Danny wrote The Shortest Way With Dissenters in 1702 using 29 pages, but Judge Goeke needs only five (count ’em, five) to send off the latest dissenters in JC Aggregates, LLC, Ornstein-Schuler, LLC, Tax Matters Partner, Docket No. 29327-21, filed 5/21/25.

See my blogpost “The Perpetuity Punt – Part Deux,” 5/1/25, for backstory.

This is the latest iteration of last-minute wannabe intervenors in one of the 34 (count ’em, 34) consolidated cases in the Dixieland Boondockery trainwreck. The settlement terms have been agreed, but unlike others where this cottage industry is involved, footnote 3 at p. 2 tells why this motion to intervene is timely. IRS blew the 60-day Rule 248(b) cutoff, and the holders of 1.94% of JC Aggregates are in.

Except.

They still need to make a substantial showing why. They don’t. They’re out.

“In short, (1) Putative Participants own only 1.94% of JC Aggregates and the overwhelming majority of partners have shown no disagreement with the proposed settlement; (2) Putative Participants have made no showing that any investigation regarding Messrs. Ornstein and Schuler, or any related entity, has affected OS’s ability to act in the best interests of JC Aggregate’s partners; (3) the terms of the settlement appear to be reasonable; (4) there has been little showing that Putative Participants are prepared to litigate the case and/or shoulder the financial burden of doing so; and (5) Putative Participants’ other claims are of little merit or relevance.” Order, at p. 4. (Footnote omitted, but it says the settlement is “all or nothing.” If everyone in JC Aggregates doesn’t settle, nobody settles.)

Reminds me of a couple local Americans with Disabilities Act stick-ups (hi, Judge Holmes).

I have to give Hale E. Sheppard, Esq., and his stalwart squad a Taishoff “Good Try, Second Class” for their ingenious Boss Hossery in Hancock County Land Acquisitions, LLC, Southeastern Argive Investments, LLC, Tax Matters Partner, T.C. Memo. 2025-50, filed 5/20/25. Whoever amongst Hale and his five (count ’em, five) compañeros came up with this one deserves it.

Malheureusement, Judge Albert G. (“Scholar Al”) Lauber, ace basher of Dixieland Boondockeries, will have none of it.

 It’s the IRS summary J classical gambit for Section 6751(b) Boss Hossery on the 20%-40% Section 6662 chops. Classical defense: was there proper delegation from Secretary; need discovery to see who did what; was Boss Hossery timely; wasn’t the real determination made by IRS High Command; Notice 2017-10 was the real determination.  The usual ripostes: CPAFs duly e-signed; Kroner and Laidlaw Harley Davidson supe was supervising when chops announced; general pronouncements from on high and notices not directed to any particular taxpayer for any particular transaction or year.

OK, im Westen nichts neues.

Except.

“Alternatively, at least with respect to the valuation misstatement penalties, petitioner asserts that HK and STH made the ‘initial determination of the penalty assessment.’ See §6751(b)(1). Messrs. K and H, senior in-house appraisers employed by the IRS, prepared an ‘appraisal review report’ that evaluated the appraisal submitted with Hancock’s return. Their report, which RA S received in August 2019, concluded that the fair market value of the donated easement was $5,169,400 rather than $180,177,000.

“’Once [an easement’s] value is determined,’ petitioner says, ‘the application of section 6662(h) is simple arithmetic.’ If Messrs. K and H made the ‘initial determination of [the penalty] assessment,’ see § 6751(b)(1), their supervisor, not RA S’s supervisor, would supposedly have been the proper person to consider penalty approval. Petitioner contends that uncertainty on this point creates a genuine dispute of material fact precluding summary judgment.” T. C. Memo. 2025-50, at p. 10. (Names omitted).

Judge Scholar Al clears that puck to the boards.

“In-house IRS appraisers do not have the authority to ‘determine’ penalties; they simply offer an opinion as to value. During an IRS examination it is the duty of the revenue agent to determine penalties, taking into account (among other things) the value of the property contributed and possible defenses the taxpayer may have. The word ‘determination’ has “an established meaning in the tax context and denotes a communication with a high degree of concreteness and formality.’ Belair Woods, 154 T.C. at 15. An ‘initial determination’ signifies a ‘consequential moment’ of IRS action. Ibid. (quoting Chai v. Commissioner, 851 F.2d at 221).” T. C. Memo. 2025-50, at p. 11.

