As I gleaned what blogfodder I could from last year’s petition tsunami, I knew very well that the vast majority of those petitions would be tossed by Ch J Maurice B (“Mighty Mo”) Foley. Like an Authority even more exalted than the Chief Judge of the U S Tax Court, “his winnowing fork is in his hand,” and the clumsy, the inept, and the protester will get the Luke 3:17 treatment, unless their petition or amended petition clears the Rule 34 bar.

I doubt Michael Rottinghaus, Docket No. 14724-21, filed 2/5/21, has ever read this my blog. But his case shows the perils of putting money before petition. Michael got tossed just before Christmas, as Ch J Mighty Mo found he had not stumped up the sixty George table stakes.

“Petitioner thereafter contacted the Court informally to advise that he had paid the Court’s filing fee. In view of the foregoing, the Court will vacate and set aside the Order of Dismissal previously entered in this case.” Order, at p. 1.

But back in July, Ch J Mighty Mo told Michael to file a “proper amended petition,” id., which to date Michael has not. So Ch J Mighty Mo gives Michael until 2/1/21 to do so. The hardlaboring Clerk will attach a form for that purpose at no extra charge.

And if Mrs. Michael wants in, she can sign on to Michael’s proper amended petition.

Word to Michael and/or Mrs. Michael (hi, Ogden Sunseteers): Always make sure your petition (or any amendment thereto) will pass muster before you send in the Three Andys. Filing fees are nonrefundable. Blow your petition, blow your money.

The recent flurry of correspondence and commentary anent 11 Cir’s reining in of IRS’ and Tax Court’s Procrustean reading of Reg. Section 1.170A-14(g)(6)(ii), including without limitation whether or not 11 Cir invalidated the Reg Section altogether, is not surprising; I’m not sure what the following means.

“After careful consideration of the agency record before us, the several opinions in Oakbrook and precedent from the Supreme Court, and this Court’s interpretation of procedural validity under the APA, we conclude that § 1.170A-14(g)(6)(ii)—as read by the Commissioner to prohibit subtracting the value of post-donation improvements to the easement property from the proceeds allocated to the donor and donee in the event of judicial extinguishment—is arbitrary and capricious under the APA for failing to comply with the APA’s procedural requirements and is thus invalid. See §§ 553(c), 706(2)(A).” Hewitt, at p. 28.

What’s invalid? The Reg, or the Com’r’s reading of the Reg to require improvements-in?

I’m not entirely sure the Court answers the question at p. 36: “Because Treasury, in promulgating the extinguishment proceeds regulation, failed to respond to NYLC’s (New York Landmarks Conservancy] significant comment concerning the post-donation improvements issue as to proceeds, it violated the APA’s procedural requirements. See Lloyd Noland, 762 F.2d at 1566; see also Oakbrook, 154 T.C. at 225–27 (Toro, J., concurring). We thus conclude that the Commissioner’s interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements to the easement property in the extinguishment proceeds allocated to the done, is arbitrary and capricious and therefore invalid under the APA’s procedural requirements. Accordingly, we reverse the Tax Court’s order disallowing the Hewitts’ carryover charitable deductions as to the donation of the conservation easement and remand for further proceedings.”

OK, so I include a tip of my battered Stetson to Judge Emin (“Eminent”) Toro for his persuasive reasoning.

Today we have a fresh reading on Treasury’s insouciant dealing with statutes. Judge Kathleen Kerrigan looks to be ready to toss Reece David Simmons, Docket No. 14352-20S, filed 1/4/21, no matter what. But her order throws a curious post-Hewitt shadow.

“The date of the notice of deficiency underlying this proceeding indicates a statutory deadline for filing a petition pursuant to section 6213(a) of the Internal Revenue Code (I.R.C.) that expired on May 11, 2020, which would have been extended to July 15, 2020, per I.R.S. Notice 2020-23. Conversely, the envelope in which the petition was received bears postage dated December 3, 2020.” Order, at p. 1.

When IRS Notice 2020-23 was first issued, I tangentially speculated whether a Notice could override an explicit statutory directive; see my blogpost “Le Quinzième Juillet,” 4/10/20, as edited. Of course, that argument is of no use to R.D. Simmons, unless the 12/3/20 mailing included an envelope with an earlier postmark that was returned during the Tax Court shutdown.

IRS could argue that Treasury’s Notice did not override the statute. The Notice only stated, somewhat elliptically, that IRS would not interpose the Section 6213(a) jurisdictional defense in any pandemic-related case. And indeed, Judge Kerrigan notes that IRS made no jurisdictional motion in this case.

But Judge Kerrigan wants the parties to show cause why she should not toss R. D. Simmons anyway.

