Habibe Kruja, Petitioner, and Ermir Kruja, Intervenor, 2019 T. C. Memo. 136, filed 10/15/19, leave unanswered the question to what extent burden of proof shifts, when IRS reverses course, allows innocent spousery to petitioner when formerly denying, and intervenor resists.

Judge Buch doesn’t want to sort it out for us.

“Our Court has not answered and we leave open the question of whether the burden of proof shifts to the intervenor when the Commissioner concedes that a taxpayer is entitled to relief and an intervenor opposes relief. Because we would decide this case the same way regardless of which party bears the burden, we do not need to decide who bears the burden.” 2019 T. C. Memo. 136, at p. 14. (Footnote omitted).

But Ermir has only the Michael Corleone gambit to play. He never put anything in the administrative record about how Habibe knew Ermir was playing games with unreported income and dubious deductions.

IRS did want to stick Ermir with 100% of the unreported State income tax refunds, but Judge Buch limits the hit to 50%.

“In the absence of clear and convincing evidence supporting a different allocation, an erroneous item of income is generally allocated 50% to each spouse.  Mr. and Ms. Kruja owned the State tax refunds jointly and there is no evidence in the administrative record, or adduced at trial, to support an allocation other than 50% to each spouse.  Accordingly, the State tax refunds are properly allocated 50% each to Mr. and Ms. Kruja.” 2019 T. C. Memo. 136, at pp. 14-15. (Footnote omitted).

But maybe Habibe knew about the refunds.

“The Commissioner contends that Ms. Kruja had actual knowledge of the unreported State tax refunds.  Although the Krujas’ bank account statements indicate receipt of State tax refunds from Arizona, the record is insufficient to establish that Ms. Kruja had actual knowledge of the unreported State tax refunds.” 2019 T. C. Memo. 136, at p. 15.

And once again the self-represented gets the short end.

“Ms. Kruja generally requested relief under section 6015 but did not provide arguments regarding relief under section 6015(b) or equitable relief under section 6015(f).  As a result, Ms. Kruja is not alternatively eligible for relief for the State tax refunds or the employee business expenses under subsections (b) and (f).” 2019 T. C. Memo. 136, at p. 15.

Since I don’t know how much is at issue, or the parties’ finances, I can’t say that a LITC would have been able to help Habibe, but it would have been worth a try.

And the Section 6662 chops have to be apportioned with the items of the spouse who generated same. So Habibe gets hit for her share of the State income tax refund and the chops appurtenant thereto.

CSTJ Lewis (“Modest Despite His Name”) Carluzzo, leaving off his honorific, hands out a Section 6673 chop to the tune of $500 to Ernest Richard Brown, Docket No. 12646-19, filed 10/15/19, without even a warning.

That’s really unlike CSTJ Lew, but in this case it’s more like what Click & Clack called a “dopeslap.”

CSTJ Lew will man’splain.

“In a notice of deficiency (notice) dated March 14, 2011, respondent determined a deficiency in, and imposed I.R.C. §6651 additions to tax with respect to petitioner’s 2008 Federal income tax. A copy of the notice is attached to the petition filed May 24, 2011, in response. See Brown v. Commissioner, docket number 12335-11.” Order, at p. 1.

OK, so Ernest followed proper procedure, attaching copy of SNOD to petition therefrom. Surely that can’t be grounds for frivolity, even though Ernest got tossed by then-Ch J Colvin for nonpayment of the $60.

Of course not. But Ernest files a new petition. And thereby hangs the cliché.

“The petition filed in this case on July 9, 2019, specifically denies receipt of the notice that petitioner attached to the petition in docket number 12335-11. That allegation is patently false; otherwise, petitioner has demonstrated no legitimate reason for attempting to invoke the Court’s jurisdiction with respect to 2008 or any of the other years listed in the petition filed in this case.” Order, at p. 1.

CSTJ Lew, maybe he forgot.

For those who reside or work in the City That L’Enfant Built, it is a public holiday; for some throughout this land, it is a religious holiday; while not a “major” Federal holiday, Post Offices and the Federal Reserve System are closed, though stock exchanges are open.

