We’ve all been there: we’ve made a deal, the best available in the circumstances, the client signs off (literally), and then backs out.

Well, this happened to a CA attorney, whom I’ll call Bogie, and Judge Albert G (“Scholar Al”) Lauber is not amused.

But there’s a twist; there must be, or else I wouldn’t be blogging this.

Vishal Mishra & Ritu Mishra, Docket No. 16492-18, filed 4/28/20, brought Bogie in from the bullpen when IRS got Judge Scholar Al to toss their first attorney. It seems first attorney had his license lifted by the Bear Republic when he flunked the ethics test. Or so a docket search and a quick Google revealed.

Enter Bogie, under the gun, who crafts a settlement that Vishal & Ritu seem to have maybe so agreed to, but part of the deal was they had to agree to an accuracy chop.

Judge Scholar Al: “Respondent’s counsel represented that he had obtained tax computations consistent with the parties’ settlement, had prepared a decision document reflecting those computations, and had presented the proposed stipulated decision to petitioners’ counsel for signature. Petitioner’s counsel then informed respondent that petitioners no longer wish to concede liability for the accuracy-related penalties.” Order, at p.1.

Maybe Vishal & Ritu were disillusioned with lawyers generally. Or maybe, like clients of every race, color, creed, affectional preference, national origin or ancestry, occupation, and favorite indoor sport, they have a selective understanding of whatever language they most commonly speak. And all the other languages as well.

Howbeit, Judge Scholar Al lays it out.

“In the Tax Court, concessions, compromises, and settlements can be memorialized in various ways, including (as here) by the parties’ execution of a stipulation of settled issues.’[A] settlement stipulation is in all essential characteristics a mutual contract by which each party grants to the other a concession of some rights as a consideration for those secured and the settlement stipulation is entitled to all of the sanctity of any other contract.’ The agreement manifested by a stipulation of settled issues will not be set aside except as necessary to prevent ‘manifest injustice,’ e.g., in the case of fraud or material misrepresentation of fact.” Order, at pp. 1-2. (Citations omitted).

So dish, Vishal & Ritu. And it had better be good.

If I had a nickel for every time I saw such a move being pulled in the last 53 (count ‘em, 53) years, I’d be on lockdown in my 175 foot custom motorsailer off the Florida Keys, trailing long lines for Blue Marlin or tuna or something. Judge Ruwe may or not be a fisherman, but he has, I suspect, a like sentiment.

Here’s Dewayne Bridges, 2020 T. C. Memo. 51, filed 4/27/20. Dewayne and his LLC-co-owner-partner Steve got SNODs, but Dewayne claims TEFRA should apply, because really it was his self-settled trust and Steve’s that truly owned the beneficial interests in their MO LLC while he and Steve lived in the USVI.

The LLC’s 1065s for the years at issue were, Dewayne admits, “inconsistent and irreconcilable”. 2020 T. C. Memo. 51, at p. 3. IRS treated the LLC as a small partnership, because the boxes on Sched B for pass-through ownership were checked “no”. Wherefore no TEFRA, no FPAA. But Dwayne claims Box 20Y on the K-1s incorrectly stated that a couple other pass-throughs were involved (hi, Judge Holmes), so IRS couldn’t reasonably believe that Dewayne and Steve were truly the owners.

So why do we care what IRS believed, reasonably or not, when it hit Dewayne with this SNOD? Because Section 6231(g)(2), that’s why.

Section 6231(g)(2) says if IRS reasonably believes that TEFRA doesn’t apply when it unloads the SNODs on the individual, then it doesn’t matter what happens later. Dwayne argues that the give-and-take at examination put IRS wise. And the RA at exam had a chart she annotated which looks like she got the word about the trusts, 2020 T.C. Memo. 51, at p. 14, but she says no.

Anyway, Judge Ruwe isn’t buying.

“This Court has noted in the past that TEFRA procedures are ‘distressingly complex and confusing’ and that it ‘can even be complex and confusing to determine whether a partnership is subject to TEFRA.’ We have also noted that the difficulties in determining whether TEFRA partnership procedures apply are generally caused by the difficulties in determining whether the partnership in question was an exempt ‘small partnership’, which is precisely the issue before us.” 2020 T. C. Memo. 51, at pp. 18-19. (Citations omitted).

Because TEFRA is chaos codified, Congress took pity on IRS.

“The Commissioner may rely on section 6231(g)(2) if three elements are met: (1) the Commissioner determined on the basis of the partnership return that the TEFRA procedures did not apply to the partnership for that year, (2) the determination was reasonable, and (3) the determination turned out to be erroneous. Bedrosian v. Commissioner, 143 T.C. at 106. Both parties agree for purposes of this motion that respondent’s determination that TEFRA did not apply was erroneous. Accordingly, we analyze the first two elements below.” 2020 T. C. Memo. 51, at p. 20.

