The Battling Yerushalmis are back, and Judge Mark V Holmes finds IRS is entirely reasonable in hitting Malka with a jeopardy assessment. Here’s the latest iteration of Malka Yerushalmi, Petitioner, Joseph Yerushalmi, Janet Baldwin, Next Friend, Intervenor*, Docket No. 5520-08*, filed 12/28/21.

Yep, thirteen (count ’em, thirteen) years and going strong. I’ve paid real money for whiskey younger than that.

Y’all recollect, no doubt, my blogpost “Ex Jersey Semper Aliquid Novi,” 9/8/21, where I described some of Joe’s and Malka’s NY real estate wheeling and dealing. Puts me in mind of some clients and some deals (and fights) from the old days, featuring lovable rogues who made the Pirates of the Caribbean look like The Love Boat.

You can follow Judge Holmes’ tracing through trusts that appear and disappear, trustees who switch in and out like hockey players doing a flying line change, with Malka as nominee or maybe not, and the US Bankruptcy Trustee suing all and sundry.

This long-running show brings more than a grimace to my battered visage, as I remember Tommy Moore’s classic words “Thus shall memory often, in dreams sublime/Catch a glimpse of the days that are over/Thus, sighing, look through the waves of time/For the long-faded glories they cover.”

They don’t make ’em like they useta.

*Yerushalmi 5520-08 12 28 21

Those of us on our third Medicare card (the old SSAN version,. the paper-with-code version, and now the plastic-fantastic) may remember Mr Keen and his sidekick Mike Kelly from the radio so long ago, the longest-running eponymous detective series.

I doubt the anonymous SO in Brian K. Bunton and Karen A. Bunton, 2021 T. C. Memo. 141,* filed 12/28/21 was alive when Mr Keen and Mike faded from the airwaves. But she treads in their well-worn footsteps, as Judge Christian N. (“Speedy”) Weiler allows.

I won’t waste time with the usual FICA/SE conflation with income tax protester jive that Brian and Karen are trying.

The point here is what the administrative record showed IRS had done, before Brian and Karen raised non-receipt of the SNOD, to try to litigate liability.

“Throughout the CDP proceeding petitioners sought to challenge the underlying liability. However, the record shows that an SNOD for [year at issue] was sent to petitioners by certified mail at the … address…. A copy of the SNOD was also sent to petitioners’ representative, Mr. B. The administrative record reflects that the IRS had submitted to the USPS an ‘Address Information Request’ or ‘Postal Tracer’ for petitioners’ current address and received confirmation that mail was deliverable to them. The IRS had verified their current mailing address before issuing the SNOD, the same address they reported on their Forms 2848.” 2021 T. C. Memo. 141, at p. 14.

It’s not enough for the IRS tax transcript to show mailing to an address. Judge Speedy Weiler does a drill-down.

“Where a taxpayer specifically alleges in a CDP hearing that he never received a notice of deficiency, an Appeals officer cannot rely solely on tax transcripts to verify that a notice has been sent. Instead, the Appeals officer is to review the actions of the IRS when the notice of deficiency was issued and the underlying documents to confirm that the correct mailing address was used to send the notice of deficiency to the taxpayer. Even when the notice was properly mailed, a taxpayer may be able to challenge the underlying liability when he or she can establish nonreceipt of the notice.” 2021 T. C. Memo. 141, at p. 13, footnote 11. (Citations omitted).

Practice tip: If you have a CDP with a non-receipt-of-SNOD issue, and a credible client, check the admin record to see if the AO found a “Postal Tracer” request and response. If it isn’t there, make a note. Might could be maybe so it’s useful.

