It is a long-standing legal maxim that the law does not require performance of a futile act. In the ongoing chanson de geste of James L. McCarthy, Docket No. 21940-15L, filed 12/10/18, Judge James S (“Big Jim”) Halpern wants to be sure that no violation of that hallowed principle has occurred.

All y’all will recall Judge Big Jim sent IRS’ and James L’s counsel off to tell him more before. See my blogpost “When? – Reprise,” 10/31/18, when Judge Big Jim wanted enlightenment of James L’s relationship to his wife’s C Corp, which leased some property from a trust, and which lease might have had some value before wife walked away therefrom.

Whatever enlightenment was furnished, the trust angle is still on the table. When James L went back to Appeals on remand, his OIC and PPIA again were bounced, because Appeals was convinced the trust property was still in play, and James L’s counsel didn’t furnish fresh financial info.

The supp NOD from the remand “…states that…apparently in response to a request for updated financial information from the Settlement Officer (SO) R, petitioner’s attorney ‘stated that if Appeals was going to maintain its decision regarding nominee ownership, there was no point in providing updated financial information.’” Order, at p. 1. (Name omitted).

Well, IRM pt. 5.15.1.l(4) (Nov. 17, 2014), and IRM pt. 5.15.1.2(3) (Aug. 29, 2018) state that for any collection alternative, the financial info must be no older than six (count ‘em, six) months. So mox nix that whatever info James L and his attorney would furnish would either constitute a concession on the trust angle if that were included, or would be bounced as insufficient if weren’t included.

Except.

“…petitioner’s refusal to submit updated financial information may provide an independent basis for upholding Appeals’ determination in the present case, regardless of petitioner’s interest in the trust’s assets–unless, perhaps, petitioner’s refusal was justified because he or his counsel were given reason to believe that Appeals had resolved to adhere to its position on the nominee issue after remand so that the provision of updated financial information would be futile.

“The parties’ briefs do not address the potential impact on our disposition of the case of petitioner’s refusal to provide updated financial information. Respondent’s briefs focus on whether SO M was correct in her conclusion that the value of the trust’s assets had to be considered in evaluating petitioner’s proposed collection alternatives. Respondent does not advance petitioner’s failure to provide updated financial information as an independent ground for upholding Appeals’ rejection of petitioner’s proposed collection alternatives. And petitioner’s briefs offer no justification for his failure to submit updated financial information. In particular, they do not describe any communications received from SO M or other Appeals representatives that might have supported an inference that the provision of updated financial information would be futile. Because the parties’ briefs are insufficient to allow us to determine the impact of petitioner’s failure to provide SO M with updated financial information, we will require further submissions. With this Order, we require petitioner to explain that failure. If appropriate, after receiving petitioner’s explanation, we will give respondent the opportunity to respond to it.” Order, at p. 2. (Name omitted).

Takeaway- Build a record. If all you get on remand is the same argument you consistently rejected, and that got you to Appeals, put something in writing about no point in giving more financial info that omits the items at issue, as Appeals won’t give on that point. And tell ‘em Judge Big Jim sent you.

Andy Marvell was chatting up his girlfriend, but The Judge with a Heart, STJ Rob’t N Armen, has no time for chatting in this designated hitter, Kwabena Owusu Banahene, Docket No. 6086-16L, filed 12/10/18.

KO’s fighting a trio of preparer chops, and opposes IRS’ summary J motion, challenging “…(1) whether Letter 1125 and the examination reports (Forms 5816) proposing return preparer penalties for [the trio] were sent to petitioner before assessment of such penalties; (2) whether petitioner received sufficient time to request further administrative consideration before assessment of such penalties; and (3) whether respondent validly assessed against petitioner return preparer penalties for the years in issue.” Order, at p. 1.

Sort of a junior version of Graev; did IRS jump the gun?

IRS claims there’s no gun to jump, unless they feel like it.