The argy-bargy from the exam doesn’t defeat IRS’ reliance on the return. “Based on the record we agree with respondent that he made his determination on the basis of the partnership returns. Further, we agree with respondent that conflicting information provided during the give-and-take of the examination that remained in dispute did not prevent him from relying on the returns to make a TEFRA determination.” 2020 T. C. Memo. 51, at p. 22.

If we let wild-carding at exams defeat returns, we’d gut Section 6231(g)(2).

OK, IRS relied on the return. Was that reasonable? Of course, Congress never defined “reasonable” in this context. So Judge Ruwe eschews an extensive dictionary chaw, and uses the standard from Reg. 1.6662- 4(d)(3)(iii) (taking into account the relevance and persuasiveness of the authorities, and subsequent developments),

IRS followed Sched B. Dewayne says, but what about Lines 20C and 20Y on the K-1s? Judge Ruwe says even that’s wrong, and minor anyway.

“Respondent’s determination did not need to be right, it just needed to be reasonable. His determination that TEFRA did not apply, based on the conclusion that the partners in… LLC, were petitioner and [Steve], was eminently reasonable and well grounded in the information shown on the face of the returns.” 2020 T. C. Memo. 51, at p. 26.

A minor inconsistency does not defeat the substance of the return.

“We think respondent can disregard minor, inaccurate inconsistencies contradicted by the totality of the returns here as well. Petitioner cannot litter his returns with misleading and inaccurate information, selectively rely upon the information, and then expect to bamboozle his way to a procedural victory.” 2020 T. C. Memo. 51, at p. 28.

Motion to dismiss denied. Go try the case.

Taishoff says this is son-of-Cohan. This was Dewayne’s and Steve’s LLC’s return. If there was any inconsistency, they created it. Someone signed it under penalty of perjury. If an error is made, it bears ”heavily upon the taxpayer whose inexactitude is of his own making.” Cohan v. Com’r, 39 F. 2d 540, at p. 544 (2 Cir, 1930).

Ch J Maurice B (“Mighty Mo”) Foley has issued a series of amendments to Rule 24, Appearances and Representation. These amendments clean up grammar and simplify the entangled processes we have heretofore encountered.

As you’ll see from the Press Release announcing these, comments are to be smail-mailed to the Chief Clerk, notwithstanding that order after order from Judge and STJ has pounded into our heads that Tax Court receives no snail-mail, and shall receive none, until the virus is defeated or tamed. Nevertheless and notwithstanding, I am sending my comments by snail-mail.

But to expedite matters, here they are. If I have any readers in the office of the Clerk, please forward.

“Generally, the proposed amendments are salutary, and will certainly simplify Tax Court practice. Anything that brings Tax Court practice closer to practice in the District Courts is welcome.

“I am sorry the Chief Judge has not seen fit to incorporate my often-repeated suggestions regarding entries of appearance by law firms. I cannot make out what objection there might be. If there is concern that members or associates of firms who are not admitted to Tax Court might attempt to appear, firms can register only their admitted attorneys, with monetary penalties for noncompliance. And as attorneys join or leave firms, updated entries of appearance for the firm can easily be filed; these are hardly different from change of address forms.

“As I said in my blogpost ’The System Won’t Allow It,’ 4/3/20: ‘There are law firms. There have been law firms for centuries. These have multiple lawyers, either as partners, shareholders, counsel, associates, or hangers-on however denominated. While one of these may be assigned to a case and remain with it from intake to file-close, it happens more often than not that one lawyer needs another to cover a court appearance, a deposition, a settlement negotiation, or any of the hundred-and-one day to days in the life of a lawyer. Surprisingly, lawyers are human: some need parental leave; some fall ill. Some even take vacations.’

“Might not the Chief Judge consider the realities of Twenty-First Century law practice?”

I repeat the immortal words of Roger Christian and Brian Wilson, and ask, as they did, that you “don’t put me down.”

No, I don’t have “the coolest set of wheels in this town.” But I maintain I have the coolest US Tax Court blog in this, or any other, town.

Check out the designated hitters on today’s Tax Court website.

And note that, hours before any were designated, the substance of all appeared on this my blog.

Remember, you read it here first.

If the devil finds work for idle hands (and few hands are idler than mine), then DC Cir is not far behind. And though STJ Lewis (“I Can’t Get Over That Name”) R. Carluzzo is never idle, DC Cir has certainly found work for his hands, and also a couple IRS attorneys (hi, Judge Holmes) as well.

