From and including tomorrow, Friday, 10/30/20, The Glasshouse Gang will stop in-person acceptance of hand-delivered documents, until further notice.

Here’s the skinny.

The 1971 Rod Stewart-Martin Quittenton lament of the pool-playing schoolboy echoes in Judge Gale’s tale of Ram Ratan Sharma and Shakuntala Sharma, 2020 T. C. Memo. 147, filed 10/29/20. Ram and Shak are trying to deduct $27K of rental real estate losses, but fall foul of the Section 469(i) $25K stop-loss, to the extent of a $5230 deficiency, and a Section 6662(a) chop.

IRS concedes the chop, but Judge Gale sustains the deficiency.

Ram and Shak agree they’re not real estate pros, but they do actively participate in their real estating. Thus, they claim the $25K stop-loss.

” The $25,000 maximum exemption is subject to a phaseout that reduces the exemption by 50% of the amount by which a taxpayer’s “modified adjusted gross income” (MAGI) for the taxable year exceeds $100,000. See sec. 469(i)(3)(A), (F). Consequently, if a taxpayer’s MAGI is $150,000 or more, the Section 469(i) exemption is fully phased out. Spouses who have filed a joint return are treated as a single taxpayer for purposes of the MAGI calculation, and both spouses’ income therefore must be taken into account in calculating their MAGI.” 2020 T. C. Memo. 147, at p. 5. (Citations and footnote omitted, but the footnote says that the $27K Ram and Shak claim is over the $25K, so the $25K is the best they could get even if they’re right, which they’re not).

Ram and Shak want to exclude their IRA and pension income from their Section 469 MAGI. They claim the instructions to Form 8582 allow this, and attach a copy of said instructions for a year other than the year at issue. Judge Gale allows this, taking judicial notice that those instructions do not vary.

Except the instructions don’t allow deductions for contributions to IRAs, much less withdrawals. Ram and Shak didn’t make any such contributions; if they had, the amount thereof would only increase their MAGI, and hence their deficiency.

There has to be a Rule 155 beancount, because Ram and Shak overstated the Social Security they received, so they need a Section 86 recalculation, and thus yet another go-around with MAGI.

See the title at the head hereof.

Chasing mirages and searching for pots of gold at the ends of rainbows have nothing on trying Section 7482 interlocutory appeals. The statute says it’s available; caselaw proves it isn’t. Case in point: Frederick Howe & Bonita A. McVaugh-Howe, Docket No. 29743-14, filed 10/29/20.

Quick man-‘splain from Judge Kerrigan: “Section 7482(a)(2)(A) provides that a Court of Appeals, upon a timely request by a party to litigation in this Court, may permit an immediate appeal of an interlocutory order of this Court when it contains a statement that a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation. Each of these three grounds must be met before we certify an interlocutory order for immediate appeal.” Order, at pp. 1-2. (Citations omitted).

The usual rule is one can appeal only from final judgments, that decide the case “and leave not a rack behind,” as a far better writer than I put it. Here, there’s still plenty of stuff; see my blogpost “Estopped to Estop,” 6/8/20.

Boni was out of the case by virtue of innocent spousery, so Fred is on his own here, with an $8 million deficiency and chops proportional.

There has to be a substantial variance of opinion on a legal issue essential to the case. Here, it’s a question whether an 872-AD is a contract like a Section 7122 closing agreement, and the caselaw says it isn’t, nemine contradicente as my high-priced colleagues would say.

Walt Whitman has certainly given me the gift that keeps on giving. My “electronic” takeoff of his leaf of grass is now in its fourth year, with no end in sight (groans from my readers).

Today, that obliging jurist Judge David Gustafson obliges me and Rashida Vance McNeil, Docket No. 14472-19, filed 10/29/20, with a pretrial checklist for the Zoomgov age. Technology provides that, although “Each degree of Latitude, Strung about Creation, Seeth one or more of us,” as a far better writer than I put it, we all can gather for a Zoomie-based teletubby.

But to make it work, here’s what y’all need to do, as Judge Gustafson advises Ms McNeil in a phoneathon.

“…the Court…instructed her to review any draft stipulation of facts that the Commissioner proposes, to propose any necessary corrections, and to cooperate with the Commissioner’s counsel in filing a joint stipulation of facts timely. The Court also gave instruction to Ms. McNeil to immediately share with her opponent any documents that she will offer into evidence at trial. The Court reminded her that any non-stipulated exhibits are also due to be filed on Monday, November 2, 2020, so that her opponent can see them in advance of trial and so that the documents can be accessed by the parties and the Court during the remote trial proceedings.” Order, at p. 1.  

And don’t forget the pretrial memorandum. Apparently Ms McNeil has, and that does not bode well. “The Court noted that one important aspect of the pretrial memorandum is its identification of any witnesses that the parties expect to call. The Court observed that this information is overdue and urged Ms. McNeil to promptly notify [IRS’ counsel] of any witnesses and to prepare for the witnesses’ participation in the video proceeding.” Order, at pp. 1-2.