But US Tax Court is shut. Whether Judges, STJs, law clerks, flailing date-stampers or hard-laboring clerks deem it Columbus Day, Indigenous Peoples’ Day, or a religious holiday, they ain’t around.

So neither is this my blog.

I guess Tribune Media Company f.k.a. Tribune Company & Affiliates, et al., Docket No. 20940-16, filed 10/10/19, must have logged in and gotten their credit reports from S&P and Moody’s, from sites other than the captioned one we ordinary types use, because the Tribunes want them in and IRS wants them out.

I’ll let Judge Buch explain: “This case is about whether a transaction engaged in by Tribune … was a nontaxable contribution of capital to the newly formed partnership … or a disguised sale of assets. Debt was incurred as part of the transaction, and Tribune guaranteed that debt. Whether those guarantees were real is an issue in this case.” Order, at p. 1.

IRS claims the proffered reports deal with years after the year wherein the transaction occurred, thus irrelevant; but even if relevant, they’re either hearsay or experts’ reports not complying with Rule 143(g).

I give IRS counsel JDS a Taishoff “Good try.” But he loses, all the way.

The Tribunes claim a lot of Tax Court cases use subsequent years info to see if year-at-issue position was real. Judge Buch buys it, subject to weighing it. “Although how those guarantees were perceived in years after the transaction may be less probative than how they were perceived at the time of the transaction, that distinction goes to the weight we give the evidence when we consider it. It does not mean we should not consider the evidence at all.” Order, at p. 2.

As for hearsay, a FRE 902(11) cert plus FRE 803(6) report-kept-in-regular-course-of-business holds the reports in, for now. But lest the crew representing the Tribunes put the ’00 Krug on ice, dig this. “Petitioners did not provide any authentication of the Moody’s credit reports or establish any other hearsay exception. We will not exclude these reports now, but will decide their admissibility at trial.” Order, at pp. 2-3.

Best get the Moody’s employees familiar with credit reporting acts and practices lined up and waiting.

Finally, “(T)he credit reports at issue are not an expert’s opinion based on the facts of this case. They are experts’ conclusions drawn from facts gathered for the purpose of rating Tribune’s credit worthiness at the time they were created. They are not documents or reports created for this litigation. These reports are factual evidence and not expert witness reports.” Order, at p. 3.

JDS’ motions in limine all crash, for now at least.

I might most humbly suggest to Judge Buch that when he gets out the scale to weigh S&P’s and Moody’s opinions on anybody’s creditworthiness, he recall that these were the guys who AAA-rated the subprime junk pools that set off the Black ’08.

And many thanks, Judge, for this designated hitter on a Friday before a three day weekend (“A klug zu Columbus’n,” y’all), when there are as usual no opinions, and 150 orders for me to plow through. Have a great weekend.

It wasn’t his fire. The fire destroyed the home of his CPA. Brent Katusha, 2019 T. C. Sum. Op. 31, filed 10/10/19, thereby lost the records to substantiate his Sched C deductions. The fire apparently didn’t keep Brent from failing to report $10K of nonemployee compensation, but he wants $7K of deductions that IRS disallowed.

This brings into play, and before STJ Panuthos, Reg. 1.274-5(T)(c)(3), the longest-running off-Broadway temporary reg.

“’Where the taxpayer establishes that the failure to produce adequate records is due to the loss of such records through circumstances beyond the taxpayer’s control, such as destruction by fire, flood, earthquake, or other casualty, the taxpayer shall have a right to substantiate a deduction by reasonable reconstruction of his expenditures or use.”  Id. subpara. (5), 50 Fed. Reg. 46022. The burden is on the taxpayer to show that the documentation was actually lost or destroyed because of circumstances beyond his control.  See McClellan v. Commissioner, T.C. Memo. 2014-257, at *13.” 2019 T. C. Sum. Op. 31, at p. 8. I missed Oliver McClellan, for whatever reason.