Y’all will readily recall David T. Myers, who, with the not-inconsiderable aid of DC Cir, kicked IRS’ jurisdictional tosses via Section 7623(b)(4) into the affirmative defense end zone, bringing about a lot of touchbacks. No? It was barely two weeks ago. So see my blogpost “For Whom the Equitable Tolls,” 4/10/20.

There’s a couple of these silt-stirs today, but I offer only a repeat performer on this my blog, the lady with the hunches, Suzanne Jean McCrory, Docket No. 3443-18W, filed 4/24/20. Suzanne’s hunch-directed Forms 211 were first described in my blogpost “Remand? You Can Whistle For It,” 1/31/18. And that kicked off another silt-stir, which we’ll put aside just now.

IRS filed the usual motion to toss, because Suzanne blew the thirty-day cutoff.

One can almost hear STJ Lew sigh, as his heaping plate is yet fuller filled.

“Respondent’s motion is based upon the ground that the petition was not filed within the period prescribed by I.R.C. §7623(b)(4). Petitioner’s objections to respondent’s motion are embodied in her opposition….” Order, at p.1.

Suzanne wins, of course, because Golsen, as blower cases are appealable to DC Cir. So, IRS, file and serve your answer within sixty days.

I’m sure every other jurisdictionally-tossed blower will be back.

Now that he’s been relegated to the Senior Class, Judge Mark V Holmes’ opinions and orders are becoming collectors’ items. And if this my blog ever gets on Antiques Roadshow, I expect one of my fave appraisers to get goggle-eyed over today’s entry, Continuing Life Communities Thousand Oaks LLC, Spieker CLC, LLC, Tax Matters Partner, Docket No.4806-15, filed 4/24/20.

Y’all will remember Warren Speiker, a man of infinite variety. No? Then see my blogpost “Titular Signatory,” 8/3/16. Warren is still at it. He wants Judge Holmes to take judicial notice of what an IRS attorney said in a brief in a different case.

So Judge Holmes takes notice of judicial notice.

Now the issue is the same in both cases: “when can the IRS disallow a taxpayer’s accounting method when that method is based on generally accepted accounting principles.” Order, at p. 1.

We start with the general concept.

“Tax Court follows the Federal Rules of Evidence. FRE201 tells us that a court ‘may take judicial notice of adjudicative facts not subject to reasonable dispute which are either generally known within the jurisdiction of the Court or capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.’ We’ve taken judicial notice of what day of the week a particular date fell on, and even in a lighthearted spirit that some allowance for snow-removal expenses by a landlord in Buffalo was to be expected.” Order, at p. 1. (Citation omitted).

The magic words are “adjudicative facts.” That means the facts of the specific case at bar necessary to decide a material element of that case. In short, only the facts, ma’am.

“…a motion to take judicial notice of what another of [IRS’] lawyers argued in another case is not such a fact, but rather a suggestion that the persuasiveness of a particular argument should be reduced because it’s insincerely held or more likely to be wrong because of inconsistency.” Order, at p. 2.

But even that much doesn’t help Warren.

“We don’t take judicial notice of prior assertions for the truth of those assertions. We also gently observe that the Commissioner seems to be involved in a very large percentage of cases tried in our Court, employs a very large number of lawyers, and cannot reasonably be expected to express the nuances of his positions in each case in ways that are entirely consistent across all litigation.” Order, at p. 2. (Citation omitted).

I’ve often said that orders and T. C  Sum.Op.s can’t be cited. But you can sure cut-and-paste the reasoning and citations without attribution into your papers.

Melvin Collins, 2020 T. C. Memo. 50, filed 4/23/20, besides having “…a bachelor of science degree in electrical engineering, a master of business administration degree in finance, and a master of science degree in applied mathematics and computer science,” (2020 T. C. Memo. 50, at p. 6), ran his tax prep business out of his wife’s basement.

And in the four years at issue, Mel turned out around a thousand returns, not counting his own, because for two of those years he didn’t file at all, and got hit for fraudulently failing to file. The other two were late.

While Judge Tamara Ashford (I can’t find a cognomen to suit) finds Mel and his wife Nikta “genuine and candid” on the stand, (2020 T. C. Memo. 50, at p. 25) that doesn’t make up for the want of evidence. Candid. self-serving, uncorroborated testimony is still not evidence. So Mel goes down for Section 6663 fraud.

What draws me to this case (which is just another indocumentado) is the twenty-two (count ‘em, twenty-two) bank accounts that Mel was running at five different banks.

Mel must have picked up a whole lot of toasters.

The RA who did the bank deposits reconstruction should get a vacation.

Ian D. Smith, Docket No. 25605-15W, filed 4/23/20, is back in Tax Court. Y’all will remember that ID upended the Ogden Sunseteers when they tried to short-change him back in ’17. What, no? Then you’ll want to read my blogpost “What Price Glory?” 6/7/17, to get the skinny on ID, whereupon you can “follow me, if you will,” as Prof. Curtiss used to say on The Hill Far Above.

