(Sorry, Guys)

Our Ancient Foe made me do it.

Happily, it seems that Mark Betz & Christine Betz, et al., Docket No. 21587-18, filed 12/13/21*, and IRS have both of them given over the discovery razzmatazz that so upset Judge Nega back in February.

The bases for Judge Nega’s lament are more particularly bounded and described in my blogpost “CLE Has Much to Answer For – Part Deux,” 2/3/21. But the intervening ten (count ’em, ten) months have apparently stilled the waters and chilled the beeves to the extent that a bushebasketful of discovery-related motions can all be dismissed as moot today.

A great holiday present for a hardworking Judge.

*Mark Betz Docket No. 21587 18 12 13 21

If, dear reader, you are old enough to remember the radio program thus entitled, you are definitely in the zone for Medicare. Judge Courtney D (“CD”) Jones is not in that category, but today she puts a stop to an incipient waltz in Nautical Hill Holdings, LLC, Inland Capital Management, LLC, Tax Matters Partner, Docket No. 11971-20, filed 12/10/21.*

The Nautical Hillbillies were on for trial in Atlanta next Valentine’s Day, but moved jointly with IRS for a continuance (what we State courtiers call an “adjournment”) and a “new trial.”

Exactly how you get a “new trial” when you haven’t yet had the old trial eludes me. Judge CD Jones is more than equal to the task, and will give the Nautical Hillbillies a “special trial”, with a scheduling order adopted from the moving papers, setting discovery deadlines. So she renames the motion as one for a special trial, and grants the motion as thus restyled.

Except.

“We agree that setting the proposed pretrial schedule shall provide the parties with adequate time to prepare this case for trial. However, in the best interest of judicial economy, we will set trial for a time and date certain following a show of compliance with the pretrial schedule and substantive trial preparation.” Order, at p. 1.

Judge CD Jones will stop the music if the parties keep waltzing.

Here in NY, our major trial courts’ Rule 202.21 requires the filing of a Note of Issue and Certificate of Readiness, showing that all discovery is complete, before a case may be calendared for trial. Perhaps where large sums and complex issues are involved, Tax Court might wish to consider a similar rule.

*Nautical Hills Holdings LLC Docket No 11971-20 12 10 21

Depositions might be an “extraordinary means of discovery” in US Tax Court, but they’re the flavor du jour everywhere else. So the interjection “asked and answered” when examining counsel tries a second round of the same question is commonplace.

Well, today I have a new take on the old rejoinder. Here’s my e-mail to Public Affairs anent the current petition inundation, and the reply I got (name omitted).

Dec. 4, 3:04 p.m.: “Ms. S, There has been much discussion lately, not only by me but also by commenters on my blog, about the flood of petitions in calendar 2021. Two recent press releases have stated that the Court itself has sought to address one consequence, the need to prevent IRS enforcement proceedings when a petition has been filed but, because of the processing backlog, has not yet been served on IRS.

“But so far no particulars have issued from the Court, discussing how the staff are dealing with the backlog generally. Is there a preliminary screening of petitions? For example, are petitions divided between those accompanied by the filing fee and those that are not? Are the petitions themselves subjected to a quick-peek, to see if they meet any applicable standard of adequate pleading (whatever that is; Conley, Twombley, Iqbal or some sui generis Tax Court standard)? If classified, how is each class dealt with? Has any stay-of-enforcement protocol directed to the backlog been adopted?

“I suggest an interview with staff might yield valuable guidance for the public. I would like to interview a member of the staff by telephone and publish the results. Can this be arranged?”

Reply, Dec. 9, 4:00 p.m.: “Thank you for your email. The Court does not comment on internal operations, but you may refer to the press release issued December 9, 2021.”

So I did. And here is something worth repeating. “Of the total petitions filed, approximately 20% were filed electronically. The Court continues to process petitions expeditiously, and the number of paper-filed petitions that have yet to be processed continues to drop as the number of electronic petitions increases. Electronic petitions were up to 30% in October and increased to 36% in November. There is no backlog with respect to electronically filed petitions.” Press Release, 12/9/21.

Btw, Tax Court reports that, as at 11/30/21, 33,300 petitions have been filed so far this year.

