Occasionally I get a headline that is so serviceable it impels me to reuse, repurpose and recycle it. Today is another example, a designated hitter from STJ Daniel A (“Yuda”) Guy, wherein he denies admins & legals to Paul Edwin Johnson & Susan H. Johnson, Docket No. 14429-18, filed 11/1/19.

Paul got a big IRA distribution and rolled it over, but he didn’t give IRS anything more than his say-so until after the CP2501 mismatch notice (the trustees of the rolled-into IRA did send in Form 5498, but it had no date for the rollover, so the 60-day barrier was still there), CP2000 proposed changes, SNOD, petition, remand to Appeals, and finally a stip of settlement agreeing that the IRA distrib was properly rolled.

Paul & Susan want admins, consisting of “$71 for out of pocket expenses (postage and the Court’s $60 petition filing fee), $3 for mileage expenses, $3,709 for preparation and filing expenses, and $9,703 representing a purported accuracy related penalty.” Order, at p. 3.

STJ Yuda treats this matter-of-factly, as is his usual wont. In a footnote. “The majority of the expenses that Mr. Johnson claims do not constitute ‘reasonable litigation costs’ as Congress defined that term in sec. 7430(c)(1)(A) and (B). Consequently, the Court limits its consideration to his claim for an award of $71 (i.e., postage expenses and the Court’s filing fee).” Order, at p. 3, footnote 2.

Maybe Mr. J. didn’t exhaust his administrative remedies, but STJ Yuda need not go there.

“…IRS received third-party information that Mr. Johnson received a pension distribution from ETC and an IRA distribution of $141,793 from Riversource, and that he made a contribution of $141,233 to an IRA account at ETC. In the light of this information, respondent was justified in seeking clarification from Mr. Johnson on three points: (1) did he receive a $20,000 pension distribution from ETC, (2) did he make a rollover contribution of the full amount of the IRA distribution from Riversource, and if so, (3) did he make the rollover contribution to ETC within the 60-day period prescribed in section 408(d)(3)(A)(i). As the owner and beneficiary of these retirement accounts, and having claimed the benefit of a rollover contribution on his joint tax return, Mr. Johnson should have maintained records of these transactions and readily shared them with respondent upon request. Unfortunately, petitioners failed to provide any documentation to respondent to assist in resolving these questions, leading to the issuance of the notice of deficiency.

“The Commissioner is entitled to maintain his position, for purposes of determining whether it was substantially justified, until adequate substantiation is received from the taxpayer. Where the resolution of adjustments hinges on factual determinations, the Commissioner is not required to concede the adjustments until he has received, and has had reasonable time to review, sufficient substantiation for the matter in question. Because petitioners did not provide any documents, records, or other objective evidence to show that Mr. Johnson made a timely and proper rollover contribution during the year in issue, respondent’s position in this case was substantially justified.” Order, at pp. 4-5. (Citations omitted).

If you’re going to claim legals & admins, by all means go all-in, but follow the rules. And when IRS wants information, see the title of this sermonette.

Nevertheless, and notwithstanding anything to the contrary or at variance with anything hereinbefore or hereinafter set forth (as my already-on-their-way-to-a-two-cliché lunch colleagues would say), the sad tale of Richard Alan Saunders & Shelia Candy Saunders, Docket No. 13352-15S, filed 11/1/19 is told again, with a rewrite from Judge Wells.

“In our opinion, we found that petitioners were not entitled to claim Mr. Steed as a dependent because he did not meet the section 152(d) definition of a “qualifying relative”. Saunders v. Commissioner, T.C. Summary Opinion 2019-29 (slip op. at 9). While this conclusion is correct, on the Court’s own motion, we deem it necessary to make a technical correction to our reasoning to comply with the relevant statutory prerequisites. We found that because Mr. Steed’s SSI exceeded the section 151(d)(1)(B) exemption amount, he failed to meet the requirement of section 152(d)(1)(B). We also noted that it was unclear whether petitioners provided for more than one-half of Mr. Steed’s support, as required by section 152(d)(1)(C).

