See my blogpost “A Mark of Respect,” 1/7/24*.

* https://taishofflaw.com/2025/01/07/a-mark-of-respect/

Most indocumentados are cases involving little, few, or no papers. But Ishveen K. Chopra, T. C. Memo. 2025-2, filed 1/8/25, has a lot of papers. Only they don’t substantiate her claimed deductions.

Judge Albert G. (“Scholar Al”) Lauber spends seventeen (count ’em, seventeen) pages demolishing Ishveen’s paperwork.

A sample. “One group of statements showed alleged transactions on an American Express (AmEx) account ending in 15008; the other showed alleged transactions on a Discover Bank (Discover) account ending in 4260. The RA noticed inconsistencies in these statements, which prompted him to issue a summons to Discover. Discover supplied the IRS with information about all Discover accounts in petitioner’s name for [year at issue]. They did not include any account ending in 4260.” T. C. Memo. 2024-2, at p. 3.

“Hotel receipts misspelled the hotel’s name and had unusually late checkout times (such as 11:10 p.m.).” T. C. Memo. 2024-2, at p. 3.

There’s a lot more, enough to get Ishveen the 75% fraud chop.

Maybe sometimes it’s better not to substantiate.

The latest addition to my list of those who cannot add comes from Judge Cary Douglas Pugh. She denies IRS’ motion for issue preclusion summary J on the amount of deficiency to be assessed against Craig P. Orrock, Docket No. 113-24, filed 1/7/24. Notwithstanding Craig’s conviction on three (count  ’em, three) counts, two Section 7201 tax evasions and one Section 7212 attempting to interfere with the internal revenue laws, by a jury of his peers in USDCDNV and affirmance thereof by 9 Cir, that doesn’t preclude Craig from litigating how much he owes.

I’ve told this story before, but the result always puzzled me. Craig’s story is even more puzzling. “The District Court sentenced petitioner to 32 months of imprisonment and ordered him to pay a $300 assessment and $923,667 in restitution to the Internal Revenue Service.” Order, at p. 2.

Seriously? $300? Y’all will recollect that the word “assessed” in Section 6751(b) triggered the whole Boss Hoss fandango; is this “assessment” the amount of tax IRS is to enter upon its books? And for that Craig gets 2 years 8 months in jail? And must pay $900K in restitution?

Of course not. IRS gave Craig a SND at no extra charge that determined a “$340,260 deficiency largely attributable to $965,816 in unreported ‘Other Income.'” Order, at p. 3. This was the result of some corporate shenanigans to hide the proceeds of a real estate sale that was the basis of the criminal case.

Apparently computing basis and deducting same from net sales proceeds is beyond the competence of an AUSA to explain, and a Federal trial jury to comprehend.

Anyway, though Craig is precluded from relitigating fraud (hence the Section 6663 chop is in), he can fight about what the tax is.

“Petitioner points out that the specific amount of reported income was not an essential element of his conviction. A jury plausibly could reach a guilty verdict at count two of the indictment without finding that petitioner owed the entire $340,260 deficiency determined in respondent’s notice of deficiency. Nor does the restitution ordered in the District Court’s final judgment conclusively establish that petitioner is liable for the entire deficiency. Thus while certain admissions from the criminal trial may constitute evidence in determining petitioner’s liability, the conviction alone does not establish that there is no genuine issue of fact as to the precise amount of petitioner’s unreported [year at issue] income.” Order, at p. 4.

The United States Tax Court Courthouse will be closed Thursday, January 9, 2025 “as a mark of respect for James Earl Carter, Jr., the thirty-ninth President of the United States.” However, DAWSON, no respecter of persons, will remain available for electronic access and electronic filing.

I confess it, and deny it not: I am a fan of the late Jimmy B. He was a “brash embodiment of the street-smart New Yorker,” my kind of guy. Especially his 1997 memoir I Want to Thank My Brain for Remembering Me struck home, when four (count ’em, four) years later I woke up in the recovery room at Duke University Medical Center drafting aloud a petition in a holdover proceeding, which caused the medics to summon my wife, as they thought I had gone mad. No, just grateful beyond words that I was able to continue to practice law, which I admit is easy to conflate with insanity.

But now it’s another work of Jimmy B.’s, The Gang Who Couldn’t Shoot Straight, 1969 vintage. And the sequel is written by Judge Mark V. (“Vittorio Emanuele”) Holmes in Crystal Anne Nelson & Joseph Nelson, Docket No. Docket No. 5223-19L, filed 1/6/24.

