If the late Dr Eric Berne, author of the classic “Games People Play,” were still among us, he would find US Tax Court “a medley of extemporanea,” as a much better writer than I put it. To prove the point, as if more proof were needed, here’s Enrique Aguilar, 2016 T. C. Sum. Op. 16, filed 5/26/20.

It really isn’t Enrique’s story, although his $12K of unreimbursed employee expenses stand the test Judge Gerber applies after IRS tosses Enrique’s entire return as fiction. No, it’s Mr Michael J Contract who, for ten (count ‘em, ten) years prior to year at issue, prepared Enrique’s returns.

Mr Contract (qualifications unstated) was a true original. I’ll let Judge Gerber explain.

“For the [year at issue] return it was Mr. Contract’s idea to report the reimbursed expenses received from Penske as business income on Schedule C and then to deduct that exact amount, resulting in zero income from his employee activity as a buyer. He created that fiction in order for petitioner to claim other expenditures as business expense deductions on Schedule C.” 2020 T. C. Sum. Op. 16, at p. 4.

As Mark Twain put it, “Well you’ve got to admire men that deal in ideas of that size and can tote them around without crutches.”

So on the trial IRS lets stand the $12K unreimbursed employee business expenses, but the rest goes to the fictionist’s grave.

On brief, IRS wants to toss everything, nail Enrique with the phony Sched C income Mr Contract dreamed up but not the offsetting deduction, and of course dump the $12K that exam allowed.

Judge Gerber isn’t having that.

“We agree with respondent that the $40,345 of income and expenses reported on the Schedule C was a fiction. The Court, however cannot agree that petitioner is not entitled to deduct the $12,060 of expenses respondent, pursuant to an examination, allowed in the notice of deficiency.

“Petitioner, on brief, argues that he did have unreimbursed employee expenses. On the record, petitioner presented evidence of expenditures. Under the circumstances, we cannot ignore the $12,060 that respondent allowed petitioner after an audit examination of his records. No evidence was presented at trial showing that respondent’s allowance of $12,060 in the notice of deficiency was in error.” 2020 T. C. Sum. Op. 16, at pp. 6-7.

Enrique gets the $12K, IRS tosses the trash, and Judge Gerber gives them both a Rule 155 beancount at no extra charge.

And this is what Doug Schulman and Dave Williams were trying to stop with the 1884 horse statute.

It’s a beautiful Spring day here on this US Minor Outlying Island off the coast of North America, but my mind is going back fifty-plus (don’t bother counting ‘em) years to the smoke-filled cardroom in Myron Taylor Hall. Around a battered table sat four young men, and as I look over their shoulders in memory I see Joel, and Barry, and Jersey Ed, and Slater. I see one of them (doesn’t matter which) slap down his cards on the table and ask “who dealt this mess?” Even if he himself had dealt it.

Oh, my misspent youth! And what wouldn’t I give to have it back and do it right this time!

But today that phrase comes back, as I behold Laurence Gluck and Sandra Prusock, 2020 T. C. Memo. 66, filed 5/26/20. I never ran across Mr Gluck, but he is a high-roller in the NY real estate business. And this is the story of a busted 1031 that never should have happened. Mr Gluck picked up a heavy chunk of change when he unloaded a high-priced condo on the “cultured, elegant” Upper West Side.

Now even the stones in the street know you do a 180-45 (unless your tax year ends sooner, in which case the time frames collapse), and 1031 into like-kind. But Mr Gluck hasn’t got enough cash to buy the kind of quality bricks to which he is accustomed. So he’s set up the condo sale with a QI (qualified intermediary, and I’ll tell you the backstory on that and the 1986 Tax Code if you’ll buy me a drink when the world is free). He gets a 25% tenant-in-common interest across town, which he has the QI put in a single-member LLC (disregarded). That’s what the deeds show. And that’s copasetic, right?

Wrong.

Some partnership, which according to the online records of the Register of the City of New York, County of New York, which keeps the land records of Our Fair City, was not in title when Mr Gluck bought in, filed a 1065, which claimed it owned the building. This partnership did give Mr Gluck some financial statements about the building claiming they owned it since 1962 during due diligence. Whether Mr Gluck got title insurance and what the title insurer insured I cannot tell.

