As long as the Boss Hoss remains in the saddle before assessment, the Section 6751(b) signoff is timely, says Judge Travis A. (“Tag”) Greaves, to Amgen Inc. & Subsidiaries, T. C. Memo. 2024-38, filed 4/4/24.

Amgen is routinely audited. Three (count ’em, three) years before the SNOD at issue here, Exam sent Amgen a memo for previous years stating that Amgen’s Section 482 transfer pricing compliance might preclude any good-faith defense to chops. Then IRS audited years at issue here, proposed chops, got Boss Hossery, gave Amgen the thirty-day package with the chops in, and moved for summary J.

Amgen, being a C Corp, doesn’t get the Section 7491(c) shield for IRS burden of production, so Amgen is on their own.

Amgen claims the memo should have been Boss Hossed. IRS relies on 9 Cir’s Laidlaw’s approach, where Boss Hossery can take place any time before supervisor loses jurisdiction over supervised. Amgen’s trusty attorneys say Laidlaw’s was an assessable penalty, namely a Section 6011(a) failure to report a dodge, so no SNOD required. The SNOD here is nonassessable, because Section 6312(a), so let’s wait for 9 Cir to speak to this type.

Judge Tag Greaves won’t wear it.

“While petitioner is correct in noting the distinction in the type of penalties at issue, we recently held that for cases appealable to the Ninth Circuit, the holding in Laidlaw’s Harley Davidson encompasses penalties subject to deficiency procedures. See Kraske v. Commissioner, No. 27574-15, 161 T.C., slip op. at 7–8 (Oct. 26, 2023). Kraske directly resolves the issue, and therefore we see no reason to delay ruling on it.” T. C. Memo. 2024-38, at p. 5.

For the Kraske story, see my blogpost “Beating the (Dead) Boss Hoss,” 10/26/23.

So Tax Court follows Laidlaw’s, and since no one suggests that any of the Boss Hosses, whether at Exam, Appeals, or OCC, lost jurisdiction over any underling at any time during the chain of events that led up to the SNOD prior to assessment, and that the memo was issued four (count ’em, four) months before IRS even started auditing the years at issue here, Amgen loses.

As I said in my above-cited blogpost, “(O)nce again, the sloppy drafting of Section 6751(b) and the statute’s mechanical application by Circuit Courts of Appeals utterly eviscerate the protection sought in 1998 against IRS juniors using the threat of penalties to beat up taxpayers and obtain unjustified settlements.”

This title won’t hardly be a best-seller with the CLEflogging crowd. Everest Granite, LLC, Everest Plains Holdings, LLC, Tax Matters Partner, Docket No. 29477-21, filed 4/3/24, was engaged in a prolonged request for admissions pingpong, wherein IRS was distinctly getting the worst of it.

In fact, so far was IRS behindhand with responses that the Everests came within an inch of defaulting IRS altogether on deemed admissions, more particularly as bounded and described in that pinnacle of the trade press Tax Notes. Tax Notes carried the story I missed 6/22/23, the same day I also missed ex-STJ Eunkyong Choi’s ill-fated barrage of quick-toss OSCs. Hardly covered myself with glory, but neither did IRS’ counsel, whom I’ll call Mikey.

Mikey was relieved of duty after the Tax Notes spread. Let those who seek anonymity in Tax Court, fail, and wind up appearing in this my blog consider themselves lucky. Judge Cary Douglas Pugh recounts the tale of Mikey’s derelictions of duty, which will cost IRS the excess legal fees and costs to which the Everests were put by Mikey’s casual approach. I can’t think Mikey will get a big hello from Danny Werfel at the next IRS happy hour.

Judge Pugh rescues IRS from default, and hacks her way through the maze of discovery and summary J demands. I’ve often said I’m a great fan of both, but it takes two to play. And Judge Pugh is obviously unwilling to allow play to continue.

“We are not satisfied that the parties have righted the discovery ship and are even more unsure that an off-the-record conference call will resolve the parties’ differences. Therefore, we will set this case for hearing at our May 6, 2024, New Orleans, Louisiana, trial session.” Order, at p. 6. And she gives the parties a list of what to talk about.

