Interest, That Is

The abate debate goes on. Jeremy Edwin Porter, T. C. Memo. 2022-25, filed 3/28/22, says IRS held the ball in the backcourt, but Judge Travis A. (“Tag”) Greaves says Jeremy and his rep were also slow-playing the hand.

“The IRS did not abuse its discretion by denying petitioner’s interest abatement claim. Petitioners delayed the examination by failing to provide the records the examiner requested and did not provide any such records in the letter petitioner claimed to have sent the IRS…. During litigation, petitioner himself requested the first continuance the Court granted and did not object to the second. See Adams v. Commissioner, T.C. Memo. 2019-99, at *13 n.7 (explaining that section 6404(e)(1) prohibits abatement where the purported delay was attributable to the taxpayer’s reasonable requests for continuances), aff’d per curiam, 811 F. App’x 276 (5th Cir. 2020). The Tax Court did not rule on petitioner’s discovery Motions until February 2019, after which petitioner concedes that Ms. V resolved his case in short order. See Lee, 113 T.C. at 150 (explaining that the ‘mere passage of time in the litigation phase of a tax dispute does not establish error or delay’ under section 6404(e)). Such delays are not grounds for interest abatement because either they are not attributable to an IRS officer or employee, or a significant aspect of the delay can be attributed to the taxpayer.” T. C. Memo. 2022-25, at pp. 5-6. (Name omitted).

For Adams, see my blogpost “Abatement of Interest,” 8/12/19.

So is the answer to oppose any IRS request for continuance? Never ask for a continuance yourself? Badger the hardlaboring Glasshouse Gang when your motion languishes, while the Judge is dealing with such as Jonah B. Addis, T. C. Memo. 2022-24, filed 3/28/22, who frivol endlessly while your case is stuck in the slow lane?

Of course not.

Sure, always provide every scrap of paper (or electrons) you have that helps your case to IRS.

But even with that, the real problem is the clogged Glasshouse docket.

Are we absolutely positively certain, beyond mayhap or peradventure, that nothing can be done to short-circuit the frivolites who prevent honest people like Jeremy and Ms. V. from “settling their case in short order” by clogging the dockets with protester jive?

There follow some comments on the proposed Rules. Other and further comments may follow. Ms. Servoss, please copy.

Rule 3(h) is too wordy. Should read “A Special Trial Judge as used in these
Rules refers is to a judicial officer appointed pursuant to Code section 7443A(a). See Rule 180.”

Rule 10(d) should read “The Clerk’s office of the Clerk at in Washington, D.C., is open from 8 a.m. to 4:30 p.m. on all days, except Saturdays, Sundays, Fed legal holidays, and public holidays in the District of Columbia, for the purpose of receiving petitions, pleadings, motions, and other any papers.” Was it intended to keep the Tax Court open on Emancipation Day? If so, why? The explanation to the Rule changes says no substantive change was intended.

Rule 20(c) omits reference to publicly-traded partnerships. Why? Otherwise, this is a welcome amendment. Of course, the new Form 6 must state that it cannot be left blank; one box or the other MUST BE checked.

Rule 21(b)(4) is very welcome, as it may be the beginning of the law firm entry of appearance, rather than the current piecemeal system. Designating a single attorney among those representing a party (whether it be petitioner, respondent or intervenor) to receive all papers in a case prevents confusion, needless duplication, and places the onus for following a case on a specific attorney. Why serve more than one attorney if more than one have appeared, even if serving electronically? Now all we need is an amendment to Rule 24 and a new Form 7A, Entry of Appearance (Law Firm), permitting every attorney in a law firm who is admitted to US Tax Court to appear, with one designated lead attorney to receive all papers. It is time Tax Court recognizes that there are law firms (especially as the majority of Tax Court Judges and STJs practiced for some part of their careers in such law firms). Lawyers take family leave, medical leave, vacations, have family emergencies (some are even single parents), and even may be actually engaged on trial on another case when ordered to appear in the case at bar. Has no Tax Court Judge or STJ never, prior to elevation to the Tax Court Bench while practicing in a law firm, when  required to appear on a date and time certain, had a medical emergency, an accidental injury, a family emergency, or been out of the country on a vacation planned and commenced before so required? And has no Judge or STJ ever been called upon, when so practicing, to “cover an appearance” for a fellow-attorney in the firm in such a predicament? If so, thrice happy that Judge or STJ. But it does happen. Tomorrow will be the fifty-fifth anniversary of my admission to the Bar; you may take my word that all the above happens.