“These returns list the name of the partnership as ‘G&P, c/o EMG & Co.,’ with an address at XYZ Park Avenue in Manhattan. The returns state that G&P was engaged in a rental real estate business and that this business began operations on February 1, 1962. It appears that G&P was originally formed as a family partnership and that, over successive generations, interests were divided and subdivided among family members and their heirs.” 202 T. C. Memo. 66, at p. 6. (Names and address omitted).

These characters gave Mr Gluck a K-1.

Why this didn’t set off bells, whistles, and sirens I do not know. Howbeit, Mr Gluck never filed Form 8082, stating he disagreed with the treatment of his interest as a partnership interest (ineligible for 1031 nonrecogition), and not as a tenancy-in-common (which is eligible).

Of course, all these ownership questions are partnership items, the partnership doesn’t qualify as a small partnership (which would duck TEFRA) because of Mr Gluck’s LLC, there never was a FPAA whereat Mr Gluck could assert his tenancy-in-common, so all of Mr Gluck’s items are individual computationals, wherefore he can’t contest the mischaracterization that blows up his 1031.

Judge Albert G (“Scholar Al”) Lauber has to toss so much of Mr Gluck’s petition as alleges qualification with 1031.

“The partnership reported on its [year at issue] tax return that it owned the apartment building and that petitioners acquired during [year at issue] a 50% interest in the partnership. The partnership was subject to the unified audit and litigation procedures of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). See secs. 6221- 6234 (as in effect for years before 2018). Respondent contends that his adjustment disallowing like-kind exchange treatment was necessary to conform petitioners tax treatment to the treatment shown on the partnership’s return and was thus a ‘computational adjustment’ within the meaning of section 6231(a)(6). Deficiency procedures generally do not apply ‘to the assessment or collection of any computational adjustment.’ Sec. 6230(a)(1). Respondent thus urges that we lack jurisdiction to address petitioners’ entitlement to like-kind exchange treatment.

“We conclude that we lack jurisdiction to redetermine the deficiency but that we have jurisdiction with respect to the penalty. We will therefore grant in part respondent’s motion to dismiss. Because we lack jurisdiction to address the merits of respondent’s adjustment, we will deny petitioners’ summary judgment motion.” 2020 T. C. Memo. 66, at pp. 2-3.

Of course, putting in the deeds to which I have referred at the summary J hearing is too little, too late. Absence of Form 8082 sinks Mr Gluck before he weighs anchor, no matter what arguments counsel makes. Computational adjustments stretch beyond arithmetic to tax treatment of an item, and IRS can go by the partnership return, absent a FPAA.

But penalties are still on the table.

Edited to add, 3/28/22: My colleague Peter Reilly, CPA, backed with all the resources of Forbes and his own extensive knowledge, informs me that the Glucks appealed to 2 Cir, and got the “pore l’il ole Tax Court” treatment. I won’t comment, here, as I did to Mr Reilly just now, about my view of the quality of advice Mr Gluck got in this deal.

The case is GLUCK v. COMM., 129 AFTR 2d 2022-XXXX, (CA2), 03/17/2022

That’s if you’re dealing with a computational adjustment from a NOD, not a SNOD. Here’s Judge Albert G (”Scholar Al”) Lauber to tell you all about it.

Amanda Iris Gluck Irrevocable Trust, 154 T. C. 11, filed 5/26/20, got a heavy-duty computational adjustment following a FPAA on a partnership wherein it was an indirect partner, hitting it for three years’ worth of tax. IRS sought to collect on the last two of those years. AIGIT petitions four (count ‘em, four) years, because the comp adjustment wiped out AIGIT’s claimed NOL from Year One.

IRS says no collection action for Year One, so that’s off the table. And IRS applied various other credits to Year Two, so no tax due for that year and thus no collection action. Greene-Thapedi and all that, y’know.

AIGIT says they want to fight about the shootdown of the 2012 NOL. If they get that, they owe nothing, so AIGIT proposes no collection alternative.

