A proper fraction, the arithmeticians tell me, is one which represents less than the whole; briefly, a proper fraction is less than 1.

Judge Patrick J (“Scholar Pat”) Urda confronts a proper fraction when dealing with Patricia Dumas, Docket No. 22859-19, filed 1/25/21, an off-the-bencher. It’s an EITC and additional child care credit, with Patricia’s grandson JCN (minor children have only initials in Tax Court; see Rule 27(a)(3)) as her qualifying child.

JCN passes the Section 152 relationship test, doesn’t provide more than half his own support, and isn’t married so doesn’t file MFJ. The problem is, he’s born during the year at issue, so couldn’t have lived more than half the year with Patricia.

To the rescue comes Reg Section 1.152-4(d)(1), Proposed Income Tax Regs., 82 Fed Reg.6370, 6387, Jan. 19, 2017. “If an individual is born or dies during a taxpayer’s taxable year, the residency test for a qualifying child is treated as met if the taxpayer and the individual have the same principal place of abode for more than one-half of the portion of the taxable year during which the individual is alive.” Order, Transcript, at p. 7, footnote 2.

A tip of the battered Taishoff Stetson to Kimberly A. Daigle, Esq., IRS’ counsel, for bringing the temp. reg. to the Court’s attention on the trial, and another to Joseph B. Schimmel, Esq., for representing Patricia at the calendar call. It would be great if these appearances appeared on the docket sheet, but DAWSON.

Howbeit, Patricia has only her own testimony for the number of nights young JCN stayed beneath her roof, and that doesn’t get it done, though obviously Judge Scholar Pat and Mr. Schimmel are trying to cut Patricia as much cliché as they can.

“On the record before us, we are unable to determine the number of nights in [year at issue] that JCN stayed in Ms. Dumas’ house.  Ms. Dumas did not present any evidence beyond her own testimony, such as a calendar, an agreement with her daughter, an affidavit, or testimony from another witnesses (such as her daughter), regarding the number of nights JCN spent at her home in [year at issue].   When asked by the Court how often JCN stayed with her, Ms. Dumas could not provide an estimated number of nights.  Instead, she vaguely testified that:  ‘So yes, I kept him.  He did stay the night a lot of nights.’  When asked by the Court whether she had a certain agreement with her daughter with regard to caring for JCN, she answered that:  ‘I would keep him.  * * *  But he has stayed the night.'” Order, Transcript, at p. 8.

Not good enough.

But Judge Scholar Pat has given Patricia and anyone similarly situated a checklist for substantiating residence requirements for EITC and additional child care credit.

I take my text from John Lennon’s best-selling solo performance.

I have probably overwearied my readers with my complaints about DAWSON. In my own defense, I have received feedback from other bloggers with not dissimilar criticisms. Nonetheless, I will try to keep this blog from becoming an endless gripe session, as these are neither edifying nor amusing. Neither does griping influence anyone who can effect an improvement; they just go into a defensive hedgehog, “consuming miles of red tape in the correctest forms of activity,” and convinced that everything is for the best in this best of all possible worlds.

But today I encounter one who seems to be a fellow-sufferer, albeit on the practitioner’s side, rather than the journalist’s.

I don’t know his/her name, but Ch J Maurice B (“Mighty Mo”) Foley tells the sorry tale in his accustomed laconic style.

“…counsel for respondent attempted to file an Entry of Appearance in the above-docketed matter. However, the underlying submission reflects no substantive content, instead suggesting a problem with the upload process.” Brad A. Governor, Docket No. 3788-20S, filed 1/25/21, Order, at p. 1.

One person’s frustrated upload is another’s frustrated download. Or search.

The failed filing is stricken, of course. And Charles Dickens’ Circumlocution Office goes on.

There are (so far) no fewer than 456 (count ’em, 456) orders on the Tax Court website today. This may be part of the post-DAWSON hiatus tsunami. Half of these are simply pretrial standing orders, as Spring session teletrials taxi out and line up.

But most unusual are some seventeen (count ’em, seventeen) orders granting motions to withdraw as counsel by a well-known Tax Court attorney.

I have reached out to the attorney, asking for any non-privileged statement he may wish to make, but I can conceive of at least four grounds whereunder privilege may be asserted. So I certainly draw no inference as to any basis for any of such motions, nor from any failure or refusal to respond to my request for comment.

And of course I will publish any response in this my blog.

But what a good question it would make for the Multi-State Ethics segment of the Multi-State Bar Examination (or any State, Commonwealth or Territory equivalent). “X, Esq., presently attorney of record in the case of X vs Y, moves to withdraw as counsel. What privileged communications or statements might be involved in, or form a basis for, such motion? Cite to specific provisions of the ABA Model Rules of Professional Conduct, or other relevant source.”

