 143(g). The Court is not inclined to grant Respondent’s Motion in Limine at this time. Accordingly, the Court will deny, without prejudice, Respondent’s Motion in Limine to Exclude from Evidence the Report and Proposed Testimony….” Order, at p. 4. (Name omitted).

Once again, the multiple-author issue is raised. IRS claims Rule 143 is a variant on China’s one-child policy: each expert’s report is the child of one parent. Judge Speedy Weiler nixes that with Judge Halpern’s opinion in Carter; see my blogpost “Judge Holmes Got It Right,” 11/6/23.

A couple petitioner’s attacks (hi, Judge Holmes, happy new year) on IRS’ experts as professional witnesses goes to weight, not admissibility. Note the attacks on IRS’ usual experts is the coming thing. And one report is helpful, and to the extent unreliable or impermissible advocacy, that can come out in voir dire if IRS seeks to qualify the witness. Order, at p. 6.

Next, the buckshot approach. “Petitioner asserts that matters concerning congressional-inducement-motive should be decided in a partner-level proceeding; such matters should not be decided in this partnership-level proceeding. Petitioner makes this motion under FRE 401, 402, and 403; petitioner argues that evidence regarding congressional-inducement-motive is irrelevant to the instant case. In the alternative, if such evidence is not irrelevant, its probative value is substantially outweighed by a danger of confusing the issues, undue delay, or wasting time. Specifically, petitioner alleges such evidence will bury critical evidence, confuse the issues, unduly extend trial, and waste the time of both the Court and the parties. ” Order, at p. 7. Denied without prejudice, since Petition didn’t say exactly what evidence they were seeking to preclude. Object on the trial.

Petitioner wants a BoP shift because IRS’ appraiser gave numbers above those in the FPAA. That is a classic nonstarter, as Judge Speedy Weiler plays preponderance-of-the-evidence countergambit. Order, at p. 8.

No joy here. Maybe it’s better to try the case, guys.

Ex-Ch J L. Paige (“Iron Fist”) Marvel leads a microcaptive insurer around by the commnly accepted idea of insurance in Terence J. Keating and Janet D. Keating, et al., T. C. Memo. 2023-2, filed 1/4/24. Yes, there’s a real insurable risk (workers’ comp claims), and the microcaptive was organized and operated in accordance with the law of its domicile (Anguilla).

But the backdated documents, sliding-scale and exorbitant premiums, nonexistent or at best slapdash underwriting, roundtripping cash, and loans to principals of the captor seriously unmoor the captive from the Section 831(d) safe harbor. It isn’t insurance as commonly understood. And the microcaptive is a standalone corporation, so the captors can’t claim whatever legitimate cash it holds as a reserve for self-insured claims.

Ex-Ch J Iron Fist collates all the past microcaptive learning, from Rent-A-Center to Avrahami to Caylor Land to Reserve Mech. to Syzygy. I’ve blogged them all (or almost all), but ex-Ch J Iron Fist saved me the trouble of finding my blogposts, and you the trouble of reading them.

This opinion sets forth exactly how not to do it.

Looks like Tax Court is giving the Supremes the Galatians 3:25 treatment again, as an IRS miscue gives Douglas Dodson and Rebecca Dodson, 162 T. C. 1, filed 1/3/24, an extra 57 (count ’em, 57) days to petition the SNOD. IRS’ attempt to revoke the erroneous dating of SNOD 1 with SNOD 2 stumbles over the last sentence of Section 6213(a), which says the date IRS puts as the last day to petition controls. That sentence was added by the 1998 IRS Restructuring and Reform Act, the wonderful enactment that gave us the Boss Hoss. The idea was to help the hapless petitioner who couldn’t figure out when to file by having IRS give a date certain.

There were two purported SNODs, issued one day apart. Both listed the identical years and taxes. The only difference was that SNOD 1, mailed in October, listed last day as December of following year, rather than January of that year. SNOD 2 “bears a stamped date specifying January [following year], as the last day to file a petition. The second notice is accompanied by a cover sheet stating: “PREVIOUS NOTICE SENT WITH INCORRECT DATE. CORRECTED NOTICE WITH CORRECT DATES.” The second notice does not differ from the first notice in any other material respect.” 162 T. C. 1, at p. 3 (Footnote omitted, but it says pages were in different order in SNOD 2; apparently doesn’t matter).

Doug and Rebecca claim they never got SNOD 2, and have USPS printouts for SNOD 2, not showing delivery.

Ex-Ch J L. Paige (“Iron Fist”) Marvel deals with this summarily. SNOD 1 is clearly a SNOD; all boxes checked, and the date is clear. No consent by petitioners to revoke SNOD 1 and sub in SNOD 2, so Section 6212(d) and Rev. Proc. 98-54, 1998-2 C.B. 529, 530 (10/26/98) are off the table, whether or not Form 8626 must be filed.

And that Doug and Rebecca had counsel is nothing to the point.

“Congress could have used narrower means to advance the purposes motivating the enactment of the last sentence of section 6213(a), but it did not. The last sentence of section 6213(a) advances the avowed congressional purpose of enabling taxpayers to rely on the IRS’s computation of the period for filing a petition, which is more than enough legislative history for us to hang our hat on, proverbially speaking. It is not our role to question Congress’s choice of means in this regard…. Likewise, we see no warrant in the statutory text for considering whether petitioners are represented by counsel or prejudiced by the first notice, as respondent would have us do.” 162 T. C. 1, at p. 8. (Citation omitted).

Taishoff says Congress knew lawyers can’t add, either.

Petition timely at Day 147, 57 days late. What price Antawn Jamal Sanders, eleven seconds late? And where’s our disciplinarian?

Well, not enough people did, because he went broke. But his nonexistent bookkeeping and sketchy cooperation with IRS nearly got him a bushelbasket of unreporteds with Section 6663 fraud chops at no extra charge, until to the rescue drove Judge Elizabeth A. (“Tex”) Copeland.

You can read the story of Jesse Alvarado and Estate of Maria de Lourdes Velasquez, Deceased, Jesse Alvarado, Special Administrator, T. C. Memo. 2024-1, filed 1/3/24. The estate of the late Maria de Lourdes is stiped out per Section 6015 innocent spousery. Judge Tex Copeland takes IRS’ bank depositry and Cohanizes like a 2023 Dodge Challenger Hellcat SVT with the 6.2 hemi for only $76K (381 original miles).

When it comes to sorting out auction prices, finance company holdbacks and chargebacks, matching VINs to vans, and bearing heavily while giving Jesse the benefit of doubt due someone who “held a PTIN and prepared returns for some other taxpayers, and … was a commercial lender at Comerica Bank for over two decades.” T. C. 2024-1, at p. 23, Judge Tex Copeland is a grand master.

Judge Tex Copeland acquits Jesse of fraudulent intent. “However, a trained tax professional in Mr. Alvarado’s presumptive position—that is, palpably suffering business losses but  devoid of the records to prove it—reasonably could have believed his business would not have tax liabilities for the years in issue.” T. C. Memo. 2-24-1, at pp. 23-24. Tax pros are some of the worst at keeping their own records; shoemakers’ children never have clichés.

Jesse does owe the recomputed deficiencies, plus negligence chops and the late-filing add-on.

But when you read her opinion, and eyeball the 20 (count ’em, 20, and I have) pages of appendix, I venture to guess that you’ll agree with me that you might just maybe so buy a used car from Judge Tex Copeland.