“SSI is not taken into account for purposes of the section 152(d)(1)(B) requirement; it is, however, taken into account for purposes of the section 152(d)(1)(C) requirement. Sec. 1.152-1, Income Tax Regs….. During [year at issue], Mr. Steed received $733 per month in SSI. Petitioners did not provide an estimate or evidence of the amount of total support Mr. Steed received per month. We do not know the fair market value of the lodging petitioners provided to Mr. Steed. We noted in our opinion that Mr. Steed’s share of the household expenses varies depending on whether it is calculated on a per room or a per person basis. We now consider that each member of the household received an equal part of petitioners’ contributions as part of his or her support. See id.slip op.at 20. Using a per person basis and adding the $80 per month in transportation costs, we estimate that petitioners provided Mr. Steed with monthly support of $560. This amount is less than the $733 in SSI, and therefore less than half of Mr. Steed’s total support. Accordingly, Mr. Steed does not meet the definition of a “qualifying relative”. See sec. 152(d)(1)(C).” Order, at pp. 1-2. (Citation omitted).

Now it’s true that Rich and Sheila Candy used a paid preparer. But Judge Wells excused chops, because they reasonably relied, were unsophisticated, and acted in good faith. And the paid preparer got it wrong.

But even a Tax Court Senior Judge with 33 (count ‘em, 33) years on the Tax Court bench got mixed up in the labyrinth that is Section 152.

See my blogpost “If This Were a Political Blog,” 9/30/19.

Congress, please copy.

But the Bushwhacker Gets Whacked

Moacir Santos, 2019 T. C. Memo. 148, filed 10/31/19, wants to claim he was prejudiced when IRS, at the trial, asserted that instead of unreported business income, he had constructive dividends from his wholly-owned C Corp.

Mo never bothered with tax returns until eighteen months after his petition, and then handed in unsigned ones, that included Sched Cs. Then, at the start of trial, Mo claimed all the income went to his C Corp. IRS said OK, so you got constructive dividends. And as we concede this is new matter, we have the burden of proof. And we also have your bank records.

Judge David Gustafson has this one.

“The Commissioner initially determined that Mr. Santos’s deficiency arose from unreported Schedule C income; and Mr. Santos’s petition appeared to claim that he was entitled to additional deductions.  However, at trial Mr. Santos moved to amend his petition (and the Commissioner did not oppose) to contend that the unreported amounts were gross receipts of [C Corp] and were therefore taxable as [C Corp]’s income, not his.  The Commissioner conceded the point, but this significant change prompted him to proceed under a new theory–i.e., that Mr. Santos had received constructive dividends from [C Corp].  Even though Mr. Santos’s asserted tax liability was smaller under this new theory than the amount stated in the SNOD, the Commissioner concedes that his constructive dividends argument constitutes ‘new matter’ since it required Mr. Santos to present different evidence.” 2019 T. C. Memo. 148, at p. 11 (Citation omitted).

Needless to say, IRS lost nothing by its concession. Mo’s proof was, shall we say, dubious.

“The Commissioner’s constructive dividend argument was tried by the implied consent of the parties.  See Rule 41(b)(1).  However, on brief, Mr. Santos argues that he will be deprived of ‘due process if * * * [the Commissioner] is allowed to proceed on a new theory first presented at the hearing’.  We interpret Mr. Santos’s argument to mean that he alleges that he was prejudiced because he was unfairly surprised by the Commissioner’s constructive dividend argument.  We disagree.  In the first place, he explicitly consented to the Commissioner’s raising that contention.  More important, Mr. Santos was the party who moved, on the day of trial, to amend his pleading in a manner that required the Commissioner to revise his position.  Mr. Santos was neither surprised nor prejudiced by the Commissioner’s constructive dividend argument.  Consequently, the Commissioner is permitted to advance his contention of constructive dividends; but as to that contention he bears the burden of proof.  He successfully sustained that burden….” 2019 T. C. Memo. 148, at p. 12.