Finally, make sure your laptop has a video camera, and show up for the Zoomgov dry run.

Did ex-Ch J Michael B (“Iron Mike”) Thornton stir some unnecessary silt in analyzing Van Bemmelen, when allowed that only three (count ’em, three) objections were available to a frustrated whistleblower? Ex-Ch J Iron Mike permitted challenges to the Ogden Sunseteers’ shotdowns only for incomplete record (whether so rendered negligently or intentionally), need for background information to see whether agency considered all relevant factors, and provided so abbreviated a record that judicial review is impossible. See my blogpost “Administering Supplements,” 8/27/20 for ex-Ch J Iron Mike’s take.

It seems summary J is inapposite for whistleblowing review. Summary J is fact-finding, not fact-deciding. But post Van Bemmelen, conflicting facts aren’t the point; only an adequate basis in the record is needed, whatever the variances between facts alleged by the parties.

That’s the point of departure for Judge Courtney D. (“CD”) Jones, when she unpacks Bobbi V Marvel, Docket No. 10452-19W, filed 10/28/20. The OS can’t even get Bobbi’s name right (Order, at p. 2, footnote 2).

But at the close of play, the SBSE evaluater decided that the amount at issue was too small to trigger an audit, despite some five (count ’em, five) years of target’s nonfiling. “As the record supports the WBO’s actions and there are no disputes of fact, the result of the case does not turn on which standard is applied.” Order, at p. 2.

“We review the WBO’s determination for abuse of discretion, and the scope of our review is generally limited to the administrative record. We will decide if the WBO’s actions were arbitrary, capricious, or without sound basis in fact or law.

“But we do not oversee the IRS’s audit and collection activity. Consequently, ‘we do not review the IRS’s decision whether to audit a target in response to a whistleblower’s claim and * * * we have no authority to require the IRS to explain a decision not to audit.’ To the extent that denial of petitioner’s claim encompassed a decision not to audit, we do not review that decision.” Order, at pp. 2-3 (Citations omitted, but expect to see them often cited).

The SBSE checked out what Bobbi provided for the relevant years, and decided it was too small to pursue.

That’s enough for Judge CD. She understands Bobbi’s frustration, but pore l’il ole Tax Court can’t order IRS to audit anybody.

And What They Get You

Judge Elizabeth A. (“Tex”) Copeland has a c.v. that would impress any senior managing partner. Her shoes would ace the Mark 9:3 color test. Truly, she would be a shoo-in for the Isaiah 53:12, clauses 1 and 2, stakes at any bloodbath (oops, I mean partners’ compensation meeting).

But look at what she gets for a designated hitter today.

Jaideep S. Chawla, Docket No. 2322-19, filed 10/2720*, a/k/a John Adams is up for around $27K in deficiencies, plus the odd chop. IRS moves to toss for want of prosecution, and Judge Tex Copeland gives Jaideep a/k/a John an order to show cause why not.

But Jaideep a/k/a John is willing to go all-in. Unhappily, he has a singularly poor hand, and none of flop, turn, or river will save him.

IRS sends in a status report, to which is attached “… a letter sent by petitioner…. Petitioner’s letter indicates that: petitioner’s name is now John Adams; multiple lawsuits have been filed by petitioner against the Internal Revenue Service related to the alleged tax bill; and that petitioner will not pay any debt until the Internal Revenue Service releases all federal tax filings of President Barack Obama to petitioner.” Order, at p. 1.

Judge Tex Copeland ordered Jaideep a/k/a John to respond electronically why he shouldn’t be tossed, whatever his name is. He doesn’t. He is.

Why the recipient of the American Bar Association Section of Taxation’s Janet Spragens Pro Bono Award (2009); Tax Person of the Year by Tax Analysts (2012); San Antonio Tax Lawyer of the Year (2011, 2017, 2018). Chair, State Bar of Texas Tax Section for the 2013-14 term, among other things, should have to deal with so unoriginal a wiseacre as Jaideep a/k/a John is beyond my comprehension.

See what credentials get you.

*Jaideep S Chawla 2322-19 10 27 20

I haven’t given out any Taishoff “Good Try”s lately, and today is not the day. The problem is, that Judge David Gustafson put on the brakes at the hold line with this designated hitter.

Dean Kalivas, Docket No. 25934-17, filed 10/26/20, missed the deadline last week for amending his petition, as you’ll remember from my blogpost “Judge on a Tear- Frivolite Beware!,” 10/20/20.  

Now IRS tries it on. IRS three (count ’em, three) weeks ago, tries a motion to require Dean to pony up paper or electrons for four (count ’em, four) matters at issue. Dean doesn’t respond to Judge Gustafson, although electronically enabled at Tax Court. He does send IRS a billet doux, wherein he states he has no paper for items 1, 2, and 4, and nothing beyond what he already handed over for item 3.