A preliminary analysis by an in-house appraiser isn’t that.

Taishoff says, that quote from Chai reminds me ya gotta love what The Jersey Boys unleashed on the world so many years ago; such a fabulous cornucopia of blogfodder. In a world plagued with war, hatred, drug addiction, population collapse and overpopulation, half the world obese and the other half starving, and deadly diseases, some our best minds are occupied with trying to find ways to undermine Section 6751(b).

Sorry, my bad. Off the soapbox.

Maybe the fact that the Federal indictment for mail fraud, wire fraud, and money laundering was tossed, and his allegations that his boss conspired with “former disgraced FBI agents to seize substantial funds from [petitioner] and to convict him of non-existent crimes” to steal $642K from his wholly-owned LLC might have suggested to Appeals to do a better job building an NEH-ETA record, rather than relying upon a doubt-as-to-collectability shootdown in John Joseph Bauche, T. C.  Memo. 2025-48, filed 5/20/25. The quoted matter is from p. 15.

Ex-Ch J L. Paige (“Iron Fist”) Marvel stresses she isn’t buying JJ’s story, but Appeals should have built a better record, especially after a remand to Appeals and a Supplemental NOD.

While JJ’s representatives filed the OIC asserting economic hardship (hence raising doubt-as-to-collectability), and since taxpayer can raise only one reason for each OIC, was Appeals right not to consider NEH-ETA?

“We will make our point plainly: An alleged corrupt public-private conspiracy to loot [JJ’s LLC]’s bank account, which allegedly resulted in petitioner’s inability to pay his tax liabilities, is a public policy or equity issue that needed to receive due consideration. We take no position on the merits of those allegations, but they needed to be appropriately considered in accordance with the IRM. The current administrative record is insufficient to permit us to review this matter adequately, necessitating a remand. We do not hold that an immediate referral [to  NEH-ETA Austin] was required but only that a referral (or at least consideration of how petitioner’s ETA OIC might receive appropriate review on NEH grounds) should have taken place once Appeals exhausted its consideration of petitioner’s ETA OIC on economic hardship grounds. Cf. IRM 5.8.11.5.1(3) (providing that generally ‘all cases must have been completely developed under all other bases before transfer will be accepted by the Austin [Office]’). This case is akin to Bogart, T.C. Memo. 2014-46, at *11, in which we concluded that the Commissioner ‘did not adequately consider’ NEH grounds where the taxpayers ‘requested relief on public policy and equity grounds’ but the Appeals officer ‘merely concluded that the ETA OIC did not merit consideration under public policy or equity grounds.’” T. C. Memo. 2025-48, at p. 37.

For the Bogart story, see my blogpost “Leftovers,” 3/19/14.

Remember, Appeals goes to Austin only with a fully-completed record. So Back to Appeals.

“We will specifically direct Appeals to consider (1) whether petitioner should be allowed the standard local housing expense because of special circumstances, (2) whether petitioner’s use of line of credit proceeds for legal fees meets the necessary expense test, (3) petitioner’s recent claim… that part of his time is now occupied assisting with caregiving for his elderly father, who has significant health problems, and (4) how to classify petitioner’s current employment or unemployment status for purposes of calculating his future income value (e.g., whether petitioner is still properly classified as temporarily or recently unemployed).” T. C. Memo. 2025-48, at p. 34.

Now I don’t buy, or reject, JJ’s story either. From what I know of asset forfeiture cases, there’s a great temptation for law enforcement to grab first and let the owner sue to get it back; they needn’t convict, or indict, or even get a warrant.

So while the toss of JJ’s indictment is just circumstantial evidence of the need for NEH-ETA public policy consideration, as Hank Thoreau said, circumstantial evidence can be strong when you find a trout in the milk.