Here’s a reminder, from Luerine Tunstle, Docket No. 11770-20, filed 1/22/21 (Another Palindrome Day).

I had to go back to the incumbency of ex-Ch J Michael B (“Iron Mike”) Thornton to find my last visitation to the topic of refunds of the sixty George ante-up. See my blogpost “You Pay, You’re Stuck,” 4/23/14.

Ch J Maurice B (“Mighty Mo”) adheres to precedent.

“…petitioner filed in the above-docketed matter an Application for Waiver of Filing Fee. However, review of the record in this proceeding reflects that the filing fee has already been paid. Accordingly, insofar as the Court is generally not in a position to provide refunds of fees paid, it is ORDERED that petitioner’s just-referenced Application for Waiver of Filing Fee is denied as moot.” Order, at p. 1.

Play before you pay.

From the Casebook of Lew Taishoff

I’m thinking of starting a casebook, assembling all the cases from blogposts past where the odd and unusual are on the menu.

Today I’ve got a case where DAWSON is the perp, The Case of the Disappearing Appearances.

Formerly, under the old and much-lamented no-name system, the docket sheet showed appearances. If petitioner were self-represented, that showed. If counsel filed the petition, or entered appearance thereafter, that showed. And IRS’ counsel was shown as soon as assigned.

That enabled me to call out dubious practitioners and sharp practice, and to praise those who did well, strove diligently, and generally took one for the side.

And it might have served as a referral service for pro ses in above their depth and looking for cover.

But the new, improved (ya gotta be kiddin’), jazzy, jim-handy DAWSON eliminated all that, and anonymity reigns.

If there is a reason for this obscurantism, it entirely escapes me.

Edited to add, 4/10/21: The appearances are there. There is a Release Note dated 3/7/21 that states appearances are to be found on the printable version of the docket sheet. But why the same information cannot be found on the docket sheet itself eludes me.

I can’t remember in which blogpost I quoted the late Henry Miller, Esq., renowned plaintiff’s  lawyer, but the quote is a classic: “When your witness shreds your client’s case on the stand, smile your sweetest smile, as if that was exactly the testimony you wanted, and wait for the recess to go into the hallway and sob.”

I don’t know if the Front Four attorneys for ASPRO, Inc., 2021 T. C. Memo. 8, filed 1/21/21, took Mr. Miller’s advice, but when “management fees” (deductible by the client) collide with “excessive compensation” (definitely not), and the fallout is nondeductible dividends, you don’t want this testimony from one of your client’s stockholders (who got said fees).

“One of petitioner’s board members, BM, credibly testified that he understood a dividend to be a ‘distribution of profits’; and when he was asked to describe his understanding of the difference between a dividend and a management fee, he testified that ‘a management fee is a distribution from the company that’s not taxed by the company and a distribution is a [sic] after-tax distribution of profits. * * * They’re both distributions.’” 2021 T. C. Memo. 8, at pp. 26-27. (Name omitted).

ASPRO’s three stockholders were using “management fees” paid to them in place of dividends or direct (excessive) compensation.

Judge Pugh runs through a bunch of factors, but BM’s testimony tells the whole story.

Edited to add, 1/27/21: I quoted Henry Miller, Esq.’s phrase somewhat differently in my blogpost “A Grammatical Shift,” 5/14/13.

Paul B. Bruneau and Karen L. Bruneau, 2021 T. C. Sum. Op. 1, filed 1/21/21, have a problem substantiating the depreciation deductions on their dog hotel and salon operation.

“Petitioners did not provide direct evidence of the amounts they paid for the various improvements to the [dog] property described above or the amounts of depreciation deductions they claimed for years before [first year at issue]. Mr. Bruneau explained that petitioners’ former accountant was in possession of their original records and that he had disappeared.” 2021 T. C. Sum. Op. 1, at p. 7.

STJ Daniel A (“Yuda”) Guy isn’t impressed with Paul’s story and blows off most of the depreciation, but Paul does get an entry in the Taishoff no-prize, sporadic “Good Excuse” sweepstakes.

There’s a lot of insubstantiation and defective recordkeeping, but it’s mostly the usual case of people running businesses who are bad bookkeepers. It’s the disappearing accountant that makes this one blogworthy.

All of my readers who are “hanging breathless on thy fate,” as a better writer than I wrote about a different ship, now can know the fate of the Challenge Vessel’s deductions and credits. Just check out Judge Albert G (“Scholar Al”) Lauber’s exegesis of Section 882(c)(2), Reg Section 1.882-4(a)(3)(i), and the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital Gains, U.K.-U.S., July 24, 2001, T.I.A.S. No. 13,161 (entered into force Mar. 31, 2003).

