Judge Courtney D (“CD”) Jones was much moved by the plight of Julian Wolpert and Estate of Eileen Wolpert, Deceased, Julian Wolpert, Executor, T. C. Memo. 2022-70, filed 7/7/22. Y’all will no doubt remember IRS counsels’ attempts to wild-card the “goofy regulation” into an indocumentado Section 162 deductions case, and an equally far-fetched endeavor to claim The Calculation Electronic duck of Boss Hossery.

What, no? Then see my blogpost “If At First You Don’t Succeed, Don’t Make It Worse,” 3/16/22.

Julian urged that trial must proceed speedily, because his trusty attorney’s equally trusty law student clinicians were about to scatter for summer vacation (or maybe white-shoe summer internships).

Well, student aid avails one little, if for substantiation one has only the Michael Corleone gambit. It seems one of Julian’s nearest and dearest, shortly after the decease of the late Eileen, inadvertently tossed the business records that could have saved part of the day.

“Notwithstanding Mr. Wolpert and the estate’s vague representations on brief that Ms. Narli inadvertently threw out business records stored in the Wolperts’ Honesdale residence following Mrs. Wolpert’s death, there is no evidentiary basis in the record (including Ms. Narli’s testimony) supporting such an allegation.” T. C. Memo. 2022-70, at p. 16. (Footnote omitted, but see infra, as my expensive colleagues would say).

“Mr. Wolpert and the estate did not specify when this incident allegedly took place. If the business records were thrown out in mid-2016, such an incident should have had no impact on business records generated after that date (including all of 2017).” T. C. Memo. 2022-70, at p. 16, footnote 32.

A couple times (hi, Judge Holmes) Judge CD Jones notes there isn’t even an attempt to Cohanize whatever isn’t sunk by Section 274 specificity.

In the interests of full disclosure, I note that one of the trusty student aides from Prof. Maresca’s Fordham Law School’s clinic spent a summer interning at a law firm with which I share office space. I was unaware of her involvement in this case until I read the opinion today.

We’ve all been there: the note of triumph, as the decision is a paean of victory, or the grating, jarring grind of defeat as the judge eviscerates all the work one’s done. And then the brisk movement, or painful trudge, to the street, where the world is going about its business regardless.

But whichever it is, counsel, Judge Ronald L. (“Ingenuity”) Buch has a reminder for you. Pick up your trial exhibits. Appeal or no appeal, whatever you’ve given in discovery, attached as exhibits to motion papers, or introduced on the trial, make sure you pick them up, or, at the very least, have copies that you can certify as true copies of the originals.

Unfortunately, fifteen years ago, when John Edward Barrington and Deanna Barrie Barrington, T. C. Memo. 2022-68, filed 7/6/22, were copping heavy-duty pleas to fraud and tax evasion, the high-speed scanner and The Cloud were not to be found in every office. “Documents obtained by the government in pursuit of the Barringtons’ cases consisted of more than 10,000 pages, including records seized by the FBI. Their attorneys gave them copies of discovery documents.” T. C. Memo. 2022-68, at p. 3.

Of course, today every 9-year-old knows that 10,000 pages barely wets the beak of an off-the-shelf 1-terabyte hard drive. Solely by way of illustration of the foregoing, see my blogpost “The Forty Million,” 4/29/15.

But John’s and Deanna’s attempt to overturn IRS’ deficiencies founder for want of the documentation they could have had, but didn’t.

“In the time between the criminal pleas and the Commissioner’s civil examination, the FBI’s records were destroyed in the ordinary course of its operations. The FBI notified the Barringtons that they could reclaim their records and held them for some time. During that time, the Barringtons never attempted to reclaim their records, and the FBI destroyed them in late 2009. When the Commissioner commenced a civil examination in 2012, the examination function could not obtain records from CI because they were grand jury materials.  Bank records were also unavailable because of the amount of time that had elapsed since the years at issue. As a result, the Commissioner used the information and figures from the plea agreements as the basis for his deficiency determinations.” T. C. Memo. 2022-68, at pp. 5-6. (Footnote omitted, but it says the grand jury materials were destroyed by Criminal Investigation in “the normal course of operations.”)

