I have lamented the want of an Office for the Self Represented at the United States Tax Court. Often. As recently as four (count ’em, four) hours ago. On this very blog.

Even more often have I praised summary judgment. I denote this tool for discovery of disputed facts (and smoking out friend, foe, and judge) with the term summary J. I did not invent the phrase. I stole it from a classmate, a very fine man and brilliant lawyer, now deceased. The story he told was that, having won summary J in a big-ticket case as a junior partner in the firm where he spent more than forty years, he bought himself a fancy car and got a license plate that read “SUMMARYJ.”

I wonder what happened to the license plate.

But into the breach steps that Obliging Jurist, Judge David Gustafson. And conforming to current judicial fashions, he’s obliging even to corporations, treating them like people.

James G. Garcia, Inc., Docket No. 14222-19L, filed 8/10/20, is facing a summary J motion off a CDP.

Now maybe James G. Garcia, Inc., has counsel in the wings, waiting to file Entry of Appearance and send in a devastating cross-motion. Or maybe not. Anyway, James G. Garcia, Inc., managed to file an Ownership Disclosure, which has daunted many another self represented.

But Judge Gustafson is taking no chances. He gives James G. Garcia, Inc., the full treatment.

“The Commissioner’s motion asserts that no trial is necessary in this case, because (the Commissioner says) no relevant facts are in dispute. The motion contends that, on the basis of the undisputed facts, the case can be decided in the Commissioner’s favor. The Court will order petitioner James G. Garcia, Inc., to file a response to the Commissioner’s motion.

“If petitioner disagrees with the facts set out in paragraphs 1-23 of the ‘Facts’ section of Commissioner’s motion for summary judgment, then his response should point out the specific facts in dispute. Petitioner’s response should state, by number, any assertion with which he disagrees, should explain the reason for his disagreement, and should cite whatever evidence supports his position. If petitioner disagrees with the Commissioner’s argument as to the law (in paragraphs 24-36 of the Commissioner’s motion), then his response should also set out its position on the disputed legal issues. Q&As that the Court has prepared on the subject ‘What is a motion for summary judgment? How should I respond to one?’ are available at the Court’s website and are printed on the page attached to this order.” Order, at p. 1.

Standard, right? Language more or less like this is found in many an order. As is the follow-up, the usual caution that if James G. Garcia, Inc., does not respond, it will lose.

But Judge Gustafson goes the extra couple furlongs (hi, Judge Holmes).

“If petitioner is unsure how to proceed, he [sic] should promptly initiate a telephone conference with the Court and the Commissioner by placing a call to the Chambers Administrator of the undersigned judge (at 202-521-0850).” Order, at p. 1.

Pro ses, take down that number.

Obliging as he is, Judge David Gustafson won’t do your research for you, but he will edit your letter before including it in an order, so as not to embarrass you with your spelling mistakes. He performs this service at no extra charge (look at all you get for sixty bucks) for Tony Patrinicola & Barbara Patrinicola, Docket No. 498-19, filed 8/10/20.

Actually, it’s Tony’s letter. He wants to add another year to his petition, based on a CP90. That form somewhat confuses even Judge Gustafson, so he treats Tony’s letter as a motion for leave to amend.

“…the notice evidently does double duty both as a notice of right to a CDP hearing and as a demand for payment. (Cf. Webber v. Commissioner, No. 14307-18L (order of June 7, 2019).) On the front page of the notice, underneath its title, is the phrase ‘Amount due immediately: $8,236.89″. The bottom third of page 1 of the Notice CP90 is an address slip that the taxpayer can use to make a payment of the stated liabilities. It gives an IRS address in Cincinnati, Ohio, and as an ‘Amount due immediately’ it repeats the amount of $8,236.89.” Order, at pp. 1-2.

Judge Gustafson cites his order in Webber, supra, but he doesn’t cite my blogpost “Judge on a Tear,” 6/7/19, which is much more entertaining.

Howbeit, if Judge Gustafson is slightly befuddled, Tony is utterly confused. His letter is addressed thus: “United States Tax Court Attn: Commissioner of Internal Revenue Maurice B. Foley (Chief Judge) Washington, D.C. 20217.”