I am not without scruples. Though I made the morning line 3 to 1 that “highly contestable readings of what it means to be perpetual” would founder in 6 Cir (see my blogpost “They Always Must be With Us,” 5/12/20), I had no bet on, as it would be taking the bookies’ money.

Well, my colleague Peter Reilly, CPA, informed me that 11 Cir had put paid to perpetual motion in Hewitt v Com’r, No. 20-13700, 12/29/31. Mr Reilly asked whether I’d blog the decision on appeal. I usually don’t blog appeals, because the trade press and the blogosphere jump on the CCAs and USDCs, and I’m left fishing behind the net. I also don’t want an inference to arise that I have any obligation to update my blogposts. These are essays, not legal opinions. Use, if at all, wholly at your own risk.

But Mr Reilly turned up some political commentary, claiming judicial misconduct. Arrant nonsense; proof once again that Lord Chief Justice Campbell was right: “There is nothing so dangerous as for one not of the craft to tamper with our freemasonry.”

Allow me to stress that Dave Hewitt’s appraisers beat IRS’. And that Dave didn’t flog pieces of his deal to dodge-hungry highrollers. And Dave raised the Administrative Procedures Act below, to contest the “highly contestable reading” by Judge Goeke.

You can read 11 Cir’s decision for yourselves, but Judge Richard Posner, late of 7 Cir, got it right. “I pay very little attention to legal rules, statutes, constitutional provisions. … A case is just a dispute. The first thing you do is ask yourself—forget about the law—what is a sensible resolution of this dispute? The next thing … is to see if a recent Supreme Court precedent or some other legal obstacle stood in the way of ruling in favor of that sensible resolution. And the answer is that’s actually rarely the case. When you have a Supreme Court case or something similar, they’re often extremely easy to get around.”

Judge Holmes got it right in his dissent in Oakbrook. The phony easements, be they scenic, conservation, or façade, are phony because overvalued. Tax Court is the valuation court par excellence. Don’t throw out the legitimate deals because the wiseguys play games.

The highwater mark of the 2021 petition tsunami was reached as at 12/31/21.

Elder brethren and sistern from Tax Court’s past can tell me if the numeration system has changed, but petitions bearing docket numbers above 40000 were filed in 1987. Since then, so far as DAWSON reveals, no year’s docket numbers reached 35000 until 2021.

I can assure my readers that this numerological excursion is a one-off, unless 2022 produces another petition tsunami. Absit omen!

As I post my last for calendar 2021, I recall, from the earliest days of my infancy, Norman Corwin’s monumental 1945 radio play thus entitled, which aired VE-day. However dated and bombastic it may sound to jaded modern ears (assuming we can pry their blueteeth loose and Sisyphus-like roll their attention spans to greater than five (count ’em, five) seconds), it remains the greatest radio broadcast of all time.

No opinions, decisions, orders, or press releases today. The tumult and the shouting have died, the captains and the kings are checking the temp on the Veuve Cliquot La Grande Dame or the Billecart-Salmon Cuvée Elisabeth Salmon Rosé (and if the temp is right, please save a couple glasses for Judge Holmes and me). The Ancient Sacrifice is hanging out, as usual, per Psalm 51:17 and Rudy Kipling.

But, praise be, we have the old USTC DAWSONized website chugging again, at full cask strength. One can word-search, download, cut-and-paste, and even link (no more PDF-ing and footnoting). Loud cheers from this bedraggled, grizzled blogger.

And this my blog’s December views total has climbed above 4700 for the first time ever, going 20% better than ever in the last eleven (count ’em, eleven, and you’d better believe I have) years.

So no matter the vicissitudes of 2021, the year ends on a note of triumph.

Happy New Year!

At long last, the promise is kept, and the US Tax Court website, so long exiled and obscured, is recalled to life.

My colleague Peter Reilly, CPA, sent me the gladsome news thus: ” Something good may have finally come from Dawson.

“It now allows key word searching.

https://www.ustaxcourt.gov/release_notes.html

“In just a few minutes I found some 183 bench opinions that I had missed.”

Better yet, all those dockets previously sealed because of one (count it, one) document, now reenter the light of day, the Genius Baristas having assumed the role of Leonora in the second act of Fidelio.

Check it out, faithful readers.

A. Asterino Starcher, 2021 T. C. Memo. 144, filed 12/30/21*, didn’t petition the SNOD from the SFR for the year she never filed. She did petition the NITL, claiming her expenses would offset her income. She got the usual pre-hearing letter, but sent in nothing.

Came the telephonic CDP hearing.

