No, I’m not pitching a charity. I’m repeating an ancient cliché, the one about the shoemaker’s children never having shoes (see infra, as my high-priced colleagues say). I don’t know what the parents of Paulette Thompson, T. C. Memo. 2024-14, filed 2/5/24, did for a living, or what shoes Paulette’s three adult children may have. But I do know that Judge Christian N. (“Speedy”) Weiler tells us that “Mrs. Thompson confirmed that she had acted as a paid return preparer and that she had prepared dozens of tax returns during the tax years at issue—just not her own.” T. C. Memo. 2024-14, at p. 15. In fact, in each of the three (count ’em, three) years at issue, Mrs. Thompson grossed north of $50K from tax prep, aside from her farming operations.

She didn’t file Sched C for any such year, but put the tax prep on her late-filed and unprocessed Sched F as “Custom Hire (Machine Work).” T. C. 2024-14, at p. 8.

Needless to say, Mrs. Thompson isn’t a great witness on the trial, and doesn’t fare so well in the substantiation stakes.  And the returns she did file, she filed late. Pro se, of course, so there are some painful “own goals” here..

I’ve said it before: “Often the shoemaker’s children have no shoes. Preparers often do what they’d berate their clients for doing.” See my blogpost “The Snitches and the Fiction Writer,” 6/1/16.

I wish I could buy stock in discovery; it is surely a growth industry, spread across numerous tax sectors, from Dixieland Boondockery to the popularly-viewed sunsets in Ogden, UT. Here’s Judge Christian N. (“Speedy”) Weiler’s take on the former, Longwood Preserve Holdings, LLC, Longwood Preserve Investors, LLC, Tax Matters Partner, Docket No. 12421-19, filed 2/2/24.

First, the Longwoods want a list of IRS’ third-party contacts. IRS says no, Greenberg Express [sic; should be Greenberg’s Express] and attorney work product for trial. Judge Speedy Weiler: “We disagree; and do not find the mere disclosure of names or identities of third parties that respondent has contacted to be privileged or otherwise in violation of Greenberg Express [sic].” Order, at p. 1. But as for what the above third parties told IRS, that’s out. Order, at p.2.

Next, the Longwoods want legal opinions and/or attorney work product, which they don’t get. They have BoP.

The Longwoods want an appraiser’s complete appraisal review report and work file, copies of all other appraisals of the property at issue, and all other valuations used as comparable for the conservation easement at issue here. IRS “objects to this request on the grounds of relevance, in violation of Rule 143(g) and on the grounds of privilege under the attorney work product doctrine. Finally, respondent notes how all responsive documents were furnished….” Order, at p. 2. Sustained.

Finally, “petitioner seeks an email from Mr. R [appraiser]…, which was referenced in documents received pursuant to a FOIA request. Respondent objects to the Request arguing the email is irrelevant to the proceeding and contains third party return information protected under section 6103. Since section 6103 protects third party tax information, including return information, respondent contends the exception under section 6103(h)(4)(B) does not apply here. Petitioner, on the other hand, contends an email is not a ‘return’ as protected under section 6103. In addition, petitioner argues the email is relevant because it contains a general discussion of ‘business use’ of donated property by respondent.

“The court does not find an email from Mr. Robertson to be a ‘return’ as contemplated under section 6103; however, the email may very well contain a taxpayer’s ‘return information’ as described in section 6103(b)(2). The Court notes how ‘return information’ does not include ‘data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.’ See I.R.C. §6103(b)(2). Accordingly, the Court will sustain in part, and overrule, in part, respondent’s objections to petitioner’s Document Request 5, and order that respondent produce the responsive email, after redacting any third-party taxpayer’s ‘return information’ contained in the email and as described in section 6103(b)(2).” Order, at p. 2. (Name omitted).

Happy hunting ground for discovery geeks.

Judge Gale drops a ten-page blockbuster in Whistleblower 4792-19W, filed 2/2/24, that will delight fans of blowerdom and win-your-case-at-discovery CLEfloggers alike, and perk up your dull-and-grey Groundhog Day.

9219 wants to depose a bunch IRS exam employees (hi, Judge Holmes) who oversaw the auf’ing of a couple exam types who saw tainted (privileged) material that 9219 cribbed from Target (the blown, not the store). IRS claims no jurisdiction, admin record only, and Section 6103 taxpayer info.