Well, it turns out that Brent can establish his CPA was burned out (Oliver couldn’t prove which hurricane wiped out what), and at least some of Brent’s records went up with the house. But Brent can’t prove how he usually kept his records and specifically what was destroyed.

“Petitioner presented 49 pages of checking account statements with notations providing partial but inadequate details on the business purpose of each expense deduction claimed.  Petitioner’s testimony was vague and unspecific as to the business expenses for meals, events, gifts, and purchases for his mechanic’s shop. Petitioner’s attempts to specifically identify persons and business purposes related to the purported expenses were not sufficient.  While petitioner identified individuals with whom he dined and attended social events, he later indicated that his attempts at identification were speculative and acknowledged that his reconstruction of expenses did not specifically identify the business conducted on these occasions.  Likewise, petitioner’s recall of purchases from music stores, book stores, and other vendors was only general, and it was not clear whether the expenditures were incurred primarily for business rather than personal reasons. Petitioner acknowledged the difficulty in associating any expense paid in [year at issue] with a specific business purpose.  On numerous occasions at trial petitioner indicated that his notations could be inaccurate because he was attempting to piece together his purchases years after charges were incurred.” 2019 T. C. Sum. Op. 31, at pp. 9-10.

And some of the checking account statements contradicts his testimony.

IRS wins.

But again, the self-represented, unless OCD to the max, rarely has decent records to begin with, even before the wind, earthquake, or fire. And there’s rarely a still small voice to help out. Reconstructing while trying to make a living hardly favors reconstructing. Finally, testifying by oneself in court, even if one has been there before, does not make the Top Ten faves among indoor sports.

Don’t panic, reader, this blog has not gone political. If you want philippics and polemics, there’s no shortage elsewhere, and I’ve contributed my share. But not here. Not in this blog.

The Constitutional issue raised by Todd Ross & Millie Vilaplana, Docket No. 19705-18S, filed 10/9/19, concerns that persnickety Affordable Care Act of 2010, specifically Todd’s & Mollie’s Premium Tax Credit.

Todd & Millie want their trial stayed, because maybe 5 Cir will confirm USDCNDTX and declare the whole shootin’ match unConstitutional.

Todd & Millie refer to a “…decision by the United States District Court for the Northern District of Texas, currently on appeal to the Court of Appeals for the Fifth Circuit, and asserted that the court had held, ‘[t]he entire ACA * * * to be unconstitutional, including * * * [advance payments of the PTC]’. See Texas v. United States, 340 F. Supp. 3d 579 (N.D. Tex. 2018), appeal filed (5th Cir. Jan. 3, 2019). Petitioners appear to assert that the appellate court may agree that the ACA is unconstitutional and therefore the tax treatment of the PTC cannot be determined until the appeal has been heard.” Order, at p. 1.

As usual, IRS is no fun. But STJ Diana L (“The Taxpayer’s Friend”) Leyden doesn’t mind spoiling the fun, either.

“Respondent states that 16 days after the United States District Court issued its decision, it ordered the decision stayed during the pendency of the appeal to the Court of Appeals for the Fifth Circuit, Texas v. United States, 352 F. Supp. 3d 665 (N.D. Tex. 2018), and, therefore, the decision is not binding on anyone. Further, respondent states that the United States District Court only considered whether amendments to the ACA that reduced the shared responsibility payment under Internal Revenue Code section 5000A(c) to zero dollars effective for months beginning after December 31, 2018, Tax Cuts and Jobs Act of2017 (TCJA), Pub. L. No. 115-79, sec. 11081(a) and (b), 131 Stat. at 2092, made the ACA unconstitutional. Respondent contends that the analysis of the decision would not affect the PTC for years before 2019.” Order, at pp. 1-2.

And with a petition date of 2018 for a 2016 deficiency, Todd & Millie are still in.

“The appeal of the United States District Court’s stayed decision does not prevent the Court from proceeding with petitioners’ case insofar as the advance payments of the PTC in issue are for 2016, a period prior to the effective date of the amendments to the ACA.” Order, at p. 2.

I give Todd & Millie a Taishoff “Good try, second class.”