“Furthermore, in light of the parties’ disputes and the attendant delays in preparing this case for trial or other disposition, we believe the continued use of requests for admissions would be counterproductive. We remind the parties of this Court’s emphasis on the stipulation process and the advantage of that process over other formal discovery options. See Branerton Corp. v. Commissioner, 61 T.C. 691, 692 (1974). To the extent the parties seek agreement regarding specific facts, they should concentrate on stipulations of facts or, if necessary, motions to compel stipulation under Rule 91(f). We will look dimly on any future motions to compel discovery that do not relate to document requests. We will discuss at the May 6, 2024, hearing whether an outright ban on requests for admissions and certain formal discovery is warranted going forward.” Order, at pp. 6-7.

I fear that some less-than-diligent types will ruin useful tools for the rest of us. Lose your case at discovery, indeed.

Unless one is a professional gambler, that’s what the IRC says. Gambling winnings are ordinary income, gambling losses are itemized Sched A deductions. But the trusty attorney (whom I’ll call Shelly) for Karen Berlant & Wayne Rhine, Docket No. 34622-21L, filed palindromically on 4/2/24, has a novel twist.

K&W netted winnings against losses, came out behind (as must gamblers do) and reported neither.

I’ll give Shelly a mention-in-dispatches, because his bold attempts fall beneath the “Good Try” level, but is worthy of better than an “Oh Please.”

CSTJ Lewis (“Wotta Name!”) Carluzzo Judge-‘splains: “Relying upon a definition of wagering provided in Title 31 or the United States Code, petitioners argue that a gambling transaction should be considered an exchange of property. And, as petitioners correctly note, losses upon the exchange of property are deductible above the line. See sec. 62(a)(3). Petitioners distinguish the long line of cases holding that a gambling loss may only be deductible as an itemized deduction (professional gamblers excepted) by pointing out that none of the previously decided cases addressed the argument they present here, perhaps, as petitioners suggest, because the taxpayers in some or many of those cases were self-represented.” Transcript, at p. 7.

Except.

“The awkwardness of conceptualizing a gambling transaction as an exchange of property is a bit like trying to force a square peg into a round hole, as the saying goes. That awkwardness in and of itself makes petitioners position less than compelling, but more technical reasons suggest that the argument must be rejected.

“Section 62(a)(3) operates, as petitioners suggest, to allow losses from the exchange of property to be deduction in the computation of adjusted gross income, or ‘above the line’. But individuals are only entitled to deductions for losses as provided in section 165, and only losses incurred in the exchange of property fitting the description of a capital asset may be deducted by an individual. See secs. 165(f) and 1211.” Transcript, at pp. 7-8.

All K&W did was put up cash, hardly a capital asset. And granting their argument would strip nonprofessional gamblers of the Section 165(d) deduction they already have.

But Shelly isn’t done.

“Petitioners acknowledge the long line of authority that supports respondent’s position in this case but suggest that the authority reflects what was once a negative public impression of the activity. They point out the increase in the number of casinos over the past few decades and the more recent opportunities for gambling through Internet websites and argue that the change in public sentiment should result in a change in law respect to how gambling losses are treated for federal income tax purposes.” Transcript, at pp. 8-9.

No dice, says CSTJ Lew.

“Changes in the law on the basis of changes in public sentiment, however, are more appropriately given effect by the Congress rather than the courts.” Transcript, at p. 9.

A Taishoff “Good Job, First Class, with Oak Leaves” goes to the trusty attorneys for Mohamed K. Abdo and Fardowsa J. Farah, 162 T. C. 7, filed 4/2/24 (Happy Palindrome Day!), whom I’ll call Meg & Dave. Mo and Far are two weeks late and much more than a dollar short, when they petition their SNOD. Their last day in the Section 6213(a) 90-day stretch was 3/2/20, but they mailed their petition on Saint Patrick’s Day, 2020, from their home in OH.

Nevertheless Mo and Far have the luck of the Irish. Because Tax Court was under the COVID lockdown mail embargo between March 19 and July 9 that year. And because, as Judge Alina I. (“AIM”) Marshall judge-‘splains: ” On March 13, 2020, the President of the United States declared a nationwide emergency under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), 42 U.S.C. §§ 5121–5207, as a result of the COVID-19 pandemic (Nationwide Emergency Declaration). See Letter to Federal Agencies on an Emergency Determination for the Coronavirus Disease 2019 (COVID-19) Pandemic Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 2020 Daily Comp. Pres. Doc. 159 (Mar. 13, 2020). The President also approved major disaster declarations for each of the 50 states pursuant to section 401 of the Stafford Act. On March 31, 2020, Pete Gaynor, the administrator of the Federal Emergency Management Agency (FEMA), at the direction of the President, signed DR-4507-OH (Ohio Disaster Declaration), which declared the State of Ohio a major disaster area. See Ohio; Major Disaster and Related Determinations, 85 Fed. Reg. 26,702 (May 5, 2020). As with each other state disaster declaration, the Ohio Disaster Declaration identified the pandemic conditions warranting the declaration as “beginning on January 20, 2020, and continuing.” See id. at 26,703.” 162 T. C. 7, at p. 4.

