Adam Sowards, T. C. Memo. 2023-99, filed 8/3/23, loses both Child Tax Credit and Additional Child Tax Credit for his numberless children, even though everyone agrees he has four (count ’em, four) who might qualify. Ditto for his EITC and recovery rebate credit, for his non-US citizen wife. Problem is, for years at issue, they had no SSNs.

Judge Gale judge-‘splains: “Petitioner’s spouse (whom he married in 2003) did not have an SSN because she was not a citizen of the United States. Petitioner also had not obtained SSNs for his children because he had intended (consistent with his religious beliefs, which include conscientious objection to public insurance and reliance on government benefits) to allow his children to decide at an appropriate age whether they wished to participate in the Social Security system.” T. C. Memo. 2023-99, at p. 3.

Adam had a back-and-forth with IRS (corroboration scarce) over getting ITINs, but we all know you can’t get an ITIN if you can get an SSN. So Adam’s claims for CTC and ACTC get bounced for Section 6213(b)(1), (g)(2) math or clericals, hence no SNOD, so Adam can contest at CDP (no prior opportunity). In the meantime, the argy-bargy over ITINs drags on until the PATH Act ups the ante for the credits, so when Adam finally caves, gets the SSNs for the kiddies, and files amended returns claiming the credits, Section 24(e) as amended by the PATH Act says he’s too late with the SSNs.

Adam also loses EITC and recovery rebate credit because Mrs. Adam had no SSN, as she was not a US citizen.

Adam turns to Chris Bourell, Esq., and his trusty Rocketguys at the University of Toledo Tax Controversy Clinic.

The Rocketguys claim unconstitutional retroactivity of the Section 24(e) amendment, but Judge Gale isn’t having it. “…the PATH Act’s amendments to the section 24(e) identification number requirements expressly apply to returns, and amendments and supplements to returns, filed after the date of its enactment. See PATH Act § 205(c)(1), 129 Stat. at 3081. Thus, by its terms, the amended version of section 24(e) applies only prospectively, to documents (like petitioner’s amended returns) filed after enactment of the PATH Act.” T. C. Memo. 2023-99, at p. 14. That it changed Adam’s expectation of what the law would continue to be doesn’t make it retroactive.

No one’s life, liberty, property, or sanity is safe while Congress…but this is a nonpolitical blog.

And of course any mistaken advice on the law from IRS’ agents doesn’t create estoppel.

Free exercise of religion doesn’t get it, either. See Miller v. Com’r, 114 T. C. 511, 6/23/00, at pp. 516-518.

Adam loses.

No, once again it’s nothing about tin whistles or foghorns; for that, see Lonnie Donegan’s 1959 cover of the 1924 Billy Rose, Ernest Breuer, and Marty Bloom chewing gum canzone.

Once again, Tax Court needs to unleash a full-dress T. C. because ex-Ch J Maurice B (“Mighty Mo”) Foley omitted from his last updating of Tax Court Rules of Procedure and Practice the equivalent of FRCP 41, allowing a petitioner to dismiss non-6213 deficiency petitions.

We all know that, in a Section 6213 deficiency case, once Tax Court has jurisdiction dismissal must simultaneously result in entry of decision for IRS in the full amount of the SNOD, per Section 7459(d).

Ex-Ch J Mighty Mo has the full list of Tax Court cases where a voluntary dismissal of the petition is permitted without entry of decision in Joseph E. Abe, DDS, Inc., 161 T. C. 1, filed 8/3/23, at p. 3.

“In nondeficiency cases filed pursuant to Code sections other than section 6213, this Court has previously granted taxpayers’ motions to dismiss or withdraw petitions. See generally Stein v. Commissioner, 156 T.C. 167 (2021) (administrative costs pursuant to section 7430(f)(2)); Mainstay, 156 T.C. at 100 (failure to abate interest pursuant to section 6404(h)); Jacobson v. Commissioner, 148 T.C. 68 (2017) (whistleblower awards pursuant to section 7623(b)(4)); Davidson v. Commissioner, 144 T.C. 273 (2015) (innocent spouse determinations pursuant to section 6015(e)); Wagner v. Commissioner, 118 T.C. 330 (2002) (collection actions pursuant to sections 6320(c) and 6330(d)). Section 6213 was not applicable to these nondeficiency cases and therefore section 7459(d) did not mandate entry of decisions in the Commissioner’s favor upon the dismissals. See, e.g., Stein, 156 T.C. at 169.”