It’s eleven years and more since I first described The Phone Call; see my blogpost thus entitled 4/15/14. But the occasions for that unpleasant occurrence have not diminished. I fear that whoever prepared the 706 in Estate of Martin W. Griffin, Deceased, Christopher Griffin, Executor, T. C. Memo. 2025-47, filed 5/19/25, may have received The Phone Call, and may have had to telephone an insurer in consequence.

I’ve been there. It’s no fun, even when you win.

Briefly, the late Martin set up one (or maybe two) trusts for Maria, surviving spouse. The first trust was $2 million, Maria getting all benefits while she lived. Upon Maria’s exit, whatever’s left goes “to or for the benefit of such one or more members of a class of persons consisting of the Beneficiary’s Descendants,” as Maria directs, except none of it goes to Maria’s estate. T. C. Memo. 2025-47, at p. 3.

Upon reading the last above-written paragraph, all my ultra-sophisticated readers cried out as one “Section 2056(b)(7) QTIP!”

The following is not intended for such as they. For civilians, bequests to surviving spouse are exempt, provided whatever survivor gets is taxed in his/her lifetime or taxed in his/her estate. What surviving spouse got that survives surviving spouse’s death is terminable interest property. Anything that surviving spouse got that tries to escape taxation, either gift or estate, doesn’t. The exception is Qualified Terminable Interest Property (QTIP). That election moves QTIP into surviving spouse’s estate if so elected on first-to-die’s 706.

“The estate did not make a valid QTIP election for the $2 million bequest on Form 706. The estate admits as much by stating that it ‘failed to evidence such a QTIP election with respect to the $2,000,000 [b]equest on Part A of Schedule M of the Form 706.’ Accordingly, the $2 million bequest is not QTIP and is includible in decedent’s estate as terminable interest property.  And the estate has not identified anything on the return that shows anything resembling ‘affirmative intent’ to make a QTIP election. We do not find it necessary to address the other two requirements for QTIP because the estate’s failure to make an affirmative QTIP election disqualifies the $2 million bequest from being QTIP.” T. C. Memo. 2025-47, at pp. 6-7.

Petitioner’s trusty attorney takes a desperation goalmouth swipe at the puck as it enters the net and the red light flashes.

“The estate contends that the $2 million bequest might still be QTIP because respondent did not mention a problem with the QTIP election (or lack thereof) during the audit process.” T. C. Memo. 2025-47, at p. 7.

He gets a Taishoff “Good Try, third class.” He also gets a brushoff from Judge Nega.

“Because of this supposed shortcoming, the estate invites us to adopt a novel substantial compliance approach and analyze whether the $2 million bequest might qualify as QTIP. The estate’s argument is a nonstarter. The Court generally does not look behind a Notice of Deficiency. Full-Circle Staffing, LLC v. Commissioner, T.C. Memo. 2018-66, at *25 (“A trial before the Court in a deficiency case is a de novo proceeding; our decision is based on the merits of the record before us and not on any previously developed administrative record.”), aff’d in part, appeal dismissed in part, 832 F. App’x 854 (5th Cir. 2020). Since no QTIP election was made with respect to the $2 million bequest, that bequest is not QTIP.” T. C. Memo. 2025-47, at p. 7. For the full circle on Full-Circle, see my blogpost “Hold the Watchman Accountable,” 5/17/18.

But a $300K bequest that IRS claims is an impermissible amendment to the $2 million trust (which is supposedly irrevocable and unamendable) turns out to be a separate trust under State (KY) law. The amendment to the trust calls this a “living expense reserve,” specifically says that any leftovers go to Maria’s estate, and that’s good enough for Judge Nega.

“The question of whether the $300,000 bequest will go to Ms. Creel’s estate upon her death or pass according to the distribution provisions of the [$2 million] Trust turns on whether the $300,000 bequest created a separate trust from the [$2 million] Trust.