But before you delve into Adams Challenge (UK) Limited, 156 T. C. 2, filed 1/21/21 (Happy Palindrome Day!), check out my blogpost ““Related To,” “In Connection With,” “With Respect To”, 1/8/20.

IRS hit the Adams gang with a jeopardy assessment they later dropped, but gave them a couple SFRs (hi, Judge Holmes) showing zero deductions. The Adams gang riposted with protective zero returns per Reg Section 1.882-4(a)(3)(vi) after the SFRs, claiming the statute had no time limit, the Reg was invalid and the treaty prevented any limit. So the Adams gang could claim deductions and credits whenever.

The issue is whether denying the Adams gang deductions and credits falls foul of statute, regs, or the US-UK tax treaty. And Judge Lauber says no, and goes back to 1918 to find consistent US policy to keep foreigners from playing roulette with US taxes. The US statute and regs say that foreigners lose deductions and credits if they don’t file returns before IRS hits them with SFRs, unless they have a great excuse (which the Adams gang doesn’t).

The problem is that IRS may not even know that an offshore has US-connected income if the offshore never files. IRS tracked down the Adams gang via satellite; Adams had to tell the US Coast Guard they were on the Outer Continental Shelf, but never told IRS.

“Congress enacted section 882(c)(2) to ensure that foreign corporations comply with the internal revenue laws. Predicating a foreign corporation’s entitlement to deductions and credits on the filing of a return is justified in the light of the administrative difficulties the IRS faces. The Fourth Circuit described this situation as ‘pregnant with possibilities of tax evasion.’ Blenheim Co., 125 F.2d at 909. ‘[U]nless a foreign corporation is induced voluntarily to advise the Commissioner of all of its income attributable to sources within the United States * * *, the Commissioner may never learn even of the corporation’s existence.’ Ibid.

“Allowing a foreign taxpayer an endless period to file a return, moreover, would enable it to game the system. If a foreign taxpayer could ‘wait and see what information the Commissioner puts on a substitute return before the taxpayer has to file a return of his own,’ Espinosa, 107 T.C. at 157, the foreign taxpayer could elect to report its actual gross income or the income the IRS alleged, whichever amount was less. The foreign taxpayer would thus enjoy a one-way street in its favor. That outcome ‘would put a premium on tax evasion and would reduce the administration of the tax laws to mere idle activity.’ Blenheim Co., 125 F.2d at 912. Congress’ enactment of an administrative provision to prevent that result is not ‘discriminatory.’” 156 T. C. 2, at p. 57.

In practice, the offshore has 23-1/2 months to come clean after the end of each tax year, before IRS can whang their deduction pate.

Now, even forty-six (count ’em, forty-six, and I have, trust me) years later, the rebuke from a steely-eyed senior law partner of a legendary real estate operator and attorney echoes in my heart’s-core.

There I was, looking for a job as we entered the Black ’74, another NYC real estate meltdown. It was only my second experience of such a one, but cliché springs eternal.

“You must have so many interesting cases,” I said, “so many interesting questions and cases.”

“Mr Taishoff,” said he, pronouncing my name correctly, “we are not in the romantic practice of law. We are here to make money…lots of money.”

I expect that if he had, on his immaculately clean, empty, half-acre George Nakashima desktop (signed), a button that would have ejected me onto Pershing Square, he would have pushed it.

Doubtless you will ask: “What has this to do with United States Tax Court, and its august Ch J, Maurice B (“Mighty Mo”) Foley?”

I had hoped in this my blog to chronicle interesting questions and cases, explore the “jumbled and wrinkly legal topography created by the collision of Code, regulations, and caselaw,” and generally wow my readers with the cases that wow the judges. Moreover, I had hoped Ch J Mighty Mo would lead us into the broad, sunny uplands of intellectually stunning tax jurisprudence.

And what did I get? DAWSON.

But Ch J Mighty Mo has even worse before him.

Here’s Motaz H. Abu Hakmeh & Wisam M. Hamdan, Docket No.  7665-19S, filed 1/21/21 (Happy Palindrome Day!). But it’s only half Mo’s & Wis’ story. IRS’ counsel (now anonymous on the DAWSON docket page, unlike the old system where you could tell the players) also takes a hand.

“… the parties filed a Proposed Stipulated Decision (docket entry #7) and a duplicate of the Proposed Stipulated Decision (docket entry #8). Neither copy of the Proposed Stipulated Decision contains the entire case caption. Furthermore, the docket number on the second page is incomplete/illegible.” Order, at p. 1.

So Ch J Mighty Mo is reduced to ordering the offending documents stricken, and gives the parties until Tuesday next to clean up their act.

And this is the grist that comes to the judicial mill in The City of the Late Insurrection.

I still long for the romantic practice of law.