I join the legion of his fans who lamented the passing of multiplex musician Charlie Daniels. Today, let’s recall his greatest hit as we peruse and deconstruct four (count ’em, four) sketchy Georgia conservation easements, all the handiwork of an outfit called HRH Investors, LLC.

Judge Albert G (“Scholar Al”) Lauber seems to be majoring in these.

HRH handed the various properties, all acquired in December, 2008, to the four LLCs at issue here, and all tax-managed by an outfit called Effingham Managers, LLC. Thereafter, the usual easements were put on, with the standard Oakbrook cutouts and Coal Property Holdings overlay. For the backstory, see my blogposts “They Always Must Be With Us,'” 5/12/20, and “Diamonds Are Forever,” 10/28/19.

I’ll list and link the opinions, but they’re cookie-cutters. All four crater.

Englewood Place, LLC, Effingham Managers, LLC, Tax Matters Partner, 2020 T. C. Memo. 105, filed 7/9/20.

Maple Landing, LLC, Effingham Managers, LLC, Tax Matters Partner, 2020 T. C. Memo. 104, filed 7/9/20.

Riverside Place, LLC, Effingham Managers, LLC, Tax Matters Partner, 2020 T. C. Memo. 103, filed 7/9/20.

Village at Effingham, LLC, Effingham Managers, LLC, Tax Matters Partner, 2020 T. C. Memo. 102, filed 7/9/20.

My esteemed colleague Peter Reilly, CPA, solicitous for my well-being and fearing I might be suffering from insomnia, sent me yesterday morning a 168 (count ’em, 168) page complaint filed last week in USDCNDGA, entitled William N. Turk, et al. v. Morris, Manning & Martin, LLP, et al. Not suffering from insomnia, I have not read the same in detail, but it seems the Turks want to be class-action reps for all those who got taken to the cliché in these syndicated easement deals.

Y’all will recollect that the lead defendant was involved in the Son-of-BOSS mix-and-match dodges, which I principally blogged with the Billyhawks. See my blogpost “Are You Being Served?” 1/16/15.

Mr Reilly tells me lead plaintiffs’ counsel is the firm that took down Jenkens & Gilchrist, major dodgefloggers. If you have insomnia, a PACER account, and want to spring for the seventeen bucks, you can scope it out.

Me, I’ll wait until it hits justitia.com.

Early draws from IRAs are traps, even for the wary. For Tamecca Seril a.k.a Tamecca Tillard, 2020 T. C. Memo. 101, filed 7/8/20, confronting a collapsing marriage, and a son about to go to college with problems at school that could stall his dream, it’s a series of IEDs.

Judge Albert G (“Scholar Al”) dissects Tamecca’s problems filling out her 1040 for the year at issue. She tried; she got the IRA draw right, and the 10% whatever-it-is, but blew the 60-day deadline to roll over an excess. She estimated son’s college bill based on the college’s acceptance letter, but she actually paid much less for the year at issue.

As for blowing the 60-day rollover, “Petitioner has not alleged any error by a financial institution that prevented her from effecting a timely rollover. She did not substantiate her contention that a postal error caused the delay, and she has alleged no disability or the like as a contributing cause. While she contends that it was always her intention to roll over the $15,000, she produced no evidence that she set the money aside (e.g., in a separate account) for that purpose.  Petitioner produced no evidence to establish what she did with the funds or how she used them.” Order, at p. 8 (Citation omitted, but see my blogpost “The Guys From the Hood,” 4/20/17, for the Trimmer case cited here).

So Tamecca owes the tax and the 10%  whatever-it-is.

But she doesn’t get the 20% five-and-ten understatement chop. IRS plays the “penalty electronic” gambit to avoid Boss Hossery, but Judge Scholar Al is letting Tamecca off the chop altogether so he doesn’t have to go there.

“Petitioner prepared her [year at issue] return during a very tumultuous time in her life. We found credible her testimony that she attempted to report her tax liability correctly. She reported the full amount of the IRA distributions she received ($54,500), but treated $15,000 as nontaxable because she intended to roll over that amount. She reported $24,660 of her distributions as subject to the 10% additional tax, correctly believing that she was entitled to some exemption for qualified education expenses. Although she did not calculate the exemption amount correctly, we find that she exercised good faith in her reporting. Considering all these facts, we find that petitioner has demonstrated reasonable cause for her underpayment.” Order, at p. 13.