“On the basis of the use of the phrase ‘living expense reserve’ and the specification of distinct distribution provisions that clearly conflict with the existing provisions of the irrevocable… agreement, we find that decedent intended to create a trust with the $300,000 bequest and intended for that trust to be administered by the same person administering the [$2 million] Trust. Bolstering this conclusion is the fact that the $300,000 bequest contemplates how any remaining amount will be distributed upon Ms. Creel’s death, whereas the $2 million bequest contains no comparable provision. Further, the $2 million bequest does not use the phrase ‘living expense reserve’—indicating a distinction between these two bequests. Decedent intended for the $2 million bequest to be transferred to the [$2 million] Trust and governed by the provisions of that trust. But he intended for the $300,000 bequest to be a part of a legally distinct trust administered by the same trustee overseeing the [$2 million] Trust.” T. C. Memo. 2025-47, at pp. 9-10. (Footnote omitted, but it says the drafting of the $300K is not as indicative as a separate trust would be; understatement).

In short, trusty attorney saves part of the $1,047,398 deficiency (plus 20% chop). But whoever prepared the trust documents and the 706 has probably gotten The Phone Call, and has made their own.

Once again, I take the title of today’s online drama from the long-running Britcom from Grace Brothers department store. Alberto Garcia, Jr., 164 T. C. 8, filed 5/19/25, says he never was, but IRS claims they have a 2014 default judgment in USDCSDTX.

Judge Emin (“Eminent”) Toro denies IRS’ motion for summary J, saying it’s a fact question whether Al Jr., was served in the TX litigation. If not, USDCSDTX had no jurisdiction, and SOL has run (apparently fraud not on the menu) on the $129K plus of Al Jr.’s alleged tax debt.

OK, so let’s have a trial.

But wait. No SND or NOD alleged. Al Jr. claims Section 7345 passport grab without substantial tax delinquency. His argument is that the defective USDCSDTX judgment is not legally enforceable, hence IRS out under Section 7345(b)(1).

“To resolve the Motion, we must decide a question that we have until now found unnecessary to answer in passport cases: What is the scope of our review or, put differently, on what evidence do we determine whether the Commissioner’s certification that a seriously delinquent tax debt exists is correct?” 164 T. C. 8, at pp. 3-4. (Footnote omitted, but it cites a bunch cases (hi, Judge Holmes) that I’ve blogged that say it wasn’t necessary before now.

All previous passport grabs were record-rulers.

Here, the NFTLs and NITLs are north of 15 (count ’em, 15) years old. Al Jr, filed a CDP on only one, and that CDP concluded north of 15 years ago. The one more recent assessment and NFTL was for $44, but that’s too small to figure in here. 164 T. C. 8, at p. 5, footnote 5.

After Al Jr.’s pro bono calendar callers first raised the non-service, Al Jr. retained counsel who said he would go to USDCSDTX, but apparently hasn’t gotten anywhere so far.

All previous Tax Court passport grabs were on uncontested facts. So mox nix whether record rule abuse of discretion or de novo is the standard of review, same result. But here the facts are in dispute.

The Van Bemmelen diss of summary J isn’t at issue here. Passport grabs essentially go off on Rule 122(a) agreed-facts; at least up to now.

All but one of the Section 7345(b) elements for seriously delinquent tax debt have been checked. That one is “legally enforceable.” And since SOL has run on everything but the USDCSDTX judgment (20 years), the seriously delinquent tax debt stands or falls on the validity (or otherwise) thereof.

Now pore l’l  ol’ Tax Court’s circumscribed jurisdiction only allows Judge Eminent and his equally eminent colleagues to decide the validity of IRS’ certification. If the amount of liability has been assessed, Tax Court cannot look behind to see if it had been properly assessed. That should have been hashed out in a deficiency case. NFTLs and NITLs should have been resolved at a CDP.

“At a minimum, however, the phrase ‘legally enforceable’ requires an inquiry into whether the limitations period for collection after assessment has expired with respect to all or part of the liability. See Ruesch, 154 T.C. at 296 (‘We are also authorized to consider whether the tax debt “has been fully satisfied or has become legally unenforceable.” Sec. 7345(c)(2)(A). The latter would be true where the collection period of limitations had expired. See sec. 6502(a).’; see also Adams, 160 T.C. at 12 (‘[A]lthough our opinion in Ruesch was deprived of its precedential effect, it has not lost its persuasive value.’).” 164 T. C. 8, at p. 10. 2 Cir dismissed appeal of Ruesch as moot when IRS folded and undid the grab.