Spoliation worth a try? Intent to preserve is an issue. And we don’t know if John and Deanna were in the slammer when they could have tried to recover the documents.

Anyway, John and Deanna have nothing wherewith to rebut most of IRS’ numbers.

Takeaway- Pick up your trial exhibits (and everything else). Scan and back up.

Clair R. Couturier, Jr., T. C. Memo. 2022-69, filed 7/6/22, is back, but the ten (count ’em, ten) years’ worth of 1040s he failed to hide from the motley viewers at 400 Second Street, NW (for which see my blogpost “The Place Where There Is No Darkness,” 4/1/19) avail him nothing. IRS never examined any of them before they hit Clair with the Section 4973 6% per year chop on the $25 million excess contributions.

So Clair’s estoppel arguments go down. And I was right three years ago: it was an IRA retroactively rejected.

Clair was disqualified as to two pieces of his IRA package, so when he cashed out and rolled, he didn’t have a taxable event until he made good the excess by taking it in as income in whatever year he chose, or until IRS called him on it, but the 6% chop kept right on going.

Now before my ultra-hip readers go all Hellweg on me, remember that IRS had actually examined the 1040 for year at issue in Hellweg, took one position, and then reversed field. See my blogpost “Foolish Consistency,”  5/5/11.

Here’s Judge Albert G (“Scholar Al”) Lauber with the story.

“Petitioner’s reliance on Hellweg is misplaced for the same reason the taxpayers’ reliance was misplaced in Mazzei I. In Hellweg the IRS examined the taxpayers’ income tax returns, issued them ‘no change’ letters, conceded the transaction’s validity for income tax purposes, and sought to take the opposite position when asserting an excise tax deficiency. The IRS in the instant case did not examine petitioner’s … income tax return and took no position regarding the tax liability reported on that return. Petitioner seeks to equate the IRS’s inaction on the income tax front with its explicit concession in Hellweg. But as explained previously, the IRS’s failure to examine a return, or to challenge a particular position taken on a return, does not constitute a concession or admission that the taxpayer’s position is correct. * * * * The IRS did not take ‘inconsistent positions’ here, as we found that it had done in Hellweg. And while the IRS may be ‘legally precluded’ by an explicit concession, it cannot be precluded by inaction, inattention, or silence.” T. C. Memo. 2022-69, at p. 10. (Footnote omitted, but it discusses Ohsman, which I discussed in my “Foolish Consistency” blogpost, above cited).

For Mazzei I, see my blogpost “Foolish Consistency – Redivivus,” 4/1/14.

Y’all may have noticed a lack of Section 7623 whistleblower cases on this my blog, and elsewhere.  No surprise, as Mandy Mobley Li put paid to Tax Court review of anything except where IRS actually proceeds administratively or judicially. The Ogden Sunseteers can rest in certainty that, if they do nothing, they are exempt from judicial review.

See my blogpost “Sealed and Blown,” 5/17/22.

So today Atm Shafiqul Khalid, Docket No. 13967-19W, filed 7/5/22, is tossed as a thresholder reject. Y’all will remember Atm from my blogpost “It’s An Order, Not A Suggestion,” 11/20/20; if you don’t remember, Atm was the man who refused to abide by a Rule 103 protective order from then-Ch J Maurice B (“Mighty Mo”) Foley.

Today, DC Cir has spared Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan from any need to deal with Atm or motions pro or contra.

“By opinion issued January 11, 2022, in the case of Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), the Court of Appeals for the District of Columbia Circuit held that the Tax Court lacks subject matter jurisdiction of whistleblower cases, such as this one, involving threshold rejections of claims for whistleblower award. By Order issued March 4, 2022, proceedings in this case were stayed pending the final outcome of Li v. Commissioner. The court of appeals’ judgment in that case is now final.” Order, at p. 1.

So the stay of proceedings is lifted, in order to toss Atm, moot all pending motions, and relieve the parties from filing any further status reports.

But just for the record, I’ll repeat what I said back in May: “Taishoff says DC Cir has made mincemeat of the whole tax whistleblower system. All the Ogden Sunseteers have to do is do nothing; no award, no Tax Court jurisdiction (and Tax Court’s jurisdiction is expressly “exclusive,” so no one else can look either).