*Brian K Bunton and Karen A Bunton 2021 T C Memo 141, 12 28 21

Feisal Ahmed, 2021 T. C. Memo. 142, filed 12/28/21* sent in a check which would have satisfied his TFRPs, except his trusty attorneys claimed it was a bond and not a payment. IRS claimed that, since the TFRPs had already been assessed, since Feisal had petitioned a NOD, won partial summary J,  had a remand to Appeals (with no supplemental NOD issued), IRS had the cash in hand to pay everything in full, and had released the NFTL, there was nothing to bond, as IRS wasn’t going to take any further collection action.

Judge Michael B (“Iron Mike”) Thornton finds that, before he petitioned, Feisal paid off one of the four FICA/FUTA quarters he was supposedly “bonding,” so only three are open. And Feisal now (seemingly) concedes that his “bond” doesn’t comply with Section 6603(a), so all three can only be bonded based on a judicially-created “facts and circumstances” scenario, which Judge Iron Mike distinguishes, because in those cases the bond was tendered before the tax had been assessed.

As usual, the most interesting part of the opinion is in a footnote, which I recommend to all my readers who take an interest in bonding.

“Sec. 6603(a), as enacted in 2004, provides that a taxpayer may make a cash deposit with respect to ‘any tax imposed under subtitle A or B or chapter 41, 42, 43, or 44 which has not been assessed at the time of the deposit.’ Respondent asserts that petitioner’s $625,000 remittance failed to qualify as a deposit under sec. 6603(a) because petitioner’s TFRP liabilities had already been assessed at the time of the remittance. Seemingly on this basis petitioner concedes the nonapplicability of sec. 6603. Neither party has addressed what would seem to be a more fundamental impediment to treating the remittance as a deposit under sec. 6603(a), namely that TFRP liabilities are imposed under sec. 6672, which is in chapter 68 in subtitle F of the Code, rather than in any of the subtitles or chapters listed in sec. 6603(a).” 2021 T. C.  Memo. 142, at p. 9, footnote 4.

Feisal’s trusty attorneys are much-respected colleagues, for whom I have high personal and  professional regard. This case is an illustration and a cautionary lesson to us all.

However much we may think we know, and however cleverly we may craft our case, the devil is always in the cliché: read the statute; read the cross-referenced statutes.

Here be dragons.

*Feisal Ahmed 2021 T C Memo 142 12 28 21

My colleague Peter Reilly, CPA, noted that the docket number of the first petition filed in calendar 2021 was number 35101-21, not 35000-21. Therefore, he asserted, Sara Elizabeth Schweigert & Marcus Schweigert, Docket No. 35000-21, served 12/23/21, did not file the thirty-five thousandth petition. Thus, my claim that 35,000 had been reached (see my blogpost “A Christmas Present,” 12/24/21, and the comments thereto) was premature.

I accept, without making an affirmative finding, that Mr. Reilly is correct.

So today I offer Maria Esnaola, Docket No. 35101-21L, filed 11/12/21*, in place and stead of the Schweigerts.

My August 30 prediction was definitely in the money. Now who’s running a pool on the total number of petitions filed this year?

*Maria Esnaola Docket No. 35101-21

While my nearest and dearest, and colleagues, are generous to me this happy season, I received today a Christmas Present from absolute strangers, who, I am sure, are utterly unaware of my existence. I am sure I never knew of theirs, either, before today.

But please accept my very best thanks, Sara Elizabeth Schweigert & Marcus Schweigert, Docket No. 35000-21, served 12/23/21*.

You made my day. Back on 8/30/21, I prophesied “Might it not be reckless speculation to suggest the number of petitions filed might approach, if not exceed, 35,000 total for calendar 2021?”

See my blogpost “Surge Update,” 8/30/21.

And best holiday wishes to all, readers and non-readers alike.

*35000-21

I hope I haven’t unduly wearied my readers with my praises of that Obliging Jurist, Judge David Gustafson. Spoiler alert: I’m going to do it again today.

