If, in reading Marie E. Henry, T. C. Memo. 2023-2, filed 1/5/22, you do not feel a slight rise in your blood pressure, you can skip the rest of this blogpost. As for me, writing a nonpolitical blog, if this case illustrates the best Congress can do, it might be best if Congress does nothing, as they are doing now.

According to Judge Ashford, during 2016 (year at issue) Marie “…has been unemployed, and during at least 2015 and 2016 she was not only in a terrible financial state but also in a terrible physical and mental state. Consequently, starting in 2015 and through at least 2016 she made early withdrawals from a retirement or pension plan to cover her living expenses, and during at least 2016 she limited her medical treatment.” T. C. Memo. 2023-2, at p. 2.

To add to Marie’s terrible financial, physical, and emotional state, she enrolled in the FL Marketplace, a creature of the much-contemned Affordable Care Act of 2010. Although Marie claimed she canceled in Month Two, she had no written proof, and the FL insurance crowd said their files showed she was in it until Month Eleven, hence the $7K APTC. Marie’s pension draws put her at 598% of the applicable poverty line (her draws and her son’s income).

Judge Ashford: “Although she appeared sincere at trial, and we do not doubt that she was in a fragile mental state during 2016, petitioner was unable to offer any documentation to corroborate her contention. Indeed, the documentation from the Marketplace shows otherwise; the documentation stated that there was no record of her attempting to request termination or cancellation of her health coverage during 2016 and on November 30, 2016, her coverage was terminated for nonpayment of premiums. We sustain respondent’s determination.” T. C. Memo. 2023-2, at p. 6.

So, sick and fragile, and eating up her retirement to stay alive, Marie owes $7K to the fisc to repay what the fisc paid to the insurance company.

I cannot very well comment on this result in language fit for reading at the family dinnertable.

I can give a Taishoff “Good Try, Pro Bono Class,” to Marie’s trusty attorney Robert D. Probasco, Esq., now or formerly of the Texas A&M University School of Law LITC. Hullabaloo Kaneck Kaneck, Hullaballoo Kaneck!

XC Foundation, T.C. Memo. 2023-3, filed 1/5/22, found its 503(c)dom yanked retro to 1/1/2016. So XC petitioned, as simultaneously its former CEO and former Secretary found themselves looking at Section 4941 excise self-dealing taxes.

Meanwhile, the CA Franchise Tax Board, like an even more Exalted Authority, has its version of a winnowing fork and gave XC the Matthew 3:12 treatment. So IRS answers “no jurisdiction, because XC the non-exempt is also XC the non-existent.” No powers, per CA law.

XC’s trusty attorney says “but XC signed a Form 872 SOL extender, which says we keep appeal rights.” Judge Albert G (“Scholar Al”) Lauber says “(P)etitioner errs in contending that this statement in Form 872 preserves its right to petition this Court. The ‘appeal rights’ to which Form 872 refers are the rights to administrative appeal within the IRS, not the taxpayer’s ability to secure judicial review. An IRS Form cannot define this Court’s jurisdiction. In any event, Form 872 preserves only those appeal rights to which the taxpayer ‘would otherwise be entitled.’ A corporation whose powers have been suspended under State law is not ‘entitled’ to commence litigation in this Court.” Order, at pp. 4-5.

Nowise daunted, XC’s trusty attorney claims keeping out XC increases the litigation burden on former CEO and former Sec’y.

Hard lines, says Judge Scholar Al. “… any litigation burden a party may incur has nothing to do with our jurisdiction.” Order, at p. 5.

I was about to award XC’s trusty attorney a Taishoff “Good Try,” but she blew it by going a bridge too far. She attacks Rule 60, that says corporate status is determined by State law.

“Finally, petitioner contends that Rule 60 is unconstitutional and violates its rights to procedural due process, equal protection, and to the protection against cruel and unusual punishment. These arguments are frivolous, and we decline to consider them further. See Wnuck v. Commissioner, 136 T.C. 498 (2011); Aldrich v. Commissioner, T.C. Memo. 2013-201, 106 T.C.M. (CCH) 192, 194 (citing Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)).” Order, at p. 5.

Yesterday, I wondered why Judge Alina I. (“AIM”) Marshall treated us to “somber reasoning and copious citation of precedent” when “a simple cite to Crain and Wnuck would be enough for us professionals.” Judge Scholar Al got it right.

I’m sure Judge Alina I. (“AIM”) Marshall is glad to join in the Psalm 118:15 treatment when Ryan Charles Minnig folds his frivolity, leading off the 2023 memorandum parade with T. C. Memo. 2023-1, filed 1/4/23.

RC was frivoling away with the wages-aren’t-income and no-valid-delegation standard protester jive from SNOD to trial. Whereupon, when Judge AIM cautioned him about the Section 6673 frivolity chop IRS wanted should he continue to frivol, RC, like many another who saw the red laser dot on the seam of their body armor, threw down his weapons.