” …petitioner joined the telephone conference as scheduled. She stated that she wished to submit a delinquent return for 2014 that would replace the SFR and reduce her tax liability. The SO explained that she could not dispute her underlying liability at the CDP hearing because she had failed to petition this Court in response to the notice of deficiency that the IRS sent her…. Petitioner confirmed that she had received the notice of deficiency. The SO nevertheless offered to look at a proposed 2014 return if submitted to him by August 7, 2020. He reminded petitioner that she needed to supply financial information by the same date if she desired consideration of a collection alternative.” 2021 T. C. Memo. 144, at pp. 3-4.

“The SO never received any financial information necessary for considering a collection alternative. He did receive from petitioner, on September 3, 2020, a delinquent … tax return, which he forwarded to a different IRS office.” 2021 T. C. Memo. 1445, at p. 4. Wherepuon, the SO confirmed the NITL.

A. Asterino asks why she can’t contest her liability, since the SO was willing to look at her (belated) return.

Judge Albert G (“Scholar Al”) Lauber eschews psychoanalyzing the SO.

” Petitioner notes that the SO offered to let her submit a delinquent return…. Why, she asks, would the SO have done this if he was unable to address her tax liability for that year? The record does not clearly establish the SO’s reasoning; one possibility is that he was considering whether petitioner’s… tax year could be submitted for audit reconsideration. But the SO’s thinking on this point is not important to our analysis. The only question of legal relevance is whether petitioner had a previous opportunity to challenge her … liability.” 2021 T. C. Memo. 144, at p. 6, footnote omitted.

No SO can consider liability if there was a previous opportunity to contest (the “single-shot” rule, per Section 6330(c)(2)(B)). Any such consideration forms no part of a NOD and may not be judicially reviewed, Reg Section 301.6330-1(e)(3), Q&A-E11.

All of which bears out the old trusim: most CDPs are lost long before they ever get to Tax Court.

*A Asterino Starcher 2021 T C Memo 144 12 30 21

The now-famous gambit is not solely the CDP petitioner’s move, but IRS can play it too. They do, in Mark G. Pfetzer, 2021 T. C. Memo. 145, filed 12/30/21*. Mark claims he never got the SNODs for the nine (count ’em, nine) years he never filed, but for which he got SFRs at no extra charge.

He also gets a NFTL.

Though he never petitioned the SNODs, he did petition the CDP sustentation of the NFTL. Appeals claims prior chance to contest, but the administrative record leaves IRS’ counsel with the Michael Corleone classical. Mark plays the Luke 18:1-8 defense, claiming at every chance he never got the SNODs.

The case comes before Judge Pugh via Rule 121, which included “… a joint stipulation of facts that included the following exhibits: the lien filing notice, petitioner’s hearing request, correspondence between petitioner and respondent during the initial administrative hearing and during remand, the notice of determination and supplemental notice of determination, SO S’s case activity record (case notes), and TXMODA transcripts for 2004 through 2012. Not included as stipulated exhibits are  (1) respondent’s complete administrative record; (2) any of the notices of deficiency; or (3) any proofs of mailing to petitioner’s last known address.” 2021 T. C. Memo. 145, at p. 7. (Footnote omitted, but it explains TXMODA, a form of IRS cyberbabble that generates transcripts, which we know are insufficient to prove mailing of SNODs.)

Judge Pugh, having sat through a hearing, a remand, and now this Rule 121, is a wee bit testy.

“Petitioner asserted during the administrative hearing and now before us that respondent failed to verify that a notice of deficiency was issued and mailed to petitioner’s last known address for each tax year in issue. Respondent attempts to deflect this challenge by asserting that it relates to the underlying tax liability, which he argues petitioner cannot challenge. But proper verification is not a challenge to the underlying liability; it is a stand-alone requirement in section 6330(c)(1) and is independent of the issues that may be considered under section 6330(c)(2) (such as the taxpayer’s underlying tax liability). Hoyle v. Commissioner, 131 T.C. at 200-203.

“We remanded this case to IRS Appeals to clarify the record as to what SO S relied upon in determining that the notices of deficiency were properly issued and sent to petitioner’s last known address, directing the parties specifically to Hoyle. Respondent has not pointed to evidence in the record showing that SO S examined underlying documents but rather has argued that her examination of the lien filing notice and the computerized tax transcripts satisfied the verification requirement in section 6330(c)(1).” 2021 T. C. Memo. 145, at p. 11. (Name omitted).

Not enough that some documents might exist somewhere to show something; there were copies of SNODs and PS3877s for a few of the years at issue, but no showing SO S looked at them, or that they made it into the admin record.

And the record rule rules: if it ain’t in there, it ain’t out here.

Mark wins.

*Mark G Pfetzer 2021 T C Memo 145 12 30 21

For one of independent mind, the spectacle of the protester-dodgers who clutter the Tax Court docket with ever-staler regurgitations of Hendrickson and his even-less-inspired disciples is wearying. I’ve been chronicling such cases for the sake of completeness, so that this my blog will cover US Tax Court more thoroughly than the blogosphere and the trade press.