9219 wants Rule 74(c)(3) general deposition of a party without that party’s consent, but Judge Gale blows that off in a footnote. “Although petitioner’s Motion is styled as if it were made under Rule 74(c)(3), which relates to depositions of a party opponent without that party’s consent, the notices of deposition…cite Rule 74(c)(2), which relates to depositions of nonparties without the consent of the opposing party. Among the reasons that the distinction between Rule 74(c)(2) and (3) is significant is that a deposition of a nonparty under Rule 74(c)(2) generally may be used during a Tax Court trial or other proceeding only for impeachment of the deponent as a witness, whereas a deposition of a party opponent under Rule 74(c)(3) may be used for any purpose. See Rules 74(f), 81(i). Furthermore, because the Commissioner speaks only through formal policy pronouncements, informal statements of his employees do not bind him and are not properly treated as his statements as a party to a case before the Tax Court.  We will therefore treat petitioner’s Motion as seeking to compel nonparty depositions under Rule 74(c)(2), as indicated in the notices of deposition, and we will recharacterize it accordingly.” Order, at p. 1, footnote 2. (Citations omitted).

Taishoff says, “Hey Congress, y’all limited Section 6015(e)(7) innocent spousery to the admin record, but added ‘newly-discovered evidence,’ which let in testimony that neither CCISO nor Appeals could take nor have opposing parties cross-examined. How ’bout doing the same for Section 7623? The Ogden Sunseteers have no way of taking testimony either.”

Of course, what chance is there that the IRS exam crew will testify on the nonexistent trial under present law? Anyway, Judge Gale delivers a Super Bowl-worthy punt: let petitioner show “whether and on what grounds an order compelling depositions under Rule 74(c)(2) is appropriate in this case in view of Berenblatt v. Commissioner, No. 7208-17W, 160 T.C. (May 24, 2023), Van Bemmelen v. Commissioner, 155 T.C. 64 (2020), and any other authorities pertinent to the proper application in this context of the precedent of the U.S. Court of Appeals for the District of Columbia Circuit.” Order, at p. 10. May the luck of the Irish attend ye, boyo, as you read these cases. I’ve already blogged them.

As for jurisdiction, IRS examined 9219’s claim, didn’t reject it out of hand, and did collect money. The only issue is whether IRS used 9219’s stuff. That’s not jurisdictional, otherwise Tax Court would have to try the whole case on the merits to see if it had jurisdiction. See Whistleblower 972-17W, 159 T.C. at 7–10; see also Lissack v. Commissioner, 68 F.4th at 1321; McCrory v. Commissioner, T.C. Memo. 2023-98, at *6.” Better yet, read my blog; I’ve blogged all these for your reading pleasure.

As for Section 6103 (a hot item in recent news, as a violator just took a five-year fall), if 9219 is trying to supplement the admin record, let 9219 show same, and let the parties dish on what Whistleblower 972-17W adds to the mix.

I can’t close without drawing attention to Judge Gale’s tour d’horizon of blower discovery at Order, pp. 6-8. It’s a ready-made drag-and-drop for your memo of law file. A tip of the battered Stetson to His Honor; battle-weary practitioners will thank you. Sir.

Judge Patrick J (“Scholar Pat”) Urda weighs up both the venial and mortal sins of Bernard T. Swift, Jr. and Kathy L. Swift, T. C. Memo. 2024-13, filed 2/1/24, their microcaptive insurers, and the reinsurance pools into which same was plunged, and finds same did not operate an insurance business as commonly understood. Rather, the whole thing was a roundy-round untaxed cash stash, courtesy of Section 831(b).

To get the tax shield, the microcaptive has to have less than $1.2 million annual premium (hence micro) and, though owned by the ownership of the captor, must diversify its risk so as to satisfy the age-old principle that “by said mischaunce shall no man be undone, but that the losse fall lightlie upon manye, and not heavily upon fewe,” as the Act of Queen Elizabeth the First (1601) put it.