Refer to my blogpost “The Plight of the Pro Se,” 7/27/20. The USDCs have offices for the self represented; Tax Court has none. While I have no statistical evidence to back up this assertion, Tax Court has more self representeds as a percentage of nongovernmental litigants than any USDC. Yet they are without guidance except from the never-sufficiently-praised pro bonos and LITCs. And most pro ses have no idea these resources exist.

So Judge Gustafson wants IRS to tell him if Tony’s letter is a timely request for a CDP, or whether IRS received any other timely request from Tony for a CDP.

I most humbly suggest that IRS’ counsel read the Webber order (and maybe even my blogpost thereon above-cited) before responding.

This is what greeted me as I drove my MacBook Pro onto the new, marginally-improved, jazzy Tax Court website.

“On Tuesday, August 11, 2020, the Court will be performing a circuit upgrade from 4:00 PM to 5:00 PM EDT. There may be a brief disruption to eAccess and this website.”

Why during the time when opinions and designated orders (few enough of those) are released?

Why when practitioners are getting the last-minute filings out the door?

Why not after 8 p.m.?

Though politics is in the air, and philippics and polemics proliferate, this blog remains immune to politics. But today we have elections again, albeit this one is a very basic election.

Craig Douglas Hoglund & Christine Joan Hoglund, Docket No. 18571-19, filed 8/7/20, are petitioning a SNOD for Year A issued solely to Chris. Craig wants in, and claims he and Chris always filed MFJ. Not only that, but Craig & Chris want to throw in tax years B through G, both inclusive.

IRS moves to toss, claiming Craig & Chris tried this move before, but Tax Court kept in only the years specifically addressed by the SNOD.

“The Hoglunds filed a response to the Commissioner’s motion. Their response makes to [sic; I think you meant “two,” Judge] principal arguments. They note that they have filed their returns ‘married filing jointly’ throughout their marriage, implying that this requires the Commissioner to issue a notice of deficiency addressed to them jointly. Citing authorities relating to collection cases, they also argue that ‘years not under consideration for a particular tax year’s hearing are considered in making a ‘Determination.'” Order, at p. 2.

Well, ya gotta check the box for MFJ. See my blogpost “Blowing the Joint,” 6/24/14. Judge Buch does a reprise.

“Under section 6013(a), married taxpayers ‘may make a single return jointly of income taxes,’ which is done by checking a box on an income tax return labeled ‘Married filing jointly.’ Choosing to make a joint return is an election. The statute permitting joint returns refers to it as an election. See sec. 6013(b). As do the underlying regulations. Treas. Reg. § 1.6013-1(a)(1). At the time the Commissioner issued his notice with respect to [Year A], the Hoglunds had not filed a joint return. As a consequence, they had not made an election to file a joint return for that year. As a result of there being no election to file jointly, it was proper for the Commissioner to issue his notice only to Mrs. Hoglund.” Order, at p. 2.

Now as to the out years, Tax Court is bound by Section 6214(b), and the immortal words of the Lieber-Stoller Coasters classic Poison Ivy: “You can look but you better not touch.”

“As this provision make clear, we can only redetermine the deficiency in the year before us, [Year A] in this case. We may look at facts from other years for the purpose of redetermining the [Year A] deficiency, but we cannot determine whether the Hoglunds have overpaid or underpaid their taxes in any year other than [Year A].” Order, at p. 3.

So Craig & Chris lose the election, and Year A is out there on its own.

Practice hint: Note the magic day for election here is the date of the SNOD, because Craig & Chris hadn’t yet filed their return. When you get a nonfiler case pre-SNOD, with spousery implications (innocent or otherwise), you might want to consider sending in a belated MFJ return. And tell ’em Craig & Chris sent ya.

With so much going on, both online and in the real word, I hadn’t blogged a bunch orders (hi, Judge Holmes) wherein Ch J Maurice B (“Mighty Mo”) Foley bounced joint stipulated decisions and the like because the IRS’ counsels’ signatures were digital and not wet-ink.

