Delta Investments, Inc., Docket No. 15731-23L, filed 5/13/24, avoids summary J sustaining a NOD on the NFTL IRS slapped it with for five (count ’em, five) years’ worth of FICA/FUTA.

Judge Elizabeth A. (“Tex”) Copeland isn’t convinced that DI’s in-house counsel (who didn’t enter appearance in this case, a good strategic move; he can then testify without the automatic exclusion Tax Court applies to attorneys for parties, despite the explicit language of ABA Model Rule 3.7(a)(3)).

IRS claims in-house counsel folded contesting liability at the CDP, after having raised it in the petition.

“In its Petition DI contends that ‘[a]t the time of the appeal’ it believed that certain of its tax liabilities had been paid. Respondent interprets DI’s statement to refer only to its request for a CDP hearing. We do not agree with Respondent’s interpretation. Claims in a petition ‘should be broadly construed so as to do substantial justice’ and a petition filed by a pro se litigant, as is the case here, ‘should be liberally construed.’ We interpret DI’s statement to mean that it challenged the underlying liability not only in the CDP hearing request but during the hearing itself. The administrative record does not support AO C’s assertion in the notice of determination that DI abandoned its challenge to the underlying liability. We conclude, based on discrepancies in the administrative record, that there is a genuine dispute as to whether DI properly challenged the underlying liability during the CDP hearing and whether AO C improperly refused to consider the issue. Summary judgment is therefore not appropriate in this case.” Order, at p. 7. (Name and citation omitted).

There’s also an apparent mix-up on the date the lien was filed and the date notice thereof was given.

And DI’s sole stockholder signed the petition as president of DI.

Takeaway- If counsel is going to be involved, note DI’s in-house counsel’s strategic move, for which he gets a Taishoff “Good Job, First Class, with Oak Leaf Cluster”. Maybe best for another officer of a corporation to appear and sign pleadings. And maybe consider this for other types of Tax Court litigation.

On the desk of Judge Joseph Robert (“JR”) Goeke stops the bucks sired by Heart Attack, “the biggest buck they [Dr. Gary M. Schwarz, co-star of Gary M. Schwarz and Marlee Schwarz, T. C. Memo. 2024-55, filed 5/13/24] had ever seen,” T. C. Memo. 2024-55, at p. 12.  Also nilgai, oryxes, and blackbuck, bass (both Florida and hybrid), and crested cormorants.

Dr. Gary ran a bunch ecotourism and hunt-for-fee operations, as well as real estate wheeling-dealing. So this is a goofy regulation case, except here the goofy regulation is Reg. Section 1.183-1(d)(1).

Dr. Gary can’t prove that the real estate appreciation he hopes will offset the seven-figure operating losses generated by his self-leasing operation. Hyping the lease rent makes ordinary losses in one entity out of passive gains to another.

His trusty CPA never asked for, nor saw, the leases, and, when he was showed them on the trial, claimed the appreciation should have been shown as gain each year, rather than at termination, when the improvements paid for by Dr. Gary’s operation belonged to the landlord. But the trusty CPA is good enough to get Dr., Gary off the 20% five-and-ten chops.

If you want to know how to run a TX ranch ecotourism business, Judge JR will tell you in exhaustive (if not exhausting) detail, 117 (count ’em, 117) pages’ worth, just as Judge Ruwe told us about how the Boston Bruins do a road trip (see my blogpost “Feed Those Bears,” 6/26/17), but looking at how the Bruins are doing just now, they would have better stayed at home). Who says tax law is dull?

Those my nearest and dearest (hi, Judge Holmes) who actually own a TX ranch should take a look.

But don’t do it like Dr. Gary.

“Many facts stipulated, alleged, argued, testified about, and otherwise presented to the Court in this case are, or appear to be, incorrect or misleading. The parties’ work occasionally reflected an uninspired attitude toward developing, trying, and briefing this case. As a result, many potentially relevant facts and arguments were undeveloped, ignored, misrepresented, and/or missed.” T. C. Memo. 2024-55, at p. 7.

And Judge JR is not about to seek Judge David Gustafson’s title as Obliging Jurist by trying their case for them.

“High up in the North in the land called Svithjod, there stands a rock. It is a hundred miles high and a hundred miles wide. Once every thousand years a little bird comes to this rock to sharpen its beak.

“When the rock has thus been worn away, then a single day of eternity will have gone by.” Hendrik van Loon, The Story of Mankind, 1921.

So one more little beak-slap at the side of The Rock of Svithjod at 400 Second Street, NW.