Anyone want to start a no-cash, air-bet pool on the final number?

Oh yes, there was an opinion today, a small-claimer. Libia Higuita Wheeler, 2021 T. C. Sum. Op. 42, filed 12/9/21*, had a beef with her ex about their Sub S and their divorce decree. But inasmuch as the case involves Section 66(c) community property issues, of which I know nothing and do not practice in community property jurisdictions, and inasmuch as I was having barbecue beef and a delightful chat with my colleague Peter Reilly, any communist proprietors will have to read Judge Pugh’s opinion without my gloss.

*Libia Higuita Wheeler 2021 T C Sum Op 42 12 9 21

We all know that Section 6015(e)(3) ousts Tax Court of innocent spousery when the alleged innocent sues for a refund. But does it matter whether the innocent sues first and petitions afterwards? Nope, says Judge Christian N. (“Speedy”) Weiler, in Alice J Coggin, 157 T. C. 12, filed 12/8/21.*

Judge Speedy Weiler has a great syntactical chaw. “Sec. 6015(e)(3) provides: ‘If a suit for refund is begun’; it does not say ‘[i]f a suit for refund is [later] begun’ or ‘is begun [after the Tax Court case]’. It provides that ‘the Tax Court shall lose jurisdiction’, not that ‘the Tax Court shall lose [earlier acquired] jurisdiction’. It provides that ‘the [district] court acquiring jurisdiction shall have jurisdiction over the [Tax Court] petition’, not ‘the  [district] court [subsequently] acquiring jurisdiction’ nor ‘shall have jurisdiction over the [previously filed Tax Court] petition’.” 157 T. C. 12, at p. 20, footnote 19.

Alice was 50-50 in a Sub S with late spouse Phil. Late spouse Phil was also late filer Phil. Alice claims late spouse forged her signature on late-filed MFJs for years 2001-2009. Just before late filer Phil became late spouse Phil, he paid all of 2001-2007 (tax, but not add-ons, chops or interest), part of 2008 (ditto), and nothing of 2009. After late spouse Phil became so, IRS socks Alice with joint-and-several for whatever late spouse-filer didn’t pay. Alice files amended MFSs, claiming refunds. IRS says no, so Alice sues in USDCMDNC for refunds, never mentioning innocent spousery. DOJ counterclaims for the unpaid stuff. USDCMDNC tosses the refund claims, but doesn’t rule on the DOJ counterclaims (reserving same for trial).

Alice finally petitions as a stand-alone (no SNOD), asking USDCMDNC for a stay pending Tax Court proceedings, which USDCMDNC grants, saying it’s not ruling on innocent spousery, but might like to hear what pore l’il ol’ Tax Court has to say, if Tax Court has jurisdiction, 157 T. C. 12, at p. 22, footnote 23.

If. How many cases revolve, rise, or set on that word.

Well, Judge Speedy Weiler, like an even greater juridical mind of old, renders a split decision. Tax Court decides tax years; claims may involve several years (identical issues, identical parties), but only the years placed in issue count. USDCMDNC put paid to years 2001-2007. Alice could’a would’a should’a raised innocent spousery there; after all, she amended her pleadings three (count ’em, three) times, and anyhow, she conceded 2001. Thus res judicata (claim preclusion) bars Tax Court from considering innocent spousery for those tax years.

But 2008 was never paid in full, and 2009 not at all. Alice did petition more than six (count ’em, six) months after DOJ tossed her, so stand-alone is definitely in play, barring res judicata.

IRS wants Judge Speedy Weiler to toss the whole shebang, arguing that when Alice invoked the jurisdiction of USDCMDNC, Tax Court was out. OK, she’s out as to 2001-2007 tax years, but there remain 2008 and 2009 tax years. Those years may serve as a defense to the DOJ counterclaims, so as USDCMDNC has jurisdiction over the trial, it has jurisdiction over that issue. But Tax Court has innocent spousery stand-alone jurisdiction for those years as well.

“Section 6015(e)(3) does not address this overlap in jurisdiction and therefore leaves us to consult principles of comity to decide whether both courts should go forward on these common issues or, if not, which one should proceed.” 157 T. C. 12, at p. 22.