Mo’s proof sustains IRS’ burden. I include only a couple examples (hi, Judge Holmes).

“First, the total value of the receipts Mr. Santos provided is $107,476, not the $79,928 he alleges constituted business expenses.  He does not specify which receipts compose the $79,928 of supposed business expenses, and he does not explain how he has a greater amount of receipts that are among his supposed business expenses but do not constitute business expenses.  It appears that he fabricated the receipts before he settled on his final story and did not notice the discrepancy.

“Second, receipts that are ostensibly from different vendors appear to be from the same receipt book.  He did not explain this fact.

“Third, the chronology of the dates written on the receipts does not follow the sequential order of the preprinted receipt numbers.  For example, a receipt numbered 238777 was dated July 2, 2010, for ‘New Fence our Richmond yard labor’, but the subsequent receipt, numbered 238778, was dated December 28, 2010 (more than 6 months later), for a $7,200 payment on an ‘Excavator CAT 308’.  And the next receipt, numbered 238779, jumps back 10 months and is dated February 28, 2010, allegedly for a payment on the same machinery.” 2019 T. C. Memo. 148, at pp. 15-16.

There’s more, but I’ll spare you.

As we start the basketball season, Judge Ruwe is getting back a blocked shot from a Monster forward; here’s Estate of Andrew J. McKelvey, Bradford Peters, Executor, Docket No. 26834-14, filed 10/31/19.

You’ll doubtless recall that the late Andrew’s Monster forward had scored big-time, according to Judge Ruwe. If not, see my blogpost “A Monster Forward,” 4/19/17.

Well, 2 Cir wasn’t so sure. They found that the late Andrew had not extended the contracts, but had entered into new contracts and had constructively sold the Monster shares, because there was a statistically insignificant chance the share price would rebound to let the late Andrew (or his estate) keep any. So the late Andrew’s attempt to extend until he died and his estate get the stepped-up basis cratered.

And the purported extensions are new contracts. So there’s both short-term capital gains and long-term capital gains in play. Short-term on the “extension” deemed termination,  and long-term on the constructive sale of the new contracts (which supposedly would never hit the “sweet spot” on termination).  See Estate of Andrew J. McKelvey v. Commissioner, No. 17-2554 (2d Cir. 2018), decided 9/26/18, cert. den.. 6/13/19.

Clear? Thought not.

But this is what 2 Cir meant. “A taxpayer and his VPFC long party can often be expected to repeat these extensions for the taxpayer’s life, knowing that at his death the shares will have a stepped‐up basis in the hands of his estate. The up‐front payment will have been received without ever incurring the capital gains tax that would have been due had the payment resulted from a sale of the stock. In this case that payment was $194 million, and thus far, no capital gains taxes have been paid. The Internal Revenue Code should not be readily construed to permit that result.” 17-2554, at p. 31.

But 2 Cir bucks this frittata back to Judge Ruwe, to decide.

“Whether the replacement of the obligations in the original VPFCs with the obligations in what we hold are new contracts satisfies the criteria for a termination of obligations that gives rise to taxable income, presumably capital gain, and the amount of such gain are issues that we leave for determination in the first instance by the Tax Court on remand.” No. 17-2554, at p. 20.

So Judge Ruwe tells the parties to brief this stuff seriatim.

Walk Into a Blog

No, I’m not auditioning for a late-night comedy slot. This afternoon the hard-laboring clerks and flailing datestampers at the Glasshouse on Second Street, NW,  have favored me with two T. C. Memos. The subject is dodging.