“The Court recognizes that respondent contends, inter alia, that the provisions of section 1.6694-4(a)(1) and (2), Income Tax Regs., are directory rather than mandatory, a contention that appears to present a legal issue of first impression. However, the Court questions whether it would be judicious to address such issue at the present time given that it would be moot (and any opinion addressing it would arguably be dicta) if respondent did, in fact, comply with the provisions of the aforecited regulation. As previously indicated, whether respondent did, in fact, comply with such provisions presents a disputed issue of material fact.” Order, at p. 2.

IRS of course wants to get partial summary J on some other stuff. As a long-time fan of summary J, I’m all in favor using it to clean up everything around. Like the famous paper towel, summary J is the “quicker picker-upper.”

STJ Armen isn’t buying.

“Further, the Court recognizes that respondent seeks, in the alternative, partial summary judgment on a number of non-dispositive matters. However, the Court again questions whether it would be judicious to address those matters at the present time because of the paramount nature of the fundamental issue, i.e., the validity of the underlying assessments.” Order, at p. 2.

Summary J denied.

Judge James S (“Big Jim”) Halpern breaks the record-breaker today, with a one-sentence, designated hitter, blow-off of what I thought was a really good blogpost (“Record-Breaking,” 12/7/18).

Well, the Supremes ducked a loaded case today, so why shouldn’t Judge Big Jim duck one a lot less loaded?

Here’s Whistleblower 11099-13W, Docket No. 11099-13, filed 12/10/18, in extenso.

“It is, ORDERED that the Court’s Order dated December 6, 2018, is hereby vacated and set aside.”

As the old State court calendar call service used to put on their slips, “Following.”

Whistleblower 11099-13W, Docket No. 11099-13W, filed 12/7/18, is setting up for a record-breaking summary J. And Judge James S (“Big Jim”) Halpern is up for the challenge, as he designates 11099.

11099 claims Ogden done him/her wrong. Nothing new here. 11099 is also jousting with Ogden about what should (or should not) be in the administrative record. Also nothing new. 11099 wants to put in expert testimony, call ex-Chief Whistler Robert Gardner as a witness, and add testimony and stuff outside what Ogden claims is the entire administrative record.

Also nothing new. See my blogpost ”Two Old Cases,” 1/10/18, where Kenneth William Kasper was terminally unhorsed by Judge Mark V. Holmes, whom I then characterized as “friend of Chenery (the doctrine, not the dodgeflogger), and Foe of the Partitive Genitive (but apparently in recovery).” Section 7623(b) defaults to the Administrative Procedures Act as for scope of review (abuse of discretion).  And if abuse of discretion is the guide, then all there is to review is what the agency had before it, and whatever the petitioner can wild-card into the administrative record that the agency had but overlooked.

But 11099 isn’t fazed by Judge Holmes’ “somber reasoning and copious citation of precedent.”

IRS of course wants summary J (nothing new there either), but isn’t getting it, because Judge Big Jim finds a factual dispute about what should be in the administrative record.

But the record-breaking news is here.

“Moreover, petitioner has filed a pretrial memorandum, in which he states his disagreement with our holdings in Kasper as to the scope and standard of review for whistleblower award determinations, and he urges us to reconsider our holdings (including that he is entitled to a trial de novo because the record rule does not govern the scope of our review in whistleblower cases).” Order, at p. 2.

So IRS can deal with 11099’s motions directed to the administrative record.

But 11099 is told to file a motion for partial summary J on his record-breaking allegations.

To the tune of the Irving Gordon 1951 hit “Unforgettable”: Non-political/ describes my blog/Analytical/But not a slog/Hope I’m being/Most uncritical/Avoiding all that’s metaphysical/And I hope that/You’re non-political too.

That said, I offer a small-claimer coupled entry, Abdeia Hassan, 2018 T. C. Sum. Op. 56, filed 12/6/18, and her non-spouse Mohamed A. Kaviro, 2018 T. C. Sum. Op. 57, of even date therewith (as my high-priced colleagues say).