I’ve extensively chronicled Ch J Maurice B (“Mighty Mo”) Foley’s tosses of petitioners who fail to ante the sixty Georges or seek waiver. See, e.g., my blogpost “‘Faster Than a Speeding Bullet’,” 12/13/18.

But today IRS is on the receiving end of the Ch J Mighty Mo’s toss, in Hajara Babale, Docket No. 5106-20S, filed 7/8/20. Haj petitioned, and IRS answered.

“An examination of that Answer discloses that it fails to meet the requirements for a proper answer under Tax Court Rule 37. That… Answer further fails to include a complete copy of the…deficiency notice issued to petitioner for 2018 upon which this case is based.” Order, at p. 1.

So what does IRS do now? Whatever they must do now, Ch J Mighty Mo isn’t waiting for them to do it.

“… respondent’s Answer…is hereby deemed stricken from the record in this case.” Order, at p. 1.

As was the case at the time of my blogpost above-cited, Tax Court pleadings are not online, so I cannot access the answer to see the defects therein. I suppose IRS can remedy these, and move to file an answer out of time (that’s Fedspeak for late). And I doubt Ch J Mighty Mo will award Haj a decision on IRS’ default.

Still and all, Ch J Mighty Mo is an equal opportunity tosser.

No, I don’t keep a physical notebook any more in this electronic age. As a blogger (successor to the newspaper reporter or columnist), I keep my notes on a computer.

One note I made the other day was the number of Tax Court cases transferred from Judge Ruwe to Judge Greaves. There were a few, which now have grown into a noticeable number. I haven’t kept count, but the number was increasing this morning.

I called Ch J Foley’s chambers yesterday and left a message. I identified myself as an attorney and a blogger, stated the purpose of my call, and asked for a callback. I haven’t gotten one. I suppose there’s more pressing business than responding to bloggers, and greater budgetary needs than engaging a press officer; although the latter would be great to have.

Ordinarily, shifts like this happen, but rarely on so large a scale. I remember commenting on cases going from Judge Gustafson to the late Judge Laro. I was concerned that there might have been a health issue; see my blogpost “Tax Court Admission Exam,” 9/6/13. Happily, that was not the case. Generally, I don’t comment on internal Tax Court administrative details that have no effect on the practitioner; even if I knew about such matters, they would hardly interest my readers.

But in this extraordinary time, unparalleled in my seventy-eight (count ’em, seventy-eight) years, I’ll take a few words from my notebook and put them here.

I hope all is well with Judge Ruwe and the Tax Court Bench.

I learn something new all the time blogging USTC. I had always thought the word “fulsome” meant exaggerated, principally in exaggerated, excessive praise or flattery. But there’s a secondary meaning, and David Frank Ruppert, Docket No. 20594-18W, filed 7/7/20, put me wise, for which I now thank him.

David Frank objects when IRS claims in their answer that they started nuthin’ and collected nuthin’. He says “…the Whistleblower Office’s review of his information was not ‘fulsome or sufficient”….” Order, at p. 1. I doubt the Ogden Sunseteers think flattery will get them anywhere. I was ready to have some fun with this, but the better angels of my nature caused me to take a wee dictionary nibble.

“Fulsome” also means “of a large size or quantity.”

STJ Diana L (“Sidewalks of New York”) Leyden is less interested how large was the Ogden Sunseteers’ scrutiny of whatever David Frank handed them, than how they rejected it.

Turns out the OS Final Decision said they tossed David Frank “…because the information provided was speculative and/or did not provide specific or credible information regarding tax underpayments or violations of the internal revenue laws.” Order, at p. 1.

No mention that IRS didn’t start or collect. They first raise that in their answer, and move for summary J.