First up is Francis Steffan Hayes, 2019 T. C. Memo. 147, filed 10/30/19, who gets Wnuck’d by Judge Patrick J. (“Scholar Pat”) Urda. It doesn’t take excessive scholarship by Judge Scholar Pat to conclude that, instead of taking on IRS’ extensive reconstruction of five (count ‘em, five) of Francis Steffan’s tax years, Francis Steffan “…reserves his energy for laying out assorted tax-defier chestnuts about the scope of the Sixteenth Amendment, the purportedly unworkable definition of income under the Internal Revenue Code, and the effect of regulations relating to the Alcohol and Tobacco Tax and Trade Bureau on the administration of the income tax regime.  The shopworn arguments he offers in support of his position are incomplete, misleading, and misguided, and have been rejected more times than we care to count.” 2019 T. C. Memo. 147, at p. 11. (Citations omitted, but ya gotta know Wnuck is in there).

IRS does more reconstruction than a plastic surgeon, and after conceding around $10K, establishes deficiencies and chops for the years at issue. But IRS left out the $400 Making Work Pay credit they originally allowed, so Judge Scholar Pat tells IRS to include it in the Rule 155 beancount or tell him why.

Taishoff says if anyone deserves credit for making work pay, it’s the RA who went through the “reams of bank account statements, checks, and money orders showing that in the years in issue Mr. Hayes received income both directly and through the media ventures he alone controlled.” 2019 T. C. Memo. 147, at p. 10. And testified in extenso about the same.

Next case is Bertram Russell, 2019 T. C. Memo. 146, filed 10/30/19. That’s Dr. Bertram Russell, although maybe after he went down for Section 7201 tax evasion in USDCEDPA and did 66 months, he stopped practicing medicine.

Anyway, Doc Bert’s game was the phony corporation. Doc Bert claimed he was an IC working for said corporation, but he never got a W-2, a 1099-MISC, or anything but sole signatory power over the corporation’s checking account, into which the IC payments for Doc Bert’s services were funneled, and from which he paid his personal expenses.

Supposedly an attorney and another doctor set up this dodge; they really could have done a better job.

Now of course an individual can incorporate his or her trade or business or occupation. And our beneficent tax system allows each of us to roll our own. But the corporation has to be real.

I’ll let Judge Ruwe explain.

“Taxpayers have the right to shape business transactions to minimize the incidence of taxation, including the right to use corporate entities.  Furthering this pursuit, a ‘corporate entity is deemed to exist as a separate taxpayer if it is organized to carry on a business activity or if, in fact, it has carried on such activity.’ (‘[S]o long as * * * [the corporate purpose] is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity.’).  However, in ‘matters relating to the revenue, the corporate form may be disregarded where it is a sham or unreal.’” 2019 T. C. Memo. 146, at pp. 9-10. (Citations omitted.)

Judge Ruwe finds Doc Bert’s corporation activities “reek of a sham corporate entity.” 2019 T. C. Memo. 146, at p. 10.

“[Corp] filed no corporate income tax return for any year, including [year at issue].  The entity had no employees and no proper physical location, and it appears to have respected no corporate formalities.  There is no evidence that it ever paid any dividends.  The 13 payments … to [Corp] were deposited into a checking account that petitioner, and only petitioner, exercised control over.  Funds in this checking account were later used to pay petitioner’s personal expenses, such as private school tuition for his children.  Petitioner observed no meaningful distinction between his personal funds and the funds of [Corp].  We therefore find that [Corp] is a sham corporate entity which is disregarded for Federal income tax purposes.“  2019 T. C. Memo., 146, at p. 10-11.

Now we all know that conviction for tax evasion with an order for restitution does not determine actual tax liability, unless the judgment of conviction so states. Nor does conviction estop IRS from going after the taxpayer for actual tax. But the conviction does establish fraud, to the extent of the Section 6663 75% chop, if for the same year as evasion is determined.

Oh, and Doc Bert owes a late filing chop.