I’m not going to discuss the facts or the law. I shall only mention in passing the result, namely and to wit, that, despite unreported actual income and phony SE income, Ab and Mo split their six (count ’em, six) children, and each get EIC, Child Credit, HOH status, Federally-subsidized housing (four bedroom flats in ME), and Medicaid and SNAP for the kids.

STJ Daniel A. (“Yuda”) Guy applies the law as it is, not as I or any (or perhaps none) of my readers might wish it to be.

I leave to my readers the discussion of whether the Internal Revenue Code should function as a public assistance law, and IRS (with assists from Tax Court) as a public welfare agency; and if so, whether you like the results.

Talk among yourselves.

Maybe Matty Arnold’s portrait of Dover Beach is a picture of me as Tax Court blogger. Again and again I comment upon some procedural flaw or shortcoming, whether statutory or regulatory, that trips up the pro se, and might even ensnare a practitioner. And the result is the very occasional recognition from on high, but more often a snub from the exalted ABA Committee on Taxation (to which eminent body I do not belong; my shoes are too dusky.).

However, cliché springs eternal, so at risk of wearying those few readers I have left, here’s a couple old beefs (hi, Judge Holmes) served up again to coldly furnish forth the blogger’s table.

First, Form 6, Ownership Disclosure Statement. The ratio of correct to defective Forms 6 is probably 1 to 100. Those corporate officers (they’re all pro se, of course) who cannot assimilate the concept of “state there is no such entity” comprise a surprisingly large part of Tax Court’s tossed petitioners. There were at least four of them today (12/6/18); to spare their officers embarrassment I won’t name them. Perhaps the only solution is to amend the form by putting next to each section “YOU CANNOT LEAVE THIS SPACE BLANK; IF THERE IS NONE, WRITE ‘NONE’.” Of course, it’s just possible that a public corporation with millions of shares traded every day might not know at any moment who owns any of their stock. In any event, the form needs to be updated going forward, as there are no longer tax matters partners for newer entities.

Next, the “blessed communion, fellowship divine” of private delivery services. See my blogpost “The Blessed Communion, Fellowship Divine,” 4/13/17. Dilatory pro se types commonly use the right service but the wrong method. Not everything on the FedEx, UPS, or DHL menu satisfies Notice 2016-30.

Even IRS gets confused. Here’s Cherynisha Marie Ingram, Docket No. 20023-18S, filed 12/6/18, but Cherynisha didn’t draw IRS’ counsel offside. She’s gotten SNODs for two years, 2016 and 2017.

Cherynisha sent in a petition to the 2017 SNOD dated July 9, 2018, “… received by the Court in an envelope sent by FedEx Ground and bearing a ship date of October 8, 2018.” Order, at p. 1.

My readers, glancing at the Notice 2016-30 list posted on every available surface in home or office, have already noticed that FedEx Ground is not included in the ranks of the Elect.

IRS apparently never posted the list, or maybe it fell off the wall, because, though they move to toss 2016 as untimely, “(R)espondent acknowledges that the petitioner attached a timely notice of deficiency for the tax year 2017 to her petition.” Order, at p.1.

Ch J Maurice B (“Mighty Mo”) Foley is positively douce. I expected something rougher than “(S)uch statement, however, raises questions vis-a-vis the rules under section 7502, I.R.C., regarding designated private delivery services.” Order, at p. 1.

So he directs IRS to “clarify” its position in a supplement to its motion to toss.

The statutory and regulatory grand slalom through which any PDS must go to certify one of its services (see my blogpost above-cited) guarantees that none of the Big Three will bother to add any service to the blessed communion. Why should they spend one minute or one cent on a process that will add nothing to their respective bottom lines? If the hapless pro se or ill-informed practitioner uses the wrong option, the PDS got paid, and xin loi about the toss. The only injured parties are the pro sese with meritorious claims that get tossed on a ridiculous hyper-technicality.