This let Treasury set aside deadlines, leading to the famous Notice 2020-24, 4/9/20 (see my blogpost “Le Quinzième Juillet,” 4/10/20; but see also my blogpost “Too Late is Too Late,” 9/10/21).

Meantime, IRS churns out Prop. Treas. Reg. § 301.7508A-1(g), 86 Fed. Reg. 2607, 2613 (Jan. 13, 2021), which goes final and which says that late petitioning doesn’t get the mandatory 60-day push other acts get.  IRS says Chevron deference bars Mo and Far.

Mo and Far (ably represented by Meg and Dave) say the statute controls; the Reg. is invalid because Congress filled the field.

“Section 7508A(d)(1) provides that, in the case of any ‘qualified taxpayer,’ the period beginning on the earliest incident date specified in the declaration to which the relevant disaster area relates and ending on the date which is 60 days after the latest incident date so specified ‘shall be disregarded in the same manner as a period specified under [section 7508A(a)].” Section 7508A(d)(2)(A) defines a ‘qualified taxpayer’ to include an individual whose principal residence is located in a disaster area. Section 7508A(d)(3), by cross-reference to section 165(i)(5)(A) and (B), defines a disaster area as an area determined by the President to warrant federal assistance under the Stafford Act. Petitioners contend that they are qualified taxpayers because they resided in Ohio at all relevant times.

“Petitioners argue that Congress clearly intended section 7508A(d) to operate in a mandatory and automatic manner and, therefore, the Secretary’s interpretation of section 7508A(d) fails under Chevron step 1. Specifically, petitioners contend that section 7508A(d) provides a mandatory extension of the deadlines and gives no discretion to the Secretary.” 162 T. C. 7, at p. 10. They claim IRS is trying to subvert Congress.

But IRS isn’t done. What does a lawyer say when confronted with a clear statute?

“…respondent further contends that the statute is ambiguous in two ways: First, Congress did not address what specific time-sensitive acts are postponed pursuant to section 7508A(d), and second, Congress did not directly address federally declared disasters without an incident date under section 7508A. In respondent’s view, the regulations are necessary to resolve these ambiguities.” 162 T.C. 7, at p.12.

Any lawyer who can’t find an ambiguity should find another way to make a living.

But Meg and Dave have a table, showing exactly where Congress lets IRS decide, and where discretion was off the table, 162 T. C. 7, at p. 15, which Judge AIM Marshall annotates.

And the table clears the boards. The contrast in language between 7508A(a) and (d) o’ercrows IRS’ wordscrabble. And the heading “Mandatory 60-day extension” while not dispositive, nevertheless provides “… an instance in which the heading is of some use for interpretative purposes, and it supports our reading of the statute.” 162 T. C. 7, at p. 17. (Citations omitted).

As for what acts are subsumed under the mandatory 60-day statutory push, Judge AIM Marshall finds no ambiguity.

“Having given full consideration to section 7508A(d) and its context, we must agree with petitioners that respondent’s interpretation conflicts with both the plain wording and the mandatory and specific nature of subsection (d). Postponement of any section 7508(a)(1) act would not be mandatory if it needed to be triggered by a discretionary act of the Secretary, who could use his discretion not to act at all. Instead, we think Congress’s intent is clear. For a defined person (a ‘qualified taxpayer’), a defined period (‘beginning on the earliest incident date . . . and . . . ending on the date which is 60 days after the latest incident date’) ‘shall be disregarded in the same manner as a period specified under subsection (a)” of section 7508A, that is by mandatorily and automatically disregarding ‘whether any of the acts described in paragraph (1) of section 7508(a),’ including the act of filing a petition with the Court, ‘were performed within the time prescribed therefor.’” 162 T. C. 7, at p. 20.

IRS fights to the finish; there is no incident date in the COVID declaration. Meg and Dave say, “So what? There was one in the OH declaration thereunder, namely, viz., and to wit, 1/20/20.”

IRS’ ex post facto regulatory binge doesn’t work.