“After respondent’s motion was filed, the Court held that, while we do not review the IRS’ decision whether to audit a target in response to a whistleblower’s claim, we may review for abuse of discretion the Whistleblower Office’s determination rejecting a whistleblower claim, even where no administrative or judicial proceeding is commenced and no proceeds are collected. See Lacey v. Commissioner, 153 T.C. __ (Nov. 25, 2019). However, respondent did not state as a basis for rejecting petitioner’s claim that no administrative or judicial proceeding was commenced or that no proceeds were collected. As a result of our holding in Lacey, respondent has not demonstrated in his motion that there is no genuine dispute of material fact concerning whether respondent abused his discretion with respect to petitioner’s whistleblower claim. We must therefore deny respondent’s motion.” Order, at p. 2.

I’d have thought that the “nuthin'” claim would be boilerplate in every Final Decision, so that the rejection of the blower would be thoroughly fulsome.

A silt-stir after Judge Holmes’ heart issues forth from the wordprocessor of Judge Albert G (“Scholar Al”) Lauber as a designated hitter, Jesus R. Oropeza, Docket No. 15309-15, filed 7/7/20.

It was chop time, and the RA sent JR “…a Letter 5153 and attached Form 4549-A, Income Tax Discrepancy Adjustments, commonly referred to as a ‘revenue agent report’ (RAR). The RAR asserted a 20% accuracy-related penalty under I.R.C. § 6662(a) ‘attributable to one or more of the following’: (1) negligence or disregard of rules or regulations; (2) substantial understatement of income tax; (3) substantial valuation misstatement; and (4) transaction lacking economic substance. See I.R.C. §6662(b)(1), (2), (3), (6). The RAR has a space for an increased 40% penalty under I.R.C. § 6662(h), (i), and (j), but states that the ‘underpayment to which 40% Section 6662 penalty applies’ is zero’.” Order, at p. 1.

What’s missing from this picture? My ultra-sophisticated readers, locked down but not locked out, will cry with one voice “Boss Hoss! Clay!”

IRS tries to rescue the miscue two weeks thereafter with a Boss-Hossed CPAF asserting 20% substantial understatement and nothing else.

Four (count ’em, four) months later, RA and supervisor approach an attorney from OCC with a memo recommending a hike from 20% to 40%, due to nondisclosed noneconomic substance transaction per Section 6662(b)(6). Alternatively, the 20% chop should be negligence or substantial understatement. Said memo is signed off by Boss Hoss and OCC attorney.

The SNOD incorporating same follows five (count ’em, five) days later.

Cue my readers.

Judge Scholar Al, classical scholar that he is, enwraps RA, supervisor and OCC attorney like the son and grandsons of Acoetes. In this race, giving Judge Scholar Al an allowance for the snakes, Athena fades in the stretch. For those who didn’t attend a high-priced college, Google “Laocoön.”

“In light of these facts, the Court would find it helpful to receive additional briefing from the parties. We ask that they assume, for the purpose of argument, that the IRS did not secure timely supervisory approval for the penalty or penalties asserted in the RAR, and then address two questions: (1) Should the RAR be regarded as asserting all four types of 20% penalty, including the 20% penalty for engaging in a noneconomic substance transaction under section 6662(b)(6)? and (2) If the section 6662(b)(6) penalty was asserted in the RAR but not timely approved, can respondent urge that he secured timely approval for a ‘40% section 6662(b)(6) penalty’ under section 6662(i), even though the latter subsection operates only to increase the rate on the base-level section 6662(b)(6) penalty, which by hypothesis was not timely approved?” Order, at p. 2.

Oh, where is Scholar John Schmittdiel, the star of my blogpost “Tax Court Admission Exam,” 9/6/13, now that we need him?

Too often we find (and judges too) that the experts retained by litigants are more advocates for a party’s position than educators of the Court, or anyone else.

So a certain Family Court (jurisdiction unstated, but petitioner filed from NV), wearied of the Wild West scene, had an approved panel of experts, from which litigants were required to pick and pay, removing the experts’ temptation to get their opinions where they get their cornpone, as a much finer writer than I put it.

Peeved at having to fork over $13.5K for “the services of several attorney, physician, and psychology service providers,” as she and loved-once jousted over custody of their lineal descendants, Monique Epperson, Docket No. 20287-18W, filed 7/6/20, dropped a bunch of Forms 211 on the Ogden Sunseteers.

