No, there’s neither porridge nor dorm rooms in The Glasshouse in The City of the Unenfranchised. Judge Patrick J. (“Scholar Pat”) Urda, a true polymath, denies a spot for the interloper Goldilocks therein.

Lontrac Enterprises, LLC, Lontrac Investors, LLC, Tax Matters Partner, Docket No. 272-18, filed 8/22/24, still gamely pitching after yesterday’s brush-off of a couple their exhibits (hi, Judge Holmes), want to squelch Boss Hossery.

The Lontracs claim the RA who handed out the chops had two (count ’em, two) immediate  supervisors, one of whom gave the Section 6751(b) sign-off too soon, while the other gave it too late.

” We are not persuaded that Lontrac Investors is entitled to summary judgment on this issue. ‘[A]n agent’s “immediate supervisor” is most logically viewed as the person who supervises the agent’s substantive work on an examination.’ Sand Inv. Co., LLC v. Commissioner, 157 T.C. 136, 142 (2021). This depends on who had the ‘familiarity with the facts and legal issues presented by the case . . . [so as] to supply the approval that Congress believed desirable.’ Id. In this case, both SRA W and SRA G apparently supervised RA T’s work, raising factual questions as to who was the immediate supervisor for purposes of section 6751(b) and whether both were actually immediate supervisors who could approve penalties at different stages in the process.” Order, at p. 2. (Names omitted).

For the Sand Investors‘ story, see my blogpost “Changing Hosses in Midstream,” 11/23/21.

But Judge Scholar Pat’s real bœuf with this move gives me the title for this sermonette.

“… Lontrac Investors’ motion with respect to penalty approval seems to employ a Goldilocks strategy, whereby SRA W’s approval was too early and SRA G’s too late and none was just right. Neither the factual record nor legal principles annunciated by this Court or the U.S. Court of Appeals for the Eleventh Circuit support Lontrac Investors’ request for summary judgment on this point.” Order, at p. 2. (Names omitted).

Bears are safe at US Tax Court; Goldilocks doesn’t have a look-in.

I’m not sure what advice to give Lontrac Enterprises, LLC, Lontrac Investors, LLC, Tax Matters Partner, Docket No. 272-18, filed 8/21/24. A docket search shows they’ve been through a number of trusty attorneys; I don’t know any more than any of them.  But the last time the Lontracs showed up here on this my blog, I stated that  their “free-swinging demands for depositions of IRS personnel and production of their employment files are out.” See my blogpost “Practice Tips – Part Deux,” 2/22/24.

Now the Lontracs want to lodge the activity record of an IRS examining officer and an IRS Notice of Proposed Adjustment (Greenberg’s Express, anyone?). They picked up both in informal discovery.

Judge Patrick J. (“Scholar Pat”) Urda, a stickler for proper procedure, sends the Lontracs off again, as he did back on 2/22/24. There’s no lodging at The Glasshouse.

“The documents lodged with the Court appear to be in the nature of evidence that petitioner wishes the Court to consider. The Court’s rules permit the introduction of such evidence through the stipulation process or as proposed trial exhibits with ultimate admissibility determined at trial.” Order, at p. 1.

So if IRS won’t stip, the Lontracs can treat them as proposed trial exhibits, and try to get them in on the trial.

I wouldn’t bet the ranch on it.

I’ll borrow a wee bit N’Awlins flavor as I mention Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan’s curb-kick of Oakbrook Land Holdings, LLC, William Duane Horton, Tax Matters Partner, Docket No. 5444-13, filed 8/20/24.

Yes, dat (sorry, that) Oakbrook, the one where “Highly Contestable” got brushhogged via Valley Park Ranch. See my blogpost “‘Highly Contestable’ Gets Brushhogged,” 3/28/24, for the skinny.

Well, looks like the Oakbrook crowd read either Valley Park Ranch or my blogpost (or both), because ninety (count ”em, ninety) days later, they moved for reconsideration, claiming change in law. Ch J TBS says they mean Rule 162 vacation, but mox nix, whatever they want, they’re not getting it. The Supremes denied cert after 6 Cir affirmed IRS a year before this motion, so Valley Park Ranch has ridden off into the sunset.