I have wearied my readers (these few, these happy few) before now with my reiterated recommendations for the improvement of the United States Tax Court, its operations and practices. I have regretted, and still regret, the necessity, but when I encounter such as Richard W. Medley, Docket No. 13511-22, filed 5/10/24, I again must suggest that Tax Court needs, and must have, some form of aid for the self-represented, whether an office for the self-represented, like the USDCs, or clerks or law secretaries deployed therefor.

I don’t have the latest statistics on the proportion of self-represented Tax Court petitioners, and I don’t know that Ch. Clk. Jeane and his subordinates keep any.* But a quick scan of any day’s docket shows a larger percentage of Tax Court pro ses than most, if not all, other Federal courts.

Mr. Medley wants STJ Adam B. (“Sport”) Landy to order IRS counsel and his own ex-counsel (who apparently bailed last year) to turn over files. Except ex-counsel “… stated to the Court that he returned to Mr. Medley ‘all materials (both hard copy and digital) Mr. Medley provided to Barnes Law at the outset of representation.’ Mr. Medley has not disputed receipt of these materials.” Order, at p. 2, footnote 2. So, since Mr. Medley tried neither informal nor formal discovery requests, his motion for discovery is tossed.

Mr. Medley also wants STJ Sport Landy to let him onto DAWSON to amend his petition and his reply to IRS’ answer, for which he’s already late. You can read STJ Sport Landy’s response for yourself at Order, p. 2. Spoiler alert- It’s strictly DIY.

Why judges and STJs need to be bothered with such stuff eludes me.

Now I know the urge to help is strong in Tax Court Judges and STJs. By way of illustration of the foregoing (as my high-priced colleagues would say), here’s Judge Christian N. (“Speedy”) Weiler testifying before the Senate Finance Committee in support of his appointment to the Tax Court Bench: “By my father’s example, he has shown me how to treat others with respect and kindness in all matters. My father has also shown me the importance of listening to my clients’ problems and how to work alongside them to help guide them to a resolution of their legal issue.” Opening Statement of Christian Weiler Nominee to be a Judge of the United States Tax Court, Senate Committee on Finance, July 21, 2020.

Far be it from me to disparage in the slightest Judge Speedy Weiler’s ideals, which all judges should embrace, or the assiduous practice thereof.

But might not a wise old clerk, or the equivalent of one of our State judges’ law secretaries, serve the same administrative function, guiding the perplexed and sparing both litigant and judge from the delay inherent in an overloaded docket? There are thousands of unnecessary orders issued to resolve problems that a phonecall (not The Phone Call), or a quick exchange of e-mails, with such a non-judicial assistant could solve. And expanding the Tax Court law secretaries’ role in this way could make that position even better training for whatever future path they follow.

I submit that at least part of the purported leisurely Tax Court atmosphere is caused by the dissipation of scarce judicial resources in administration. And it can be solved.

*Edited to add, 5/10/24: In point of fact, the hard laboring intake clerks and flailing date stampers in the fifty-year-old House That Vic Built do keep such statistics, among their other arduous labors. A tip of my battered Stetson to Sarah Silfies Finken, Esq., Administrative and Case Services Counsel, now serving as what we used to call an “acting jack”, an appointment without a rank, in Public Affairs, for turning me onto Page 21 of the FY2025 Congressional Budget Justification, wherein it is written “(I)n FY2023, taxpayers were self-represented (pro se) in 77 percent of the cases filed.” Jibes completely with what I thought; I doubt the number has changed since I started this blog. 

Once again, Judge Christian N. (“Speedy”) Weiler referees a discovery face-off between IRS and Carl B. Barney, Docket No. 5310-22, filed 5/8/24, with IRS looking for privilege wherever they can find it. You’ll find some backstory in my blogpost “A Retrieved Deposition,” 3/5/24. And if you’re a fan of unscrambling frittatas, Judge Speedy Weiler reprises Carl’s give-and-go with his for-profit colleges, and why Carl wants to bail from his Section 453 installment sale election, Order, at pp. 2-3.

As part of the bail, Carl filed three (count ’em, three) 1040-Xs, one for each year at issue. But before IRS could bounce them and hit Carl with a SNOD, IRS had to get an OK from the Joint Committee on Taxation (JCT), Congress’ uber-guru on taxation.

Much of the Order deals with IRS’ responses to Carl’s trusty attorneys’ last round of objections to what IRS claimed was privileged, which is the deliberative privilege of the Executive Branch and the client-attorney commonlaw privilege. Judge Speedy Weiler has the Cliff Notes in the Order, at p. 5.