“So thanks to DC Cir, the brand-new Chief Whistler Mr. John W. (“Hoppin’ John”) Hinman has the easiest job in the world; he can run the 100% sequester.”

Though the nomenclature might be a wee bit confusing, last month there was celebrated as a national holiday for the first time National Independence Day, s/a/k/a Juneteenth. Today is celebrated just plain Independence Day.

In each such event, Tax Court is closed, and so am I.

No, not another Rule 162 vacation of a decision or order. This time it’s the real vacay, the loading up of the rented minivan, or the Uber to the airport, followed by adventure and the happiest of memories, or an experience in contrast to which Dante’s ninth circle would be a delicious treat. And the memo?

In those long-gone pre-smartphone and tablet days when I was a partner or of counsel, when one went away for more than a three-day, one was required to leave one’s desk absolutely bare, save only for a memorandum at the center thereof. That memorandum was a précis of every matter on which one was currently engaged, with client contact information, adversary or counterparty information, details of matters requiring attention, and one’s own detailed itinerary and how one might be contacted.

I remember lengthy phonecalls in an Edwardian sittingroom in Chiswick, on a payphone in a bar in Elmira, New York, and the bemused glances of passersby as I fed Euros into a payphone in Veere, in the Netherlands.

Of course, in preparing the aforesaid memorandum, one did something with each matter, to show one’s partners, associates, and staff, how irreplaceable one was.

Today, as we start the July Fourth three-day and the beginning of the serious summer travel season, the United States Tax Court bench is not behindhand, unloading 933 (count ’em, 933) orders. There are some 700 standing pretrial orders (regular and small-claimer) to keep the petitioners occupied, and a few more detailed types.

Here are just two.

Sharon O. Eddy & Stuart W. Eddy, Deceased, Docket No. 14165-22, filed 7/1/22, has Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan worried about the late Stuart’s estate. I point out that estates aren’t “probated”; wills are probated; estates are administered after they become subject to proceedings in probate court.

Here’s Sharon’s assignment. “…petitioner shall file a status report and therein provide information regarding the following matters: (1) whether the estate of decedent Stuart W. Eddy has been or will be probated; (2) if decedent’s estate has been probated, whether an executor, administrator, or other fiduciary has been duly appointed for decedent’s estate by a court of competent jurisdiction and, if so, the name and address of such duly appointed fiduciary; (3) if no fiduciary has been duly appointed by a court of competent jurisdiction, whether there is a successor trustee or similar fiduciary with respect to a living trust established by decedent and, if so, the name and address of such fiduciary; (4) whether any fiduciary of decedent’s estate intends to prosecute this case on decedent’s behalf by filing an appropriate motion to substitute parties and change caption (to which should be attached relevant documentation supporting the individual’s or entity’s status as a fiduciary with legal capacity to represent decedent’s estate); and (5) if decedent’s estate has not been or will not be probated and decedent’s estate otherwise has no fiduciary, the names and addresses of decedent’s heirs at law, except for petitioner Sharon O. Eddy. A copy of decedent’s death certificate shall be attached to the status report.” Order, at pp. 1-2.

A different petitioner is Martin G. Plotkin, Docket No. 16224-14L, filed 7/1/22. There’s a bit of backstory in my blogpost “Multiplex Man,” 2/3/21. Martin gives away nothing to The Energizer Bunny; Martin has six (count ’em, six) new motions, and Judge Morrison would like a separate reply to each from IRS’ counsel by 8/1/22. Five of the six relate to individual Appeals employees, and one is a document request.

As lien cases are record rule, I wonder about relevance, but we shall see.

Meanwhile, desks are cleared for vacation. Off to sun ‘n’ fun.

As at 6/30/22, I am informed that this my blog had 421 followers. Further, I am informed that this my blog had 2,332 views for the month ended 6/30/22 (including Saturdays, Sundays, and days which are legal holidays in the District of Columbia), the fewest views since the first-half of calendar 2020, in the depths of the COVID pandemic.

