It’s thirteen (count ’em, thirteen) years and more since I first suggested that something was less than perfect about automatic admission to practice before the United States Tax Court. “The attorney need show no proficiency in Federal practice (to say nothing of Tax Court practice), or even the vaguest acquaintance with the IRC.” See my blogpost “A Book and a Modest Proposal,” 5/22/12.

US Tax Court practice is a minefield; even the adept come a cropper. Attorneys of vast reputation in other areas of the law receive comeuppances. After more than fourteen (count ’em, fourteen) years of almost daily coverage, and 4,766 blogposts, 95% of which relate to Tax Court cases, law and practice, I cannot claim expertise.

So I feel for Mr. Hawkins, Esq., as he tries to rescue Afsaneh E. Hawkins, Docket No. 10443-20L, filed 9/28/23, his spouse. Appeals had given Afsaneh a NOD sustaining a NITL, which Afsaneh petitioned. IRS predictably moved for summary J after an attempt by Afsaneh to get an OIC failed.

“…the day answering briefs were due, we got a motion to continue for one day from Ms. Hawkins. [The next day], we got a motion to continue more generally in a document signed by Mr. Hawkins who, though a lawyer, is not admitted to practice in Tax Court. Accompanying this was a contract that he had signed back in 2020 with a firm that is not a law firm but calls itself ‘American Tax Solutions.'” Order, at p. 1.

Maybe Mr. H, Esq., was going to try for another OIC; sounds like one of those midnight television commercials pitching “get rid of your tax debt,” but rather gets rid of your money, but I can’t tell.

But that’s beside the point. The general idea is, when you get a summary J motion, you answer it. At least in Judge Mark V (“Vittorio Emanuele”) Holmes’ courtroom.

“This suggested that there was some confusion on the part of the Hawkins as to what we were requiring. We spoke with them … to try to clarify that all we need is a response to the IRS’s motion that we can also consider Ms. Hawkins’ own motion. We also explained to Mr. Hawkins that, until and unless he becomes a member of the Tax Court bar, he may not file anything on his wife’s behalf.” Order, at p. 1.

I am sure Judge Holmes told Mr H, Esq., that fifty Georges, a certificate of good standing, no more than 90 days old, from any Rule 200 Court to which he is admitted, and a completed application form (Form 30, nowhere to be found on the Court’s website, but here’s a link) would get him admitted.

So Judge Holmes resets the briefing schedule, seriatim instead of simultaneous.

Two words to Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan: Automatic admission is a mistake. And please put Form 30 on the website.

Even STJ Diana L. (“Sidewalks of New York”) Leyden, in her Zoomiegram today, counseled pro bonos and LITCs that utmost diligence when reviewing figures after settling a case may not be enough. She suggested getting a CPA or an EA to doublecheck the numbers, as even IRS gets it wrong, and “Lawyers can’t add.”

Proof positive comes from her colleague STJ Peter (“Headbanger”) Panuthos in Raymond S. Edwards, T. C. Sum. Op. 2023-29, filed 9/27/23. Ray failed to file a year’s worth of FICA/FUTA/ITW, as he kept paying his personnel while his daycare operation’s license was suspended. Ray is fighting over add-ons (late filing, late paying), and how IRS applied his payment to include add-ons, when he directed his payment be applied to tax only.

Ray’s excuses that IRS was late with the PIN he needed to set up his EFTPS account, and he had to pay his personnel to keep from losing them even though he made no money, don’t get it.

But for one quarter, IRS claims late filing, but the SO’s notes shows he did timely file. “On the basis of respondent’s own records and notes, we are not satisfied petitioner was correctly assessed an addition to tax for failure to timely file his Form 941 for the period ending March 31, 2015.” T. C. Sum. Op. 2023-29, at p. 7. Everything else is sustained.

But IRS did misapply Ray’s payment. However, rather than unscramble that frittata, STJ Panuthos merely notes that an appropriate order and decision will be entered.

Word to Ray and his trusty financial consultant (and everybody else): Triple check that order and decision.

It takes Judge Goeke 31 (count ’em, 31) pages to decide that Organic Cannabis Foundation, LLC,, 161 T. C. 4, filed  9/27/23, is entitled to equitable tolling on its Letter 12153 for Year Three of the Section 6320 NFTLs it got.

For the backstory, see my blogpost “Roll On, Silt, Roll On,” 11/14/22.