But of course Carl’s trusty attorneys demand production of the Joint Committee stuff, to which IRS ripostes with US Const. Art. I, §6, cl. 1: “[F]or any Speech or Debate in either House [Senators and Representatives] shall not be questioned in any other Place.”

“The privilege is rooted in the separation-of-powers doctrine. Its ‘”central role” . . . is to “prevent intimidation of legislators by the Executive and accountability before a hostile judiciary.’” Eastland v. United States Servicemen’s Fund, 421 U.S. 491, 502 (1975). The Supreme Court has held that the Speech and Debate Clause provides ‘protection against civil as well as criminal actions, and against actions brought by private individuals as well as those initiated by the Executive Branch.’ Id. Legislators acting within the sphere of legitimate legislative activity ‘should be protected not only from the consequences of litigation’s results but also from the burden of defending themselves.’ Dombrowski v. Eastland, 387 U.S. 82, 85 (1967).

“In determining whether particular activities other than literal speech or debate fall within the ‘legitimate legislative sphere’ we are to look at whether the activities took place ‘in a session of the House by one of its members in relation to the business before it.’ See Kilbourn v. Thompson, 103 U.S. 168, 204 (1880). To that end, we must determine whether the activities are ‘an integral part of the deliberative and communicative processes by which Members participate in committee and House proceedings with respect to the consideration and passage or rejection of proposed legislation or with respect to other matters which the Constitution places within the jurisdiction of either House.’ Gravel v. United States, 408 U.S. 606, 625 (1972).” Order, at p. 6.

Judge Speedy Weiler’s biographical sketch doesn’t state whether he was on law review at Loyola of New Orleans, but if he wasn’t, he should have been. 

IRS flunks most of the privilege claims.

“There also remains the significant issue of whether the asserted speech and debate privilege extends beyond members of Congress or delegated congressional staff to include staff of the JCT. While we refrain from deciding the issue (which appears to be one of first impression), we are not inclined to extend the privilege beyond a member of Congress or his or her delegated congressional staff. Gravel, 408 U.S. at 625–28. In any event, respondent’s possession of the JCT documents may constitute a waiver of the congressional privilege. For example, while respondent has withheld a letter from JCT Chief of Staff Thomas Barthold to former IRS Commissioner Charles Rettig, it is unclear whether Mr. Barthold sent the letter at the behest of a committee member and why this letter remains privileged as it was sent to a member of the executive branch.” Order, at p. 8.

Anyway, IRS’ privilege log is “…incomplete or at a minimum too vague to determine whether a privilege applies. We do not accept respondent’s contention that ‘providing any additional information about the documents would reveal information subject to the asserted privilege;’ since we fail to see how disclosing the sender, recipient, date, or subject matter would otherwise disclose the underlying information within the document.” Order, at p. 8.

So Carl’s motion is granted in part, denied in part, and anyway without prejudice. Emphasis by the Court, and cheers from discovery geeks everywhere.

“Thou are a rare noodle, Master. Do what was done last time is thy rule, eh?” G.B. Shaw, Saint Joan, Scene VI

I’ve used that quotation before to call into question some hidebound adherence to precedent, but CSTJ Lewis (“A Rare Name”) Carluzzo shows that such adherence can serve the adherent well.

Justin M. Maderia, T. C. Sum. Op. 2024-5, filed 5/8/24, comes up light on the proof side when IRS claims he got $192K in constructive dividends from the lobster brokerage corporation, 50% of whose stock he owned.

As the case is a small-claimer, one expects something less than top-of-the-line lawyering, but CSTJ Lew is beyond unimpressed with both sides here.

“Few facts have been stipulated. The First Stipulation of Facts and the First Supplemental Stipulation of Facts consist almost entirely of documents. Many of those documents, apparently intended by the parties to ‘speak for themselves,’ have little to say. Other than the Stipulations of Facts no evidence was offered by either party. No witnesses were called at trial, and no other documents were offered into evidence. Nevertheless, in opening statements and closing arguments, counsel for the parties relied upon facts not in evidence to support their respective positions. Those ‘facts’ are ignored in this Opinion.

“At trial respondent objected to the admission of stipulated Exhibits 9-P, 10-P, and 11-P. According to respondent, the information in the documents is not relevant. Ruling on respondent’s objection was reserved at trial. After consideration of what little evidence we have, we find that the information in those Exhibits is probative to the imposition of the section 6662(a) accuracy-related penalty here in dispute. That being so, respondent’s objections are overruled, and the documents will be received into evidence.” T. C. Sum. Op. 2024-5, at p. 2, footnote 2.