After ID’s earlier win, he moved for summary J and to shift BoP. IRS countered with a motion to remand, apparently to straighten out their earlier miscues.

Judge Morrison got this one, after then-Ch J L Paige (“Iron Fist”) Marvel took Judge Gerber off the case after the above-referred-to upending.

ID claims that remand is unnecessary and prejudicial. There are no new facts. Tax Court should decide this de novo, not on abuse-of-discretion, and not be immured within the administrative record. Finally, if remand, ID would have to file a fresh petition within 30 days if he didn’t like what the OS did, hence prejudicial.

Judge Morrison says Kasper (which I’ve blogged too many times to count) put paid to de novo review; thus the admin record is the gold standard. Likewise, ol’ Whistleblower 769-16W says remands in blower cases are copasetic; see my blogpost “Anyone Can Whistle – And Get Remanded,” 4/11/19. Also, blowers are Golsenized to DC Cir, which says a “new legal case” can result in remand.

Lo and behold, as my late and much lamented colleague Stan D. would have said, ID’s win first-above-hereinbefore-stated (as my sequestered-but-still-high-priced colleagues would say) is a “new legal case.” And DC Cir would much prefer the administrative agency do the heavy lifting, rather than itself try to sort these matters out. Expertise and familiarity, y’know.

Finally, “…we are not convinced that petitioner would be prejudiced by a remand. Petitioner argues that he would be prejudiced because he claims he would need to file another Tax Court petition after receiving a supplemental determination on remand. But the Tax Court will retain jurisdiction over the case during the remand and after the Whistleblower Office makes a supplemental determination. See Whistleblower769-16W v. Commissioner, 152 T.C. at 180. Therefore, a new petition will not be necessary.” Order, at p. 4-5.

And ID’s BoP motion remains in abeyance, in case he needs to try the case.

A Taishoff “Good Try” goes to ID’s trusty attorney, Shine Lin, Esq.

Judge Gale has designated a discovery geeks’ delight in Adrian D. Smith & Nancy W. Smith, et al., Docket No. 13382-17, filed 4/22/20. This latest episode is a follow-up to my blogpost “Evasive or Not Fairly Directed,” 3/12/20, wherein Judge Gale told IRS to lay out what they were contending and what were the bases therefor.

IRS provided supplementary responses by way of reply.

Ad & Nancy claim that fourteen (count ‘em, fourteen) of the supplementary responses to their interrogs, seeking the legal and factual bases upon which IRS rests the SNOD at issue “remain insufficient” and consist of “untimely objections, * * * incomplete responses, and * * * theories bankrupt of both legal and factual support.” Additionally, petitioners assert that the Supplemental Answers “are neither under oath nor made in good faith.” Order, at p. 2.

I think that Ad’s & Nancy’s counsel meant “bereft” rather than “bankrupt.” Watch that spellcheck, guys.

Howbeit, Judge Gale lets in seven of the fourteen as being close enough. But they’re not signed nor are they sworn to. Rule 71(c) says they have to be, and USCFC caselaw says IRS counsel is the one to sign and swear. So do it.

The aim of these interrogs is to get the material facts that underpin a party’s contentions. And answers like “all the papers you sent me” aren’t answers.

“…respondent repeatedly asserts that in support of his stated position or contention he relies on ‘petitioners’ bates-numbered [sic] document productions’. However, respondent does not identify the Bates numbers of the particular documents on which he purports to rely for his stated position or contention. Such a position is contrary to well established discovery principles. ‘An attorney who is faced with ‘contention’ type discovery must identify the witnesses and documents he/she has marshaled in a way to support his/her client’s position and to help illuminate the issues to be resolved as the responses and answers are due.’” Order, at p. 5 (Citation omitted).

For you civilians, Bates-stamping relates to a mechanical device for numbering paper pages. Now there are computer programs to do that. But the name sticks.

Of course you can’t demand all this stuff before the other side has had a fair whack at discovery. But this case is almost three (count ‘em, three) years old, and the time for formal discovery is past. “We therefore agree with petitioners that respondent has had ‘ample time’ to formulate and state his positions and contentions, particularly in view of the Court’s granting the vast majority of his extensive and highly detailed discovery requests.” Order, at p. 5, footnote 9.

And claiming you’ll prove your case out of the mouths of your adversaries and their employees (a well-worn tactic for opening statements to a jury, if, and only if, you can deliver) doesn’t cut it. Name your witnesses, says Judge Gale. Now.

Read Judge Gale’s opinion. He’s written your discovery brief for you, if contention interrogatories are the flavor du jour.