Judge Lauber: “The SO declined to consider petitioner’s underlying liability challenge, reasoning that it had had a prior opportunity to dispute its [Year Three and Year Four] liabilities…by paying the tax and filing refund claims. Respondent now concedes (correctly) that the SO’s rationale was erroneous. When section 6330(c)(2)(B) refers to a prior ‘opportunity to dispute such tax liability,’ it means an opportunity to dispute the liability in a prepayment posture.” 154 T. C. 11, at p. 12 (Citations omitted)(Emphasis by the Court).

Now we all know that in the SNOD (deficiency) context, comp adjustments are off the table. In the TEFRA days when the facts of this case took place, the fight at partnership level settled liability, so all that’s left is arithmetic, no second bite.

But here there was no first bite.

“The liabilities at issue arose from computational adjustments to petitioner’s [Year Three and Year Four] returns, which the IRS believed necessary to make those returns consistent with the reporting by the partnerships in which petitioner held interests. We generally lack jurisdiction to review computational adjustments in deficiency proceedings. See sec. 6230(a)(1). But our review in CDP cases is not so limited.

“In CDP cases involving assessable penalties (viz., penalties not subject to deficiency procedures), we have jurisdiction to review a taxpayer’s underlying liability for the penalty provided that he raised during the CDP hearing a proper challenge thereto. See Yari v. Commissioner, 143 T.C. 157, 162 (2014) (ruling that section 6330(d)(1) ‘expanded the Court’s review of collection actions * * * where the underlying tax liability consists of penalties not reviewable in a deficiency action’), aff’d, 669 F. App’x 489 (9th Cir. 2016)….” 154 T. C. 11, at p. 13 (Further citations omitted).

For the backstory on Yari, see my blogpost “The $100,000 Misunderstanding,” 9/15/14.

Anyway, the door is open, and IRS’ claim that AIGIT is fighting about the (closed) Year One is misplaced. AIGIT is claiming they should have been allowed a carryforward into Years Three and Four. And Tax Court can always go back to a closed year when a carryforward is on the table.

AIGIT also claims IRS messed up the computations, because the partnership from whence cometh this mess netted out some income and deductions.

The SO considered none thereof. So no summary J for IRS.

As United States Tax Court in exile is closed for the holiday, there will be no post other than this. I ask that readers place a candle in a window, if possible, in remembrance (electric preferred).

Locked-down and sequestered as I am, I approach nostalgia as I think about the days when I had clients. They were so varied, and yet so alike. The experiences I had were often surreal, an endless loop of L’année Dernière à Marienbad, interspersed with silent-film comedy reels. And all the while shooting down the sharp, clear, technical slalom of New York City real estate, negotiating gates at high speed, in an adrenaline-fueled euphoria. You truly couldn’t make that stuff up.

So when I read Judge David Gustafson’s admonition to Robert Bruce Blackmer, Docket No. 8091-19S, filed 5/22/20, the warm wave of recognition that broke over me as I rolled through the surf of memory brought a wrinkled smile to my ancient visage.

This is really too good to paraphrase.

“…the Commissioner filed a status report that states: ‘On April 28, 2020, respondent’s counsel and petitioner discussed the case and status reports telephonically, and petitioner stated that he will hire an attorney two months before the trial and that the case is not susceptible to settlement at this time.’” Order, at p. 1.

Oh, and by the way, Robert and IRS had a Branerton conference in February.

On this schedule, by the time Robert has retained counsel (if anyone other than a pro bono will take a small-claimer), discovery will be complete and Robert will have a bunch of Rule 37s, 90s and 91s wrapped around him tighter than snakes on Laocoön. With summary J to follow.

Judge Gustafson, obliging as ever, cautions Robert. “The Court advises Mr. Blackmer that he should not delay by planning to ‘hire an attorney two months before the trial’. Experience teaches that by that time, it would be too late for the new attorney to prepare the case for trial. The new attorney would want to propose that the trial date be continued so that he can properly prepare the case, but Rule 133, sent. 5, provides: ‘[E]mployment of new counsel ordinarily will not be regarded as ground for continuance.’ Mr. Blackmer should either handle this case himself without counsel or should now hire counsel promptly.” Order, at p. 1. (Emphasis by the Court).