Even those with sieve-like memories will recall my blogpost “Guidelines – Part Deux,” 12/22/21, wherein I again asked for clear guidance as to the imposition of the Section 6673 frivolity chops. Judge Gustafson’s response could not have been more comprehensive or more swiftly delivered if he had come to visit, borrowed Sir Andrew, and typed out his “Order Making Absolute Our Order to Show Cause” in Michael Balice, 17799-18L, filed 12/23/21,* in my livingroom.

You’ll need a long memory to recall Mike. See my blogposts “The Jolly Rounder,” 3/16/15, and “The Jolly Rounder – Part Deux,” 9/24/19.

Judge Gustafson has the whole catalogue of Mike’s numerous frivolities. And he reminds me of the catalogue of factors he promulgated in Leyshon, for which see my blogpost “Another Rounder’s Day,” 6/3/15.

In short, there are guidelines a-plenty, if one but looks for them. And Judge David Gustafson has listed them all, with “somber reasoning and copious citation of precedent.”

This time, Judge Gustafson whangs Mike with another $10K Section 6673 frivolity and delay chop.

*Michael Balice Docket No 17799-18L filed 12 23 21

It’s every sailor’s nightmare: dead into the wind, the boat upright but heeling to leeward, bow not coming over, sails luffing their stuffing out, and the surf on the lee shore getting louder. Happily for IRS, Judge Christian N. (“Speedy”) Weiler gives them an early Christmas present by letting them (partially) get out of stays. Here’s Longwood Preserve Holdings, LLC, Longwood Preserve Investors, LLC, Tax Matters Partner, Docket No. 12421-19, filed 12/23/21,*

My readers will recall that Judge Speedy Weiler stayed all, but then partially unstayed, the Longwoods back in March, so that the parties’ appraisers could eyeball the Longwoods’ high-priced Glynn County, GA boondocks, to come up with a Gunga Din appraisal thereof (“nothin’ much before, An’ rather less than ’arf o’ that be’ind.”). If not, see my blogpost “Staying the Stay,” 3/22/21.

Today Judge Speedy Weiler lifts even more, as he lets IRS go on discovering and developing its case.

” Respondent now seeks a partial lifting of the stay so that he can further engage in discovery to determine the value of the conservation easement at the time of the grant. We agree with respondent that a partial lifting of the stay for the purpose of engaging in discovery related to the value of the conservation easement and a ruling as to whether respondent has met his burden of production under section 6751(b), would narrow the issues for trial and reduce the burden of litigation on the parties and on the court.” Order, at p. 2.

Precisely what IRS needs to discover about what their own people did when is unclear to me. Did IRS seriously think Judge Speedy Weiler’s stay back in March prevented them from reading their own files and talking to their own employees about the chops or anything else?

But more work on developing valuation is definitely to the point. 11 Cir has Hewitt, the grandpappy of the GA conservation dodges, wherefore “highly contestable readings of what it means to be perpetual” are definitely under the appellate electron microscope. As I said in my blogpost hereinabove-cited, “Can’t read too much into this, but just possibly might could be IRS is less than sanguine about what 11 Cir will do.”

*Longwood Preserve Holdings Docket No. 12421-19 12 23 21

Tax Court is celebrating this pre-festival Palindrome Day by issuing no opinions, and the orders, though many, are routine. So I want to use this caesura to climb once more on my little soapbox to agitate for guidelines when Section 6673 frivolity chops are on the menu. For some backstory, see my blogpost “Guidelines,” 8/12/21.

Here’s the routine warning for first-timers, with which I entirely concur, in Kendra Nicole Scarborough, Docket No. 12198-20, filed 12/22/21*, from Ch J Maurice B (“Mighty Mo”) Foley: “Petitioner’s attention is invited to I.R.C. section 6673(a). If it appears to the Court that a taxpayer’s position in a proceeding before the Court is frivolous or groundless, then the Court can impose a penalty (not to exceed $25,000) on that taxpayer. Petitioner is advised that it appears to the Court that the position she has taken in this case is frivolous or groundless. No penalty will be imposed at this time. However, future submissions advancing a frivolous or groundless position will result in the imposition of a penalty.” Order, at p. 1.