Joseph D. Abe, DDS, is a CA corp which petitioned a revocation of its pension plan qualification per Section 7476, seeking a declaration that the plan was OK. Now they want to dismiss their petition. No background facts are given, so we are left unenlightened as to why they petitioned and why they want to dismiss.

Regardless, ex-Ch J Mighty Mo, seeing IRS doesn’t object to dismissal, tosses the petition.

Walt Whitman, thou should’st be living at this hour. Tax Court has unleashed the pamphlet electronic, with monthly up-dates front-running the semiannual bound vols.

Here’s the skinny: “The Tax Court’s published Reports are available as monthly or bimonthly pamphlets that provide the correct citation pages before the semiannual bound volumes are printed. Pamphlets are now available electronically below [On the website]. When the pamphlet opens, click a link in the Table of Cases to open an opinion.”

When 11 Cir got done with Section 6751(b) Boss Hossery (see Kroner v. Com’r., 48 F. 4th 1272, 11th Cir. 2022), we had a replay of ex-Ch J Michael B. (“Iron Mike”) Thornton’s dictionary chaw in Graev (see my blogpost “A Non-Christmas Story,” 12/26/16).

“Hard cases make bad law,” my old mentors on The Hill Far Above drummed into my barely-post-adolescent skull, and is that ever true in Kroner. See my blogpost “Imaginary Friend,” 6/1/20. Burt Kroner comes off as a heavy-duty wit, wag, and wiseacre, so 11 Cir wants his head on a platter. Ex-Ch J L Paige (“Iron Fist”) Marvel is no friend of such types, but she properly found IRS was out on chops leg before wicket, having hit Burt with a Letter 915 and then a Letter 950, each time attaching Form 4549, but no Boss Hoss sign-off had yet occurred. 11 Cir went back to “assessed” as entry on IRS’ books, which is where ex-Ch J Iron Mike concluded his dictionary chaw.

By 11 Cir logic, as assessment of a deficiency cannot occur until after judicial resolution (Section 6213(a)), Boss Hossery need not take place until after trial, appeal, remand, retrial, appeal, further appeal, and remand. Given the leisurely pace of Tax Court litigation, assessment may not take place until twenty (count ’em, twenty) years after chops first are mentioned.

True, 11 Cir did require that the Boss Hoss still retain supervisory authority at time of signoff. But as signoff need occur only at the end of the road, one can imagine IRS’ counsel dragging the Boss Hoss from his/her retirement party to scrawl “OK” on the document (which need not be on paper, need not have a wet signature, and need take no specific form), to wave at the last person standing.

This is farcical.

For an application of this schemozzle, see Steven Feller & Louise Feller, Docket No. 11581-02, filed 8/2/23. Unhappily, Steve’s & Lou’s witness made no notes of pre-Boss Hoss discussions of chops with IRS, so can’t specify names or dates, only generally mentioning some IRS types with whom he dealt. Judge Christian N. (“Speedy”) Weiler finds that insufficient to defeat IRS’ motion for (surprise, surprise) partial summary J, even if 11 Cir hadn’t held that Boss Hossery could take place in the sweet bye-and-bye.

“Under section 6751(b), respondent is not required to make a negative showing that a formal communication did not occur. Rather, the taxpayer will be required to produce evidence of a prior formal communication since such communication, if it exists, would have been received by the taxpayer. An earlier communication between an examining agent and a taxpayer regarding potential penalty imposition would not insulate the taxpayer against a future formal determination of penalties. A formal communication by respondent of the penalty to the taxpayer, after supervisory approval has been secured, is the mandate of section 6751(b).” Order, at p. 3, footnote 2. (Citation omitted).

I most respectfully submit the foregoing formulation makes Section 6751(b) worse than worthless; it makes examination a free-fire zone where examining agents can threaten fraud penalties and worse to extort settlements, while Tax Court and 11 Cir piously clutch their dictionaries.