I deduce from the foregoing statistics, without having made independent investigation of their accuracy, that my “followers” simply aren’t “following.” Had even 200 of the 421 viewed this my blog even once daily on 20 days, not the whole 30, there would have been 4000 (count ’em, 4000) views during the said month, not 2,332.

So I invoke the words of Tom Jones’ and Harvey Schmidt’s 1960 classic.

William Joseph Davidson, Docket No. 5849-09, filed 6/30/22 (and that docket number is no typo, this is an oldie but goodie) is back home (see my blogpost “Be Back Home in Thirty Days,” 6/27/19). But is precluded from claiming (a) he doesn’t owe north of $418K in tax for 1998, (b) he didn’t willfully evade payment of tax on $200K for 2001, and (c) he doesn’t owe Section 6651(f) add-ons in respect of the said years.

Judge Colvin has the story. And uses the old-fashioned term “collateral estoppel,” which now is translated as “claim preclusion.”

Wm Joseph copped a plea in USDCEDMO on the tax due for 1998 and the evasion in 2001. IRS wants summary J, now that Wm Joseph is out of the slammer.

“Collateral estoppel applies here because the matters at issue here are identical with the ones decided in petitioner’s criminal case, Davidson v. United States of America, U.S. District Court for the Eastern District of Missouri, docket number 4:05CR00519; a final judgment was rendered by a court of competent jurisdiction in that case; respondent is in privity with the United States; the parties actually litigated the matter at issue and the resolution of those matters was essential to the prior decision; the controlling facts and legal principles have not changed; and there are no special circumstances that would warrant making an exception to the normal rules of issue preclusion. A guilty plea is treated as the prior litigation of an issue of fact or law.” Order, at p. 4. (Citations omitted).

This isn’t like the restitution cases, where restitution is determined but the exact tax, add-ons, and chops is not, and the plea bargain says so. Here Wm Joseph copped to the exact amounts.

But whatever else IRS wants is held in abeyance. No need to rush matters.

Fur Systems, Inc., Docket No. 4099-22, filed 6/29/22, gives Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan a chance to review for us how to get a refund of overpayment of tax and interest thereon, when no SNOD or NOD has issued.

“In a deficiency case, this Court’s jurisdiction depends on the issuance of a valid notice of deficiency and a timely filed petition. Rule 13(a), (c), Tax Court Rules of Practice and Procedure; Monge v. Commissioner, 93 T.C. 22, 27 (1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988). In an interest abatement case, our jurisdiction depends, in part, on the issuance of a notice of final determination for disallowance of interest abatement claim or the IRS’ failure to make a determination within 180 days of the filing of a claim for abatement. See Internal Revenue Code (I.R.C.) sec. 6404(h).” Order, at p. 1.

The Fur have no SNOD, NOD, or claim for refund that has sat out the six month hold. IRS moves to toss The Fur.

“In petitioner’s objection to respondent’s motion to dismiss, petitioner asserts that ‘the determination of Overpayments of tax is under the jurisdiction of the Tax Court.’ Petitioner is correct—up to a point. In a case based on a notice of deficiency, in which the Court must determine the correct amount of tax,  this Court may make a determination concerning whether there has been an overpayment of tax. See I.R.C. section 6512(b). Otherwise, however, this Court does not have jurisdiction to make determinations concerning overpayments or refunds. Taxpayers generally have two years to file a lawsuit following the disallowance of a claim for refund. See I.R.C. sec. 6532(a)(1). The Tax Court, however, is not the proper court in which to file such an action. A taxpayer may seek a judicial remedy for wrongful denial of refund claims— i.e., a refund suit in compliance with I.R.C. sections 6532(a)(1) and 7422(a)—either in the United States Court of Federal Claims pursuant to 28 U.S.C. sec. 1491(a)(1), or in Federal district court pursuant to 28 U.S.C. sec. 1346(a)(1). Those statutes do not confer refund jurisdiction on the Tax Court. Accordingly, this Court cannot and does not decide whether petitioner is entitled to recover a refund for the 2019 tax year.” Order, at p. 2.

No, I’m not going to discuss any recent decisions by the Supremes; at least, not on this my blog. I’ve had a lot to say elsewhere. And there are two (count ’em, two) indocumentados issued today, but I’ll skip them also; nothing new, neither petitioner provided any documents.