IRS says “requests as to items 3 and 4 are moot.” Fair enough. They also want Dean precluded from putting in any paper for any issue where he’s said he has none, except what he’s already given IRS. Judge Gustafson obliges.

“It is entirely reasonable to grant the additional relief that the Commissioner requests–i.e., to preclude Mr. Kalivas from producing at trial documents that he failed to produce during discovery.” Order, at p. 3. And he takes IRS at its word about the letter Dean sent IRS, but not to Judge Gustafson.

Item 1 involves money Dean claims is a loan, but IRS claims is income. Item 2 is Sched C and Sched E deductions.

But now IRS gets crafty.

IRS’ counsel wants Judge Gustafson to order that “…the issues to which respondent’s discovery request pertains shall be taken as established as set forth in the notice of deficiency dated September 12, 2017.” Order, at p. 3.

In other words, win your contested case without a trial, especially as to deductions that may be justified without paper; what’s a little case like Cohan among friends?

Judge Gustafson cuts IRS’ counsel down like an outfielder throwing a strike ahead of a sliding baserunner.

“…we do not ‘take as established’ (1) the taxability of the payments from R McK nor (2) Mr. Kalivas’s non-entitlement to additional Schedule C and E expense deductions.” Order, at pp. 3-4. (Name omitted).

But IRS can try again. I suggest after trial. And IRS’ counsel isn’t getting a Taishoff “Good Try,” even third class, for that one.

Maybe Greg Alan Rubstello, Docket No. 13598-19, filed 9/26/20, got beat a distended nostril by Amazon Prime, but he sure ran a great race. Last Friday, my blogpost “The Status Report,” 10/23/20 featured Judge David Gustafson’s admonition to Greg Alan and IRS for a big-hearted stretch run. Judge Gustafson ordered that every status report must show progress.

Today, Greg Alan and IRS produce the “…parties’ stipulation of settled issues (Doc. 9) filed October 21, 2020, that resolves all of the income issues in this case, and the Commissioner’s status report filed October 20, 2020.” Order, at p. 1.

Wherefore and whence, I reiterate my suggestion to Judge Gustafson’s colleagues that they in like manner festoon their orders for status reports. Might work wonders clearing the docket.

It’s one of the very few things you can fax to Tax Court. It’s probably The Glasshouse’s most-filed document. Crafty counsel use it to try to get extensions of time (no, must use motion), wildcard in evidence, arguments, and Boss Hossery (among other improper things). And Judges use it as a judicial alarm clock to keep litigants awake and up to date with discovery, trial prep, and stipulations.

Every day’s orders pages are littered with directions to submit joint Status Reports (or separate ones, if jointure is inexpedient), always with due dates, and sometimes with sequential due dates.

Today, Judge David Gustafson has a new twist to bestir the somnolent litigant, and it’s worth his colleagues’ emulation. Here’s Greg Alan Rubstello, Docket No. 13598-19, filed 10/23/20. I don’t know if it’s Greg Alan or IRS or both who’s waltzing, but it doesn’t matter.

“ORDERED that, no later than November 16, 2020, and every 60 days thereafter, the parties file shall [sic: has Yoda joined the Tax Court typing pool?] a joint status report (or, if that is not expedient, then separate reports) giving the status of the case and recommending a schedule for further proceedings. Each report shall include a paragraph that explicitly states what has occurred since the filing of the previous status report.” Order, at p. 2. (Emphasis by the Court).

I’d place additional emphasis on the last sentence thereof: “Each report shall include a paragraph that explicitly states what has occurred since the filing of the previous status report.”

“All Quiet on the Western Front” should not be an acceptable statement.

Judges tend to be intimidating. Maybe it’s the black robe, or the deus ex machina aura that comes from the judicial power of the jurisdiction.

But sometimes Judges can be human. Especially when dealing with the window of a decedent, whose case has had “a long and difficult history,” and must now navigate the whitewater twists and turns of Dawson’s Creek.

Here’s Winston Tease, Docket No. 15466–07L, filed 10/22/20, thirteen (count ’em, thirteen) years old and not even in the bottle yet. But if, like me, the late Winston Sr. echoes “through the smoke rings of my mind” as a recent Nobel laureate put it, check out my blogpost “David Hume and Bishop Berkeley,” 9/8/20.

Howbeit, the widow of the late Winston Sr. (whose demise, Judge Holmes acknowledges, has not been greatly exaggerated) “… sent a letter to the Court asking for permission to retain Mr. JS (who was Mr. Tease’s former lawyer) to help her in this case. The Court filed this as a ‘response to order….”

“Mrs. Tease doesn’t need to ask the Court’s permission to hire a lawyer, but her lawyer does need to file a short form called ‘an entry of appearance.’ Mr. JS is sure to know how to do so. We encourage him to do so.” Order, at p. 1. (Name omitted).

But here’s classic Holmes. ” Because the Court usually speaks to parties in the form of opinions and orders, it is ORDERED that on or before January 8, 2021, Mrs. Tease’s lawyer may file an entry of appearance.” Order, at pp. 1-2.