I see today on the new, only-marginally-improved, jazzy Tax Court website that Ch J Mighty Mo, bowing to the unavoidable constraints of the COVID-19 new reality, will allow e-signatures on joint stipulated decisions, sidestepping 15USC§7003(b)(1).

There’s more, so look here: https://ustaxcourt.gov/resources/press/08062020.pdf

Now all we need is for Ch J Mighty Mo to energize Rule 34(a), and allow e-signed petitions and amendments thereto. Too bad he didn’t do so yesterday.

I’m sure IRS won’t mourn the passing of TEFRA, either.

Case in point. Even though the partnerships that generated ginormous NOLs for Ritchie N. Stevens and Julie A. Keen Stevens, 2020 T. C. Memo. 118, filed 8/6/20, may be small partnerships for TEFRA purposes, there still have to be partner level determinations. IRS hasn’t done them. The returns Ritch and Julie filed are not oversheltered per Section 6234, except for one year at issue out of the seven (count ’em, seven) years at issue.

Ritch and Julie have BoP that their partnerships are not small, and therefore need FPAAs, and fail to carry the burden. But IRS still has to consider partnership items, even without the FPAA prelude.

IRS’ lumping of all their securities transactions into aggregated sales and aggregated basis is a gift to Ritch and Julie; if IRS did not, they could have hit Ritch and Julie with the entire sales prices as gain, and let Ritch and Julie try to prove basis.

But IRS has problems. Without taking the partnership items into account, their failure to disallow partnership items, coupled with their computations of nonpartnership items, create no deficiencies. IRS can try to scuttle the partnership items and seek to collect the taxes that result from wiping out the losses and NOLs arising therefrom, but SOL may prevent that.

If you want the nitty-gritty from Judge Halpern, and have a craving for 87 (count ’em, 87) pages of his prose, read on.

But I’ve gleaned one point worth stressing from his elaborate deconstruction.

“In Dees v. Commissioner, 148 T.C. at 5, we distilled our prior caselaw into a ‘two-prong approach to the question of the validity of * * * [a] notice of deficiency.’ In the first step of the Dees approach, ‘we look to see whether the notice objectively put a reasonable taxpayer on notice that the Commissioner determined a deficiency in tax for a particular year and amount.’ Id. at 6. A notice that meets that test is valid, without the need for further inquiry. If instead the notice is ‘ambiguous’, we wrote, ‘the party seeking to establish jurisdiction * * * [must] establish that the Commissioner made a determination and that the taxpayer was not misled by the ambiguous notice.” Id.” 2020 T. C. Memo. 118, at pp. 44-45.

OK, so what price all these notices that say “we send you a SNOD” when IRS didn’t, and all the various letters, notices, forms and billets doux IRS unloads that claim a difference between what the return shows and what IRS claims is owing? And when IRS claims no jurisdiction because the document wasn’t a SNOD? I’ve blogged plenty of cases where a document says there’s a difference between return amount and tax due. And a reasonable taxpayer, not an EA, CPA, RRP, or attorney would certainly think they were on notice.

True, I didn’t blog Dees. But I’ll cite it.

Not From Your Ex

Judge Albert G (“Scholar Al”) Lauber’s infinite variety is again at center-stage, as he shuts down Steven R. Matzin and Sarah Schroeder, 2020 T. C. Memo. 117, filed 8/.5/20. It’s Steve’s story, because it involves Steve’s property split with Sarah’s predecessor, Georgeann.

Steve’s Sub S owned 70% of a cash-cow LLC that provided dental support around this broad land. This was the couple’s largest asset, and Steve ran up $160K in legal fees in negotiating the property deal and the divorce.

After whacking up cash on hand, life insurance, real estate, and a to-be-decided-later split of furniture and art, Steve works out a payout to Georgeann for the worth of the Sub S stock which owns 70% of the cash-cow LLC. Steve pays Georgeann’s share of some debts, and pays her some interest on the promissory note he gave her for the paydown on the Sub S stock. Steve didn’t want to split the Sub S stock with Georgeann; he didn’t want to be in business with her, and the other members of the cash-cow LLC would have to consent to let her in. She knew nothing about dentistry, leaving it to the lawyers to pull as many of Steve’s teeth as they could.