In the meantime, let IRS serve their Branertons by the end of June.

You know what’s going to happen. If Robert shows up for trial at all, he’ll ask for more time because he can’t find a lawyer.

Edited to add, 5/23/20: For a masterclass in this sort of thing, see my blogpost “Quo Usque Tandem Abutare, Alexander, Patientia Nostra?” 5/13/13.

No, not the long-departed and much-lamented television series, from the days when commercial television had pretensions to a brain. Today I want to talk about the omnibus motion, a fixture in State court (and the Federal courts as well), but a pariah at the locked-down Glasshouse on Second Street.

For the civilians in the audience, an omnibus motion combines various grounds for various requests for relief, and lets the Court resolve all these matters at once. Initially, it’s more work for counsel on both sides, and the Court, but it’s a great tool to clear cut and brush hog a lot of extraneous matter, or even dispose of the case itself.

I understand that Tax Court expresses its solicitude for the self-represented in Rule 54(b) single-shot  motion practice. Jack-lighting deer with one headlight is cruel enough; a muilti-highbeam array is many times worse. And of course, unlike many courts, State and Federal, there is no office for the self-represented at the Glasshouse.

But IRS attorneys are under pressure to clear dockets. So I don’t fault the IRS attorney, doubtless frustrated by petitioner’s nonresponsiveness, for flashing the highbeams at John Joon-Il Kim , Docket No. 6160-18, filed 5/22/20.

I’ll defer to That Obliging Jurist, Judge David Gustafson, to tell the tale.

“…the Commissioner filed a ‘Motion to Dismiss for Failure to Properly Prosecute’…which alleges (at paras. 59-61) a history of non-response and non-communication by petitioner. The bulk of the motion, however, consists of assertions about the amount of petitioners’ correct tax liability in support of a ‘claim for increased deficiency’ (para. 55). It is not unusual to see, in a motion to dismiss for failure to prosecute, a request for a decision redetermining a deficiency in a decreased amount, reflecting partial concession by the Commissioner.” Order, at p. 1. (Emphasis by the Court).

Now of course Judge Gustafson isn’t going to let the deficiency hike go by.

“However, the undersigned judge believes that a claim to increase the amount of the deficiency is best stated in respondent’s original answer or in an amended answer that respondent moves for leave to file, in compliance with Rule 41(b). In this instance the ‘claim’ is inserted in a motion to dismiss for failure to prosecute, and is contrary to the spirit, if not the letter, of Rule 54(b) (forbidding ‘joinder of motions’). We would entertain a proper motion to amend the answer to assert an increased deficiency or a motion to dismiss for failure to prosecute, but not both simultaneously.” Order, at p. 1.

So the motion gets tossed without prejudice.

But the gambit seems to have worked, at least with Judge Gustafson.

Judge Gustafson orders that JJ, by June 26, “…shall confirm or correct his mailing address and telephone number, and he shall respond to paragraphs 59-61 of respondent’s motion (alleging that Mr. Kim failed to return telephone calls and failed to respond to letters). He should begin immediately to communicate with his opponent, the IRS’s attorney, Amy Chang.” Order, at p. 2.

I mention IRS’ attorney by name here, and give her a Taishoff “Good Try, First Class.” I add, however, a warning not to make this standard operating procedure when confronted with a stonewall. While this gambit may work once or twice, systematically ignoring a Court Rule can get you jacked up.

Ya gotta love this stuff; I certainly do. The practice of law (and I suppose medicine, both on humans and animals) gives the practitioner a ringside seat on The Human Comedy, and often the human tragedy.

STJ Daniel A (”Yuda”) Guy draws a whistleblower that shows that the “small court” is often the stage where the Human Comedy is played out.

Rena Elizabeth Houston, a.k.a Tneka Rena Galloway, Docket No. 9869-19W, filed 5/21/20, got tossed by the Ogden Sunseteers without even an “and/or.” Brevity sure is the soul of wit in Lee Martin’s bailiwick.