Ch J Mighty Mo doesn’t tell us what delictions Ms Scarborough committed, but that’s tangential. Ms. Scarborough has been warned that whatever she alleged has consequences beyond the mere dismissal of her petition, as happened here.

But beyond that lies a broad, uncharted expanse. Is it $25, $250, $2500, or $25,000? Does the axe fall at petition, motion, discovery, pretrial memo, or trial?

I’m slightly surprised that no wit, wag, or wiseacre, mulcted in four figures for frivolity, doesn’t use the newly-enabled Orders search feature on the DAWSON site to accumulate a bunch orders (hi, Judge Holmes), chopping various petitioners in widely varying amounts for the same, or nearly the same, offenses, and thereby claim abuse of discretion, or excessive fines and penalties, when the chop descends upon them.

I’m not saying that judges can’t have broad discretion to control their courtrooms or prevent contumacious tactics. And I’m not debating the wisdom or otherwise of sentencing guidelines, or mandatory minimum and maximum sentences. It’s not the province of either the executive or the legislative branch to reduce the judiciary to mere puppets.

What I am saying is that a certain consistency is not the hobgoblin of small minds, when penalties imposed vary so widely, with no guidance whatever either to the judge or the frivolite. And I most respectfully suggest the Tax Court bench ponder the suggestion that there should be.

*Kendrta Nicole Scarborough Docket No 12198-20 12 22 21

Paging Peter Reilly

My colleague Peter Reilly, CPA,  and I have spent much time trudging through the “impenetrable morass, unintelligible alike to laymen and lawyers,” that encompasses the “goofy regulation,” Reg. Section 1.183-2(b) and its nine (count ’em, nine) factors. Full many a time have we seen the wealthy hobbyist unhorsed; but at odd whiles the wannabe, though beset by losses, wins through. See, for example, Lowell Den Besten’s story “Cutting Horses Gone to Seed,” 11/25/19.

Today we have rags-to-riches hedgefundie William R. Huff, and his lawyer wife Cathy Markey Huff, 2021 T. C. Memo. 140, filed 12/21/21,* applying their awe-inspiring business skills to try to set up a miniature donkey breeding business (no, I promise you I’m not making this up; I haven’t touched a drop yet today) to supplement daughter Jenny’s income from her dog-grooming gig (which also loses money).

Wm. R. started in Hell’s Kitchen on our Minor Outlying Island, went through City U’s B School, and ended up with his own hedge fund, a brigade of researchers, and AGI north of $21 million. He bought Jenny a NJ farmstead for her doggery, and after his friend Mr P suggested miniature donkey breeding, bought the next-door farm, signed up for the NJ farmers’ relief program (the Garden State, remember), and ran a tight ship and a bunch five-figure losses (Merry Christmas, Judge Holmes).

Judge Patrick J (“Scholar Pat”) Urda finds Wm. R. really truly wanted to make the business profitable, so as to hand it over to Jenny. He relied on Mr P, apparently a seasoned miniaturist, and questioned his advice when it didn’t work. He consulted with every agricultural extensionist he could find, including but without limiting in any way the generality of the foregoing those On The Hill Far Above. He kept good records. When Mr P tried to craft too sweet a deal to sell him some mokes, Cathy intervened to make it fair.

Wm. R. took jackets off the donkeys when it got too cold, changed their feed, electrified their barn, and kept on top of his manager. While busy making millions elsewhere, he was more than a passive investor.

You can read for yourselves Judge Scholar Pat’s dissertation, but, as always, Taishoff has the real story.