Section 6320(a)(3)(B) doesn’t bar Appeals from hearing a late-filed Letter 12153 request for a CDP. Legislative history, the intent, purpose, and language of the statute are gone over in depth, and Boechler, P. C., gets a real workout.

But at close of play, “Taxpayers must pursue a CDP hearing before they can seek judicial review. A categorical prohibition of equitable tolling of the filing deadline for Appeals’ review of collection actions would be contrary to Congressional intent. It would mean that we would protect a taxpayer’s ability to seek judicial review through equitable tolling of the section 6330(d) deadline for filing a petition while denying taxpayers the possibility of equitable tolling to obtain Appeals’ review and a determination for this Court to review. Although the Supreme Court did not address the 30-day period for requesting a CDP hearing in Boechler, we will not apply a stricter standard to the administrative filing deadline. Congress allowed for equitable tolling of the judicial filing deadline in section 6330(d)(1). Boechler, P.C. v. Commissioner, 142 S. Ct. at 1500–01. It would not have intended to place a separate procedural obstacle to access this Court by precluding tolling of the 30-day period for requesting a CDP hearing.” 161 T. C. 4, at p. 30.

Judges Kerrigan, Gale, Paris, Morrison, Nega, Pugh, Ashford, Urda, Copeland, Toro, Greaves, Marshall, and Weiler, are OK with this.

Judge Courtney D (“CD”) Jones agrees that Appeals can hold the CDP on a late Letter 12153 if equitable considerations so dictate, but dissents as to Reg. Section § 301.6320-1. The majority says the Reg doesn’t bar equitable tolling of the thirty-day period to petition from a NOD. Judge CD Jones says the statute is ambiguous, so she wants a Chevron part two analysis whether the Reg falls foul of the statute. The majority breezes past the Reg.

Judges Foley and Buch agree.

Time for a trip to 9 Cir, and beyond?

STJ Diana L. (“Sidewalks of New York”) Leyden, erstwhile Taxpayer Advocate for Our Fair City, presided over a distinguished Zoomiegram panel of LITC and pro bono attorneys, bringing to the fore the need for volunteers and the valuable training this provides practitioners.

Of course, those who read this my blog know all that. I am sure many of you are calendar call commandos and helpers of the helpless.

I did find interesting reference to Rule 151.1, Brief of An Amicus Curiæ. It seems that, when a novel legal question of far-reaching impact may arise in a self-represented case, Tax Court will reach out to ABA Tax Section, and even various organs of the blogosphere, to solicit motions for leave to file briefs amicus. Shares of Mandy Mobley Li! Of course, those not deemed sufficiently important will hear nothing. I suggest the Tax Court Bar generally should be notified; if we are not sufficiently important to be notified and perhaps allowed to seek leave (which is not automatic, of course), why are we allowed inside the Glasshouse at all?

If any suspect I have a pony in this horserace, they’re quite right. Who else has covered USTC on a daily basis for twelve (count ’em, twelve) years?

I do want to thank the LITCs for pairing rookies with established players in pro bono teams. The only way to learn one’s craft is on the job with those who know. Young lawyers too often are out on their own with no role models.

Judge Morrison’s exposition in John Peter Zaimes, T. C. Memo. 2023-118, filed 9/26/23, is more formal than the title first set forth at the head hereof would imply. But I recommend it as a comprehensive essay on reasonable cause for failure to file and pay timely, a drilldown into Section 6651 and Section 7502.

Judge Morrison believes JP when he says he mailed his return and a check for part (but not all) of the tax he owed. JP was rushing to the airport, and his trusty CPA gave him the return, but did not e-file it until a year later, after JP discovered his mailed return was never received nor his check cashed.

Tax owed is not an issue; JP concedes. The issue is the late-filing and late-paying add-ons.

Section 7502, and its regs, get a workout. Judge Morrison prints it in extenso at pp. 12-20. JP fails to prove he put adequate postage on the envelope, or that he properly addressed the envelope. And IRS says they never got it; getting it within the time when mail ordinarily gets from sender to proper IRS processing office is also required. Nonreceipt nullifies JP’s credible testimony that he put a private postage meter mark with the magic date on the envelope. And 9 Cir, whence JP is Golsenized, says extrinsic evidence can’t prove timely mailing if the return was never received.