For Ruesch, see my blogpost “Ruesch to Judgment,” 6/26/20. For Adams, see my blogpost “Section 7345 – Backdoor CDP?” 1/24/23.

Now 28 USC §3001, the Federal Debt Collection Procedures Act, has been interpreted by 9 Cir to set no limit on enforcing a Federal judgment for a Federal debt, and 5 Cir has said “amen” in an unpublished opinion. But IRS has only asserted 20 years here, so Judge Eminent ducks Federal debt collection SOL. But here, says Taishoff, be dragons.

Judge Eminent goes with somber reasoning and copious citation of precedent going back to at least 1818 that a judgment obtained without personal jurisdiction over a party is void as against the unserved party. Y’all learned that in first-year law school Procedure 101.

IRS does have a 1931 case where Tax Court’s mama, the Board of Tax Appeals, held that a petitioner could not collaterally attack a USDC judgment in Tax Court. But that case involved someone who was admittedly served but claimed that service didn’t rope in his wholly-owned corporation. Here, Al Jr, was never served at all, he says.

The APA limitation on agency review to record rule is a default rule. Judge Eminent reviews redetermination SND jurisdiction, contrasting it with Section 7623 whistleblowing record-ruling, innocent spousery pre-Section 6015 (e)(7) review de novo, and CDP record-ruling.  

 Section 7345(b) requires Tax Court to determine legal enforceability, not just to “review” the certification. The magic word is “determination.”

“…we take Congress’s choice to refer to our task as “determin[ing] whether the certification was erroneous” to mean that (where necessary) we must make that determination based on a record developed in this Court, including (where appropriate) any evidence introduced at a trial, not simply the record available to the Commissioner during the administrative process.” 164 T. C. 8, at p. 19. (Footnote omitted.)

Anyway, there haven’t been any cases like this before, and in the ten (count ’em, ten) years since Tax Court got Section 7345 cases they’ve all gone off on record rule.

Go try the case.

Taishoff says, if Al Jr, wins in Tax Court, can that determination do any more than void the passport grab?  What is the preclusive effect of such win, if any, as against IRS in USDCSDTX? Did IRS’ concession of the unlimited USFDCPA SOL set a precedent? Fortunately, this case is a one-off.

Ex-Ch J L. Paige (“Iron Fist”) Marvel provides another Cliff Notes quick-study for nonattorney aspirants to Tax Court admission at pp. 3-4 of Anthony Angelo Masciantonio & Barbara Elaine Masciantonio, Docket No. 16236-22, filed 5/16/25.

Petitioners seek abatement of interest after they stiped out deficiencies and chops.

“Under section 6404(e)(1)(A), the Commissioner may abate part or all of an assessment of interest on any deficiency that is attributable to an unreasonable error or delay by the Commissioner’s employees or officers in performing a ministerial or managerial act. To qualify for an abatement of interest, the taxpayer must (1) identify an error or delay by respondent in performing a ministerial or managerial act; (2) establish a correlation between the error or delay by respondent and a specific period for which interest should be abated; and (3) show that the taxpayer would have paid his or her tax liability earlier but for such error or delay. When enacting section 6404(e), Congress intended for the Commissioner to abate interest where failure to abate interest would be widely perceived as grossly unfair and did not intend that abatement be used routinely to avoid payment of interest.

“A managerial act means an administrative act that occurs during the processing of a taxpayer’s case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. Treas. Reg. § 301.6404-2(b)(1). A ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer’s case after all prerequisites to the act, such as conferences and review by supervisors, have taken place. Treas. Reg. § 301.6404-2(b)(2). A decision concerning the proper application of federal tax law is neither a managerial nor a ministerial act. Treas. Reg. § 301.6404-2(b)(1) and (2). Section 6404(e)(1) also does not provide for abatement of interest if a ‘significant aspect of the error or delay is attributable to the taxpayer involved.’” Treas. Reg. § 301.6404-2(a)(2).” Order, at p. 3. (Citations omitted).