Let’s all give a good, hearty Tax Court Observers’ welcome to Judge Emin (“The Eminent”) Toro, the latest addition to the Tax Court bench. Judge Toro brings hefty academic, judicial and white-shoe experience to this distinguished Court. I look forward to great orders and opinions from Judge Toro.

On a day with no opinions or designated hitters, I am thrown back on reflections on Tax Court practice and procedure. Joe Daniel Skelton, Docket No. 15412-19, filed 10/29/19, offers me one such. Ch J Maurice B (“Mighty Mo”) Foley tosses JD’s petition at IRS’ request, to which toss JD has no objection.

JD petitioned the usual eighteen-year bundle (tax years 2000 to 2017), and of course neither SNOD nor NOD was in evidence.

So why blog it? Because IRS asks for a Section 6673 frivolity chop, and Ch J Mighty Mo shows JD the yellow card. “Although an I.R.C. section 6673 penalty will not be imposed here, petitioner is admonished that the Court will consider imposing such a penalty in future cases commenced by petitioner seeking similar relief under similar circumstances.” Order, at p. 2.

Wherefore it might be inferred that JD was a Wit, Wag or Wiseacre, because he had earlier sent in a document bearing the unusual title “Affidavit of Lawful Claim of Title, Will, Execution of Will, Declaration of Status & Appointment and Standing Orders for the Trustees.” This document, however, is not available online, and your reporter hasn’t the slightest intention of trucking on down to The Glasshouse at 400 Second Street, NW, to enlighten you, dear reader, with its contents.

And JD thereafter filed a motion to dismiss for cause, leading one to conclude that at least one of the three Ws above-mentioned might be in play.

But I’d like to say a word about petitioning something that a Tax Court Judge mightn’t find to be a SNOD or NOD.

We all know that there is no form of SNOD mandated either by statute or regulation. Only the taxpayer, tax and year need be stated, and of course the contact info for TAS. NODs can issue for equivalent hearings (no right to petition), as well as the usual laundry list where the NOD plus petition is the ticket to Tax Court (worker classification, innocent spousery, revocation of 501(c)(3) status, whistleblowing, and passport-grabbing).

But how is the ordinary taxpayer to know which is which? See my blogpost “Fake Out,” 12/16/14, where an IRS letter that says they sent a SNOD when they didn’t, and to petition Tax Court if you disagree with IRS’ numbers, somehow isn’t a SNOD.  See a recent, like yesterday, example, my blogpost “Petition Everything,” 10/28/19, where a SNOD gave the same deficiencies for two related entities at the same last known address, but if the wrong entity petitions, the right entity gets tossed too late to petition.

And there is a plethora of orders tossing petitioners who petition one IRS-standard-issue piece of paper or another that isn’t a SNOD, or the right kind of NOD (remember, tax refund and child support levies aren’t tickets to Tax Court).

So before deciding a priori (as Judge Scholar Al or Judge Scholar Pat might say) that someone dropping a petition (and in JD’s case, even ponying up the sixty simoleons) is a Wit, Wag or Wiseacre deserving of The Yellow Card, maybe there is legitimate ground for confusion. Although in JD’s case, not so much.

The Mack Gordon-Harry Warren 1943 Oscar winner echoes through Tax Court, as Judge Paris goes to “preponderance of the evidence” and bids farewell to burden of proof where IRS folds an innocent spouser, but intervenor goes all-in.

Here’s Jane M. Lassek, Petitioner, and Michael E. Smith, Intervenor, 2019 T. C. Memo. 145, filed 10/28/19. It’s the usual; IRS folds one of two years at issue, intervenor opposes both years.

Petitioner goes one for two, as Judge Paris is down with the conceded year despite intervenor’s objections. The non-conceded year is a win for IRS and intervenor.

Like 98% of innocent spousers, it’s a fact-bound trudge through Rev. Proc. 2013-34 (which I’ve exhaustively blogged), and The Big Seven Factors. Taxpayer First plays no part, as no newly-discovered evidence.