And reliance on CPA doesn’t work, unless advice given was legal advice, but all JP has it that his CPA never told him to file certified. Relying on the instructions to Form 1040 doesn’t work, especially if you can’t testify that you read said instructions. If JP could prove USPS lost the return, he might have reasonable cause, but he can’t prove that.

As for failure to pay, reasonable cause must exist at due date without regard to extensions. Reasonable cause that arises later, say at a subsequent month, does not excuse the 0.5% add on for that month. And partial payment doesn’t excuse, only reduce the amount of tax due on which the add-on is computed. IRS gave JP credit for his partial payments when they computed the add-on.

In short, file certified, registered or IRS-approved PDS if filing paper. Otherwise, e-file. And tell ’em JP sent ya.

Turns out that Joseph Michael Balint, T. C. Memo. 2023-118, filed 9/25/23, was grousing about someone grabbing his IRA and other stuff, as I surmised back in 2019; see my blogpost “Common Sense in Tax Court,” 10/2/19. Likewise turns out that it was his loved-once Jacqueline, to whom Joe gave POA whilst in the FL slammer. Jacqueline proceeded to grab north of $130K therewith, and skedaddle for KY, filing for divorce as she went.

Joe didn’t know that Jacqueline grabbed his gelt and scarpered until he got served with divorce papers while he was still in jail.

Judge Gale recollects the sad tale of Andy Roberts, referred to in the aforementioned blogpost, and lets Joe off the hook for whatever didn’t benefit him. Now this comes up in a CDP, so before y’all yell “prior opportunity to contest,” Joe self-reported the income even though he claimed he never got it, as he was scared that, if he didn’t, the FL authorities would revoke his parole. Hence self-reported. So he gets a chance to contest, and does.

Joe sued for divorce his own self after Jacqueline’s case didn’t result in judgment. FL State court found Joe didn’t owe tax on what Jacqueline took, but no issue preclusion, as IRS wasn’t a party to State court proceeding. And nonmutual preclusion generally only bars a claim defensively. Nonmutual offensive collateral estoppel doesn’t apply against the government.

Joe wasn’t the distributee of Joe’s IRA money per Section 408(d)(1), as Jacqueline took same in breach of her fiduciary duty under the POA.

“… although a taxpayer is generally treated as the recipient of any income received by his or her agent, that rule does not apply ‘where the agent receives and misappropriates funds for his own use, where the principal had no knowledge of such misappropriation, and where the principal received no economic benefit from the misappropriated funds.’” T. C. Memo 2023-118, at p. 12.

True, the POA provided for dispositions of property and giving of gifts, which might otherwise be adverse to principal’s interest, but only for tax, estate, and public assistance planning purposes, to benefit Joe. It wasn’t an open-ended license to grab. Judge Gale has plenty of FL somber reasoning and copious citation of precedent for that. And Joe had made it clear to Jacqueline while he was in jail what he wanted…protection of his assets.

Joe’s off the hook.

Ain’t Nobody Happy

This was my lodestar from childhood’s earliest hour, and remains so. And it clearly obtains forcefully in Judge Ronald L. (“Ingenuity”) Buch’s court, as he denies summary J to IRS in Jeffrey D. Hoyal and Lori D. Hoyal, Docket No. 6791-20, filed 9/25/23.

Jeff and Lori ran their businesses through various vehicles, but we’re concerned with Crater Lake Trust, an irrevocable. During years at issue, Jeff was trustee, and beneficiary was Jeff’s Momma, Dawna. IRS wants to collapse the trust and send all tax incidents though to Jeff per Section 671, on an assignment of income theory: the trust really belonged to Jeff. IRS claims, per Section 674, Jeff could do what he wanted with trust corpus and income, there being no party adverse to Jeff or any nonadverse party.

IRS relies on the provisions of the trust instrument. Jeff and Lori claim questions of fact: was Momma Dawna an adverse party; did she provide “approval or consent” to what Jeff did or didn’t do, per Section 674(a); did Jeff part with command and control over the trust property or income; and was Momma Dawna the sole beneficiary of the trust?

“The Hoyals and Crater Lake Trust argue that Dawna Hoyal is an adverse party that had approval power and used that power. They contend that she is an adverse party because she was the beneficiary of Crater Lake Trust during the years in issue. And they contend that she had approval power because she approved all major decisions about Crater Lake Trust’s investments and sale of property, and she reviewed and signed its tax returns. The Hoyals and Crater Lake Trust rely on the deposition of Dawna Hoyal…. and the deposition of Jeffrey Hoyal… as support for their argument that Dawna Hoyal had approval power.” Order, at pp. 3-4.