To be Continued.

Edited to add, 3/26/22: Rule 10(d) and 25(a)(5): definition of “legal holiday” should be moved to Rule 3. The proposed Rules are confusing.

Today we have a reprise of my blogpost “The Master Mechanician,” 3/21/22, and it’s what we used to call a “carbon copy” of the fact pattern therein described. Today’s case is Point Of The River, LLC, Parkway South, LLC, Tax Matters Partner, Docket No. 12049-19, filed 3/25/22.

It’s the same kind of phoneathon with the same RA and the guys from OCC on the horn with the Pointers’ rep, saying there’ll be chops but not specifying which. And of course it’s months until the FPAA issues with the chops, by which point the Boss Hoss has hoofprinted the penalty lead sheet and everything but the menu for lunch.

Now I’m a fan of Judge Albert G (“Scholar Al”) Lauber; no schoolmate of my nephew JVTB (he’s not a minor, but I’ll use initials) and my colleague Peter Reilly, CPA, is a bad guy. So I am not ragging him.

But these formalistic constraints on the curative requirement of Section 6751(b), minimal as it is, rob the statute of the very protections Congress manifestly intended to provide.

Don Vito Corleone and his colleagues did not need to place a horse’s head in the bed of everyone whom they wished to coerce. All they had to intimate is that they were making an offer “you can’t refuse.”

And IRS’ riposte, that wily taxpayers and their Machiavellian counsel and representatives would draw trusting RAs offside by artfully asking in the naïvest way “what about penalties” can be easily met with “let’s stick to the tax due and statutory additions.” Unless, of course, the RA does up the lead sheet and gets it Boss Hooved before the phoneathon.

Today, for the first time, a single intrepid internet voyager has found his/her way to this my blog from the archipelagic Republic of the Maldives, which lies astride the Equator in the Indian Ocean, and whose total land mass is a trifle more than double that of the Minor Outlying Island off the Coast of North America whereon I reside.

My source tells me that the Republic encompasses some 35,000 sq. mi. of ocean, but only some 115 sq. mi. of land, no natural part of which is more than 5.1 metres above Mean Sea Level. The Republic’s population is some 560,000 persons.

Now the same source tells me that The Plurinational State of Bolivia, to which nation-state this my blog is terra incognita, has no sea at all, but does comprise 424,161 sq. mi. of territory, all to the south of the Equator. Its highest natural point is at 6,462 metres above MSL.

So how is it that none of the eleven-and-one-half millions (count ’em, eleven-and-one-half millions) of the inhabitants of The Plurinational State has yet paid this my blog even a single visit?

Get with it, Bolivia.

Except in an OIC

Despite filing an OIC which “…did not correctly identify the taxpayer, failed to provide correct information about tax liabilities, failed to indicate the reason for the offer, and erroneously reported financial information on Form 433-B,” Order, at p. 4, the long-suffering SO offered Shipra Bhansali d.b.a. Scrum Technologies, Docket No. 17120-19SL, filed 3/24/22, a six-year streamliner IA.  

Despite getting a six-week extension to respond, Shipra said nothing.

My readers will at once intone with one voice “Those who need it won’t read it, and those who read it don’t need it.”

The readers aforesaid know that the minute a collection alternative is offered in a CDP, they’re working on their counterproposal, marshaling facts and figures to support the same. And preparing to seek a further extension, more effectually to do so.

Yes, this is a small-claimer. And yes, a docket search shows the $60 filing fee was waived. So doubt as to collectability has to be front and center. If Shipra hasn’t got the sixty Georges and can establish she hasn’t, even a facially-reasonable IA offer of $180 per month made two (count ’em, two) years ago and based on erroneous information may no longer comport with economic reality.

But ya gotta say so. And have your counteroffer ready. And maybe back it up with a changed-circumstances remand; see my blogpost “Back to the Future,” 8/1/11.

