When the Supremes bring the Administrative Procedures Act to bear upon the Executive Branch, new winds blow through Ogden. So STJ Diana L. (“Sidewalks of New York”) Leyden wants to hear from IRS about admitting extrarecord documents to the administrative record, and the impact of Loper Bright Enter. v. Raimondo, 603 U. S. _____ (2024), in John Dee, Docket No. 26749-16W, filed 9/9/24.

John was here last month with his expansive motion; see my blogpost “Watching Fewer Sunsets in Ogden,” 8/14/24.

Maybe the Ogden Sunseteers’ clampdown on expanding the admin record unduly cramps STJ Di’s style, when she unpacks whether the OS considered all that IRS did with what John turned up.

If so, is this a new trend in record-rule cases? Of course, Congress slammed the door on administrative record extensions with Section 6015(e)(7) in innocent spousery. Are we likely to see an amendment of like tenor to Section 7623, if STJ Di and the CCAs go full Loper Bright on John (“Hoppin’  John”) Hinman’s outfit?

More and better silt-stirs a-comin’.

I hardly think the above will serve as the title for a successful CLE, but IRS’ trusty counsel is showing us the way in North Donald LA Property, LLC, North Donald LA Investors, LLC, Tax Matters Partner, Docket No. 24703-21, filed 9/6/24.

Trial Session One is set for this coming Monday, 9/9/24, before Judge Albert G. (“Scholar Al”) Lauber. Of course, Judge Scholar Al put out a scheduling order for the trial, with a cutoff date for pretrial memoranda, wherein witness lists were to be exchanged.

Less than three (count ’em, three) weeks before trial, IRS serves a subpoena on nonparty RESPEC, which moves to quash. The subpoena calls for a “company representative” to testify about RESPEC’s mining generally, its work for the LA Donalds, and its former employee who prepared a feasibility study for LA Donald’s Dixieland boondockery. Said employee is already on the witness list.

RESPEC never made the witness list of either party.

But wait, there’s more.

Judge Scholar Al already quashed a subpoena duces tecum, which called for similar information.

“The subpoena requests information from a ‘corporate representative’ about RESPEC’s work for North Donald. But it was Mr. L who prepared the feasibility study that North Donald hired RESPEC to complete, and it would seem obvious that he is much better positioned than a ‘corporate representative’ to shed light on RESPEC’s work for North Donald. The subpoena also requests that a RESPEC representative be prepared to testify about the company’s experience in clay mining and mining generally. That information strikes us as irrelevant—what work other RESPEC employees may have performed on other projects or for other clients sheds no light on the specific clay feasibility report that Mr. Laporte prepared for North Donald in or around 2017.” Order, at p. 2. (Name omitted).

The subpoena is burdensome, untimely (no showing of good cause to ignore the deadline), requests information already denied…That’s how to get your subpoena quashed.

He doesn’t say so explicitly in Wanrietta Faye Coursel, Docket No. 16247-23L, filed 9/6/24, but Judge Ronald L. (“Ingenuity”) Buch decides that when the AO pulled the plug on Wanrietta’s CDP on the last day of the stated period to reply to the latest request for information, the AO abused his/her discretion. Wanrietta says she mailed that information on that last day.

Of course an AO can set reasonable limits within which taxpayers must respond to requests. But Wanrietta had been responding timely all the way through the CDP, meeting all deadlines and showing up for the hearing.

“Similar to the taxpayer in Long, Ms. Coursel had demonstrated cooperation with the appeals officer and promptly responded to all communications with all requested information. Ms. Coursel attended her hearing and promptly provided requested information. And, according to Ms. Coursel, when the appeals officer requested additional information, she likewise mailed it on the due date. But the appeals officer closed the case on the date of the deadline. Ms. Coursel established a pattern of responsive communication with the appeals officer. Thus, an abrupt closure of the case without confirming whether Ms. Coursel had sent the requested information was an abuse of discretion by the appeals officer, particularly given the course of conduct of the parties.” Order, at p. 5.