That’s enough for Judge Ingenuity Buch. Just relying on the written word of the trust instrument isn’t enough.

No summary J.

I was surprised when Judge Patrick J. (“Scholar Pat”) Urda cited, apparently as authority, two (count ’em, two) orders from wholly-unrelated cases in Beaverdam Creek Holdings, LLC, Beaverdam Creek Investors, LLC, Tax Matters Partner, Docket No. 12362-21, filed 9/22/23.

Before going off to celebrate this date, I gave one last look for blogfodder to close out the rather slim pickings this week afforded. Here’s IRS playing the Boss Hoss summary J gambit with extra caution after the Lakepoint drubbing. Order, at p. 4, footnote 4.

The Dammed were fighting over whether the declarations by supervisor and supervised were inadmissible hearsay, but Judge Scholar Pat gave that short shrift. Hearsay that can be reduced to admissible evidence on the trial can be used to support summary J in 11 Cir; supervisor and supervised could both testify under oath on a trial, and the Dammed are in 11 Cir.

“These declarations, together with RA S’s declaration, confirm SRA P’s explicit statement on the penalty lead sheet that she was RA S’s immediate supervisor at the time she approved the penalties. See e.g., Order, Elbow Creek Aggregates, LLC v. Commissioner, No. 14702-21 (T.C. Mar. 21, 2023) (‘[a]ll three individuals ha[d] supplied Declarations confirming that Messrs. V and S supervised Ms. G during the Elbow Creek assignment.’); Order, Sunfish Cove, LLC v. Commissioner, No. 14163-21 (T.C. Mar. 23, 2023) (‘RA P and Mr. G ha[d] submitted Declarations . . . averring Mr. G was RA P’s immediate supervisor).’ Order, at p. 5. (Names omitted).

I didn’t blog Elbow Creek because Judge Albert G (“Scholar Al”) Lauber gave a beautiful and much more blogworthy dissection of Section 86 Social Security taxation that day in Lin, T. C. Memo. 2023-37. Anyway, Elbow Creek is just a rehash of Kroner any-time-before-assessment Boss Hossery. I did blog Sunfish Cove (see my blogpost “That’s the Word – Part Deux,” 3/23/23).

But the point of all this (OK, y’all can yell “There is?” I can take it) is that Judge Scholar Pat, who has tried some eighty Tax Court cases before ascending the bench, forgot Rule 50(f): “Orders shall not be treated as precedent, except as may be relevant for purposes of establishing the law of the case, res judicata, collateral estoppel, or other similar doctrine.” None of those are in play here, as I can find no connection among the Dammed, the Sunfish, or the Elbows, such as would invoke law of the case, issue preclusion, claim preclusion, “or other similar doctrine.”

This merits a Taishoff “Huh?”

In Mikel P. Kunza & Tanya R. Kunza, Docket No. 15726-21S, filed 9/22/23 (a very special day in my house), Judge Ingenuity Buch revives Judge David Gustafson’s answer to my long-expressed need for a structure for judges and STJs to follow, and guide for petitioners and practitioners, in dealing with the Section 6673 delay-of-game chops. In parsing past orders and opinions, with unexplained or semi-explained variations in whether to impose, and how much to impose, I suggested that the process was arbitrary, and that thereby contumacious litigants might contest or avoid impositions on reconsideration or at USCCA. I won’t try to collate all my blogposts; this would only weary me and my readers. But Judge Gustafson had the answer back in 2015; see my blogpost “Another Rounders’ Day,” 6/3/15.

Mik & Tan are long-time rounders, going back fourteen (count ’em, fourteen) years. IRS moves to toss their latest visit to The Glasshouse on Second Street, NW, for lack of prosecution. Judge Buch, sua sponte (that means on his own, for you who didn’t go to expensive law schools), tells Mik & Tan that Section 6673 is in play.

First, Judge Ingenuity Buch goes through IRS’ and his attempts to move the case. It’s a third-party reporting joust, so Mik’s & Tan’s claim they didn’t get the cash isn’t per se frivolous. But Mik’s & Tan’s interactions with IRS were less than cooperative.