Crys & Joe were down $2 million in tax for years at issue, which they didn’t contest, but wanted an OIC of $1750 payable in  installments. So they riposted the NFTL with Letter 12153, whereupon IRS earned the title first set forth above at the head hereof, as my two-Grey-Goose-Gibson-lunching colleagues would say.

“The IRS botched the hearing, however, by sending some important correspondence—including the notice scheduling the CDP hearing—to the wrong address. When the Nelsons didn’t show up at the hearing, the Commissioner sent them a ‘last chance letter”—also to the wrong address.” Order, at p. 2 (unnumbered).

The NOD did get to them, properly addressed, which they petitioned, after which they received the rejection of their OIC. As trial approached, remand was the obvious course. Then SO F (name omitted) got into the act. As can be seen from the following, SO F did not exactly cover himself with glory.

“At this point his manager intervened. She noted in the case activity report that:

‘Although SO informed the POA [i.e., power of attorney—the Nelsons were represented by their accountant, BS, during the CDP hearing] of the missing documents, SO F did not explain why he needed these documents (which are presumably for a collection alternative) . . . did not specify what months of bank statements are needed . . . did not specify which estimated tax payments are needed … did not provide a deadline for the filing of the [most recent year] Form 1040 tax return . . . did not provide a deadline for the other documents . . . did not explain what would happen if the requested documents were not submitted by the deadline.’

“The manager also noted that she did not consider the SO’s vague recollection of requiring the Nelsons to produce these documents on the same day he asked for them to be ‘a reasonable opportunity to submit documents.'” Order, at p. 3. (unnumbered).

But when SO F, duly chastened, requested the information in proper form, trusty accountant BS told SO F that client refused and that SO F could file a supplemental NOD rejecting everything. Obviously, BS is too well-bred to repeat what I daresay was his clients’ actual response.

Judge Holmes is constrained by the record rule in this 9 Cir Golsenized case, and sustains the supplemental NOD.

“This case has had many odd twists, but in the end the Commissioner is right that the deliberate refusal of a taxpayer to comply with reasonable demands for documents and proof of compliance with filing obligations for later years means there was no abuse of discretion in denying the Nelsons an offer in compromise and issuing the supplemental notice of determination.” Order, at p. 7 (unnumbered).

I want to thank Judge Holmes for issuing the order in drag-and-drop format even though the pages are unnumbered. Much better than trying to retype or paraphrase.

That’s what Judge Ronald L. (“Ingenuity”) Buch does, and tells IRS, when dealing with IRS’ motion for partial summary J denying Section 41 Qualified Research credits, in System Technologies, Inc., Docket No. 12211-21, filed 1/3/24. STI made powder-coating equipment for outboard motors and stuff, which it sold to manufacturers. All the contracts at issue specified IN law; but the contractual warranty was simply “exclusively repair or replace.” No other remedy provided for breach.

IRS claims this puts the fun in “funded” research. Buyer is paying for the research; seller has no skin in the cliché. Researchers have to buy the credit by taking the economic risk of failure.

So what if STI couldn’t deliver any conforming goods? IRS says that’s a nonissue, everybody knows that STI could deliver. Judge Ingenuity Buch says that goes to uncertainty, a different gate in the four-part Section 41(d) slalom. Maybe STI flunks on uncertainty, but that’s not at issue here.

Taishoff says uncertainty is inherently factual. Holmes (Sherlock, not Judge Mark) asked the basic question: “Of what had you made certain, after you had made certain that you had made certain of nothing?” The Adventure of the Golden Pince-Nez.

IN law (their take on the Uniform Commercial Code, which is pretty uniform on sales; I remember when we first saw this brand-new enactment On The Hill Far Above under the firm hand of The 49th MacNeill of Barra, RIP) provides among the remedies for seller’s nonperformance is restitution of whatever buyer paid seller. And while the IN UCC says the parties can contractually modify or eliminate the warranties and remedies provided by statute or commonlaw, IN decisional law says the parties can’t trade away all their rights if the result would be inequitable. Practice tip: IN lawyers check out Judge Buch’s essay on IN sales of goods law, Order, at pp. 5-6.

