Alexis de Tocqueville noted the unique role of American courts, that of setting aside laws they do not like on constitutional grounds. This seems an article of faith to Americans. And it certainly is one to which Janice Lauren Kirkel, Docket No. 23818-18S, filed 7/24/19 subscribes.

Janice Lauren “…failed to report on her income tax return… unemployment compensation of $11,050 from the New York State Department of Labor. Petitioner does not deny in the petition that she received such amount; rather, she contends that unemployment compensation does not constitute income, contending that unemployment compensation ‘is designed to sustain those who do NOT have income’ and that ‘[t]axing these benefits is * * * cruel, short-sighted, and runs afoul of any theory of economic success.’ (Emphasis in the original.)” Order, at p. 1.

Apparently The Judge With a Heart, STJ Robt. N. Armen, is supposed to set aside Section 85, and ignore the broad sweep of Section 61.

IRS wants summary J; Janice Lauren wants “my day in court.”

I won’t hold you in suspense.

Here’s STJ Armen’s take.” Petitioner contends that, for various policy reasons, unemployment compensation should not constitute income. However, the fact of the matter is that the law, as enacted by Congress and as set forth above, states that unemployment compensation is income.” Order, at p. 3 (Emphasis by the Court).

Summary J for IRS. L’il ol’ Tax Court must follow the law, like all those other courts.

Y’all remember Joseph J. Zajac, III, Docket No. 1886-15, filed 7/23/19, no? JJZIII was here just last month, in my blogpost “Mulligan – A Causerie,” 6/18/19.

Maybe JJZIII read Judge Gale’s previous order as requiring only that he testify, because all the stipulated facts and documents are in evidence from the last trial, and all the rulings made by Judge Chiechi are still in effect. So maybe no new discovery is needed or permitted.

Nevertheless, JJZIII sends in “…a ‘Notice of Unavailability’, which provides in full: ‘Petitioner, pro se, will be unavailable from July 22, 2019, to August 19, 2019. No one is authorized to accept or respond to documents on the Petitioner’s behalf. Deadlines outlined in Court Order dated June 19, 2019, [sic] are not impacted.’” Order, at pp. 1-2.

Yes, the case is on for trial 11/19/19. But what new discovery there is to take place is a mystery, if everything that went in evidence on the last trial is automatically in evidence for this trial.

Still, Judge Gale is not amused.

“Consequently, petitioner is under a continuing obligation to comply with the requirements set forth in the Court’s Order dated June 18, 2019, and the Standing Pretrial Order. Those requirements include, among other things, an obligation to engage in informal communication and cooperation with respondent in preparing this case for trial. See Rule 70;2 Branerton Corp. v. Commissioner, 61 T.C. 691 (1974). Moreover, should respondent’s attempts at informal discovery in this case fail, he may seek formal discovery under our Rules, for example, by serving written interrogatories, see Rule 71, requests for production of documents, electronically stored information, or things, see Rule 72, or requests for admission, see Rule 90. Under such circumstances, petitioner would be required to file a timely and appropriate response under our Rules.

“In substance, petitioner’s Notice of Unavailability appears to be a tacit request that the Court allow him to disregard his trial obligations for a 28-day period. Such an action is not contemplated by our Rules. Accordingly, we will direct the Clerk of the Court to strike petitioner’s Notice of Unavailability from the record in this case, and we advise petitioner that any failure to respond to respondent’s proper and reasonable requests during the pretrial period is at petitioner’s own risk.” Order, at p. 2.

Still, I do not recommend telling the Judge you’re not around, when you’re on for trial.

IRS is trying the old smothering trick, attempting to stop Estate of Charles P. Morgan, Deceased, Roxanna L. Morgan, Personal Representative and Roxanna L. Morgan, Docket No. 592-18, filed 7/23/19, from putting in various out-of-Court declarations of the late Chas P. “…offered by petitioners for their truth, that do not qualify for one of the exceptions to hearsay set forth in Rules 803 and 804 of the Federal Rules of Evidence.” Order, at p. 1.

Now we all know from Evidence 101 that hearsay is whatever someone says out of court, where the one who said it isn’t in court to be cross-examined. Except stuff. The stuff is what the cited Federal Rules of Evidence say.