“Except for very limited exceptions, this Court lacks jurisdiction once a decision becomes final within the meaning of section 7481. As relevant here, a decision of the Tax Court becomes final upon the denial of a petition for certiorari, if the decision of the Tax Court has been affirmed or the appeal dismissed by the United States Court of Appeals. See §7481(a)(2)(B).” Order, at pp. 1-2. (Footnote and citations omitted, but see infra, as my expensive colleagues would say, for the footnote).

“As a general rule, the finality of a decision is absolute, with the few following exceptions: (1) where there was fraud on the Court, (2) where the Court never acquired jurisdiction to make a decision, and (3) where the Court discovered a clerical error after the decision had become final.” Order, at p. 1, footnote 2. (Citations omitted).

Just as important is 6 Cir’s mandate; and a mandate is what the appellate court told the lower court to do. 6 Cir affirmed Tax Court’s decision.

And as we’ve seen again and again,  when mandate is on the menu, “(T)hat court cannot vary it, or examine it for any other purpose than execution; or give any other or further relief; or review it, even for apparent error, upon any matter decided on appeal; or intermeddle with it, further than to settle so much as has been remanded.” In re Sanford Fork & Tool Co., 160 U.S. 247 (1895), at p. 255.

I’m going to give John S. Winkler & Lynne A. Price, Docket No. 25989-22, filed 8/20/24, a Taishoff  “Invention Class Honorable Mention” for John’s careful papering of his bid for his own Section 7430 legals and admins. Judge Travis A. (“Tag”) Greaves does toss John’s bid for legals notwithstanding.

Immediately upon receipt of the SNOD, “… Husband, in his capacity as attorney, sent himself and Wife a client engagement letter for his legal services. After respondent later conceded that petitioners actually owed no deficiency… Husband sent Wife an invoice for $6,147 for legal services rendered and a court filing fee paid during the dispute. On the same day, both Husband, in his attorney capacity, and Wife, in her petitioner capacity, submitted a Motion for Reasonable Litigation or Administrative Costs (Motion), requesting $6,087 in attorney’s fees and $60 for the Court’s filing fee. Days later, Wife wrote Husband a check for the amount indicated in the invoice” Order, at pp. 1-2. (Footnote omitted, but it says the check is attached to John’s motion to supplement his claim).

Ol’ Joe Alfred Izen, Jr., would be proud to welcome John to the Inventors’ Club. See my blogpost “The $2000 Misunderstanding,” 6/12/12, for Joe’s story.

Meantime, Judge Tag Greaves slams the door on John’s invention.

“In determining whether a fee was incurred, pro se petitioners cannot recover the costs of their own time. There are several reasons to justify this restriction. First, an individual appears before the Court as a petitioner or as an attorney—not both. In other words, there is no difference between pro se petitioner attorneys and pro see petitioner non-attorneys; in either instance a person may fill the role of attorney or petitioner. Second, to incur an expense, one must have liability to pay it. Critically, one does not have liability to pay one’s own self back.

“The restriction against collecting for one’s own labor is true when a petitioner-attorney represents his spouse as well.” Order, at pp. 2-3. (Citations omitted).

But John does win one: he gets the Sixty Georges.

Admins aren’t like legals; you can flunk one of the tests for legals (like unreasonably protracting the proceedings or not exhausting administrative remedies) and still get admins, as long as you substantially prevailed.

And it doesn’t matter if you hired counsel or were self-represented, you still paid those costs. If you got legals, part of the award would include some or all of the admins.

“Here, respondent only contends that petitioners unreasonably protracted the proceedings. However, even if that were so, we find that they may nonetheless be awarded the $60 court filing fee.” Order, at p. 4.

I make so bold as to suggest that what United States Tax Court needs is not some new, jazzy, jim-handy software, but rather an office for the self-represented. I know I’ve wearied my readers with this plea often enough; see, e.g., my blogpost “‘We Don’t Need No’ Department,” 2/15/24.

Yet another illustration, where even Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan is unable to help, Mary Addoo, Docket No. 10138-23L, filed 8/16/24, shows how thoroughly adrift pro ses consume “scarce judicial resources,” even as they are pointed at the LITCs and calendar call commandos.