Tax Court has exclusive jurisdiction over abatement claims. Petitioners need to duck the Section 7430(c)(4)(A)(ii) $2 million net worth bar; that’s each spouse for MFJs.

While standard of review is abuse of discretion, abatement cases aren’t record-rulers; there’s de novo for evidence.

Here, all petitioners had was materiality and relevancy objections to the admin record. They had no evidence outside the admin record.

“Rule 93(a), however, requires the entire administrative record (or so much of it as either party may deem necessary for a complete disposition of the issue or issues in dispute) to be filed with the Court no later than 45 days after the notice setting the case for trial is served ‘if judicial review of the Commissioner’s determination ordinarily would be based solely or partly on the administrative record.’ While we may consider materials outside the administrative record in an interest abatement case, review of the Commissioner’s decision not to abate interest for abuse of discretion is ordinarily based partly on the administrative record, and filing the Administrative Record was thus required regardless of petitioners’ views as to its relevance or materiality.” Order, at p. 4. (Footnote omitted).

The stip doesn’t help, as all it says is interest will accrue and be assessed as provided by law.

“Section 6601(a) provides that if ‘any amount of tax imposed by this title . . . is not paid on or before the last date prescribed for payment, interest on such amount at the underpayment rate established under section 6621 shall be paid for the period from such last date to the date paid.’ See §§ 6072(a), 6151(a) (generally prescribing the last payment date for calendar-year taxpayers as the 15th day of April following the close of the calendar year); see also § 6601(b)(1). This is true even though the amount of tax imposed is the subject of preassessment litigation in this Court, at least in the absence of a cash deposit. Cf. § 6603(a) and (b) (providing a method for a taxpayer to halt the accrual of interest on unassessed tax by making a cash deposit).” Order, at p. 5.

Note that the dubious legal advice provided by IRS counsel (described in Order at pp. 4-5) is neither administrative nor ministerial.  Statute and regs, guys, nothing else.

Yes, I know, in United States Tax Court a matter of seven years is but the twinkling of an eye. However, I do want to claim modest credit for blogging away back in April, 2018, what Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan unloads on Hannah K. Heart, Docket No.  13242-24, filed 5/15/25.

Hannah tries an oldie-but-not-goodie, filing a petition but not specifying year(s) at issue, nor attaching SND nor NOD. IRS moves to dismiss for want of jurisdiction, claiming they never issued either to Hannah from 2014 (a year when she raises a Form 843 seeking abatement of a penalty or addition to tax) to the present.

OK, possibly just a misapprehension of the law. We’ve seen dozens.

Except.

“… petitioner previously filed a case in Docket No. 10216-18 seeking review of notices of deficiency and notices of determination for tax years 2000 through 2017 that was dismissed for lack of jurisdiction on the ground that no notice of deficiency or notice of determination was issued to petitioner that would permit her to invoke this Court’s jurisdiction.” Order, at p. 2.

Reckoning Hannah should know better, Ch J TBS shows Hannah the Section 6673 yellow card.

See my blogpost “I’m Beginning to See the Light,” 4/9/18.

Those amongst us who foresaw a tsunamic silt-stir when the Supremes unleashed Boechler, P. C., upon us who never did them any harm will find our fears, like rumors of Mark Twain’s early death, greatly exaggerated.

Ch J-elect Patrick J. (“Scholar Pat”) Urda raises high the bar for CDP equitable tolling in Virgil Joseph Aiello, T. C. Memo. 2025-46, filed 5/15/25. VJ had serious eye problems for five (count ’em, five) years before surgery fixed them three (count ’em, three) years before the CDP.

VJ didn’t provide papers or phone in for the CDP nor respond to the “last chance,” so Appeals issued the NOD, which VJ got two days later. VJ did send in the petition and the sixty Georges, but sent them to Appeals, which promptly returned them to VJ.

The “last chance” said to send petition to The Glasshouse in the Governmentally Efficient City.

VJ finally properly sends in petition and fee six months later, attaching a TAS letter suggesting OIC, which VJ says doesn’t solve his problem.