Justin’s trusty attorney, whom I’ll call Gene, may have saved himself and his client with those disputed exhibits. As IRS deployed two (count ’em, two) attorneys here, SMH, as they say on their smartphones.

The lobster brokerage’s 1120 doesn’t show how any expense stated therein relates to the alleged deficiency, nor does Justin’s 1040 show any payments from lobster brokerage other than salary and wages. Nor does it (or the attorneys) talk about E&P. The SNOD does, it is presumed correct, and Justin doesn’t contest any expense item, nor deny that lobster brokerage had E&P.

His trusty attorney’s arguments about Exam miscues get run over by Greenberg’s Express. But Justin does claim that he was audited in prior years, and whatever he got in those years from the lobster brokerage settled out at Exam, so all he did in year at issue is what he always did before. I infer that this was the stuff of the disputed exhibits, in which case Gene gets a Taishoff “Good Job, third class.”

“Considering petitioner’s apparent consistent course of conduct with respect to positions taken on his federal income tax returns over a period of years and the results of the examinations of some for prior years, we find that petitioner acted reasonably and in good faith with respect to the underpayment of tax for [year at issue]. That being so, he is not liable for a section 6662(a) penalty for that year.” T. C. Sum. Op. 2024-5, at p. 5.

It’s been nine (count ’em, nine) years since I saw a serial bankruptcy filer show up in Tax Court. The previous case is to be found in my archive, wherein lies my blogpost “A True Rounder,” 4/20/15. But now Lisa M. Holley, T. C. Memo. 2024-54, filed 5/8/24, takes up the tactic.

I’ll let Judge Albert G. (“Scholar Al”) Lauber take up the tale.

“Upon review of publicly accessible court records, the SO ascertained that petitioner had filed for bankruptcy four times between 2016 and 2020. Each case was dismissed by the court, which determined that petitioner was seeking to delay collection efforts by the IRS and by United Healthcare, a judgment creditor. In her case activity record the SO noted the determinations by the bankruptcy court that petitioner had filed for bankruptcy in bad faith, had submitted false and misleading documents to the court, had made unauthorized payments during the bankruptcy case, and had engaged in efforts to hide income and assets.” T. C. Memo. 2024-54, at p. 3.

Lisa owed about $2 million in tax. The SO bounced her CDP for want of current compliance with estimateds. Read the opinion for more.

Turns out that when the SO told Lisa’s representative that Collections reckoned that Lisa could sell off some of her assets and do a PPIA, “(P)etitioner’s representative withdrew later that day. (The SO noted in her case activity record that ‘TP changes POAs frequently.’) Petitioner’s new representative contacted the SO…and reiterated petitioner’s desire for an IA. But the representative made no specific offer in terms of monthly payments or payment period.” T. C. Memo. 2024-54, at p. 4.

You can see where this is going.

The Section 6213(a) automatic stay, an analog to Bankruptcy’s11USC§362, gives support to the Hallmark Collective argument in deficiency cases.

Charles Dickens’ creation, to which I’ve referred before now, may be a misnomer. The word “circumlocution” means talking around, using a lot of words to avoid making an exact statement. Dickens’ creation did that, but also concocted spurious legislation, which purported to solve a problem, but left matters just as they were before.

Today we have a fine example of many words talking around the point.

Shielder Evondra Pressley, Docket No. 9471-22L, filed 5/8/24, petitioned something, possibly a NOD, judging from the “L” suffix. Shielder is pro se, hence her petition may be slightly less than perfect. IRS deploys three (count ’em, three) attorneys, all presumably adroit at drafting pleadings. Their efforts are not much better.

It falls to Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan to unscramble this frittata.

IRS moves for judgment on the pleadings.

“Given the relief sought in the Motion, that is dismissal, and the ground for that relief, that is that the Petition was not filed within the period of limitations prescribed by I.R.C. section 6330(d)(1), respondent’s Motion will be recharacterized and treated as a motion to dismiss for failure to state a claim upon which relief can be granted.” Order, at p. 1.

Of course, obeisance to Boechler, P. C., must be paid.

“Respondent’s Motion relies upon the undisputed facts in the record that show that the Petition was not filed within the period of limitations prescribed in I.R.C. section 6330(d)(1). Petitioner has not claimed, much less established, that equitable tolling extended that period to the date that the Petition was filed.” Order, at p.1.

One must ask what happened to the good, old-fashioned motion to dismiss for want of jurisdiction. Not to mention how a pro se like Shielder would know to plead equitable tolling.