Maybe, says Judge Travis A. (“Tag”) Greaves, but even though Amgen Inc. & Subsidiaries, Docket No. 16017-21, filed 8/1/23, filed a motion to calendar, requesting Judge Tag Greaves to visit their manufacturing site on the Isla del Encanto, he must decline.

IRS says the trip will give a distorted view of the importance of the Puerto Rican site and its operation, because Amgen & Subsidiaries site their drug operations in various locales, and have adopted the profit split method for allocating income and deductions amongst the lot. So this is a Section 482 reallocation case, and the issue is who does what, where, and when, to keep Amgen & Subsidiaries from allocating the cherries to the low-tax places and the pits to the high-tax.

The only specific Rule is Rule 72(a) which allows one party to enter another’s land for discovery. True, Tax Court Judges have done site visits in the past. The USDCDPR checklist is “(i) the importance of the evidence to be obtained; (ii) whether a view will substantially aid the Court in reaching a correct verdict; (iii) whether the Court could visualize the scene from other types of evidence apart from a site visit; and (iv) whether site visits would be practical or logistically difficult.” Order, at p. 3. (Citations omitted).

“A profit split analysis requires the relative evaluation of the economic activities of all the parties to an economic venture. Respondent maintains that an AML [Puerto Rico] site visit (without visiting other relevant sites) would prejudicially emphasize the functions and resources employed by one controlled entity, while ignoring those of Amgen’s U.S controlled entities. We agree. Without the benefit of visiting the other relevant sites, the Court could not put AML’s operations in proper perspective in determining comparability with the other sites.” Order, at p. 3.

I note in passing that these are all U.S. operations, as Puerto Rico is United States territory.

Judge Tag Greaves will have to get his impressions of the other sites from “standard presentation methods such as videos, photographs, expert reports, testimony, or documentary evidence.” Order, at p. 4. No reason the same from the PR site could not serve as well.

And Judge Tag Graves is not pulling a Willie Nelson any time soon. “Finally, we recognize the possibility that the Court may benefit from visiting AML as well as several of Amgen’s numerous facilities throughout the U.S. The logistics, time commitment, and impracticality of crisscrossing the U.S. to do so, however, would be prohibitive.” Order, at p. 4.

I do give the trusty attorneys for Amgen & Subsidiaries a Taishoff “Good Try,” although which of the fifteen (count ’em, fifteen) attorneys listed for petitioner on the docket search came up with the idea, I do not know. Your colleagues should buy you a Bacardi 8 Años piña colada.

I don’t know if Suzanne Jean McCrory, T. C. Memo. 2023-98, filed 8/1/23, is a devotee of the I Ching, but she certainly has followed the oft-reiterated injunction therefrom first above-written at the head hereof (as my expensive colleagues would say). With the fruitless years behind her, and the apparently hopeless years before her, Suzanne Jean kept volleying those Forms 211 at the Ogden Sunseteers, while Chief Whistler John W. (“Hoppin’  John”) Hinman’s myrmidons gave her the Mandy Mobley Li treatment.

This time she fired off a salvo of seven (count ’em, seven), and she finally hit the jackpot. She got a post-sequester $1694.31 for the consolidated bunch. I think she’s still out of the money when you consider the postage for all the predecessor applications. So Suzanne Jean threw in sixty Georges out of her winnings and petitioned.

IRS asks Judge Emin (“Eminent”) Toro to toss Suzanne Jean for want of jurisdiction, and incidentally to overrule Lippolis because it conflicts with Li, the Ogden Sunseteers’ get-out-of-work-free case. For the backstory on Lippolis, see my blogpost “The $2,000,000 Misunderstanding,” 11/20/14. IRS claims the award to Suzanne Jean was based upon Section 7623(a) (discretionary, hence nonreviewable), because the Section 7623(b)(5) $2 million predicate was not attained.

The Final Award Letter from the OS wasn’t a model of clarity.