Mary petitions eight (count ’em, eight) years, of which probably five (count ’em, five) are closed years, and for seven (count ’em, seven) of which IRS has issued neither SNOD nor NOD, nor has Mary properly filed Form 843 for interest abatement. Ch J TBS goes through all this stuff with painstaking diligence, which you can read for yourselves.

True, Mary has petitioned one year for which there is a NOD, so that stays in.

Again to quote the midnight telehucksters: “But wait, there’s more!”

“…petitioner seeks additional relief that the Court is unable to grant. Petitioner asks for a continuance pursuant to Rule 133. This case is not scheduled on a trial calendar, so this request is premature. Petitioner demands a ‘trial by jury,’ and requests that the Court compel the inspection of IRS and Department of State records for petitioner and issue a subpoena for her IRS file. However, the Tax Court does not hold jury trials, and petitioner’s request does not indicate that she has attempted informal discovery communication with respondent’s counsel in satisfaction of the Court’s procedures. Petitioner requests relief under I.R.C. section 7345(e)(2); however, she has provided no evidence that the Commissioner has certified to the Secretary of State that she has seriously delinquent tax debt.

“Finally, petitioner requests ‘legal assistance’ as a pro se litigant. Although petitioner is entitled to have the assistance of counsel, see Rule 24, she is not entitled to court-appointed counsel. It is true that under the Sixth Amendment to the United States Constitution, an indigent defendant in a criminal case may be entitled to appointed counsel where, ‘if he loses, he may be deprived of his physical liberty.’ However, petitioner’s physical liberty is not in jeopardy here and, therefore, the Sixth Amendment right to counsel has no applicability in this tax case.” Order, at p. 3. (Copious citation of precedent omitted).

Ch J TBS does tell Ch Clk Jeane to enclose a copy of the New York City LITC letter when he sends Mary the bad news.

Why the Ch J of the United States Tax Court needs to trouble herself with this stuff, when a second-year associate (given proper training; and I don’t mean one from a going-rate firm, although maybe one such might wish to consider seconding a bright youngster from the their tax department at full salary) could do this as well, eludes me.

Edited to add, 8/19/24: Ch J TBS vacates the above order 8/19/24, “Due to inadvertent clerical error and for cause.” No further explanation.

Edited to add, 8/23/24: Seems like the hereinabove aforementioned “inadvertent clerical error” is corrected today. The only errors I can find is in the docket entry for 8/16/24, where Respondent’s motion to dismiss is mischaracterized as petitioner’s motion, and the year 2018 is given as “20818.” Btw, what is an “advertent clerical error”? Isn’t every error “inadvertent”?

I’ve mentioned before that USPS collection times are critical for last-minute petitioners. My local post office has a battered sign next to the maildrop stating that mail deposited therein later 5 p.m. local time will bear the next day’s postmark. This notwithstanding that, by my arithmetic, there remain seven (count ’em, seven) hours to the day, and two (count ’em, two) more hours when the post office remains open and the maildrop available.

But, post-Antawn Jamal Sanders and Nutt, every second counts.

So, while Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan doesn’t let Ken Tran & Stephanie Tran, Docket No. 7967-24, filed 8/15/24, tell about how they mailed their petition on Day 90, because their envelope bears a clear USPS postmark showing Day 91, and Section 7502 says that’s conclusive, one might speculate this is another case of the maildrop after the cutoff.

True, Section 7502 is clear enough: registered or certified mail, or one of the “blessed communion, fellowship divine” among the PDS, is best.

But ordinary people don’t know that.

Maybe the easy times in Ogden, UT, are coming to an end, and the Ogden Sunseteers, a/k/a the Whistleblower Office, have to do more than say “we didn’t use the stuff” to blow off the blowers.

STJ Diana L. (“Sidewalks of New York”) Leyden thus instructs the Sunseteers in John R. Dee, Docket No. 12649-16W, filed 8/24/24. John claims the administrative record is deficient, as is the OS’ explanation of how they dealt with John’s blowing.

Front and center is John’s claim that he blew on Target’s expensing “expenses incurred for remodeling, enhancements, and asset replacements” rather than properly capitalizing same. Order, at p. 2. OS claim that Target submitting a Form 3115 change of accounting method around the time John sent in his Form 211, and that turned them on. But all the admin record shows is a disallowance of a deduction, no discussion of expense-vs-capital. Note that $130K of additional tax was collected after all adjustments were made as a result of the disallowed deduction.