But now, as I enter the twelfth (count ’em, twelfth) year of this my blog, I assert that ol’ Plato got it right: they got all the benefits of living and working here; they could’ve left at any time on complying with Section 877 and gone wherever would take them (and the US defense umbrella would cover a lot of those wherevers); wherefore, their dodging and legalistic blather is unworthy of serious consideration.

But Judge Elizabeth A (“Tex”) Copeland has some “somber reasoning and copious citation of precedent” for Michael R. Lowe, Docket No. 10954-20, filed 12/30/21*. Maybe Judge Tex Copeland is forbearing because Mike’s a fellow Texican.

Judge Tex Copeland thoroughly examines the Brushaber gambit (the Sixteenth Amendment dodge) at Transcript, pp. 8-10. Mike tries, of course, the old wages FICA/FUTA dodge, which gets the Crain brush-off.

Finally, Mike gets shown the Section 6673 frivolity yellow card.

IRS folds the Section 6662(a) accuracy chop. I most respectfully suggest that only encourages frivolites and dodgers.

*Michael R Lowe, Docket No 10954-20 12 30 21

Today STJ Daniel A (“Yuda”) Guy brings us the story of Whistleblower 15977-18W, 2021 T. C. Memo. 143, filed 12/29/21*, hereinafter known as Blower 159. You can only get Blower 159’s tale on this my blog after today, as the Genius Baristas have sealed the whole show.

Turns out the target, US-born to foreign nationals and now a prominent citizen of parents’ domicile Ruritania (which the unimaginative litigants call Country X, unaware of Anthony Hope and Rudolph Rassendyll), has neither US passport nor SSAN (no mention of ITIN, EIN, or TIN). Blower 159 cannot find any signs that Target (hereinafter “Rudy”) availed himself of any of the privileges and immunities (to say nothing of the “blessings of liberty to ourselves and our posterity”), and neither can the Ogden Sunseteers.

The OS did get a classifier from SB/SE, who decided Blower 159’s info was not credible. The Award Recommendation Memorandum (ARM) says “WB did not provide bank statements, financial records, or source documents that would allow the Service to determine amounts, tax years, where business income was allocated, (related entities?), nature or validity of the allegation, etc.” 2021 T. C. Memo. 143, at p. 6. Rudy’s off the radar.

Blower 159, petitioning the shootdown, wants a remand to “perfect” his claim. STJ Yuda says he can try again, from scratch.

“Section 301.7623-1(c)(4), Proced. & Admin. Regs., provides in relevant part that, if the whistleblower does not provide specific and credible information, the WBO has the discretion to reject the claim or inform the whistleblower of any deficiencies and provide the whistleblower an opportunity to perfect the claim for award. The regulation goes on to state that, if the WBO rejects the whistleblower’s claim for lack of specific and credible information, as was the case here, the whistleblower may perfect and resubmit the claim. Id.; see Rogers v. Commissioner, 157 T.C. 20, 29-30 (2021); Lacey v. Commissioner, 153 T.C. at 161 n.15. Under the circumstances, petitioner may elect to perfect and resubmit the claim to the WBO, but the WBO is not obliged to permit petitioner to do so within the context of this action.” 2021 T. C. Memo. 143, at p. 12.

Note that the epistolary volleying I so often blogged in the past, though it has led to the OS labeling its shootdowns as “‘FINAL DECISION UNDER SECTION 7623(a)'”, 2021 T. C. Memo. 143, at p.7, goes on in different guise, as there’s no SOL and apparently no user fee for filing Form 211, so serial blowing can go on apace (hint to that compleat angler Mr. Lee Martin, Chief Whistler).

STJ Yuda gives me a belated Christmas present in denouncing a pet peeve of mine: “We note that the final decision at issue in this case uses the ambiguous ‘and/or’ formulation that often makes it difficult to discern the WBO’s reasoning.” 2021 T. C. Memo. 143, at p. 9. Thanks, Judge; maybe if the Tax Court bench smites the OS with friendly rebuke a couple more times (hi, Judge Holmes, Happy New Year), they may get the message.

Anyway, Blower 159 loses summary J. Record is clear enough for STJ Yuda to find a rational basis for the shootdown. IRS’ move to amend their answer to allege Blower 159 didn’t clear the $2 million bar (Section 7623(b)(5)(B)) is denied as moot.

Takeaway 1- If born here and don’t want world-wide taxation, go away and stay away.

Takeaway 2- Blowers, take heart. There’s always another day and another Form 211.

*Whistleblower 15977-18W 12 29 21