“The Whistleblower Office has considered your Form 211, Application for Award for Original Information….Internal Revenue Code section 7623 provides that an award may be paid only if the information provided results in the collection of tax, penalties, interest, additions to tax, or additional amounts. The Whistleblower Office has made a final decision to reject your claim for an award.

“The claim has been rejected because the IRS decided not to pursue the information you provided.” Order, at pp. 1-2.

Rena/Tneka also petitioned an alleged NOD and an abatement of interest denial, but Ch J Maurice B (“Mighty Mo”) Foley tossed that one last year because no NOD was ever issued.

Rena/Tneka’s blower bœuf was also wide of the mark.

She claims a “…small municipality has been corrupted and ‘has not paid the judgment issued by [a State court] * * * nor has [the municipality] made any attempts to pay nor provide a judgment bond to pay for the physical damages they have cause [sic] to me’.” Order, at p. 2.

IRS moves to toss for failure to state a claim. Rena/Tneka fires back with an “’Amended Petition/Objection’ repeating the allegations that she made in the petition. Petitioner also filed two exhibits: A ‘Questionnaire for Public Servant’ and a ‘Violation Warning, Denial of Rights Under Color of Law’.” Order, at p. 2.

I’m sure we’ve all seen them in small claims part, or village court, or justice court, or in whatever it’s called in the jurisdiction in which you toil. They think it’s like television. Judge Judy, maybe.

STJ Guy has, I’m sure, seen it too.

“The petition in this case does not include allegations or statements necessary to satisfy petitioner’s burden of presenting a valid claim for judicial review under section 7623. Petitioner does not allege that she provided information to the IRS regarding an underpayment of Federal tax or violations of the internal revenue laws. Nor does petitioner allege that the WBO abused its discretion in rejecting her whistleblower claim or that the IRS erred in declining to pursue the information that she provided. Although we give petitioner the benefit of the doubt at this stage of the proceedings, and read her pleadings liberally, the allegations in the petition and amended petition/objection relate only to a complaint concerning enforcement of a State court judgment. The relief that petitioner seeks simply is not cognizable under section 7623. Because petitioner fails to state a claim for which relief can be granted, we shall grant respondent’s motion to dismiss.” Order, at p. 3.

La commedia è finita.

I wouldn’t be at all surprised if CSTJ Lewis (“I Just Love That Name”) Carluzzo didn’t think reflexively of Milton’s great sonnet as he crafted his order in Sungmi Bang, Docket No. 16550-19S, filed 5/20/20.

Sungmi wanted innocent spousery, and petitioned a non-NOD (maybe) IRS denial. IRS did deny one year, but there are two more hanging fire. IRS’ answer says no NOD as to the two, so toss because no jurisdiction.

“Petitioner does not seem to dispute respondent’s claim that a notice of final determination for [Year One] and/or [Year Two] has not been issued to her. We point out that respondent’s failure to issue a final notice of determination in response to a taxpayer’s section 6015 election or request for relief for any given year does not, as respondent’s motion proceeds, necessarily preclude the Court’s jurisdiction over that year for purposes of section 6015 relief. See sec. 6015(e)(1)(A)(i)(II). The Commissioner’s failure to act in response to a taxpayer’s request for section 6015 relief within a certain period allows the taxpayer to seek relief here.” Order, at p. 1.

Moreover, IRS’ non-NOD rejection of the two is dubious, at best.

“According to respondent, the [Year One] and [Year Two] request was ‘declined because a requesting spouse is barred from relief from joint and several liability under section 6015 by res judicata for any tax year for which a court of competent jurisdiction has rendered a final decision on the requesting spouse’s tax liability***.’” Order, at pp. 1-2.

OK, pop quiz. Whether or not this is indeed a NOD, what’s wrong?

If you answered, “res judicata (or claim preclusion) is an affirmative defense, not a jurisdictional bar,” you get an “A”.

“As indicated above, respondent’s motion also suggests that petitioner is barred from relief for [Year One] and [Year Two] by res judicata. See sec. 6015(g)(2). The application of res judicata, however, even if appropriate, does not operate to deny the Court’s jurisdiction over [Year One] and [Year Two] in this case. Res judicata is an affirmative defense.” Order, at p. 2. (Citations omitted).