But Was He Doin’ Her Wrong?

I can’t tell how long ago Frankie’s and Johnny’s ill-fated love was first balladized into immortality. Even such experts as Leonard Feather, Carl Sandburg, John Jacob Niles and James J. Fuld differ. Nonetheless, the old story, “he was her man, but he was doin’ her wrong” echoes even from the august foyers of 400 Second Street, N. W., to the Loop of Chicago, as Judge Goeke will have to decide, in John E. Rogers & Frances L. Rogers, et al., Docket No. 1052-12 (no missprint, this one has been going on for seven years), filed 10/9/19.

Judge Goeke will hear argument two weeks from this Friday whether Frances L. (“Frankie”) Rogers can remove spouse John E. (“Johnny”) Rogers as her attorney. Two fresh attorneys have apparently filed Entry of Appearance for Frankie, but somebody objected, whether IRS or Johnny is nowhere stated. Oh, and Frankie wants a new trial.

Yes, it’s the Jetstream guys, an endless source of blogposts.  Cain’t hardly wait for the outcome of this one.

We are all used to the demands for responses to interrogatories and document production. From our salad days in Civil Procedure 101, through our apprenticeships as the very trash of the legal profession, to our present eminences (be they never so small), it has been dinned into our consciousness that the first thing a defendant does (and IRS is a perennial defendant in Tax Court) is to herniate the plaintiff with discovery demands, simultaneously with our answer.

IRS is nowise loath to do so. It’s a “win your case before discovery” gambit that enthralls the Continuing Ed crowd, and brings to mind the ancient Tammany Hall war-cry today.

IRS is at it again in Jesse Alvarado & Maria De Lourdes Velasquez, Docket No. 15059-18, filed 10/8/19.

Judge Elizabeth A. (“Tex”) Copeland has sussed out the fact that Jess & Maria are not battle-hardened pro se litigators or frequent rounders.

“The interrogatories (e.g. questions to be answered by the Taxpayers) begin after the six page motion and include questions numbered one (1) through (8) for which the government requests a written response. The request for production of documents begins after a seven page motion and has twelve (12) separate requests for documents. Under this Order, the Taxpayers, also known as ‘petitioners’ in this case, must respond to the IRS’ questions in writing and must produce the documents the IRS has requested.” Order, at p.1.

A seven-page motion, filled with enough legalese to glaze the eyes of even the hardiest, followed by twelve (count ’em, twelve) separate requests (doubtless with division, subdivision, paragraph and sub-paragraph). And a couple self-representeds (hi, Judge Holmes) are supposed to decode, demystify, deconstruct, and respond to same in thirty days or less.

Although I myself never heard it, IRS counsel must chant the Old Tammany Hall war cry every day. “Big chief sit in teepee, cheering braves to victory, swamp ‘em, swamp ‘em, get the wampum, Tammaneeee!”

No, this is not an essay on the overbearing micromanaging forebear of some innocent infant. Today we have the story of the helicopter pilot whose younger son is a keen tennisplayer, so off to GA he and family go from ME. But the pilot is flying off-again, on-again Medevacs on contract in Saudi Arabia (hereinafter “The Kingdom”), and wants Section 911 treatment.

You see where this one is going in Joseph S. Bellwood and Jacqueline E. Bellwood, 2019 T. C. Memo. 135, filed 10/7/19. Joe never had the 330 days in The Kingdom, so the enhanced scrutiny of “tax home” in The Kingdom is then applied.

Judge David Gustafson tries to be obliging, but Joe has too much density altitude to get his case off the ground. Joe’s “abode” was back in the U.S.A.

“One’s ‘abode’ is where he ‘abides’.  Acone v. Commissioner, T.C. Memo. 2017-162, at *12.  However, an individual’s abode cannot be determined by simply identifying the location where he spent the greatest number of days during  a given period, especially if a location where he spent fewer days was his family home where he spent those days with his wife and youngest son.  This Court and at least one Court of Appeals have recognized a domestic-vs.-vocational distinction for determining one’s ‘abode’ under section 911….” 2019 T. C. Memo. 133, at p 17. (Citations omitted).