But Judge Pugh, like most judges, likes to make her own rulings on what is and what isn’t barred by those Rules. Blanket objections take away all the fun, and are therefore wet blankets in Judge Pugh’s courtroom.

“In Goldsmith v. Commissioner, 86 T.C. 1134 (1986), we declined to uphold a blanket objection and we declined to grant a blanket exception; instead we considered whether specific statements met a hearsay exception.

“Here too we will evaluate the admissibility of any statements under the hearsay exceptions as they arise at trial; we will not preclude petitioners from relying upon the residual exception found in Rule 807 in advance of trial.” Order, at p. 1.

IRS counsel can object as the trial goes along.

Or rather, I don’t, but Judge Gale corrects the electronic jamming of his order in Eileen Phyllis Strul a.k.a. Eileen P. Strul, Docket No. 26639-16, filed 7/22/19.

“Petitioner also requests that the Court clarify the last sentence of footnote two on the first page of the Court’s Order dated June 26, 2019, which reads: ‘In particular, and as discussed infra pp. 10-11, petitioner’s allegations may be relevant to the extent respondent was in possession of evidence that she was entitled to the premium tax credit but nonetheless failed to concede this case in a timely fashion.’

“The aforementioned reference to pages 10 and 11 of the Order dated June 26, 2019, was made with respect to the pagination of the Order as originally drafted before being electronically formatted for service, which caused a change in the pagination. The final sentence of footnote two instead should read: ‘In particular, and as discussed infra p. 8, petitioner’s allegations may be relevant to the extent respondent was in possession of evidence that she was entitled to the premium tax credit but nonetheless failed to concede this case in a timely fashion.’ We will direct that the Order dated June 26, 2019, be modified to reflect the correct pagination.” Order, at pp. 1-2.

Eileen also wants interest abated and her amended return for the year at issue dealt with, giving her a bigger refund. She gets most of what she wants from Judge Gale.

Of course, once you timely petition a SNOD, the whole year is up for grabs.

More than once I’ve found the pagination of opinions and orders, and transcripts of off-the-benchers attached to orders, scrambled by electronically-concocted pagination. I’m glad Judge Gale is dealing with this. It makes the blogger’s task (and the tasks of counsel who must quote from these) easier.

And I wish Judge Gale had designated this order. That would make my task even easier.

I’ve expatiated on that Obliging Jurist Judge David Gustafson’s overflowing benevolence toward the feckless, hapless pro se often enough.

But today he’s run out of second chances to bestow upon Judith Lee Alston, Docket No. 10936-18L, filed 7/19/19.

For the backstory on Judith Lee, see my blogpost “Obliging? – He’ll Draft Your Motion For You,” 12/21/18, as updated today.

But none of the electronically-transmitted orders, throwing Judith Lee the ropes spun by Judge Gustafson, bounced from Judith Lee’s inbox. And to none was there any response.

“The Court’s records indicate that none of the filings in this case that were sent to Ms. Alston’s email address of record were rejected or undelivered. For all those reasons we will grant the Commissioner’s motion to dismiss for lack of prosecution….” Order, at p. 3.

Once again a family lawyer is asleep at the switch. The quick-and-cheap split of the dependency income exclusion (one parent gets the exemption in odd-numbered years, the other in evens) in a separation agreement or divorce decree is worthless without Forms 8332 signed and in escrow.

I’ve blogged this again and again.

Yes, I know that Section 151(d)(5)(A) says “In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026 …(T)he term ‘exemption amount’ means zero.”

But there are years prior, and maybe years to come.

Judge Buch has the case of Jason George DeMar, 2019 T. C. Memo. 91, filed 7/18/19, and it’s a Rule 121 on-the-papers.

JG claims he sent in the Form 8332 after he filed his HOH return for the year at issue, while his return was in Examination. And after his loved-once had already taken the exemption on her return for the year at issue, raising potential double-dip.