Likewise OS claims that IRS didn’t audit Target’s income tax return. But John blew on Target’s employment tax shenanigans, which the Form 3115 didn’t mention. However, IRS did audit and found the FICA stuff OK for one year, but not for two (count ’em, two) succeeding years.

There’s already been one remand, but the copy of the supplemental notice that issued therefrom, which made it into the record, is undated, and anyway still doesn’t mention expense-vs-capital.

Now adding stuff to the admin record in whistleblower cases is the exception rather than the rule.

“We clarified that such supplementation is limited to three narrow circumstances: (1) if the agency ‘deliberately or negligently excluded documents that may have been adverse to its decision,’ (2) if background information was needed ‘to determine whether the agency considered all the relevant factors,’ or (3) if the ‘agency failed to explain administrative action so as to frustrate judicial review[.].'” Order, at p. 10. (Citations omitted).

A certified admin record is presumed complete, and the proponent of additions must provide clear evidence to show that OS considered the additions, although not including same in the admin record. The gaps between what OS said they did and what John shows they saw is enough to deny summary J to IRS.

So let the OS ” explain whether petitioner’s claim substantially contributed to the adjustment… regarding the reduced deduction for certain repairs; and (2) whether Taxpayer’s employment tax was examined for [Years Two and Three], if proceeds were collected with respect to any such examination, and if so, whether petitioner’s claim regarding Taxpayer’s FICA Tip Credit substantially contributed to the examination and collection of proceeds.” Order, at p. 14.

The Sunseteers get 60 (count ’em, 60) days to do it.

A docket search shows John is pro se. He gets a Taishoff “Good Job.”

No, not the 1970 Paul Williams’ – Roger Nichols’ booster rocket for The Carpenters, rather this is the story of Kwaku Eason and Ashley L. Leisner, T. C. Sum. Op. 2024-17, filed 8/13/24.

Ashley and Kwaku tried to make it big in real estate by giving $41K to one of those teach-you-to-make-a-fortune-in-real-estate courses, which didn’t, and cratered off the launchpad. Incidentally, taking Kwaku’s and Ashley’s Sub S and $41K with them.

Kwaku and Ashley filed an 1120S and Sched C, when they should just have flowed through whatever tax incidents there were to their 1040 MFJ. But CSTJ Lewis (“That Name Is The Best Thing in This Post”) Carluzzo won’t bother with technicalities.

“To keep things simple, however, we ignore the technicalities that govern the federal income taxation of an S corporation and its shareholders and focus on petitioners’ entitlement to the deductions as though the deductions were properly reportable as trade or business expenses on the Schedule C included with the return.” T. C. Sum. Op. 2024-17, at p. 3.

Anyway, Kwaku and Ashley only had stationery and business cards printed in year at issue, by which time the make-a-fortune dudes had folded, leaving Kwaku and Ashley both uneducated and out of business.

Unfeeling IRS disallowed all of Kwaku’s and Ashley’s Section 162 deductions. IRS had reasons, but CSTJ Lew only considers that the Sub S wasn’t a business yet.

“More likely than not, [make-a-fortune’]’s failure to fulfil its contractual obligations to petitioners frustrated their intention to start the business they had expected to conduct through [Sub S]. Whatever the reason, petitioners have failed to demonstrate that they were carrying on a trade or business themselves or through [Sub S] by the close of [year at issue]. That being so, they are not entitled to the deductions claimed on the Schedule C, and respondent’s disallowance of those deductions is sustained.” T. C. Memo. 2024-17, at p. 4.

Worse, IRS wanted a Section 6662(a) five-and-ten chop.  And on the face of it, IRS has checked the boxes. But CSTJ Lew says “no, Kwaku and Ashley acted in good faith.”

“Unlike countless other cases where the imposition of a section 6662(a) penalty is supported, at least in part, by the taxpayer’s claiming deductions that could not be substantiated, here there is no dispute that the expenses to which the disallowed deductions relate were paid.”  T. C. Sum. Op. 2024-17, at p. 5.