The above quoted matter is found in the aforesaid order, at p. 2.

Monique claims Family Court never filed 1099s on the recipients of this judicial largesse. She also claims that the Gang of Four providers never paid tax on the credit card, check and cash payments she gave them over two (count ’em, two) tax years.

The Ogden Sunseteers, facing this volley, bobbled the ball. Judge Elizabeth A. (“Tex”) Copeland explains.

“Upon receiving the initial Forms 211, the WBO assigned master claim number 2018-003598 to the Family Court (identified in the administrative file as Taxpayer A), and related claim numbers to the Contractors: 2018-003599 (Contractor B), 2018-003600 (Contractor C), 2018-003601 (Contractor D), and 2018-003602 (Contractor E). First, in the WBO’s electronic tracking system (e-trak), the WBO classifier coded the claims as falling within the purview of the Small Business and Self-Employed division (SB/SE) of the IRS. Then…the classifier re-coded the Family Court claim as belonging to the Tax Exempt and Government Entities division, particularly the sub-division responsible for Federal, State, and Local Governments (TEGE). Additionally, the classifier placed the Contractors’ claims in suspense based on the related master claim, with instruction to ‘follow any action taken on the related claim.'” Order, at pp. 3-4. (Footnote omitted).

The TEGE subject matter guru rightly concluded that Family Court paid nobody, so they weren’t required to file anything. The right Boss Hoss signed off, so the OS analyst sent Monique a bounce letter, stating “Allegations are Not Specific, Credible, or are Speculative.”

The OS analyst followed instructions, and simultaneously bounced Monique’s Contractors claims.

Judge Tex Copeland gives IRS summary J on Family Court. Monique paid the Contractors directly.

As to her Contractors claim, Monique can’t tell if any or all of them cleared the $200K Section 7623(b) gross income limit, but for summary J Judge Tex Copeland will give Monique a bye. The Section 7623(b)(5)(B) $2 million amount-in-dispute limit is another story.

Though Monique only claims $13.5K, the $2 million stop-strip is an affirmative defense, not a jurisdictional bar. And IRS only raises that in its summary J motion.

Too late, says Judge Tex Copeland. “An affirmative defense cannot be raised, for the first time, in a motion for summary judgment. Our rules require that an answer ‘be drawn so that it will advise the petitioner and the Court fully of the nature of the defense. * * * [T]he answer shall contain a clear and concise statement of every ground, together with the facts in support thereof on which the Commissioner relies and has the burden of proof.’ Rule 36(b); see also Whistleblower 14376-16W v. Commissioner, T.C. Memo. 2017-181 at *14.” Order, at p. 8.

For the story of Six One Six Whiskey, star of the immediately aforementioned, see my blogpost “Voluntary Malgré Lui,” 9/18/17.

As to the Contractors, the record shows right church, wrong pew. Yes, a TEGE subject matterer sussed out Family Court. But an SBSE sachem never weighed in. The record is incomplete. There remain questions of fact as to what, if anything, SBSE did or concluded.

But IRS can try again. I make the morning line 8 to 5 for a motion to remand.

US Tax Court shuts down, I shut up.

Enjoy the holiday.

But That’s No Reason To Go To Tax Court

Ordinarily, I wouldn’t even bother blogging Mark Pilyavsky, 2020 T. C. Sum. Op. 20, filed 7/2/20. Judge Gerber is remarkably douce, given how quickly and thoroughly Mark’s case craters.

But we’re coming up on a three-day weekend. I can’t spend it with one of my nearest and dearest in her Berkshire retreat; the Bayou City is under siege; and my local museums and concert halls are locked down, as am I. Note well, I am not complaining; so many have it so much worse, and I fear worse is yet to come. But if I have to shut down (or, as I’m sure some would say, shut up), I’ll take one more time at bat.

Mark claims IC, except his employment contract with PIMCO as senior database engineer says he can’t work for anyone else as a consultant, which he claimed on his return he was, and anything he invents or creates is work for hire.

Mark testifies truthfully and candidly.