Judge Buch: “We need not reach the question of whether section 152(e)(2)(B) leaves room for a noncustodial parent to submit Form 8332 or a similar written declaration at some point after filing his or her original return.  The current regulations do not explicitly allow (or prohibit) Form 8332 or a similar written declaration to be submitted during examination or with an amended return.  Sec. 1.152-4, Income Tax Regs.  A proposed regulation explicitly permits a noncustodial parent to submit Form 8332 or a similar written declaration during examination or with an amended return.  Sec. 1.152-5(e)(2)(i), Proposed Income Tax Regs., 82 Fed. Reg. 6387 (Jan. 19, 2017).  But that regulation requires that the custodial parent either did not claim the dependency exemption or filed an amended return removing the claim to the dependency exemption.  Id.  We have no such facts in the record.” 2019 T. C. Memo. 91, at pp. 5-6.

Has any reader seen a malpractice suit by a parent who gets the exemption denied despite compliance with separation agreement or divorce decree, for want of Form 8332 or equivalent?

No, 400 Second Street, NW, has not become a used-car lot, nor has Judge Vasquez traded in his robes for plaid pants and white shoes. Rather, the salespersons’ slogan is applied to CNC NFTLs where the petitioner earns no income and can’t prove how his credit was dinged so as to hinder collection.

Here’s Deborah P. Richards and Daniel D. Richards, 2019 T. C. Memo. 89, filed 7/17/19, whose only source of income is Social Security and who are accorded CNC status.

Dan tells the SO that the NFTL placed when he defaulted on his installment agreement and got CNC status “…was ‘impacting * * * [his] credit and he * * * [might] not be able to get a car loan’ in the future.” 2019 T. C. Memo. 89, at p. 4.

SO P said that just getting a ding on your credit score doesn’t prevent a NFTL to protect the fisc while you’re in CNC status. (Name omitted).

Now of course my sophisticated readers will cry out as one, “Bronze and Budish!” And they’ll be right; see my blogpost “Cast in Bronze,” 11/24/14. Whatever IRM pt. 5.12.2.6 (Oct. 14, 2013) says, if a petitioner can produce probative evidence that the NFTL would hamper ability to pay, SO must consider that.

But Dan and Deb didn’t raise Budish (they were pro sese, natch). And even if they did, they produced no evidence that the NFTL hurt their ability to pay.

“Unlike the taxpayer in Budish, petitioners do not contend that SO P misinterpreted the IRM in making her determination.  Nor did petitioners present any concrete evidence during the CDP hearing to demonstrate how the NFTL would negatively affect their financial circumstances and credit standing.  Petitioners contend that SO P’s balancing analysis consisted of only ‘superficial boilerplate language’ and that she failed to consider the negative impact that the NFTL would have on petitioners’ credit standing and financial circumstances.  However, unlike the AO in Budish, SO P actually considered Mr. Richards’ argument about petitioners’ credit standing and pursued a followup inquiry.  Specifically, SO P asked whether the NFTL would affect petitioners’ ability to earn income.  After learning from Mr. Richards that their only income source was Social Security, SO P determined that the NFTL was not overly intrusive and was necessary to protect the Government’s interest.  This determination was well within her discretion.” 2019 T. C. Memo. 89, at p. 12. (Name omitted).

So, at 400 Second Street, NW, today, the advertising slogan still remains: Bad credit? No credit? No problem! The NFTL remains in place.

Note I’m not blogging John E. Rogers and Frances L. Rogers, et al., 2019 T. C. Memo. 90, filed 7/17/19. Mr Rogers’ bad bookkeeping, contradictory testimony, and the weight of his past delictions give Judge Goeke lots to say, but it’s the old unsubstantiated and unproven deductions, and they’re very much of a muchness.

One of the problems with blogging US Tax Court is an impetus to ascribe to the pro se litigant a tactical perspicacity that the pro se does not have. So if I ascribe a cute tactical move to Sanford M. Kirshenbaum & Sally Kirshenbaum, Docket No. 10135-17S, filed 7/16/19*, that they never thought of, I apologize. Chronicling the moves of wits, wags and wiseacres over the years makes me do it.

Sandy & Sally petitioned a SNOD arising from their underreporting of a couple IRA distributions (hi, Judge Holmes) on their unexcused late-filed MFJ, with a knock-on effect on their taxable Social Security and medical expense deduction.

The SNOD also got the numbers wrong, but IRS counsel concedes the error by letter, and trial is continued (that’s adjourned, for you State courtiers) for a year. Ten days before trial, IRS counsel sends Sandy & Sally a stip to settle everything, and two days before trial the signed stip is filed.