Neither does Judge Scholar Pat.

“To be entitled to equitable tolling, a taxpayer must establish that he pursued his rights diligently and that extraordinary circumstances outside his control prevented him from filing on time.” T. C. Memo. 2025-46, at p.4. VJ must bear this “heavy burden.”

He doesn’t.

“Mr. Aiello has not met his burden to show his entitlement to equitable tolling. As an initial matter, ‘[e]quitable tolling is a rare remedy, and the burden is on Mr. [Aiello] to show that he “diligently pursued his rights for the entire period he seeks tolled, not merely once he discover[ed] the underlying circumstances warranting tolling.”‘  Mr. Aiello argues that he diligently pursued his rights by sending his Tax Court petition to the Appeals officer. But the notice of determination explicitly told him that he needed to file that document with this Court.” T. C. Memo. 2025-46, at p. 4. (Citation omitted).

“Even assuming arguendo that sending his petition to the Appeals officer might represent an attempt to pursue his rights, Mr. Aiello has not shown that he continued to diligently pursue his rights in the six months between the Appeals officer’s return of his petition and filing fee check… and the filing of his petition in this Court…. In fact, Mr. Aiello fails to show that he took any action on this matter whatsoever in the nearly four months that followed the issuance of the June Taxpayer Advocate letter.” T. C. Memo. 2025-46, at p. 5.

The medical issue doesn’t help.

“Although Mr. Aiello faced significant medical problems beginning in 2014, these problems had resolved by 2019 (according to both Mr. Aiello and his doctor) and played no part in his tardy filing. And when given the opportunity during the evidentiary hearing to identify any other extraordinary circumstance that might explain the delay, Mr. Aiello stated: ‘Nothing stands out in my mind.’” T. C. Memo. 2025-46, at p. 5. (Footnote omitted, but read it; 1 Cir says obstruction by adversary might give rise to equitable tolling; how about misleading IRS advice? I know, statute and regs control, nothing else, but it might be worth a try with really good facts).

If you don’t know what either of those financial shellgames is, consider yourself lucky. If you want to know, Judge Morrison will Judge-‘splain them to you in Kirk Stevens & Shannon Stevens, T. C. Memo. 2025-45, filed 5/15/25.

If you already know, you might read the fifty (count ’em, fifty) pages of Judge Morrison’s words and figures. I lost him at around page 3, but I found that even he got confused around page 23.

“Pomerantz (one of petitioners’ experts) further calculated that by Date.14 (January 1, 2018), the accrued interest and principal on the 2016 note would have been compounded over eight quarters and would be $142,467,412.14 This loan-balance amount, Pomerantz explained, is ‘identical’ to $160,679,613 minus $18,032,207, or $142,647,406. Indeed, the two amounts differ by a trivial $6.” T. C. Memo. 2025-45, at  p. 23. No Judge, by my arithmetic it comes to a less-than-trivial $180,000, unless 467 was mistranscribed as 647.

Does nobody proofread these opinions?

But after all the mathematical gyrations, the case goes off on the promissory notes offset with the Bermuda options yielding a zero result, hence no economic effect, hence not true indebtedness entitling Kirk & Shannon to OID interest deductions offsetting the big gain they got when they sold their business.

As for chops, IRS is in a muddle deciding between 20% and 40%, but sort it out at 20%, especially when the tax attorney whose high-priced opinion Kirk & Shannon bought for $40K disavowed same.

I’m going to quote the following from Judge Morrison’s opinion, and contrary to my usual practice, I’m naming names and dates. Gopman is a tax attorney who specialized in trusts and estates. Rubinger is the tax attorney who gave the opinion. SLS is Kirk’s & Shannon’s business, which they sold. Shannon is a long-time accountant who ran her own tax prep business.