Ch J Kerrigan, and Judges Foley, Buch, Nega, Pugh, Ashford, Urda, Copeland, Jones, Toro, Greaves, and Weiler are on board with this.

Judge Ronald L. (“Ingenuity”) Buch concurs, noting that Chevron may be on the way out, as the Supremes have granted cert in a case to reconsider. Howbeit, “Over a century of precedent supports the unremarkable proposition that ‘[a] regulation to be valid must be reasonable and must be consistent with law.’ Before Chevron, it was clear that ‘regulations, in order to be valid, must be consistent with the statute under which they are promulgated.’

“In recent years, the Supreme Court has held regulations to be inapplicable with only a fleeting reference to Chevron…,  or without referencing Chevron. And the Supreme Court has specifically stated that it ‘need not resort to Chevron deference . . . [when] Congress has supplied a clear and unambiguous answer to the interpretive question at hand.’” 162 T. C. 7, at p. 24. (Citations omitted).

Judges Nega, Ashford, Urda, Copeland, Toro, and Greaves agree.

Judge Courtney D. (“CD”) Jones says this case strikes a blow for Rare Noodledom. Hallmark Collective and Sanders keep a consistent tone. When Congress sets a limit, game over. Culp doesn’t apply outside 3 Cir, and cert has been sought there.

“Today, the opinion of the Court holds that section 7508A(d) provides for an unambiguously self-executing postponement period for certain acts set forth in section 7508(a), including the filing of a petition for redetermination with the Tax Court. § 7508(a)(1)(C); see op. Ct. p. 18. This position is consistent with the Court’s prior decisions in Hallmark and Sanders that the deadline under section 6213(a) is jurisdictional, because unlike equitable exceptions, statutory exceptions to jurisdictional deadlines are of course permissible. Moreover, our prior decisions in Hallmark and Sanders are further undergirded by the jurisdictional nature of the AIA, codified under section 7421(a)….” 162 T. C. 7, at pp. 26-27.

Judge CD Jones points out that assessment and collection are as essential as barring injunctions to prevent collection and enforcement. And as I have pointed out, the automatic stay in Section 6213(a) is a narrow exception to Anti-Injunction Act’s high wall against interference.

Judge Greaves is OK with the Section 6213(a) part. Judges Buch, Nega, Urda, Copeland, nd Toro agree with it all.

Suzanne M. Frost, Docket No. 2287-21L, filed 4/1/24, is fighting both the seven-figure deficiency from two (count ’em, two) years of ex-spouse’s construction operation, and the interest and add-ons resulting therefrom.

IRS’ bankruptcy expert concedes that Year One add-ons (late filing, late paying) were due more than three (count ’em, three) years before Suzanne petitioned, as due on the April 15 of following tax year. Hence, though assessed and not disputed in the bankruptcy proceeding, the Year One add-ons are included in Suzanne’s discharge. See Order, at pp. 13-14, for the whole story about what is and isn’t discharged in bankruptcy. Might be a good question on the next EA exam.

But the rest of Suzanne’s taxes are in. IRS has both SNOD and CML (Certified Mailing List), and that the SNOD doesn’t have the certified mail number on it doesn’t matter. Suzanne’s claim she never got the SNOD doesn’t count, as it was mailed to last known address. Anyway, Suzanne had a chance to contest in the bankruptcy proceeding she filed, and didn’t contest.

Judge Elizabeth A. (“Tex”) Copeland, though denying Suzanne summary J on anything, notes IRS waited seven (count ’em, seven) years before going after Suzanne, so Suzanne wants interest abated. IRS says Suzanne caused the delay when she filed FOIA claims and innocent spousery (denied). Judge Tex Copeland says those are fact questions, not suited for summary J.

As to innocent spousery, “(I)t is not clear from the record whether Ms. Frost received the final determination letter, the mailing of which is reflected on the CML. Neither party has produced a copy of the final determination letter; and, because of that, there are genuine issues of material fact relevant to the parties’ innocent spouse relief dispute.” Order, at p. 15. (Footnote omitted, but read it.).

“In his Motion, Respondent contends that Ms. Frost’s actual receipt of either the Notice of Deficiency or the final determination letter is unnecessary ‘to limit [her] from raising a spousal defense as the claim does not dispute the existence of the liability.’ Respondent cites no caselaw to support his position.” Order, at p. 15, footnote 20.

Innocent spousers, please copy.

A Taishoff “Good Try” to Suzanne trusty attorney, whom I’ll call Chris.