Eventually the cash-cow LLC is sold. Steve gets a sweet $85.7 million capital gain, of which he owes Georgeann 50% , but IRS claims Steve’s gain is greater by $5 million, although they settle out at no more than $3 million extra. We should all have such troubles.

But Steve needs more basis, so he claims what he paid Georgeann and his attorney increased his basis in the Sub S stock. No question what he paid Georgeann wasn’t deductible alimony, or rehabilitative alimony under then-applicable local (FL) law. Obligation to pay survived her death, and was neither income to her nor deductible to Steve.

Judge Lauber lets in parol evidence, finding the divorce agreement between Steve and Georgeann ambiguous. Any lawyer who can’t find an ambiguity in any document should find another way to make a living.

“The negotiating history makes absolutely clear that the parties desired to effect an equitable distribution of marital assets, including… Steven’s indirect interest in [cash-cow]. The payments specified in the agreement are consistent with the parties’ understanding, as shown in the negotiating history, that $10.5 million of value would be placed on Georgeann’s side of the ledger on account of Steven’s indirect interest in [cash-cow]. Because it was impractical for Georgeann to receive a $10.5 million partnership interest in [cash-cow], the parties agreed that she would be paid that value in the form of cash, a promissory note, and Steven’s discharge of her share of certain liabilities.” 2020 T. C. Memo. 117, at p. 10. And though there was a payout over time, it was still a lump-sum property split.

Yes, it’s property settlement. So what?

So Section 705(a)(1) doesn’t work to increase or decrease Steve’s basis in the Sub S (taxed as a partnership), because whatever Steve paid Georgeann didn’t change his distributions from the Sub S. And Steve neither gave the Sub S money or property, nor paid off any of the Sub S’s liabilities. So Sections 722 and 752(a) are off the table. Finally, neither Steve nor Georgeann acquired any greater interest in the Sub S than the 70% Steve had to begin with, squelching Section 742.

If the marital split involved shares of publicly-traded stock, Steve’s handing over half to Georgeann wouldn’t increase Steve’s basis in the remainder.

As for the legal fees, whatever claims Georgeann had to Steve’s interests in the Sub S had nothing to do with the cash-cow LLC. What Steve paid to Georgeann and his attorneys didn’t defend or perfect title to real or personal property, so whether or not to capitalize those costs per Reg. Section 1.263(a)- 2T(e)(1) is beside the point. Anyway, the Sub S paid nothing to defend or protect its title to the 70% interest in the cash-cow; it was all Steve.

Georgeann had, under then-applicable local law, only a claim to a piece of the value of all Steve’s assets, not any specific asset, and local law made it clear that designating property as marital property was for evidentiary purposes and not to vest title. If she wanted a piece of the cash-cow action, she’d be like any other creditor. She’d have to get a court to give her a charging order, directing the Sub S to fork over some or all of Steve’s share of the Sub S’s distributions. A creditor of a partner gets no lien on partnership assets, as I once had to teach a senior associate half-an-hour before our firm got sued.

Judge Scholar Al puts the cap on this bottle. “In effect, petitioners argue that any debtor who honors his obligations is entitled to capitalize those payments on the theory that he is removing a cloud on his title to assets that might be subject to collection action if he defaulted. That is plainly not the law; if it were, every payment by a partner on a personal debt would increase his basis in the partnership.” 2020 T. C. Memo. 117, at p. 18. (Footnote omitted, but it says that, though local law says even a spurious request for a charging order gives rise to a cloud on title, the case cited relates to a real claim, not a hypothetical.)

I really wanted to give Steve’s trusty attorneys a Taishoff “Good Try, third class,” but they blew it with this one.