“Bill McDermott, a certified public accountant, began preparing SLS’s tax return for the tax year 2014. McDermott had a copy of Rubinger’s tax opinion letter. On or before August 21, 2015, McDermott suggested to Shannon Stevens that it was advisable for taxpayers to disclose ‘certain tax shelter’ transactions to the IRS and asked her whether she thought such a disclosure was warranted with respect to the deductions for interest accruing on the 2014 note. On August 21, 2015, Shannon Stevens asked Gopman about McDermott’s inquiry. Gopman in turn sought Rubinger’s views. Rubinger explained to Gopman that he would advise against claiming the interest deductions at all. Rubinger asked Gopman not to reveal this advice to petitioners. Gopman refused. He explained to Rubinger: ‘We cannot keep the advice between you and me though as we have to advise them [i.e., petitioners] the right way.’ Gopman made petitioners aware that Rubinger advised against claiming the interest deductions.” T. C. Memo. 2025-45, at p. 14.

Gopman gets a Taishoff “Good Job.” I expect Rubinger got The Phone Call.

Late Boss Hossery gets rescued by Laidlaw’s Harley Davidson after some adroit testimony from IRS exam personnel.

Judge David Gustafson is a model of courtesy. Arthur M. Bialer, Docket No. 6983-19W, filed 5/14/25, has furnished Judge Gustafson much material, and furnished me no fewer than six (count ’em, six, and I have) blogposts. I have already designated Arthur as successor to the late Fighting Joe Insinga.

It seems Arthur wants to take his war with DC Cir’s view of whistleblowing to a “pre-trial” conference in Tax Court. While Judge David Gustafson isn’t quite so obliging, he’s perfectly willing to let Arthur take the hold off IRS’ summary J motion. Judge Gustafson put Arthur’s case on hold pending appellate decisions in Lissack and Shands, both of which I blogged at Tax Court (I leave appeals to the trade press and blogosphere). Those appeals having been decided and become final beyond possibility of further appeal, Judge Gustafson was waiting on Meidinger (which I blogged) and Kennedy, T. C., Memo. 2021-3 (which I didn’t).

Leaving aside the obvious point that there are no Tax Court trials in Section 7623 whistleblower cases (they’re all record-rulers; did the Whistleblower Office abuse its discretion, based on the administrative record as permissibly supplemented?), Judge Gustafson will let Arthur respond to IRS’ stalled summary J motion without the benefit of any good language that an appellate decision in either Meidinger or Kennedy might afford him.

“In describing the context of this case, petitioner’s motion refers to ‘grossly erroneous judicial decisions’ of the Tax Court and the Court of Appeals; refers to ‘cases in which the Court of Appeals has issued one or more opinions in gross error, and under procedural circumstances that shock the conscience’; and explains that ‘each of the holdings that led, directly or indirectly, to Shands [cited above]— Cooper [v. Commissioner, 136 T.C. 597] (2011), Cohen [v. Commissioner, 139 T.C. 299 (2012), aff’d per curiam, 550 F. App’x 10 (D.C. Cir. 2014)], Kasper [v. Commissioner, 150 T.C. 8 (2018)], and Li [v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), abrogating Lacey v. Commissioner, 153 T.C. 146 (2019)]—was devoid of analysis based on relevant legal authority, and each was issued under appalling procedural circumstances’.” Order, at p. 2.

With becoming delicacy, Judge David Gustafson suggests “(W)e therefore tentatively conclude it is likely that petitioner intends to respond to the motion for summary judgment by filing a response that proposes that multiple precedential opinions of this Court and of the Court of Appeals should be overruled.” Order, at p. 2.

Unhappily, Golsen. Pore l’il ol’ Tax Court can’t overrule DC Cir, and meek and modest Judge David Gustafson can’t overrule a bunch his colleagues (hi, Judge Holmes) all on his lonesome.

But Judge Gustafson has an offer that Arthur can refuse or accept.

“We are inclined to await the D.C. Circuit’s opinions in Kennedy and Meidinger before deciding the Commissioner’ motion for summary judgment in this case. We would have supposed that petitioner might likewise prefer to await those opinions so he could take them into account in composing his opposition to the Commissioner’s motion. But if he would prefer to file his opposition now, we will allow it.” Order, at p. 3.

So Arthur, the choice is yours: file your answer to IRS’ summary J motion, or file a status report stating that you’ll await the outcome of the aforesaid appeals, or make “another appropriate filing.” Order, at p. 4.