“The Decision Letter listed all seven claim numbers in the ‘Re:’ line and stated that ‘[the WBO] has made a final decision that you are entitled to an award of $1,694.31.’ The Decision Letter did not identify which claim numbers the award related to, but explained the award computation in an attached Determination Report. The Report, also listing all seven claim numbers, stated that the ‘[f]inal tax, penalties, interest, and other amounts collected based on information provided by Whistleblower’ were ‘$179,672.20’ and that the recommended award percentage was 1%, subject to a modest reduction under the Budget Control Act of 2011, Pub. L. No. 112-25, 125 Stat. 240. The Report cited section 7623(b)(2) to justify the amount of the award and did not analyze the claim numbers individually.” T. C. Memo. 2023-98, at p. 4. (Footnote omitted, but it says the preliminary report said the same.).

So the Li toss, where the OS do nothing, is not in play here, because the OS did collect and did make an award. But only Section 7623(b) awards are subject to Tax Court review, and those awards must scale the $2 million/$200K minima of Section 7623(b)(5). Section 7623(a) awards need scale no such, but are nonreviewable. Of course, the label put on the award doesn’t determine its nature.

“As we have already noted, the D.C. Circuit held in Li that this Court lacks jurisdiction to review a threshold rejection issued by the WBO because, in such a case, the IRS takes no action with respect to a whistleblower’s claim. Li v. Commissioner, 22 F.4th at 1017. But the D.C. Circuit recently confirmed that our Court does have jurisdiction when the IRS proceeds with an action related to a whistleblower’s information and nevertheless declines to grant an award under section 7623(b). Lissack v. Commissioner, 68 F.4th at 1321. As the Commissioner’s Motion points out, the latter situation is analogous to one in which the IRS issues an award pursuant to section 7623(a) after proceeding with an action based on a taxpayer’s information and collecting proceeds. See Lippolis, 143 T.C. at 396 n.2 (observing that, when the WBO grants an award under section 7623(a), it implicitly denies an award under section 7623(b)). Thus, accepting the Commissioner’s own analogy, Lissack contradicts the position advocated in the Motion. Moreover, neither Li nor Lissack addressed specifically this Court’s precedent on the jurisdictional status of the monetary thresholds of section 7623(b)(5) or cast any doubt on that precedent.” T. C. Memo. 2023-98, at p. 7.

For the backstory on Lissack, see my blogpost “A Piece of the Action – Part Deux,” 8/17/21. And again, in the interest of full disclosure, Mr. Lissack was formerly a client of mine, many years ago and in an unrelated matter.

So Tax Court precedent, that the $2 million/$200K hurdles are affirmative defenses to a Section 7623(b) claim, and not jurisdictional (shades of Myers and Boechler, P. C.), means IRS needs to answer Suzanne Jean’s petition, and plead and prove the affirmative defenses.

Suzanne Jean is in line for the first Fighting Joe Insinga Memorial Award.

The day has come, whereon and whereafter all newly filed posttrial briefs filed by practitioners admitted to practice before United States Court and all newly filed amicus briefs filed pursuant to Rule 151.1 in non-sealed cases will be made available to the public remotely through DAWSON, the new, improved, jim-handy (yeah, right, ya think?!) electronic filing and case management system.

The above was foretold in my blogpost “Coming Down the Creek,” 5/5/23.

Hence, this notice appears as a matter of record.

The YouTube car guru whose call appears first written at the head hereof, and others of that ilk, are wont to lament the required motor vehicle inspection régimes of the several States. Their plea is that antipollution and like requirements necessitate expensive repairs, whereas those who live in States where no such laws and regulations obtain can drive their vehicles for decades.

This being a nonpolitical blog, I take neither side here. But I am sure Timothy J. Goumas & Meredith E. Goumas, Docket No. 29100-21, filed 7/31/23, lament they live in a State which requires such inspections. Their car and truck expenses get thoroughly trashed when IRS gets the State inspection data from the Department of Motor Vehicles (DMV). The inspectors recorded the mileage driven between inspections for the four (count ’em, four) vehicles claimed to be driven in Timothy’s consulting business. See Transcript, at p. 9.

That plug-in under the dashboard is the On Board Diagnostic (OBD) port. The car gurus hook up expensive computers, which see all, know all, and tell all. And the State inspectors have them too, and share with IRS.