“At trial, however, petitioner disavowed his statement that he was an independent contractor with PIMCO. Instead he testified that he was an employee. In addition, evidence in the record shows that he had agreed with PIMCO that he would not perform the same type of work with outside clients or use his experience in such pursuits. The presentation and explanation attached to the Schedule C was accordingly a fabrication intended to establish the appearance of a Schedule C business activity in order to report losses that could be claimed to be deductible from ordinary income.

“Further diluting petitioner’s position is that he does not have any original records of the alleged activity other than his bank statements from which his return preparer developed summaries in an attempt to support the more than $50,000 in claimed deductions. Petitioner’s testimony was vague, and he did not go into any details of his alleged business activity. On cross-examination it was shown that the summaries had numerous inaccuracies and contradictions. Under the circumstances, we find that petitioner’s testimony and other evidence lack credibility.” 2020 T. C. Sum. Op. 20, at pp. 6-7.

Mark was pro se, of course. I lament the recent death of Henry G. Miller, Esq., a remarkable trial lawyer from whose lectures I learned much. He said that when one’s client’s testimony sent the client’s entire case down the drain, one should brighten up, as if that testimony was just what you wanted the jury to hear, and smile one’s sweetest smile.

Then, when the judge nonsuited your client and dismissed the jury without having given them the case (as there was no case to give them), go out, find a quiet corner, and cry your eyes out.

IRS has them, when they try to fraud-chop John Thomas Minemeyer, 2020 T. C. Memo. 99, filed 7/1/20. John Thomas is no angel; he went down for Section 7201 tax evasion for two (count ’em, two) different years in USDCDCO. IRS was looking for $100K in 75% chops for both years.

Judge Kerrigan tells the story of one of those years.

“… a revenue agent visited petitioner in prison and provided him a Form 4549, Income Tax Examination Changes, for [years at issue]. No letter from respondent was attached to the report. Petitioner signed the Form 4549 agreeing to deficiencies and penalties but later requested that the agreement be withdrawn.” 2020 T. C. Memo. 99, at p. 3.

” Upon petitioner’s request, respondent withdrew and disregarded the Form 4549 that petitioner signed…. a Letter 950, commonly referred to as a 30-day letter, was sent to petitioner. L, the immediate supervisor of the revenue agent, signed the 30-day letter as group manager. A Form 4549-A, in which respondent asserted that petitioner was liable for a section 6663 fraud penalty of $42,708 for [one year at issue], was included with the 30- day letter. The Form 4549-A included the words ‘corrected report’ at the top of both pages of the form. The revenue agent signed the Form 4549-A. Above the revenue agent’s signature the following statement was included: ‘This Report supersedes the report issued….'” 2020 T. C. Memo. 99, at p. 4. (Name omitted).

There followed a SNOD, of course, countersigned by L.

I can almost hear my readers shouting “Boss Hoss! Jailhouse 4549 not Boss Hossed! Clay!”

Of course, Judge Kerrigan is on this one like cliché on rice.

“When the revenue agent visited petitioner in prison, he provided petitioner a Form 4549, which petitioner signed. Petitioner contends that he was under duress to sign the Form 4549 and for that reason he withdrew his consent. During respondent’s counsel’s opening statement at trial he contended that petitioner received a preliminary form before the formal communication in the 30-day letter and that petitioner signed it, agreeing to the fraud penalty for [one of the years at issue]. This statement is an acknowledgment that the Form 4549 communicated an intention to impose a penalty.

“Respondent did not offer this Form 4549 into evidence. Therefore, we cannot determine whether the Form 4549 or the 30-day letter was the initial determination for the purpose of section 6751(b). Without the Form 4549 we cannot determine whether that form clearly reflected the revenue agent’s conclusion that petitioner should be subject to a penalty. If the Form 4549 was the initial determination of the fraud penalty for [one of the years at issue], there is no evidence of its timely written approval.” 2020 T. C. Memo. 99, at pp. 7-8. (Citation omitted).

IRS has burden of production to establish Section 6751(b) sign-off. No earlier 4549, so IRS dropped the burden.

Note that hitting John Thomas with a 4549 while he was sitting in the slammer was less than a brilliant move; if SOL was an issue, the 30-day letter, duly Boss Hossed, would have served. And not saving the 4549 was even less brilliant.