Not making money in Year One of a new business isn’t conclusive that you’re not trying.

“Further, reasonable minds could differ over the point in time, and/or the specific actions that establish when a business not subject to a licensing obligation begins. The Internal Revenue Code touches on the point, but little guidance is offered. For example, section 195(c)(2) provides, in relevant part, that ‘the determination of when an active trade or business begins shall be made in accordance with such regulations as the Secretary may prescribe,’ but there are no such regulations.” T. C. Sum. Op. 2024-17, at p. 5.

Taishoff says maybe there are no regs because it’s all facts-and-circumstances; every story is different. But this story is sad enough for CSTJ Lew to cut Kwaku and Ashley a wee bit slack.

“Petitioners spent a considerable amount to enroll in [make-a-fortune]’s courses during [year at issue]. They had business cards and stationery printed during [year at issue]. But for the failure of Education to honor its contractual obligations to them, they might very well have taken additional actions to allow for a finding that the business started during [year at issue]. We are satisfied that they believed in good faith that it did. They are not liable for a section 6662(a) penalty.”

Takeaway: If you’re starting up, get whatever licensure you need, print those business cards and stationery (even if all you send out are texts and e-mails), save and annotate your receipts, credit card and bank statements; and open that business bank account, even if you don’t get a toaster any more. And tell ’em Kwaku and Ashley sent ya.

If You Can’t Prove You Mailed It

Thus Judge Travis A. (“Tag”) Greaves admonishes three I(count ’em, three) IRS attorneys, who can allege only a NAMES transcript provided the last known address of Mark F. Coble, T. C. Sum. Op. 2024-16, filed 8/12/24. Except that address is in Seattle, WA, and Mark says he lived in Santa Fe, NM.

Alas, “…respondent did not include a copy of the NAMES transcript. The CEAS transcript lists petitioner’s address as the [Santa Fe] address.” T. C. Sum. Op. 2024-16, at p. 2.

Judge Tag Greaves judge-‘splains. “The IRS CEAS system is a web-based application. See Internal Revenue Manual (IRM) 4.10.15.1 (Sept. 21, 2018). IRS employees use the CEAS system to assist in examining individual returns, among other purposes.” T. C. Sum. Op. 2024-16, at p.4, footnote 5.

NAMES is a command code in the Integrated Data Retrieval System, which ties into the Name Search Facility, which is updated daily; unhappily, the NSF lists multiple addresses, and this time IRS guessed wrong.

However, mox nix.

“Respondent has failed to carry his burden of establishing that the notice of deficiency was properly mailed. Respondent has not presented any testimony regarding the mailing procedures used with respect to this notice of deficiency—such as through submitting an affidavit. Respondent must therefore establish proper mailing through presenting documentary evidence. To that point, respondent has not produced Form 3877 and cannot rely on the presumption of official regularity to establish proper mailing. As a result, respondent must present sufficient other evidence to establish proper mailing. To meet this threshold, respondent merely directs the Court to the tracking number stamped at the top of the notice of deficiency and an entry on the CEAS transcript. This type of documentary evidence falls short of what we have accepted in the past to show proper mailing in situations where the Commissioner does not present a Form 3877.” T. C. Sum. Op. 2024-16, at p. 6. (Citations omitted, but get them for your memo of law file.)

I’m sure Mark’s trusty attorney from NM Legal Aid’s LITC, whom I’ll call GA, has the citations; and now, as the petition is tossed for want of a valid SNOD and  3SOL has run on the year at issue, she also has a Taishoff “Good Job.”

It’s a year to the day since ex-STJ Eunkyong Choi departed US Tax Court with neither bang nor whimper. The chirp of the crickets is deafening as ever; the silence is as the roaring of mighty waters.

Why, oh why, is not a simple answer forthcoming? Tax Notes, a trade press stalwart, had a piece from no less than Keith Fogg, Esq., professor emeritus and retired honcho of the Harvard LITC, chronicling the event but not the why and wherefore. My request to Prof. Fogg for explication brought a cordial reply, but he could furnish no more than “what I have written, I have written.”

So I must join Inspector Lestrade, and ask “But what is the object of this deep deception, Mr. Holmes?” That’s Sherlock, not Judge Mark V.