The immortal words of Lt. Col. John McCrae, the Voice of Flanders’ Fields, echo today, as that patient and obliging jurist, Judge David Gustafson, confronts one whom Taishoff deems the successor to the late Fighting Joe Insinga.

That worthy successor, assisted by his zealous, trusty attorney (whom I’ll call Mike), is Arthur M. Bialer, Docket No. 6983-19W, filed 5/7/24.

For Fighting Joe’s farewell, see my blogpost “Taps for Fighting Joe,” 12/5/23.

Art has only furnished me with four (count ’em, four) blogposts to date, as against the late Fighting Joe’s 18 (count ’em, 18, and I have). But it’s early times yet, as Tax Court litigation goes; Art and Mike are clearly aboard for the long haul.

I won’t try to paraphrase or summarize Judge Gustafson’s latest attempt to do a Bletchley Park on a couple Art’s motions (hi, Judge Holmes).

This is such stuff as bloggers’ dreams are made on.

Yes, it’s another case of pushing the law to the limits, but it fails because of what was (or was not) within the envelope mailed by Milton Thomas Roberts, Docket No. 7011-22, filed 5/6/24. Milton Thomas was late with two (count ’em, two) years’ returns. IRS admits it got one of them. Milton Thomas claims he mailed both 1040s in the same envelope, and proffers PS Form 3800, U.S. Postal Service Certified Mail Receipt, claiming same is prima facie proof he mailed both.

Judge Courtney D. (“CD”) Jones says no, Section 7502 doesn’t save Milton Thomas.

“… section 7502 is inapplicable in this case. In the Petition, Mr. Roberts concedes that he did not timely file his return for taxable [year at issue]. Therefore, Mr. Roberts’s return for taxable [year at issue] would only be filed upon receipt of that return by the IRS, and the certified mailing receipt postmarked after the due date for filing the return is not prima facie evidence of the filing of the return. Estate of Wood, 92 T.C. at 796; see also §7502(c)(2). Nonetheless, Mr. Roberts asserts that he has provided evidence that he mailed his returns for [both] taxable years… in the form of a certified mail receipt. But Mr. Roberts did not include any return receipt as direct proof of actual delivery. Despite this fact, respondent acknowledges that he received Mr. Roberts’s return for [other] taxable year… which was purportedly sent at the same time as Mr. Roberts’s [year at issue] tax return. Nevertheless, Mr. Roberts has not set forth any evidence that the… package contained his return for taxable [year at issue]. Therefore, a genuine dispute remains regarding the issue of whether Mr. Roberts mailed—and respondent received—Mr. Roberts’s return for taxable [year at issue] at the same time it received his return for [other] taxable year…. Accordingly, we will deny Mr. Robert’s [sic] Motion for Summary Judgment.” Order, at p. 4.

Why does it matter? Because IRS denied Milton Thomas his alimony deduction for year at issue. Milton Thomas claims the SNOD resulting therefrom is too late per Section 6501, as what he filed was outside 3SOL; IRS says he never filed for year at issue, hence no SOL, although other year is out.

So the outcome must abide the trial.

Takeaway- If you’re past due date, even mailing Certified RRR won’t help you. IRS can still claim what you mailed wasn’t the magic paper. E-filing has its benefits.

No, not that phone call, the one that is every practitioner’s nightmare; I described it in my blogpost “The Phone Call,” 4/15/14.

This is Judge Goeke laying out the parameters for IRS telephonic testimony in the long-running saga of Scott A. Blum & Audrey R. Blum, Docket No. 5313-16, filed 5/6/24. Y’all will remember Scott, the toddler toy salesman turned computer millionaire; what, no? Then see my blogpost “OPIS Finis,” 1/18/12.

Judge Goeke doesn’t tell us why telephone testimony is allowed. I would have thought Zoom or equivalent, allowing observation of body language, would be a better choice when credibility of testimony is at issue. You can’t hear sweat or eyes turned away.

Howbeit, here’s what the terms are: “…the witnesses testifying by telephone are directed to complete their testimony: (1) with no notes or other documents/information accessible by them (unless permitted by the Court during the testimony); (2) with no one else present in the room with them; and (3) from a quiet location. If they plan to use cellular phones, the witnesses are also directed to testify from a location that they know to have good reception and to not view any text messages, websites, or other information during their testimony.” Order, at p. 1.

And to avoid the complications described in my blogpost “Oaths in Vietnam,” 3/30/21, “(T)he witnesses must also complete their testimony from the United States, and not be out of the country during the above-referenced Special Session.” Order, at p. 1.