For the Long story, see my blogpost “I’ve Heard That Song Before,” 10/30/23.

Note that whether Wanrietta actually mailed the information isn’t the issue. Note also that Wanrietta had previously faxed a response to an earlier request, after the AO had telephoned her to find out why she had missed a previous deadline. Order, at p. 2.

“We make no finding as to whether Ms. Coursel, in fact, provided the requested information on [last day]. The administrative record neither establishes nor refutes the mailing of the requested additional information. But we need not resolve this question, because whether or not Ms. Coursel responded, the appeals officer abused her discretion in not allowing time for that response to arrive.” Order, at p. 5.

Maybe a course of conduct establishes that mailed is filed.

No doubt about it, Dennis Lee Simpson is definitely a WFC (Wag First Class). See my blogposts “Sign on the Dotted Line – No,” 1/21/23, and “The IEDs of Tax Court Practice,” 9/12/23.

See also Dennis Lee Simpson, T. C. Memo. 2024-85, filed 9/5/24.

Judge Ronald L. (“Ingenuity”) Buch simultaneously acknowledges Dennis’ canny dodging of the fraud exception to Section 6501 3SOL, incidentally defeating the Section 6651(f) enhanced late filing for fraud add-on, but hoists him with his own petard in proving he never filed for one year at issue. See my blogpost first hereinabove-mentioned, as my high-priced colleagues would say. No 1040, no SOL.

IRS wants to use one or two Dennis’ finger-fehler (hi, Judge Holmes) to cover multiple badges of fraud, but Judge Buch won’t let them. He plays Humphrey Bogart, as IRS’ seven (count ’em, seven) attorneys try to play Alfonso Bedoya, uttering the world-famous line that Bedoya never spoke. IRS doesn’t have enough badges, says Judge Buch. So one of Dennis’ years, and two of his self-settled trust’s, are out, per 3SOL. And the Section 6651(f) fraudulent late filing enhancement is out for everything.

But one year is in, the one for which Dennis established he never filed a return (the one filed in his name he successfully disavowed). So Dennis is drawing dead. He put in no evidence to overturn all the delicts more particularly bounded and described in IRS’ First Amended Answer to Second Amended Petition.

Incidentally, if you’re interested in how those magazine subscription solicitation businesses work, Judge Buch will tell you.

It’s a truism: if you gotta gamble in a casino, lay off the slots. They’re the worst-paying game in the place.

But Katherine J. Kalk, T. C. Memo. 2024-82, filed 9/4/24, confounds both me and six (count ’em, six) IRS attorneys, as she stips out with IRS that she won amounts equal to in one, and more in five, tax years than IRS originally allowed.

KJK was trying to develop a “casino app” to help slotniks track their action and casino marketers get angles on patrons, but that never came to fruition. She claims she gambled to get “patrons’ perspective” and get in with the casino’s marketing people. She also had a full-time job as a computer consultant.

The consultant activity’s deductions founder on the usual indocumentado. But the gambling losses survive, despite KJK’s somewhat casual recordkeeping.

“As a backup position petitioner urges that we estimate her gambling losses by considering evidence supplied by her bank statements. We have previously held that relevant evidence may include ‘casino ATM receipts, canceled checks made payable to casinos, * * * and credit card statements stating that cash was advanced at the casinos.’ We will do the same here.” T. C. Memo. 2024-82, at pp. 18-19. (Citation omitted).

KJK has bank statements showing cash withdrawals at casino ATMs, and those substantiate amounts KJK claimed.

But notwithstanding getting more winnings than she first claimed, KJK still ends up behind.

Lay off the slots.

Was Karen Veeraswamy, T. C. Memo. 2024-83, filed 9/4/23, a shareholder in the S Corp, the sale of whose principal asset threw off a $2.5 million gain, despite the sale taking place while the S Corp was in bankruptcy?