Ch J Maurice B (“Mighty Mo”) Foley, nearing the close of his illustrious and industrious tenure as Capo di tutti, has set forth amended Rules for comment. I’ll reserve my detailed comments for another day; but do note that the deadline for getting your bouquets and buckets to the Ch. Clk. Ms. Servoss at The Glasshouse in the City of the Stateless, is 5/25/22, not later than 4:30 p.m., and that means “…standard time in the location mentioned except when advanced time is substituted therefor by law.” Proposed Rule 3(i).

The Great Chieftain of the Jersey Boys will have to adapt his mantra that Tax Court’s purpose is “to secure the just, speedy, and inexpensive determination of every case.” Now Rule 1 no longer says Tax Court “shall” do so, but that it “should” do so. Of course, Ch J Mighty Mo is quick to assert that the change is merely to conform to FRCP 1, and no substantive change is intended. Indeed it does so conform, but wasn’t the imperative rather than precatory language better?

I respectfully request Frantic Frank to favor us all with his comments; if he is agreeable, I’ll print them in extenso, unedited and without any comment from me.

But I do want to cough the “modest cough of the minor poet,” as a much more celebrated writer than I put it.

See Proposed Amendment to Rule 20, at pp. 5-6, and pp. 113-114. Finally, we have a Form 6 that almost does the job. We have a check-the-box form that answers all my many objections. Only one (count it, one) quibble: instead of “(please mark the appropriate option)”, the instruction should read “(YOU MUST CHECK ONE).”

Still, I thank Ch J Mighty Mo for his efforts.

And I’m going to have a wee Vodka Gibson this evening to celebrate: I feel like we’ve knocked a chip off the Rock of Svithjod.

Self-reporteds are summarily assessed, per Section 6201(a)(1) and Reg. Section 301.6211-1(a). You said it.

And Ch J Maurice B (“Mighty Mo”) Foley reminds Paul Jaworski and Anne Jaworski, Docket No. 14945-21, filed 3/22/22, that “(T)he IRS is also authorized to ‘immediately assess and collect’ the additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654, if such additions are determined by the amount of tax shown on the taxpayer’s return if a return is filed. Such summary assessments are not subject to normal deficiency procedures and are beyond the scope of this Court’s jurisdiction, and no action or proceeding may be commenced to enjoin the IRS’ actions. Additionally, I.R.C. section 6213(a) specifies that the Court “shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition.” Order, at pp. 3-4. [Emphasis added.]

This one involves three (count ’em, three) years. Year One involved a SNOD, which Paul and Anne admittedly timely petitioned, and that year has its own docket number. Paul and Anne filed the petition in this case for Year Two, and that’s also timely, but no one has sought consolidation.

Next, Paul and Anne amended this petition to object to a CP22E changing their tax obligation for Year One. IRS replied that all of Year One is on the table in the first petition.

Now Paul and Anne move to restrain collection and get a refund for their Year Three overpayment, part of which IRS applied to Year One and the rest to Year Two. IRS agrees to abate the premature assessment for Year One, as that’s sub judice; but the Year Two number is  the number in the return Paul and Anne filed, and IRS hasn’t assessed anything else. Finally, Section 6402(a) allows IRS to hold their refund, and Tax Court has no jurisdiction over that.

Ch J Mighty Mo unscrambles this frittata.

This petition is too late for Year One, so Year One is off the table. Happily, the earlier petition is timely for Year One, so all Year One matters get hashed out there.

Likewise, no SNOD for Year Three. So in this case, Tax Court has no jurisdiction over either Year One or Year Three.

Year Two is a self-reported, for which no SNOD needed. Likewise, IRS has authority to apply any overpayment from Year Three to Year Two.

Paul and Anne want legal fees, but they’re too early. They haven’t prevailed in all contested issues yet.

Clear? Thought not.

No argument from me that Judge Albert G (“Scholar Al”) is a master of the intricacies of IRS’ determinations to assess chops. Today he has an essay on the official Tax Court view of Section 6751(b) Boss Hossery in Oxbow Bend, LLC, Parkway South, LLC, Tax Matters Partner, T. C. Memo. 2022-23, filed 3/21/22.

And Judge Scholar Al cites and explicates each and every opinion, all of which state that a “determination” means a written statement. I’ve blogged therm all.