Miniature donkeys aren’t fun. “At trial Mr. Huff credibly testified that he derived ‘zero personal pleasure’ from the miniature donkeys. As he explained: ‘It’s a lot of work. * * * I don’t cuddle them. I don’t pet them. * * * [T]here is no satisfaction of having these. These are not pets. This is like livestock.’ In fact, Mr. Huff testified that miniature donkeys are ‘quite ugly’ and look like a ‘gigantic hairball’. Mr. Huff also pointed out that, unlike horses, miniature donkeys could not make up for the hard work with the joys of the saddle. Jennifer echoed this point, explaining that her ‘dad’s kind of a business guy * * * not the cuddly animal type’. Finding Mr. Huff’s cool personal feelings toward the miniature donkeys believable, we conclude that this factor favors the Huffs.” 2021 T. C. Memo. 140, at p. 41.

Wm. R. wasn’t burying telephone numbers of income in donkey droppings. His losses went down during the years at issue;  loss-leader sales were to show farm income to justify the NJ benefits. And if he wanted to give Jenny money, “there were other, significantly easier ways to do it.” 2021 T. C. Memo. 140, at p. 39.

Ultimately, when you show eight figures of AGI and a three-quarter billion-with-a-B net worth, $30K of write-off isn’t much of a shelter. Note that the donkey business was the only thing for which IRS nailed Wm. R. and Cathy for years at issue.

So, as we remember the late great Brig. Gen. Jimmy Stewart, USAF, in “It’s a Wonderful Life,” let’s repeat the immortal greeting “Hee Haw!”

*William R Huff 2021 T C Memo 140 12 21 21

It’s third time up for James E. Hansen & Helen R. Hansen, Docket No. 16157-18, filed 12/21/21; y’all will recall Jim & Helen’s previous visits; if not, see my blogposts “A Current Example,” 11/4/21, and “The Rewards of Virtue,” 12/8/21.

And it’s up, up and away, as IRS wants Judge Morrison to take judicial notice of three (count ’em, three) satellite photographs which appeared on the website of the county wherein Jim’s real estate developing was generating the deductions IRS disallowed.

Are these extraterrestrial snapshots relevant?

Maybe. IRS folded everything but $67K worth of recycled asphalt and some other road improvements pretrial. There followed a Rule 122 for the unfolded $67K, but Judge Morrison hadn’t ruled thereon when IRS folded the entire case: “no deficiency, no chops, no add-ons, no refund.”

Now IRS wants to put in the extraterrestrials, because Jim & Helen want Section 7430 admins and legals.

“The IRS asserts that satellite photos are useful to show the existence of buildings, locations of buildings, and locations of roads. The IRS also asserts that the satellite photos show the condition of roads and whether roads were paved or unpaved.

“The Hansens contend that the satellite photos are irrelevant because they relate only to the merits of the deduction. It is true that the merits of the deduction have been resolved. However, this alone does not preclude the photos from being relevant. There remains the issue of whether the IRS’s position was substantially justified. Sec. 7430(c)(4)(B).

“The Hansens also argue that it is difficult to tell from the photos the ‘condition of the recycled asphalt road improvements’ and the ‘washboard’ nature of roads. Relatedly, the Hansens argue that any changes to the color of roads between the photos was caused by ‘asphalt dust’. They also argue that expert evidence is needed to interpret the photos.

“These last objections do not address that the IRS intends the Court to draw conclusions about the existence of buildings, locations of buildings, and locations of roads. Thus, the Hansens have not argued or shown that there is a reasonable dispute about these facts.” Order, at pp. 2-3.Leaving out the neologism “relatedly,” Judge Morrison says he will take judicial notice, but to what extent and of what details are unclear.

“Neither the Hansens nor the IRS have explained to the Court exactly what which [sic] portions of the roads are in dispute as to their paved-or-unpaved nature or as to their conditions. As to the paved and unpaved nature of roads, and as to the conditions of roads, the Court will not draw any conclusions from the photos that are not obvious from the photos.” Order, at p. 3.

*James E Hansen Docket No 16157-18 12 21 21