The reason I’m bothering with this at all is stated in the title.

As far as Judge Paris is concerned (and I’m thinking she is speaking for her colleagues as well), where IRS folds and intervenor fights on, burden of proof is invariably irrelevant. So preponderance-of-the-evidence wins the day.

In this case, the question was the requesting spouse’s actual knowledge that the MFJ return understated income. Intervenor claimed requestor “had reason to know.” Not good enough.

“If, as here, all of the other requirements of that section [6015(c)] have been satisfied, then, as relevant here, the burden of proof is shifted to the Commissioner and relief is denied to the requesting spouse only if the Commissioner “demonstrates that * * * [the requesting spouse] had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency”. Sec. 6015(c)(3)(C); see Charlton v. Commissioner, 114 T.C. 333, 341 (2000); Martin v. Commissioner, T.C. Memo. 2000-346, slip op. at 12-13.” 2019 T. C. Memo. 145, at p. 13.

But if IRS folds, where does the burden of proof go?

“An issue arises where the burden of proof shifts to the Commissioner in cases when the Commissioner favors granting relief and the nonrequesting spouse intervenes to oppose it. The Court has previously resolved this issue of burden shifting by deciding the case on a preponderance of the evidence as presented by all three parties. See Hollimon v. Commissioner, T.C. Memo. 2015- 157; Pounds v. Commissioner, T.C. Memo. 2011-202; Knight v. Commissioner, T.C. Memo. 2010-242; McDaniel v. Commissioner, T.C. Memo. 2009-137. “ 2019 T. C. Memo. 145, at p. 13.

And that’s what Judge Paris does, and I’ll wager one bucket of Modelò Negras that’s what her colleagues do, from now on. Invariably.

So we’ll never know if the burden of proof shifts to the intervenor, or stays with the requestor.

Takeaway- Intervenor, try your case as if IRS wasn’t there, because as far as Tax Court is concerned, they might just as well not be.

Coal Is Not

And coal has to be forever, or their conservation easement tanks. So says Judge Albert G (“Scholar Al”) Lauber in Coal Property Holdings, LLC, Coal Land Manager, LLC, Tax Matters Partner, 153 T. C. 7, filed 10/28/19.

The Coalholders donated 3,713 acres of strip-mined TN they bought three (count ‘em, three) weeks before to a qualified organization, three (count ‘em, three) days after an investor bought 99% of the Coalholders for $32.5 million, and claimed a $155.5 million deduction.

The aim was to let the land recover from strip mining by natural means, and prevent strip mining from ever happening again.

Problems: the deed allows the present oil and gas lease, and any mineral extraction that the lessee chooses to remain in place, provided the 501(c)(3) donee doesn’t reasonably object. And the gas wells and cellphone towers can remain. Plus underground lines, utility lines, “roads and/or driveways for vehicular access to areas of the Property on which the existing and additional structures and related ancillary improvements are and may be constructed.” 153 T. C. 7, at p. 10.

And if the easement is judicially extinguished (the only way it can be), then out of any proceeds, the  Coalholders first get FMV (based on a formula), plus the amount of “any prior claims,” with a savings clause that this cannot torpedo the easement.

And there’s the usual appraisal.

The formula would allow the 501(c)(3) grantee to come up short in the event of judicial extinguishment, plus the “prior claims” language could guarantee that result.

“The Conservancy’s [501(c)(3)] share of the proceeds would thus be reduced by any amounts paid in satisfaction of prior claims–e.g., claims against Coal Holdings by the oil and gas lessees or cell tower operators–even if the easement’s fair market value were determined exactly as the regulation requires.” 153 T. C. 7, at p. 32.

The savings clause is a condition subsequent, and a dead loser. The Palmolives got torpedoed by a similar clause.  See my blogpost “No Joy Forever – Because Golsen,” 3/11/17.

Just when you thought the Coalholders had gone the limit, here’s the kicker.