Anyway, the no-NOD defense fails, if Sungmi can show she only stood and waited the six (count  ’em, six) months law that Section 6015(e)(1)(A)(i)(II) allows IRS to forgo the NOD and let an innocent spouser simmer before they can go to Tax Court.

But since no one has put in anything about the timing, IRS’ motion to toss for want of jurisdiction is itself tossed.

And I’ll even forgive CSTJ Lew for that “and/or” above.

The answer for Mr F. (name omitted) is “No,” and Judge Courtney (“CD”) Jones will tell you why not in Sunil S. Patel & Laurie McAnally Patel, et al., Docket No. 24344-17, filed 5/20/20.

It’s not that Mr. F shouldn’t be subpoenaed as a non-party witness. “Respondent represented, and petitioners did not dispute, that Mr. F served as a wealth management advisor to petitioners and, in that capacity, played a significant role in setting up the micro-captive arrangement.” Order, at p. 1. Clearly relevant and material, and Mr F as a non-party is not subject to a Branerton play-nice.

On background, micro-captives are purported insurers of a single enterprise, or controlled group of enterprises. Micros have often been used to take big deductions. Policies are massively overwritten (premiums greater than any actuarial risk). The micro then cookie-jars the “premium” cash against liabilities that (a) never happen, or (b) are laid off on macro insurers, so the micro runs no economic risk, thus not really insurance. Not saying that happened here; let’s see what happens as the case proceeds.

IRS first claims they served Mr. F, with the subpoena duces tecum, to show up and bring papers. Then they say, “sorry, my bad, didn’t serve.”

Judge CD: “the Court ordered respondent to file a copy of the subpoena duces tecum, including verification of the date of service. Respondent filed a response… admitting that he had not served the subpoena duces tecum on Mr. F, apologizing to the Court for the incorrect representation, and explaining how it occurred.” Order, at p. 1.

But IRS’ attorneys never lacked resourcefulness (some, less charitable, might say chutzpah, if you’ll pardon an arcane technical term). “He nevertheless asked the Court to compel a virtual deposition of Mr. F (in the light of concerns related to COVID-19), albeit without the documents.” Order, at pp. 1-2.

Now IRS did properly serve the Rule 74 deposition notice before COVID-19 shut everything down. So IRS’ counsel is not out on a limb when he asks for a Zoomathon sans documents.

But Judge CD says Rule 147 is not off the table.

“The record establishes that Mr. F’s deposition is warranted and that respondent served Mr. F with a notice of deposition…pursuant to Rule 74(c)(2). But respondent has not met the requirements of Rule 147 because he has not served Mr. F with a subpoena to require his testimony and/or production of documents listed in the attachment at the deposition described in the notice. As a result, respondent has not done what is necessary to compel Mr. F to testify and/or to produce documents at the deposition.” Order, at p. 2. (Name omitted, emphasis added).

Judge, two things bother me. First, IRS’ counsel doesn’t want no documents. Second, what’s with the “and/or” bit? See my blogpost “Ran the Checklist,” 4/6/20.

I praised you then, in these words. “Again Judge CD joins in rebuking the bureaucratic responsibility-ducking language of the form shootdown letter. “The WBO’s form letter contained the same ‘and/or’ conjunction that led to a lack of clarity in Lacey v. Commissioner, 153 T.C. __, __ (slip op. at 33) (Nov. 25, 2019). In this case, the record establishes that all of the reasons stated in the letter are justified. So the general lack of clarity attendant to the “and/or” conjunction is inconsequential here. But the Court continues to be concerned that, in a closer case, this form text may create confusion when we review a summary rejection of a whistleblower claim. See Alber v. Commissioner, T.C. Memo. 2020-20, at *8-9 n.5.” Order, at p. 2, footnote 5.” Loc. cit., as my high-priced Zoomer colleagues would say.

I most respectfully submit that this is a case where “and/or” definitely lacks clarity and creates confusion.