But the stip never includes the final numbers, so two weeks after the nontrial, IRS sends a proposed decision document to Sandy & Sally, embodying the numbers resulting from the stip. Nothing happens for two (count ‘em, two) months, so IRS moves for entry of decision.

Sandy & Sally oppose, with a brand-new set of numbers, neither explained nor substantiated.

That Obliging Jurist, Judge David Gustafson, is anything but obliging. Sandy & Sally had a chance to try all the numbers, and prove whatever they could.

“That … trial was to be their opportunity to prove any error in the IRS’s SNOD. If income adjusted on the SNOD was not really paid to them or was not taxable, then the trial was their opportunity to so demonstrate. If any deductions were wrongly disallowed, then the trial was their opportunity to so demonstrate. If their return was not untimely (or if they had reasonable cause for the untimeliness), then the trial was their opportunity to so demonstrate.” Order, at p. 7.

Remember, Sandy & Sally had their trial continued for a year. And they apparently weren’t ready to go to trial when the trial date came around, so they stiped out.

“But when the time came to prepare (as they had agreed) ‘a decision to be executed by the parties and entered by the Court in this case’, they attempted to backtrack and dispute matters that they had resolved. We will not honor that attempt. They entered into an agreement, and we will hold them to their word.” Order, at p. 7.

Note that the stip let Sandy & Sally off from any Section 6662(a) chops, although the Section 6651(a)(1) addition is there for late filing.

So maybe a good way to dodge Section 6673 is to continue trial, stip out, and play around with the decision documents. Don’t try this at home.

*Kirschenbaum 10135-17 7 16 19

But the late great Vincent Thomas Lombardi was heard to say in response thereto, “It’s the only thing.” Now The Judge With a Heart, STJ Robt. N. Armen, isn’t quite so single-minded as the late great Vince, but Theodore James Zalesiak, 2019 T. C. Sum. Op. 16, filed 7/15/19, didn’t win, and didn’t play, often enough, to qualify as a pro in the poker stakes.

TJ did play the online game, and did play cash games and show-up tournaments, but never got on television. And he mostly worked as a construction manager in the Chicagoland area, although he did play when traveling (mostly to visit family on his accrued leave time from work), and whenever he got a break from construction managing.

My colleague Peter Reilly, CPA, would doubtless comb through the Section 183 factors for deductions from profit-making activity. STJ Armen does a quicker sweep.

“Petitioner testified at trial that engaging in poker-related activities consumed his nights and weekends for the year in issue.  But simply spending all of one’s free time on an activity does not transform the activity into a trade or business, nor does it make the participant a professional.  In addition, petitioner stopped engaging in poker-related activities for a substantial period during the year in issue because his job as a construction manager would not permit him to continue playing poker at that time.  He also took a trip… and played poker in various cities, but it was possible only because he accrued enough leave to do so; and, notably, he visited family and friends in those cities during the trip (i.e., he “was able to get two birds with one stone”).

“Most importantly, petitioner relied on his full-time employment to substantially support his pursuit of poker.  In [year at issue] petitioner’s wages constituted 98.1% of his total income. Without his wages as a construction manager he could not have paid his rent or otherwise have supported himself, nor could he have indulged his passion for poker.  Furthermore, he recognized the need for wage income, and he looked to employment, not poker, for his livelihood.  Petitioner’s reliance on employment for his livelihood is consistent with his characterization on his returns of his occupation as a ‘manager’.  Indeed, petitioner testified at trial that self-describing himself as a “manager” ‘was always something that I would tell people that I was doing if they would ask me on a professional level.’” 2019 T. C. Memo. 16, at pp. 12-13.

I expect Phil Hellmuth, Daniel Negreanu, and Phil Ivey would each use different nomenclature if asked what he does on a “professional” level. And spend a lot more time, and do a lot better, at the poker table.

A fellow blogger, commenting upon Martin A. Kapp, as to which see my blogpost “The Rogues’ March – Part Deux,” 7/9/19, was kind enough to remark that “I swear you can get an almost complete liberal arts education from Mr Taishoff’s tax blog.”

Thank you.