Remember, USDCMDNC wanted to hear what Tax Court would say. And judges are no different from the rest of us: if someone else wants to take the heavy lifting, go to it, mate.

Alice can go for innocent spousery for years 2008 and 2009 in USTC.

*Alice J Coggin 157 T C 12 12 8 21

My preparer colleagues are even now standing to their kit and bracing for the inundation of client requests for tender loving care and understanding as said clients drop off shoeboxes, totebags, and multi-part accordion envelopes (of the kind generically referred to by their older compères as RedWelds, a well-known brand).

These contain receipts, credit card statements, bank statements, brokerage statements, real estate closing statements, and pieces of paper “wretched, crinkled, scrawled over, blotched, frowsy.”

And from these, my colleagues and their trusty software craft the tax returns that furnish grist to today’s creaking mill in the Second Street, NW, Glasshouse.

DAWSON Opinions search function, restored, shows us that even the shoebox or RedWeld recordkeeping system, if the same as mother made, will stave off the Section 6662(a) chops. And though in the case of Maryann Patacsil, Docket No. 21903-19, filed 12/7/21*, much of IRS’ asserted unreported income and sketchy deductions o’ercrow Maryann’s little envelopes showing the expenses of her CA care home operations, Maryann escapes the chops.

CA care homes are residences for the serious disabled, or what are called group homes back East. Maryann got her learning from her Mom. Judge Holmes is at pains to point out Maryann’s engaging personality, care for her “consumers,” and her lack of accountancy or tax background. Mom was a “little envelopes” type of bookkeeper, the kind who dumps them on your desk and tells you “go to it.”

Most important, the years at issue were the early years of Maryann’s operations on her own.

“She had grown up in a business in which accounting system was bookkeeping via envelopes and receipts turned over to one’s CPA at the end of the year. Under these very special circumstances for these years early in her business career, I find she was reasonably relying on her mother and the accountant so I won’t sustain the penalty for her in any of these three years.” Transcript, at p. 19.

OK, preparers, “look how it comes again.”

*Maryann Patacsil Docket No. 21903-19 12 7 21

Y’all will recollect that IRS’ virtuous trial counsel, discovering controlling contrary precedent downGolzenized to James E. Hansen & Helen R. Hansen, Docket No. 16157-18, filed 12/7/21*, brought same to the attention of Judge Morrison, earning him a Class A diss from his fellow IRS counsel. If not, see my blogpost “A Current Example,” 11/4/21.

Well, IRS’ virtuous attorney may have earned the scorn of his mates for following ABA Model Rule 3.3(a)(2), but Jim & Helen R want Section 7430 legals and admins.

So Judge Morrison orders a volley of responses. Will Jim & Helen be rewarded for IRS counsel’s virtue? Stay tuned.

*James Hansen & Helen Hansen Docket 16157-18 12 7 21

The Tax Court website reports a major outage, which commenced an hour ago. The Genius Baristas are scrambling to restore Opinions and Orders, but no ETA for restoration.

Just before Opinions slid into murk, I saw an off-the-bencher by Judge Mark V Holmes, that I wanted to blog for the interface of the shoebox or Red-Weld method of tax recordkeeping with the Section 6662(a) chops.

But we’ll have to wait for it.

Once again The Glasshouse Gang have reached out to the sidewalks of New York, and tapped the former Taxpayer Advocate in the New York City Department of Finance to join the Special Trial Judge team. So let’s welcome STJ Eunkyong (“N’Yawk “) Choi to the Tax Court Special trial bench.

And while we’re in a welcoming mood, let’s welcome STJ Adam B (“Sport”) Landy, who joins from OCC.

Glad to see the Tax Court bench adding talent, as the petition tsunami rolls on. I’m sure these new STJs will hit the ground running.

Here’s their stories.

I’ve just concluded an e-mail volley with my colleague Peter Reilly, CPA. Mr Reilly asked why I hadn’t blogged Estate of Prince R. Nelson, Deceased, Comerica Bank & Trust, N. A., Executor, Docket No. 11442-21, 11/30/21*. It seems the case has been picked up by the trade press, due to the high profile of the decedent in the popular music line.