Jo Ann Sharp, Docket No. 7077-19, filed 6/28/22, doesn’t provide any documents either, but she has a lot of Constitutional arguing why she shouldn’t, and why IRS should have BoP. Jo Ann was “a limited partner in High Mountain Medz LLC,” Order, at p. 1. I thought LLCs, though taxed as partnerships, had members and managers, not partners general or limited, even in CO. And HMM is a pottery.

Howbeit, IRS wanted back-ups for HMM’s COGS and deductions, but all HMM gave them was redacted, so IRS says they can’t determine if the numbers HMM claims are okay.

Jo An says IRS is taking her right against self-incrimination by requiring her to pony up unredacted stuff. Remember, Sixteenth Amendment says Congress taxes income, not gross receipts.

Judge Elizabeth A. (“Tex”) Copeland: “Viewing Mrs. Sharp as an individual, the Fifth Amendment protects only against compelled self-incrimination. The privilege against self-incrimination has never been thought to be in itself a substitute for evidence that would assist a party in meeting their burden. See United States v. Rylander, 460 U.S. 752, 758 (1983). Thus, where a party is required to maintain adequate records to establish the correct amount of taxable income, using the privilege to escape that requirement would impermissibly convert the privilege ‘from the shield against compulsory self-incrimination which it was intended to be into a sword whereby a claimant asserting the privilege would be freed from adducing proof in support of a burden which would otherwise have been his.’ Id. Rylander teaches that Mrs. Sharp’s ‘possible failure of proof on an issue on which [she] bear[s] the burden is not “compulsion” for purposes of the Fifth Amendment.” Feinberg v. Commissioner, 916 F.3d 1330, 1337 (10th Cir. 2019) (citing United States v. Goodman, 527 F. App’x 697, 700 (10th Cir. 2013)), aff’g on other grounds T.C. Memo. 2017-211. Mrs. Sharp is not under a compulsion to produce records related to HMM’s COGS exclusion. She was required to maintain those records in the ordinary course of her business under section 6001 and Treas. Reg. §1.6001-1. She is free to choose whether she wants to produce those records to substantiate HMM’s COGS exclusion and she bears the consequences of her choice,  including the possibility that she will not have met her burden of proving that Respondent erred in disallowing HMM’s COGS exclusion from gross income. See id.  As such, from an individual perspective, the Fifth Amendment accords Mrs. Sharp no protection since there is no compulsion.” Order, at p. 4.

And HMM as an entity fares no better.

Note that the Feinberg case above-cited is an appeal from a Tax Court opinion I blogged; see my blogpost “Cohan and COGS,” 10/23/17.

Jo Ann next claims she’s denied due process, but (a) Fourteenth Amendment due process applies to States, not the Federal Government, and (b) HMM had the obligation to keep records, which Jo Ann can still provide, as this is a de novo from a SNOD.

Jo Ann next claims Section 280E,  no-deductions-for-illegal-business, is a penalty, hence IRS should have BoP.  In a move that earns him a Taishoff “Good Try, Guts Move,” Jo Ann’s trusty attorney cites Judge Tex Copeland her own self saying it is a penalty.

“This Division of the Court partially dissented in N. Cal. Small Bus. Assistants, 153 T.C. at 90-94 (Copeland, J., concurring in part and dissenting in part). In that side opinion, this Division of the Court observed that ‘even if section 280E was not written as a penalty provision, it operates as such.’ Id. at 93. Mrs. Sharp is seemingly advancing that observation as her argument. But we will not depart from the majority’s precedential holding that section 280E is not a penalty, id. at 72, in this case.” Order, at p. 6, footnote 6.

“Settled precedent”? Yeah, most F affirmative, roger that. Sorry, guys, I said I wouldn’t.

Btw, the N. Cals were the subject of my blogpost “Through the Vegetation,”  10/23/19. See my remarks in that blogpost. If it stings like a penalty, it ain’t a butterfly. Judge Tex Copeland got it right.

Jo Ann claims IRS was arbitrary and capricious, and attaches to her seriatim opening brief the lead sheets Exam used to show HMM didn’t provide complete documentation. But she doesn’t show anything to contradict.