“Although the Commissioner’s factual suppositions may be correct, we cannot rely on them in deciding a motion for summary judgment, where we must draw factual inferences in the light most favorable to the non-moving party. Furthermore, the Commissioner’s argument does not appear to be directed at the question of funded research, but instead at the question of whether the research is qualified research. As previously discussed, for expenses to constitute qualified research, the research must pass each prong of a four-part test. The first prong of this test, the section 174 test, requires the taxpayer to demonstrate that the research ‘would eliminate uncertainty concerning the development or improvement of a product.’ Treas. Reg. §1.174-2(a)(1). The Commissioner expressly argues that neither System Technologies nor its customers had any doubt that System Technologies could deliver the contracted products. This may raise a fact question as to whether there was uncertainty concerning the development or improvement of a product, but it does not answer the question of what remedies might be available in the event of such a failure. In such an event, however remote, Indiana state law provides the remedy of a refund of payments made.” Order, at p. 7.

Oh, and for blow-off and cool-off, see Order, at p. 2 (Tomita project).

Someone with a stronger stomach than mine can abstract and digest Matthew D. Hutcheson and Annette Hutcheson, T. C. Memo. 2025-1, filed 1/2/25. Matthew D. Hutcheson got a 17 (count ’em, 17) year stretch after being convicted on 17 (ditto) counts of wire fraud in USDCDID.

“During his career he held himself out as an expert in fiduciary responsibilities for qualified retirement plans and held symposiums offering training in such services. He has published numerous articles on retirement-plan fiduciary responsibilities. He also was a frequent speaker on topics relating to retirement plans and testified before the U.S. Congress about qualified plans, fiduciary obligations, and the need to provide accounting transparency to plan participants.” T. C. Memo. 2024-1, at pp. 3-4.

He also stole $5 million from pension funds he managed (T. C. Memo. 2024-1, at p. 2), whose participants were over the age of 60 (T. C. Memo. 2024-1, at p. 6) for his personal use.

Judge Goeke has the details. I’ll waste no more readers’ time on this mini-Madoff.

Capitol Places II Owner, LLC, Historic Preservation Fund 2014 LLC, A Partner Other Than The Tax Matters Partner, 164 T. C.1, filed 1/2/25, loses its $23.9 million historic façade easement write-off, as Interior and Treasury didn’t agree that the Capitolists’ “three-story classical revival masonry building designed by James Urquhart, an architect prominent in early 20th-century Columbia,” 164 T. C. 1, at p. 3, was “certified by the Secretary of the Interior to the Secretary [Treasury] as being of historic significance to the district. I.R.C. §170(h)(4)(C).” 1645 T. C. 1, at p. 5. (Footnote omitted).

That’s Columbia, SC, a town familiar to all us Fort Jackson alumni.

The Capitolists claim that if the district is in the National Register of Historic Places, that’s enough, but Judge Patrick J. (“Scholar Pat”) Urda, says no, read the statute. Your property has to be historically significant in the district.

And just having some paperwork that mentions the property somewhere  in the file at the Registry doesn’t get it, either. The Capitolists’ claim that “the phrase ‘listed in the National Register’ should be read to include anything and everything within the boundaries of a National Register listing, based on a hodgepodge of documents from two Keepers of the National Register, the South Carolina State Historic Preservation Office, and the Federal Energy Regulatory Commission.” 164 T. C. 1, at p. 9, gets them a Taishoff “Oh, Please,” and a shootdown from Judge Scholar Pat.

But the Capitolists’ trusty attorneys go down fighting, in the tradition of the Great Chieftain of the Jersey Boys, who’s in the thick of the fray. They claim that being in the “land area” of the historic district is good enough.

“Although [Capitolists]’s argument asks us to interpret ‘listed’ to include ‘resources within the boundaries of a listed properties,’ the broader statutory context blocks this reading. Section 170(h)(4)(C)(i) provides that a ‘certified historic structure’ includes ‘any building, structure, or land area which is listed in the National Register,’ while, under clause (ii), the term includes ‘any building which is located in a registered historic district (as defined in section 47(c)(3)(B)) and is certified by the Secretary of the Interior to the Secretary as being of historic significance to the district.’ If a building is necessarily ‘listed in the National Register’ simply by being within the boundaries of a property listed in the National Register, such as a registered historic district, then section 170(h)(4)(C)(ii) has been rendered superfluous.” 164 T. C. 1, at p. 10. (Citation omitted). In statutory construction, no word left behind.

Anyway, the façade easement protects only the façade, not the building itself or the land under the building, so the land area isn’t protected.

The above-captioned, translated, is a public holiday in the City of the Stateless, wherefore, in pursuance of Rules 10 and 25(a)(5)(A), both the United States Tax Court and I are closed.