“Finally, petitioners complain that, if we do not allow a basis increase, they will have no way of recovering the costs of Steven’s divorce against his taxable income. That is correct and unsurprising. Steven agreed to a property settlement through which Georgeann received an equitable share of the marital assets.  Spousal payments made pursuant to a property settlement are not tax-deductible. Had Steven made payments that qualified as ‘alimony’ for Federal income tax purposes, those payments would have been deductible. See sec. 215. But the agreement explicitly stated the parties’ understanding that, for income tax purposes, the payments would be neither taxable to Georgeann nor deductible by him.” 2020 T. C. Memo. 117, at pp. 20-21.

Sorry, chaps, we taxpayers aren’t paying for your divorce.

No, this blog has not gone political. I express my political views, one might say vociferously, elsewhere. But Judy Yiu, 2020 T. C. Sum. Op. 23, filed 8/5/20, elected Section 6015(c)  to remove from her shoulders the burdens of her loved-once’s tax delictions. This election did not go well.

STJ Panuthos notes Judy was employed during the year at issue as a legal assistant in the Los Angeles City Attorney’s office. 2023 T. C. Sum. Op. 23, at p. 3. Though STJ Panuthos doesn’t state whether Judy had help from her colleagues, this might be another case where a little learning is a dangerous thing.

Her loved-once claimed $2500 of education credits on their joint return for year at issue, which IRS disallowed, and hit Judy with a SNOD therefor, amongst other things. Judy didn’t petition same, but filed a stand-alone, being then divorced and abiding separately from loved-once.

While stand-alone was pending, Judy paid the entire deficiency. IRS let Judy off the $2500, but hit her for the rest. Judy petitions for a refund of the $2500. She agrees that, for the year at issue, she doesn’t qualify for Section 6015(b) (innocence plus apportionment) or (f) (equity).

STJ Panuthos is blunt.

“… respondent allowed petitioner partial relief under section 6015(c). The parties agree that petitioner is not entitled to relief under section 6015(b) or (f). This should end the matter, except that petitioner paid the entire [year at issue] tax liability before filing a claim for relief under section 6015 and now seeks a credit or refund for the amount of relief granted. The problem for petitioner is the clear text of section 6015(g), which governs the allowance of credits and refunds in cases where the taxpayer is granted relief under section 6015(c).” 2020 T. C. Sum. Op. 23, at p. 6.

Section 6015(g)(3) is as clear as anything in the Code: “No credit or refund shall be allowed as a result of an election under subsection (c).”

And STJ Panuthos will tell you why.

“… Congress intentionally denied taxpayers any refund under sec. 6015(c). A House report…elaborated that an election under sec. 6015(c) ‘is limited to deficiency situations and only affects the amount of the deficiency for which the electing spouse is liable. Thus, the election cannot be used to generate a refund, [or] to direct a refund to one spouse or the other’. H.R. Rept. No. 105-817, at 63- 64 (1998), 1998-4 C.B. 253, 315-316.” 2020 T. C. Sum. Op. 23, at p. 6, footnote 4.

Practice point- Consider calculating whether to pay a SNOD in full, when Section 6015(c) is in play, or pay all but the contested amount. Underpayment and interest add-ons should tip the balance. Making a deposit to stop interest might not work, if refunds or credits are off the table.

And STJ Panuthos raps IRS’ counsel’s knuckles. Practitioners, take note. There was the usual Rule 91 stip, and therein lies the rub.

“Attached to the stipulation are two exhibits marked A and B, respectively. Exhibit A is 494 pages (identified as the ‘entire administrative record’) and exhibit B is 13 pages (identified as miscellaneous account transcripts). Rule 91(b) provides that stipulations shall be clear and concise and exhibits should be numbered serially. The parties have not directed the Court’s attention to any of the documents in the stipulation that are relevant to the very limited issue in this case. The attachment of an the entire administrative file of almost 500 pages as a single exhibit without identifying the particular documents creates a substantial burden in reviewing the record in a submitted case. We presume that this stipulation was drafted and exhibits compiled by counsel for respondent. We urge counsel to comply with the Rules.” 2020 T. C. Sum. Op. 23, at p. 3, footnote 3.

While herniating your opponent with paper might be a tactic, herniating the judge is less than a good idea.

One of the oldest journalistic clichés is that the crime story hits page one, but when the prosecutor drops all the charges or the accused is acquitted, the story hits the back page below the ads.