“Although petitioner did not abandon his frivolous arguments, he was cooperative at trial and worked collaboratively with respondent’s counsel in the stipulation process. He stated: “I certainly don’t want to make any other frivolous points as they’re called, but I’m just trying to do what I think is right and not sort of ruffle any feathers.” T. C. Memo. 2023-1, at p. 3.

Although a simple cite to Crain and Wnuck would be enough for us professionals, Judge AIM provides the usual “somber reasoning and copious citation of precedent” to not sort of ruffle any feathers. And RC, although a second-time loser (see T. C. Memo. 2023-1 at p. 3), avoids the Section 6673 chop.

Summary judgment motions are a favorite tactic of mine. They give discovery of your case, your adversary’s case, and, most importantly, what the judge thinks of both cases. But you have to make your case. IRS omits too many steps in The Harbinder S Brar FLP II, n.k.a. Bosh LP, Brar Property Management Inc., Tax Matters Partner, Docket No. 17763-19, filed 1/3/23. IRS hit la famille Brar with 24 FPAAs and 3 SNODS, to which la famille Brar filed 27 (count ’em, 27) petitions. IRS seeks summary J in all, and loses.

“Important here is what occurred during the examinations. The revenue agent summoned Mr. Brar for an interview. At that interview Mr. Brar invoked his Fifth Amendment right against self-incrimination to virtually every question the revenue agent asked. The revenue agent also summoned Mrs. Brar for an interview, but she declined to attend and offered to respond to written questions instead. The revenue agent sent Mrs. Brar written questions and she responded by invoking her Fifth Amendment right against self-incrimination in her written answer to every question.” Order, at pp. 2-3.

IRS wants Judge Elizabeth A (“Tex”) Copeland to draw a negative inference as to all matters and bar the Brars from putting in any evidence. Trouble is, Judge Tex Copeland isn’t having it.

There’s no showing that the Brars will take the Fifth on the trial. IRS’ motion papers don’t include tax returns or transcripts for entities and years at issue to establish what are the deficiencies, and don’t put in all the bank account reconstructions to show unreported income. And since IRS wants fraud chops, they need clear and convincing evidence, whatever the Brars put in. So the Brars need not even respond to this motion.

No summary J, but no prejudice either.

Taishoff says, wow! Judge Tex Copeland really rapped IRS’ metaphorical knuckles. And yet, it was worth a try.

Although John Phillips opined back in 1966 that one “can’t trust that day,” whenever a public holiday in the Distritto Columbiano shows up on a Sunday, observation, or celebration, or commemoration is shunted off to the next ensuing Monday.

New Year’s Day is no exception.

I stand mute.

I’m not feeling particularly Auld Lang Syney today, as the Tax Court website is letting 2022 fade away in a flurry of routine orders. But this year was momentous.

The scholarly articles are starting to blossom as the blogosphere and the trade press slice, dice, and digest the Supremes’ effort to bring “discipline” to Tax Court jurisdiction via Boechler, P.C. My sources tell me that I, even I, am mentioned in one dispatch in an academic law review, a sacred grove hitherto unpolluted by my nonwhite shoes. Even though only a footnote, it’s something.

My specific comments need no further airing. I expect the silt stirred by Washington Nine will provide me with blogfodder throughout my declining years, even more prolific than the Great Graev tsunami kicked off by The Jersey Boys.

The supernal intermeddling by jurists afar remote from the actual practice of law and the operational difficulties of the trench warriors who must take what Congress has given them, no matter how far inadequate, and “stoop and build ’em up with wornout tools” is a wonderful aid to the blogger.

While the year just past brought me sorrow at a personal level, it has certainly provided journalistic joy.

Happy New Year to all!

The Incompetence Epidemic

We have just seen a world-class shambolic schemozzle at Southwest Airlines that put the DAWSON debacle in the shade.

I myself, though not a passenger on SWA, have seen a similar. For more than forty years, I have dealt with National Life of Vermont, formerly one of the best-run, old-line, mutual insurance companies, whose ancestry goes back to 1848.

I initiated a transaction on December 1, 2022, which had to be completed by close of business tomorrow.  It will not be completed. The crew at National Life Group (its current iteration, which bears no resemblance to its ancestor) is incapable of issuing a check and getting it to me in New York. I had three times emphasized the importance of the transaction, each time was assured to would be dealt with. I was told National Life Group only mailed checks; they were incapable of sending one by PDS, even after I offered to give them my account to which to bill.

They were twice incapable of issuing a check and mailing it.

My relationship with them will terminate. I strongly suggest anyone who reads this to consider carefully whether they wish to commence or maintain a relationship with an organization that makes the Genius Baristas and 18F look like Einstein meets Hawking.