“While the Court perhaps does not have the full array of communications between the parties, the Commissioner provided email correspondence between his counsel and Mr. Kunza. Those communications show polite inquiries, suggestions, and overtures from the Commissioner’s counsel. They also show profanity-laced tirades directed at the Commissioner’s counsel, his paralegal, government lawyers in general, and the Court. Mr. Kunza raises issues of race, politics, and COVID vaccines, none of which bear on the tax issues in this case.” Order, at p. 2.

Now under the usual procedure, that would be enough to qualify Mik & Tan for the Section 6673 finals, and assure them a place on the chopping block. But this is Judge Ingenuity Buch; remember his often-quoted 63 (count ’em, 63) page takedown of Stephen T. Waltner. Well, if you don’t, see my blogpost “Cracking Up,” 2/27/14.

So Judge Ingenuity Buch gives Mik & Tan the Waltner treatment, first itemizing every attempt to get this case moving. Next, he goes back to 2009 and gives a précis of each of Mik’s & Tan’s four (count ’em, four) previous visits to Tax Court (and, in fairness, one of them did settle out) and whether a Section 6673 chop or warning followed.

But the tour de force comes at pp. 3-4, as Judge Ingenuity Buch revives Judge David Gustafson’s twelve-point checklist from Leyshon and runs it, item by item, with citations to specific supporting incidents.

It doesn’t matter that the deficiency is $1100; a $500 chop is a stinger.

If making imposition of Section 6673 chops appeal-proof is your aim, Judges Gustafson and Buch will show you how.

Third time is distinctly unlucky for Clair R. Couturier, Jr., Docket No. 19714-16, filed 9/21/23, as Judge Albert G. (“Scholar Al”) Lauber kicks Clair’s expert witness SJS into touch. You’ll remember that Clair was fighting over a busted IRA (ten years’ worth of 6% per annum Section 4973(a) excess contributions tax).

Clair and an outfit called The Employee Ownership Holding Company, Inc. (TEOHC) did a give-and-go rollover, and canceled a bunch agreements (hi, Judge Holmes), which gave rise to some $26 million of cash and a note. But no separate allocation between rolled and canceled (unrolled) was made at the time, so it remains to do so now, so that the worth of the unrolled can be determined, and the 6% excise tax applied (plus chops).

This is Clair’s third appearance in this my blog. See my blogpost “Foolish Consistency – One Mo’ Time,” 7/6/22 for the rest.

SJS opines that the canceled agreements violate ERISA, so they’re worthless. Yes, don’t yell, it’s a conclusion of law, which is the province of the judge, so whatever SJS has to say about that is out.

Next, “…he opines that their value should be capped at 15% of ‘the total equity value of the company [i.e., TEOHC].’ He bases this opinion on a ‘rule of thumb that many ESOP trustees use when negotiating executive compensation agreements that dilute the ownership rights of the ESOP.’ This supposed ‘rule of thumb’ is that ‘no more than 15% of the equity value can be used for executive compensation.’ His report supplies no facts or data to support this statement; it is simply an assertion discussed in a single paragraph on page 14 of his report. He acknowledges that his supposed rule of thumb ‘is not a hard rule’ and that he has ‘seen ESOP-owned companies with more . . . equity compensation to management than 15%.’” Order, at p. 2.

Do you hear echoes of the infamous “Primoli memo,” which birthed the much-derided 15% diminution for façade easements? Judge Scholar Al hears echoes of vitamin pill scion Mitch Skolnick, whose unhorsing I chronicled in my blogpost “Horsefeathers,” 6/3/19.

“SJS’s second opinion must be excluded because he supplies absolutely no facts or data to support his 15% number, but only his bare assertion that this is a ‘rule of thumb that many ESOP trustees use.’ In Skolnick v. Commissioner, T.C. Memo. 2019-64, 117 T.C.M. (CCH) 1319, 1322, we rejected expert testimony from an appraiser for similar reasons, ruling that an expert must ‘explain how he got to his results, which requires that he show the data he considered, the methodology he applied, and the manner in which he applied his methodology.’ ‘Without that information,’ we noted, ‘the Court has no means of examining whether the report ‘rests on a reliable foundation and is relevant to the task at hand.’ Id.” Order, at p. 2. (Citation omitted).

Besides, the issue is not what a hypothetical ESOP trustee may have done, but what the parties to the deal (Clair and TEOHC) agreed was the value of what Clair got.

So Judge Scholar Al gives “thumbs down” to SJS’ report and his rule of thumb.