Judge Emin (“Eminent”) Toro Judge-‘splains: “The DMV maintains records from vehicle inspections. These records include, among other information, the vehicle’s identification number (VIN), the registration number, the vehicle’s make and model, the inspection date, and information from the OBD program, including a current odometer reading. In the inspection records, the figures shown for the odometer readings represent the inspected vehicle’s mileage in thousands of miles.” Transcript, at p. 8.

Judge Eminent  compares those miles with Timothy’s reconstructions of records lost in multiple floodings of his basement. The reconstructions do not come out of the comparison well.

“To summarize, although we believe Mr. Goumas did drive to some of his appointments, in light of the numerous discrepancies in the testimony and records, we simply cannot conclude that the Goumases have satisfied their burden of proof with respect to the claimed deductions for car and truck expenses.” Transcript, at p. 26.

Timothy’s meals and entertainment deductions fare no better.

I point out that relatively inexpensive devices can read the OBD information. Another tool in IRS’ kit.

Judges love settlements, wherever and however they originate. I’ve noted before that judges may act as catalysts in bringing the parties together, whether by sitting them down (either physically or electronically)  and banging heads, or by subtler means, like telling them to go try the case, which they are loath to do.

Judge Mark V. (“Vittorio Emanuele”) Holmes has done this before (see my blogpost “Prolegomena to a Settlement,”11/23/20), and he does it again with Hugo S. Bernal & Paula Bernal, Docket No. 11566-20L, filed 7/28/23. Hugo & Paula want to joust about their liability for the three (count ’em, three) years at issue. Problem is, they’re petitioning a CDP, they’re Golsenized to 1 Cir, and 1 Cir is strictly record rule from a CDP, no trials, just abuse-of-discretion.

Hugo & Paula and IRS want a third continuance (that’s an “adjournment,” if you’re a State courtier), but Judge Holmes thinks it’s time to stop waltzing. So he set up a phoneathon.

“It is apparent that petitioners want very much to contest their liability for the three tax years… at issue. Because our review is limited to the administrative record, that may be difficult, as we explained. Settlements are nevertheless to be encouraged, and the parties had already set up a meeting in late August.” Order, at p. 1. (Nudge nudge, wink wink).

“To keep the case moving to a conclusion, we will not grant a third general continuance, but we will allow the parties to propose a briefing schedule that will give them some time to try to negotiate a settlement whose terms might not be achievable through litigation.” Order, at p. 1.

Word to Hugo & Paula: the deal you make with IRS may be a lot better than what Judge Holmes can give you (and what 1 Cir would buy).

I’ve often written (in fact just now) about the variety of interesting cases that come before the US Tax Court. No Federal enactment touches “every living heart and hearthstone all over this broad land,” like the Internal Revenue Code. 

But alas, for every such interesting case, be it worthy of a full-dress T. C. or Memo, or only a humble Sum. Op., off-the-bencher, or order, there are dozens of protesters, dodgers without even an interesting dodge, or run-of-the-mine indocumentados featuring post-event ballpark guesstimates, ginned-up post-Exam spreadsheets, or just witness stand performance art. Nothing worth noting.

So when Judge Alina I. (“AIM”) Marshall filed her opinion in Robert R. Doggart, T. C. Sum. Op. 2023-25, of even date herewith (as my already-on-their second-Grey-Goose-Gibson colleagues would say), a cursory glance would have persuaded me to call a truce to my labors, especially after Judge David Gustafson’s magnificent mathematical marriage earlier today of hog farming and lumberjacking.

But Bob Doggart showed an original streak worthy of note here.

Yes, the lapsed insurance policies paid off the accumulated loans and generated income, even if he got no cash. Yes, his rental real estate deductions crater because he lived in the premises for more than the Section 280A(d) 14-day free kick during year at issue. And yes, Bob Doggart owes tax and add-ons even though he was in the slammer during years at issue.

But Bob Doggart’s real estate depreciation deduction is a true original.

“In calculating the loss on Schedule E, petitioner claimed deductions for … $73,593 for depreciation that petitioner calculated using the appraised value of the property and a seven year cost-recovery table, which he selected because it corresponded to the length of his remaining prison sentence.” T. C. Sum. Op. 2023-25, at p. 3.

I want to award Bob Doggart a Taishoff “Clessic”, and that’s no typo.