One of my nearest and dearest has a blog. She remarked a few days ago that the posts she thought were most deserving of attention got almost no views, while those she thought only mildly deserving got many more.

I discussed a variant of this phenomenon five (count ’em, five) years ago, in my blogpost “Go Figure,” 10/21/16.

Today, locked-down with no work to do, I looked back at my all-time stats, and found that my blogpost “Wow,” 7/1/16, is third among individual blogposts. But the sensational story that blogpost presaged evaporated the next year, as I chronicled in my blogpost “Unwow,” 4/6/17.

“Wow” has, to date, over 800 views. “Unwow,” 16.

I remember the remark of Ray Donovan, formerly United States Secretary of Labor, indicted for larceny and fraud. When, after he had resigned his post, he was acquitted on all counts two years later, he famously asked “Which office do I go to to get my reputation back?”

I do not know what to tell the person named in my blogpost.

Perhaps Judge David Gustafson is also a fan of the Houston youtube mechanic, as today he sends that message to IRS and Bryce Thompson Osoinach & Cameo Marie Wall, Docket No. 3472-19S, filed 8/5/20.

IRS is a couple days late (hi, Judge Holmes) with a status report. Ordinarily, an obliging jurist will make a COVID-19 allowance. But Judge Gustafson had told the parties three (count ’em, three) months ago to get moving. Instead, he got this: “Petitioners presented some documents to Appeals that required the Exam function to review. This has delayed the consideration of this case. Respondent will work with Appeals and Exam to make sure the documents are reviewed as quickly as possible given all the logistical challenges taking place at this time…. In order to make sure progress is made in the next few months, respondent suggests requesting an updated status of the case in October, 2020.” Order, at p. 1.

Judge Gustafson hits the brakes.

“Without meaning to overlook the logistical challenges and other difficulties that the parties are facing during the current pandemic or to be ungrateful for their work, the Court notes that the progress recently reported has been disappointing, and notes that counsel’s expectation (‘progress … in the next few months’ that might yield only an ‘updated status of the case in October, 2020’) is out of keeping with the Court’s expectation.” Order, at pp.1-2.

So we’ll have a teletrial in October.

STJ Diana L. (“The Taxpayer’s Friend”) Leyden is nowise behindhand with Donald C. Karn, Jr., Docket No. 10694-19S, filed 8/5/20.

STJ Di had ordered the parties to play nice and file a Rule 91 stip. IRS said they’d sent one to Don.

Don is peeved that IRS took a year-and-a-half to produce, not a copy of a W-2, but “a computer-generated printout of the alleged W2 form. It was not a copy of the original form, and it took respondent over a year and a half.” Order, at p.1.

Don also said he wouldn’t do a phoneathon with IRS.

STJ Di sets teletrial for October. If anyone wants a phoneathon, give STJ Di’s chambers a ring. But do as set forth in the title first set forth at the head hereof (as my high-priced colleagues would say).

I objected to teletrials because the public couldn’t watch them. But I’m coming around to the idea that they are the tsunami of the future. They stop the waltzing, and concentrate the litigants’ minds wonderfully. Now if the videos could be posted online for the public to view, that would be perfect. The whole “pick a venue” issue would vanish. All trials would be held at The Glasshouse server, wherever that is. Teletrials would do away with the need for judges, IRS’ counsel, parties’ counsel, litigants and witnesses to go on the road, saving a bundle of money and a bushel of time.  There are no juries in Tax Court trials, so that’s not an issue.

If we get permanent teletrials out of this pandemic, it’s truly an ill wind that blows no one some good.

Edited to add: And I’m certainly not suggesting that calendar call pro bono volunteers be shut out, and helpless self-representeds be left to a cruel fate. Break-out rooms are a standard feature in most teletubby software, and online trials give pro ses and the vols a chance to get together well in advance of trial with Zoomies, Facetimes, and like software. Instead of the “justice in the hallways” that I see at in-person trials, the LITCs and pro bonos can be on-call, and space-and-time concerns eliminated. It’s a total win-win.