For once, a whistleblower did get an award, but the Ogden Sunseteers gave with the left hand (information IRS unlikely to find on their own, and provided enough substantiation to nail the targets),so 15% sequestered rewards, but took with the right (held off telling IRS until his fellow fraudsters fired him from the business and shortchanged him with the spoils, so the bad guys got away with some skullduggery).

Felix Luu, 2022 T. C. Memo. 2022-126, filed 12/28/22, was engaged with family in poultry farming and running a supermarket. They were also skimming cash receipts. Felix first filed a Form 211 with Ogden, and later sued in State court when he discovered he was being shortchanged, whereupon the family came clean with IRS, except they were a wee bit parsimonious with the truth. IRS agrees that Felix’s blow netted better than $2 million, and gave him 15% (less sequester).

Felix wants more.

Judge Christian N (“Speedy”) Weiler has this one, and he goes through the entire Whistleblower story, statute and regs. Of course, Van Bemmelen gets heavy play: though both sides move for summary J, there’s no fact-finding as these cases go off on administrative record – abuse of discretion. And Judge Speedy Weiler can’t find any.

First, the good news. ” The record reflects the WBO’s process in determining that two positive factors existed, with the first positive factor being how the information petitioner furnished was previously unknown to the IRS, and second, that the information petitioner furnished identified behavior that the IRS was unlikely to identify or was difficult to detect by reasonable diligence. See Treas. Reg. § 301.7623-4(b)(1)(ii) and (iii).” T. C. Memo. 2022-126, at p. 20.

And though IRS is parsimonious with detail how they gave Felix another 7% for this, Felix didn’t ask for more, and Judge Speedy Weiler can’t find that arbitrary or capricious.

Next, the bad news. Felix delayed blowing for a couple years (hi, Judge Holmes) until the family fired him, and Felix also took some OTB (off the books) cash his own self. So Felix is knocked back down to the base 15%, and Judge Speedy Weiler doesn’t find that arbitrary or capricious either.

Now we all remember the Swiss banker who blew on his old bosses while in the slammer, netting around $46,000 per day while he was in durance vile, on a 26% award.

Maybe what poor ol’ Felix gave IRS was chickenfeed.

Susan P. Kechijian, T. C. Memo. 2022-127, filed 12/28/22, watched from the gallery as both the trial of her late husband’s and her deficiency case was tried and then affirmed on appeal to 4 Cir. But she was represented by the same trusty attorney who represented her late husband in life and thereafter his estate (of which she was co-ex’r). And that’s enough for Judge David Gustafson to find claim preclusion (res judicata) barring Section 6015(g)(2) innocent spousery.

For the backstory, see my blogpost “Unvested Stock, Vested,” 4/24/17.

Susan never raised innocent spousery during the previous litigation. Representation by counsel does show participation, but that’s not enough. There are cases when the non-requesting spouse ran the show and shut out the requesting spouse, despite requesting spouse having the same attorney.

“…here Mr. Kechijian had died a year and a half before the trial in this case. He was not able thereafter to restrict Ms. Kechijian’s pursuit of her interests and, in particular, her pursuit of a claim under section 6015. She was no longer under the shadow of Mr. Kechijian but rather was in a position to control the litigation however she wished—both as a petitioner in her own right and as the co-executor of Mr. Kechijian’s estate.

“As to her co-executor, Mr. H, we assume it is true, as Ms. Kechijian alleges, that only he and not she gave instructions to counsel for the handling of the deficiency case after Mr. Kechijian’s death. However, that was by Ms. Kechijian’s choice.” T. C. Memo. 2022-127, at p. 14. (Name omitted).

Judge Gustafson says this may have been a wise tactical move, but Ms. Kechijian never claimed conflict of interest on her attorney’s part, nor that she was left out of the loop. Besides, says Judge Gustafson, once the late Mr Kechijian was the late Mr Kechijian, her attorney’s loyalty was to her; but Taishoff says, what about the estate? Were there heirs, legatees, or beneficaries whose interests might have been adverse to Ms. Kechijian’s?

Howbeit, Ms. Kechijian could have taken the helm, and chose not to.

No innocent spousery for her.

Takeaway- Attorneys, watch out for conflicts. Interspousals can be dangerous to your professional health.

I take my text from a Christmastide classic: Jeanne S. Leyvraz was dead, to begin with. There is no doubt whatever about that. The docket entries are clear and in due form, attested to by the Ch Clk, Ms Servoss, and the Ch J, the Hon. Kathleen (“TBS = The Big Shillelagh”) Kerrigan. The case is officially stricken from the trial session and officially restored to the general docket.

So it must be understood that Jeanne S. Leyvraz was dead, or there would be nothing remarkable about the case captioned “Estate of Estate of Jeanne S. Leyvraz, Deceased, Patricia Perlman, Executor” Docket No. 32009-21, filed 12/28/22.

It is a law school trusts and estates 101 maxim that a living person has neither estate nor heirs. To have two (count ’em, two) estates is double proof.

Charlie Dickens would definitely approve.