“Petitioner discerns no fault in the ‘prior claims’ provision, asking rhetorically:  ‘How else would prior claims be addressed?’  It is not necessarily unreasonable for a deed to provide that prior claims may be paid from sale proceeds. What is unreasonable, and what violates the ‘judicial extinguishment’ regulation, is the requirement…that all prior claims be paid out of the Conservancy [501(c)(3)]’s share of the proceeds, even if those claims represent liabilities of Coal Holdings.” 153 T. C. 7, at p . 32, footnote 5. (Emphasis by the Court).

Ya gotta love these facts, and the gang that petitioned with a straight face. Tungsten? Titanium? You pick it.

Even Someone Else’s SNOD

What’s in a SNOD? My battle-hardened readers will respond, “year and tax. Everything else is commentary.” Well, there’s more than that, as ex-Ch J L Paige (“Iron Fist”) Marvel tells U. S. Auto Sales, Inc., 153 T. C. 5, filed 10/28/19.

“Petitioner is a corporation whose principal place of business was in Georgia when it petitioned the Court.  Petitioner and U.S. Auto Finance, Inc. (U.S. Auto Finance), are related entities which share a mailing address and are represented by the same counsel.  Petitioner and U.S. Auto Finance filed separate income tax returns for taxable years ending (TYE) June 30, 2003, 2007, and 2008.” 153 T. C. 5, at p. 3.

IRS unloads eleven (count ’em, eleven) pages of SNOD on Sales. But only four pages pertained to Sales, and the remaining seven pertained to Finance. And the identical alleged deficiencies ascribed to Sales in the front four got ascribed to Finance on the back seven. Sales petitions.

Then two months later, IRS unloads a fresh SNOD on Sales, with widely different deficiencies ascribed to Sales only. Sales petitions this one.

IRS wants to toss Sales’ first petition, because IRS meant Finance only, so Sales is the wrong party and no jurisdiction. I think IRS meant “no standing to sue,” a subset of no jurisdiction. “No standing” means “not your pig, not your barbecue.”

IRS puts in the tax returns of Sales and Finance for the years at issue, showing all the numbers in the SNOD at issue relate to Finance, and have nothing to do with Sales.

The rule here is cited in a case I didn’t blog. Basically, if the recipient of a SNOD can tell it’s a SNOD, and is directed to said recipient, that’s it, the recipient can petition. “But if a notice is ambiguous, the party seeking to invoke our jurisdiction must establish both that: (1) ‘the Commissioner made a determination’ as to the taxpayer and (2) ‘the taxpayer was not misled by the ambiguous notice.’ Failure to meet either test results in a conclusion that the notice is invalid.” 153 T. C. 5, at p. 8. (Citations omitted).

And Tax Court can use extrinsic evidence to resolve an ambiguous SNOD. Thus, reading the first SNOD, one can tell the years and the taxes, but first it says Sales owes and then it says Finance owes. The key is the separate tax returns for Sales and Finance. Reading the first SNOD against its tax returns for the years at issue, Sales had to know that Finance was meant, not them.

Besides, Sales petitioned the second SNOD timely, so Sales wasn’t prejudiced.

Finally, it’s true that there’s no standard form for a SNOD, but besides the year and the tax, the SNOD has to tell the taxpayer that it is in fact their tax and their year. This SNOD is so ambiguous that it isn’t a SNOD, at least as to Sales. But it might be valid as to Finance, since Sales and Finance share last known addresses. And mistakes in addresses don’t necessarily invalidate SNODs; see my blogpost “Name and Number,” 6/9/11.

Takeaway- In this context, if you have any related entity whatsoever named in a SNOD sent to you, they should petition and you should petition. Finance may have missed the boat, since the SNOD sent to Sales was sent to the last known address of Finance. And because who knows what an unambiguous SNOD is, petition everything anyway (just hold off the $60 until you have to send it).