They key test, though trite, is simple: Home is where the heart is.

“Consequently, when one of the locations with which an individual is connected is in the United States (e.g., when during the relevant periods the taxpayer owns a home in the United States and spends numerous days at that home, and when the taxpayer’s spouse and youngest child live at that home during the relevant periods), we consider the domestic or vocational nature of the time spent in each location in addition to counting the number of days. Accordingly, we compare the domestic and vocational qualities of Mr. Bellwood’s respective dwellings, and the time he spent at each, to help determine whether his ‘abode’ remained in the United States.” 2019 T. C. Memo. 133, at p. 18.

Of course, the fact of home ownership in The Land of the Free, and the presence of one’s nearest and dearest there (as opposed to exiling them to “stronds afar remote”), do not negate Foreign Earned Income Credit.

Except.

“During the time Mr. Bellwood spent in Saudi Arabia, his regular activities were primarily vocational.  Mr. Bellwood testified that his non-work-related activities in Saudi Arabia were limited because of the demanding nature of his work–he went to the barber or grocery store as needed and visited the occasional restaurant, but most of his time in Saudi Arabia was spent either working or resting and preparing for his next shift.  That is true, but only because when Mr. Bellwood had spare time, he did not wish to spend it in Saudi Arabia.  Rather, during his days off duty, Mr. Bellwood returned to his home in the United States where he spent time with his family, pursued his hobbies, and managed the day-to-day affairs of his personal life.  In Georgia he maintained his registration to vote, received his mail, updated his driver’s license, and registered his vehicle.  Thus, the nature of Mr. Bellwood’s respective dwellings and the manner in which he spent his time at each indicate that his ‘abode’ was in the United States, and that he traveled to Saudi Arabia for work only.” 2019 T. C. Memo. 133, at p. 20.

Besides, his employment contract said that when his tour was over, he would be repatriated.

Unreimbursed employee expenses go by the boards. as does reliance on Turbotax. One again, “(A)lthough this Court has not held that TurboTax or other tax preparation software would qualify or fail to) qualify as advice of a ‘competent professional’, we have held that ‘[t]ax preparation software such as TurboTax is only as good as the information the taxpayer puts into it.  The misuse of tax preparation software, even if unintentional or accidental, is no defense to accuracy-related penalties under section 6662.’  Langley v. Commissioner, T.C. Memo. 2013-22, at *9-*10 (citations omitted).” 2019 T. C. Memo. 133, at p. 33.

And Joe’s inputs were replete with what Judge Gustafson characterizes as “foot faults.”

I reiterate a firm offer I made to US Tax Court right after Tax Day on April 16 this year. See my blogpost “Admitted but not Recognized.”

“There exist such things as law firms, with principals and associates all of whom are admitted to Tax Court. So there really needs to be a new form of Entry of Appearance, recognizing that law firms do exist, that various attorneys employed therein share files among themselves, and might occasionally ask a colleague to cover a routine matter while on trial or on vacation. Maybe we don’t need the covering attorney to file an Entry of Appearance for essentially a one-time appearance. Perhaps a one-size-fits-all law firm Entry of Appearance, listing all admittees in one place, might save time and paper (or electrons).”

But no.

Here’s Estate of James Dieffenwierth, Deceased, Vicki Dieffenwierth, Executrix, Docket No. 17268-19, filed 10/4/19. Same old, same old. Ms. Dowd, in the same firm as Mr. Brown (according to their website), used Mr. Brown’s e-access because the firm has none. And gets the old right-about-face.

Would it be beyond the technical capabilities of the Tax Court Techies to create a firm Entry of Appearance, which the managing clerk of the firm can update as personnel changes, with appropriate e-signatures for each attorney in the firm admitted to USTC?

If they can manage it, we wouldn’t have to play put-and-take every time the lead attorney wants to take a vacation, gets sick, goes on family leave, has a family crisis, or is actually engaged elsewhere on the date a motion is to be argued.

Other courts have managed to recognize the existence of law firms.