Of course, Judge CD is right about COVID-19. “Respondent’s failure to serve Mr. F. with a subpoena is made more problematic by the current crisis surrounding COVID-19. The Court is concerned that it is not currently safe to serve him.” Order, at p. 2. Both the process server and Mr F are at risk with personal service.

But why deny IRS’ motion to take the deposition sans documents? Even without prejudice, as here, insisting on personal service of a subpoena that IRS is willing to do without only delays the case indefinitely. If IRS is playing games and seeking a double shot at Mr F, first without documents and then afterward with documents, then at that time a protective order requiring a showing of special circumstances for a rematch (and COVID-19 is expressly not one such), or a flat denial shuts the game down.

I miss baseball. I’ll admit it has been a while since I did a full score of a game, forward K for struck out swinging and backwards K for caught looking, BB for walk (base on balls), and all that. And I’ll also admit I probably forgot a lot of notations.

But here are some of my notations from this blog, for those scoring, if any.

A Taishoff “Oh Please” comes in two classes; it’s given for particularly lame arguments or odiferous maneuvers. A Taishoff “Good Try,” again two classes, is given for an inventive ploy that fails, but really deserves praise. And a Taishoff “Good Job,” generally is given for a well-prepared and executed case, showing professionalism and class.

Today I have a Taishoff “Oh, Please” for IRS. The case is Robert J. Peacock and Bonita B. Peacock, 2020 T. C. Memo. 63, filed, 5/19/20. IRS wants to toss the Peacocks because Bob ponied up the claimed deficiency. Although IRS marked the check on their records as a deposit, and although Bob tendered the check with a four-page cover letter demanding a review by Appeals, IRS said “SNOD issued after payment was a mistake, no deficiency, no jurisdiction.”

Judge Vasquez is not impressed.

“Rev. Proc. 2005-18, sec. 4.01(1), states that a ‘taxpayer may make a deposit under section 6603 by remitting to the * * * appropriate office at which the taxpayer’s return is under examination, a check or a money order accompanied by a written statement designating the remittance as a deposit.’ Other than requiring a ‘written statement’ accompanying a check or money order, the revenue procedure does not specify how a taxpayer may designate a remittance as a deposit.” 2020 T. C. Memo. 63, at pp. 9-10. (Footnote omitted).

IRS says since Bob wrote “payment” on the memo line of his check, that means he paid. Judge Vasquez says, if no four-page letter that came with the check, it would be a payment. Except the letter makes it clear Bob wants to pursue the matter.

Judge Vasquez quotes the IRM even though it it’s neither law nor reg, to show how IRS expects its staff to deal with matters.

“Respondent asserts that the cover letter merely expresses disagreement with RA M’s determination. Respondent argues that an expression of disagreement ‘is not determinative of whether a remittance * * * [that satisfies] the underpayment in full should be treated as a payment or a deposit.’ However, petitioner husband’s letter did more than express disagreement. It also requested another meeting with the RA and stated that a request for Appeals review was forthcoming. These statements are as indicative of a desire to dispute a liability in prepayment forums as the term “Stop Interest”, which the IRM deems sufficient to denote a remittance as a deposit under section 6603. See IRM pt. 4.4.24.6.1(1). Accordingly, we hold that petitioner husband properly designated the remittance as a deposit under section 6603 and Rev. Proc. 2005-18….” 2020 T. C. Memo. 63, at pp. 12-13. (Footnotes  and name omitted).

Judge Vasquez makes it clear he isn’t deciding that just voicing disagreement in a transmittal letter makes a check into a payment and not a deposit. See 2020 T. C. Memo. 63, at p. 13, footnote 14.

And the IRS coded the check as a 640 (6603 deposit), and issued a SNOD.

The Peacocks win.

A Taishoff “Good Job” to The Jersey Boys, and a “Good Job” from Judge Vasquez.

“When this case was called from the calendar, Mr. Agostino and Mr. Colasanto were present in the courtroom as volunteer lawyers. They entered appearances on behalf of petitioner husband for purposes of arguing the motion before us, and we are thankful for their pro bono service.” 2020 T. C. Memo. 63, at p. 1, footnote 1.