BT (that’s Doc BT) owned a string of urgent care walk-in clinics, of the “usual litany of sprained ankles, sore throats, runny noses, eye injuries, and whatnot” variety. T. C. Memo. 2024-13, at p. 3. Many doctors passed through the system, but tort-reforming Texas kept malpractice recoveries low. So Doc BT had a lot of taxable cash, and rising commercial malpractice premiums. So he did the cruise-destination number, setting up offshore microcaptives (in the BVI) electing onshore Section 953 tax treatment, with supposed pool reinsurers staying in friendly offshore islands (St. Kitts), and writing exotic policies, purportedly to spread the risks.

There’s fifty (count ’em, fifty) pages of deconstruction, but the bottom line is no one not terminally insane would pay the premiums the reinsurers were getting, unless they were getting back better than 97% as retrocessionaire, and paying almost no losses and no taxes.

Judge Scholar Pat quotes Avrahami, Caylor Land, Szyzgy, Rent-A-Center, and hoc genus omne to hit the microcaptives and Doc BT with deficiencies and the five-and-ten 20% substantial understatement chop.

At first glance, why a motion to change caption in Arthur M. Bialer, 6983-19W, filed 2/1/24, should require five (count ’em, five) attorneys from IRS counsel to reply is truly befuddling. But the motion is unique, in that it seeks to erase Art from 4-1/2 years and 152 docket entries by simply giving him a nom de guerre in lieu of the name by which he has been known in Tax Court and on this my blog the while.

As to the latter, see my blogpost “The Whistle Blown on Summary J,” 12/2/19, “All Those Old Familiar Faces – One Mo’ Time,” 1/31/23, and “Slamming The Window,” 10/11/23.

As to the five attorneys, Judge David Gustafson elaborates why he can’t oblige.

“Where proceeding anonymously is permitted, Rule 345 requires the public filing of redacted versions of the documents. Petitioner proposes no procedure by which his name might be redacted from all prior documents in the record and replaced with a pseudonym. Theoretically one would submit redacted copies of all 152 filings in this case, on which petitioner’s name would be obscured every time it appears, and then the originally filed documents would all be sealed, and the new redacted versions would be filed, so that the Tax Court’s public record in this case would no longer disclose petitioner’s identity. But petitioner has not submitted (nor proposed a process for submitting) such redacted versions.” Order, at p. 6.

Apparently Art discovered that prospective employers could find out he was a blower with a simple online search, four-and-one-half years into the process. Blowers do get special protections from possible bad effects of blowing via Tax Court Rule unavailable to the ordinary petitioner, but blowers have to ask for them upfront. Tax Court can’t unring bells.

Mike’s trusty attorney doesn’t help. “We cannot ascribe any weight to petitioner’s counsel’s assertion that he has only just learned that Tax Court orders are publicly accessible on the Court’s website, if this is proposed as a reason that the delay should be excused. Whether he knew the particular means by which our orders can be publicly accessed on the internet, he must have known (and his first request to proceed anonymously shows that in fact he did know) that one way or another the Tax Court is a ‘court of record’ (sec. 7441) and its records are public records (sec. 7461) to which the public has access (see Rule 27(b)(2). At numerous times throughout the pendency of this case, the parties have filed and objected to, and the Court has ruled on, requests to seal specific documents.” Order, at p. 4. If these documents weren’t public, why fight over sealing or unsealing them?

And that ten (count ’em, ten) items were sealed back in June, 2021, doesn’t mean everything was sealed. Or so says Judge Gustafson, although steady readers of this my blog will recollect that back in 2021 sealing one document sealed them all. See my blogpost “Beeves,”  7/16/21.

Better the dude should read my blog; most of the time he wouldn’t even have to read the Tax Court website. Apparently his client does read somebody’s blog.

“Petitioner expresses concern that blog posts on the internet reveal information about this case. That is, he acknowledges that such information is already available on the internet, and our own simple internet search using his name yielded links to copies of orders that we issued in this case (i.e., links on non-Tax Court websites that, of course, we do not control). The toothpaste is out of the tube.” Order, at p. 5.

Modesty forbids my speculating on whether Judge Gustafson reads my blog.

Motion denied.

Takeaway, a classic “Those who read it don’t need it, and those who need it won’t read it”: Like the hockey players say, “Ya step on the ice, ya gonna get hit.” If you want anonymity, ask for it from the getgo, and tell a real good story, as clear and convincing as you can make it.