The Oxbows claim that when the RA examining their AL scrub conservation easement mentioned penalties in a phoneathon with IRS Counsel and their representative, that was when Boss Hossery came into play, not later when she sent out the FPAA.

“Petitioner thus contends that RA S was obligated to secure her supervisor’s approval for the penalties before convening the telephone call.

“We disagree. 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, LLC v. Commissioner, 154 T.C. 1, 15 (2020). An ‘initial determination’ signifies a ‘consequential moment’ of IRS action. Ibid. (quoting Chai v. Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff’g in part, rev’g in part T.C. Memo. 2015-42). A ‘mere suggestion, proposal, or initial informal mention’ of penalties does not reflect an examining agent’s ‘initial determination.’ Tribune Media Co. v. Commissioner, T.C. Memo. 2020-2, 119 T.C.M. (CCH) 1006, 1010. Rather, ‘the ‘initial determination’ of a penalty assessment will be embodied in a formal written communication” that notifies the taxpayer of the decision to assert penalties. Belair Woods, 154 T.C. at 10; see Oropeza v. Commissioner, 155 T.C. 132, 138 (2020) (‘[A] taxpayer may receive this notification in a notice of deficiency, or he may receive the notification in a document that the IRS sent him at an earlier date.’).” T. C. Memo. 2022-23, at p. 5. (Name omitted).

The Oxbows lose.

Taishoff says, don’t get me wrong, I’m not saying the Oxbows are injured innocents; read the facts as stated in the order and decide for yourself.

But I do say, once again, what Congress thought they were doing didn’t happen. Congress wanted to prevent low-level IRS employees from bludgeoning taxpayers by threatening chops to extract settlements. But most of that bludgeoning takes place, if at all, long before FPAAs or SNODs. And while Judge Scholar Al waxes eloquent about problems of proof and taxpayer gameplaying if oral communications were considered as “determinations,” T. C. Memo. 2022-23, at p. 8, when does he think the bludgeoning takes place, if at all? If Boss Hossery needn’t happen before an IRS employee issues a formal, written statement, then the employee will bludgeon away. I’m sure Don Vito Corleone never issued a “formal, written statement” in his life.

Discovery geeks and ethics wags have a goody from Judge Albert G (“Scholar Al”) Lauber. Can IRS ask members of a petitioner LLC if they’d like to talk? The answer Judge Scholar Al gives is there’s no harm in asking, provided (1) if any member is represented by counsel, IRS terminates the conversation and addresses the member’s counsel only, and (2) if any privileged matter is revealed, IRS agrees to a FRE 502(b) notice and nonwaiver.

IRS did this in Oconee Landing Property, LLC, Oconee Landing Investors, LLC,  Tax Matters Partner, Docket No. 11814-19, filed 3/18/22. But the Oconees want a Rule 103 protective order, claiming ABA Model Rule 4.2, comment 7 says that members are “constituents” of Oconee, therefore are shielded from IRS’ come-hithers.

Cf. my blogpost “The Stealth Sequester,” 2/16/22, where Judge Christian N. (“Speedy”) Weiler goes over the same issues with ABA Model Rule 4.2.

Judge Scholar Al: “At first blush, Model Rule 4.2 would seem to have no application here. As petitioner’s counsel has repeatedly asserted, none of the individual investors is ‘represented by [petitioner’s counsel] in th[is] matter.’ Some of these investors may be represented by their own counsel. But petitioner does not challenge respondent’s representation that, as soon as he learns that an investor is ‘represented by another lawyer in the matter,’ …, he will immediately cease communication with that person and direct any future communication to that person’s lawyer.” Order, at pp. 4-5.

But are the investors “constituents” of the Oconees, hence within the penumbra of ABA Model Rule 4.2? Nope; “Petitioner has failed to establish–indeed, it has not attempted to show–that the individual investors ‘supervise, direct, or regularly consult with’ petitioner’s counsel regarding this case. Petitioner has not alleged, for example, that any of the investors regularly reviews draft stipulations, motions, or Court orders, or that they discuss or influence litigation strategies. There is no indication that they have the authority to fire petitioner’s lawyers and hire new ones.” Order, at p. 5.

A constituent is on the sidelines kibitzing with the coaching staff, wearing the team jacket and baseball cap, not sitting in a luxury box watching the game.