I replied that I hadn’t, because the order was routine. Besides which, if the trade press had discussed it, I was not minded to tag along. Mr Reilly noted the stip of settled issues was available from the documents department at Tax Court, and, as the case is settled pending local probate court approval, the stipulated decision will doubtless be sealed. Moreover, the particular trade press outlet that carried the most commentary was locked behind a paywall. So, to spare the frugal, would I, who make my blog free to all comers, cover the story?

No; I’m as frugal as they, if not more so. If the document is not sealed, anyone can order a copy, for the same fifty cents per page, three-buck cap.

But more to the point, I remembered that our colleague, Mr Paul Streckfus, deplored the sealing of stipulated decisions. Not only must justice must be done; justice must be seen to be done.

On the same day that Judge Holmes issued the order in Nelson, Judge Albert G (“Scholar Al”) Lauber issued his opinion in James R. O’Donnell, 2021 T. C. Memo. 134, for which see my blogpost “Bring Them Into Compliance,” 11/30/21.

It’s not “in the interest of government,” said Judge Scholar Al, that a habitual non-filer who ran up a tax tab north of $2 million over a two-decade stretch should buy his way out at a dime on the dollar, even if he was dead broke and IRS couldn’t get any more.

But even more to the point (and yes, dear readers, there definitely is one this time), I can’t say it better than Judge Scholar Al: “Because reports of accepted OICs are publicly available, see sec. 6103(k)(1), the IRS may reject an OIC if it determines that the ‘public reaction to the acceptance of the offer could be so negative as to diminish future voluntary compliance,’ see IRM pt. 5.8.7.7.2(2).” 2021 T. C. Memo. 134, at p. 12. (Emphasis added).

“Publicly available,” forsooth. So people can see if IRS is letting some animals who are more equal than others off the hook on the cheap.

OK, US Tax Court. OK, Genius Baristas and 18Fs (if you latter types are still around trying to “improve the way the US Tax Court engages with the public”; aye aye, roger that, most F affirmatory). Why are these stipulated settlement orders not publicly available at no charge on the website? Rule 27(b)(2)(B) says the website shall contain “any opinion, order, or decision of the Court.”

*Estate of Prince R Nelson Docket No 11442-21 11 30 21

While the United States of America has no official language (despite various attempts to legislate one), and while the question whether there should be such a one has great political philippic potential, nevertheless and notwithstanding, the United States Tax Court conducts its proceedings in English. See Administrative Order 2020-02, 5/29/20, which provided, in pertinent part: “All Court proceedings are conducted in English. All documents must be filed in English or include a certified English translation. You should let the Judge know as early as possible that you require help with English. It is generally the responsibility of each petitioner to bring an interpreter. If you give advance notice, the Court may have one available.”

However, this Admin Order was terminated by Administrative Order 2021-01, 8/27/21, which omits the above cited language.

My readers will doubtless recall Judge Albert G (“Scholar Al”) Lauber dealing with German in my blogpost “The German Invasion,” 9/17/20; Judge Elizabeth A (“Tex”) Copeland dealing with Spanish in my blogpost “LITC and VITA,” 8/20/19; and Judge Mark V Holmes being bemused as the Golden Gophers’ interpreter tries to translate “negative amortization” into Oromo, which is “an Afro-Asiatic language, of the Cushitic branch, and is the most widely spoken language in Ethiopia.” For that gem, see my blogpost “The Golden Gophers Win One,” 5/6/14.

Be all the foregoing as it may, Ch J Maurice B (“Mighty Mo”) Foley eschews the role of polyglot in Justino Hernandez Larios & Teresa Salazar Barranco, Docket No. 18751-21, filed 12/3/21*.

Justino & Teresa filed “an imperfect petition written entirely in Spanish. Petitioners did not attach a Notice of Deficiency to the Petition.” Order, at p. 1.

Ch J Mighty Mo tells them to amend in English, concisely and clearly setting forth assignments of error and facts in support of each thereof. And send in the sixty bucks.

Think maybe so it might could be time for a Rule about languages, Ch J?

*Justino Larios & Teresa Barranco Docket No 18751-21 12 3 21