Judge Mark V. Holmes says she was, despite first IRS and DOJ saying she wasn’t, then saying she was, and then she first saying she was and then saying she wasn’t. It took several twists during her tumultuous marriage and divorce, but she discovered the original corporate records in a “cockroach-infested basement” (T. C. Memo. 2024-83, at p. 5) while serving as adm’r of her late (divorced) husband’s estate. And those records say she was a fifty percenter.

This could take place only in NYC. And ya can’t make this stuff up.

Karen, pro se, says her husband told her he was the sole shareholder, and that’s what he told the bankruptcy court twice (corporate and personal). But after first claiming she wasn’t, she then found the records and  claimed she was a fifty percenter, and got her share out of the surplus on the bankruptcy sale. Now she claims the IRS is collaterally estopped from claiming she is a shareholder, and hitting her for tax.

For a pro se, Karen gets a Taishoff “Good Try,” claiming she’s entitled to half the gain but owes no tax.

Bad luck, Karen; Judge Holmes quotes Blaise Pascal: “Contradiction is not a sign of falsity, nor the want of contradiction a sign of truth.” T. C. Memo. 2024-83, at p. 1. (Footnote omitted).

To opt out of ownership of corporate stock, there must be an affirmative act.

“Abandonment also generally requires a taxpayer to relinquish the asset and any future claims to it. When the asset is an intangible property interest—such as shares in an S corporation—we look for an express manifestation of abandonment.” T. C. 2028-83, at p.10. (Citations omitted).

Karen didn’t. She filed a proof of claim, saying she was, in her husband’s personal bankruptcy, which Judge Holmes takes as her “final, considered position in those proceedings.” T. C. Memo. 2024-83, at p. 10.

No court ever finally adjudicated Karen’s status as shareholder, hence no issue or claim preclusion. Judge Holmes wades through the tests for both forms of preclusion, and finds Karen flunks both.

Taishoff says, ultimately, Judge Holmes won’t let anyone walk away with half of a $2.5 million gain without paying tax.

Is The Power to Destroy

If any further evidence were needed, here’s Amgen Inc. & Subsidiaries, Docket No. 16017-21, filed 9/3/24.

IRS hits Pfizer, marketing joint venturer with Amgen, with a blockbuster duces tecum. Pfizer can come up with the documents they shared with Amgen, but IRS wants Pfizer’s internal stuff. Pfizer claims it would cost $1 million to do the document review (relevance and privilege). Pfizer employs an in-house Global Discovery Counsel, whom I’ll call Mr. B.

“Mr. B represents that Pfizer does not maintain a centralized computer system that could be searched for responsive documents. Instead, the best approach to collecting responsive documents is through document custodians. Mr. B identified 20 relevant document custodians related to the internal analysis documents and 4 document custodians related to the internal dispute documents. Most of these document custodians are no longer employed at Pfizer and due to the passage of time, Mr. B indicates that Pfizer cannot be certain it identified all relevant document custodians.” Order, at p. 5.

Judge Travis A. (“Tag”) Greaves reviews the requirements for third-party subpoenas. Distilling all the somber reasoning and copious citation of precedent, it comes down to how much burden does it put on the nonparty for how much return to the party. Here, there’s a contract between Pfizer and Amgen, State law gives a lot of room to interpret it, and whatever shared stuff Mr. B. can come up with will do.

Taishoff draws some conclusions. One, discovery has gone totally bonkers.  Here, IRS wants “a large collection of documents that relate to the HCR Fees over a five-year period of time. While respondent tailored the requests to seek only those documents related to the HCR Fees, Mr. B represents that the subpoena still requires Pfizer to review over a million documents that are between ten and fourteen years old.” Order, at p. 5. And having to employ an attorney solely to deal with discovery (Global Discovery, yet) shows that the disease is spreading.

Two, technology has facilitated discovery to such an extent that the best defense is to eschew technology altogether. Pfizer’s globalists employ basic infantry tactics: spread out, keep moving, rotate personnel.