No protective order, despite the Oconees presenting Judge Scholar Al with an unsworn screed from an ethics professor reiterating the Oconees’ argument. IRS moves to strike, but it’s really not necessary.

“Respondent has moved to strike this declaration for noncompliance with Rule 143(g), which requires (among other things) that expert witness testimony take the form of a report, exchanged in advance with the opposing party, and that the expert be available for cross-examination. We need not decide that question because we agree with respondent that the declaration should be disregarded as impermissible advocacy in contravention of Federal Rule of Evidence 702. The declaration offers no help to the Court in understanding any evidence, grasping the inner workings of any industry, or determining any fact in issue. It simply expresses the declarant’s personal opinion–aligning precisely with petitioner’s argument–about how the legal question currently before the Court should be decided. That is the province of the Court, not of an expert.” Order, at p. 7.

Practice tip: If you want to get a Judge mad at you, suggest he doesn’t understand the law. Remember Alex Pope: “Men must be taught as if you taught them not;/And things unknown proposed as things forgot.”

Btw, Judge Scholar Al notes the promoters of this raid on the Treasury are playing D in a class action in USDCNDGA, Order, at p. 2.

Maybe Tax Court is tired of refereeing the unending perpetuity pingpong matches. Judge Albert G (“Scholar Al”) Lauber seems to be getting a lot of them, so today he sends IRS and Pickens Decorative Stone, LLC, Eco Terra 2016 Fund, LLC, Tax Matters Partner, T. C. Memo. 2022-22, filed 3/17/22, off to find out what the 501(c)(3) guardian does with its rights to protest, protect, and defend, when confronted with infringements on the Conservation Purposes set forth in the deed. The deed covers 46 acres of GA scrub which the Decorated Stoners claim is worth the $24.7 million deduction they sold to the usual highrollers with big gains to bury.

The deed has the old “object in 30 days or you’re out” if the Decorated Stoners want to vary from the stated Conservation Purposes. IRS wants summary J that this provision thwarts perpetuity, but the Decorated Stoners say the 501(c)(3) could always sue to enjoin. We’ve seen the “deemed consent” clauses get rough treatment (cf. my blogpost “The Forty-Five,” 3/14/18), but maybe so it might could be this time for once the Decorated Stoners have dodged the cliché.

“On the basis of the record that currently exists, petitioner seems to have the stronger argument regarding the proper construction of the deed. However, in a case such as this, we do not think the ‘deemed consent’ issue can be decided as a matter of law. [501(c)(3)] may be deemed to have consented to the exercise of certain rights, but only if it has failed to respond to notices from Pickens over a period of time. [501(c)(3)]’s internal procedures and past practice may shed light on whether this is likely to happen. In any event, the question whether the exercise of a right to which consent is deemed given would impair any conservation purpose presents factual questions ill-suited to summary adjudication. For these reasons we conclude that the better course of action is to deny respondent’s Motion on this point.” T. C. Memo. 2022-22, at p. 5.

Judge, if perpetuity must be established at inception, how is “likely to occur” a factor? I’ve argued for years that condemnation, the greatest probable cause for extinguishment, is “so remote as to be negligible,” but nobody has listened. Are you now wild-carding it in?

But the Decorated Stoners want to fight the chops, and here they lose. Their argument, though, gets a Taishoff “Good Try, Third Class.” Here the dates matter.

Notice 2017-10, 2017-4 I.R.B. 544, 546, back in January, 2017, painted a bull’s-eye on syndicated conservation easements. Wherefore, say the Decorated Stoners, Boss Hossery was necessary for every syndication easement from that moment, as the Notice was “formal notification of an unequivocal intent” to chop all syndicated conservation easements.

Judge Scholar Al replies, I dare say wearily.

“An IRS announcement directed to the public at large cannot constitute ‘the first formal communication to the taxpayer of penalties.’ Moreover, because the IRS did not select Pickens’s return for examination until July 2019, it could not possibly have ‘determined’ any penalties against Pickens in 2017. The ‘initial determination’ of a penalty occurs when the IRS makes ‘an unequivocal decision to assert penalties.’ The IRS could not have made an unequivocal decision to assert penalties against Pickens before reviewing its return to determine if there existed an ‘understatement.’” T. C. Memo. 2022-22, at p. 7 (Citations omitted).