The pebbles roar again, and “bring the eternal note of sadness in.”

It’s been five years and more since I first introduced the new-fledged US citizen who starred in essayist-raconteur Harry Golden’s tale, but in fairness to latecomers, here it is again.

“An immigrant finally attained citizenship. After the swearing-in, he stoutly refused to understand, much less speak, his native tongue. He spoke only broken, heavily-accented English. When his wife of many years addressed him in the language they had shared throughout their lives, he turned to his US-born and educated children and asked them “Vot did she set?” Whereupon his wife called down upon his head maledictions unknown even to scholars of their childhood language, but which connoisseurs hastened to extol as masterpieces of invective.”

Well, I’m sure Frederick G. Durham, Docket No. 26563-17S, filed 12/6/18, is too well-bred to utter even the smallest cry of dismay, when STJ Lewis (“Oh, sweet name”) Carluzzo requires him to show cause why STJ Lew shouldn’t grant “respondent’s oral motion to dismiss for lack of prosecution.” Order, at p. 1.

True, Fred was a no-show at last month’s trial calendar call in Philly. And maybe so Fred’s pre-trial show-and-tell was non-existent. And it may very well be that IRS’ counsel told the whole story with “the punctilio of an honor the most sensitive,” as a far more brilliant lawyer than I put it.

Still and all, how can anyone reply to an oral motion that s/he never heard, otherwise than by quoting the new citizen’s catchphrase?

Tax Court will be closed tomorrow, Wednesday, December 5, 2018, in mourning.

It may not be a change in method of accounting if you change an item to reflect changed external facts. In any case, it’s not a subject for summary J in Thrasys, Inc., et al., 2018 T. C. Memo. 199, filed 12/4/18.

Thrasys was developing hospital operating software for Siemens, the multinational electric outfit, and got a $15 million payment in Year One. Ordinarily, Thrasys reported similar payments as “advance payments,” and deferred these one year forward per Rev. Proc. 2004-34, which lets software developers defer such payments.

IRS claims the $15 million should have been reported in Year One, not Year Two, because Thrasys once before blew the one year deferral and took two. Thrays claims that was a one-off error, not an abandonment of the advance payment deferral method.

If you book items the same way for two years running, you’ve established your method of accounting, and cannot change without the blessing of the Com’r. As a certain ethnic group remarks, “We make the same mistakes three times running and call it a tradition.”

IRS is ready to pounce, nailing Thrasys for recognizing in the wrong year, and also claiming that when Thrasys went from C Corp to S Corp in that same year, the $15 million was “net recognized built-in gain.”

As to the latter, Judge Lauber isn’t going there. But there’s a preliminary problem for IRS’ summary J.

“For at least two reasons we believe that there exist genuine disputes of material fact concerning the correctness of respondent’s submission.

“First, as far as the record reveals, Thrasys treated only one customer payment–the $15 million payment it received from Siemens in [Year One]–as a ‘deposit’ for book or Federal income tax purposes.  That treatment appeared on only one tax return, namely, petitioner’s Form 1120 for [Year One].  (On its Form 1120S for [Year Two} Thrasys shifted the $15 million from the ‘deposit’ category into the ‘deferred revenue category.)  A question of material fact exists as to whether petitioner’s ‘deposit’ treatment displayed the consistency required to constitute a method of accounting on the basis of which Thrasys ‘regularly compute[d]’ its income.  See sec. 446(a), (e).

“Second, a change in method of accounting does not include ‘a change in treatment resulting from a change in underlying facts.”  Sec. 1.446-1(e)(2)(ii)(b), Income Tax Regs.  Thrasys treated the $15 million payment differently from the customer payments it had received during {Three Previous Years], and it did so in accordance with adjustments that an independent auditor had made to its {Year One] financial statement.  Because Thrasys at yearend [Year One] was in technical breach of its software development contract(s) with Siemens, the auditor believed that the $15 million payment might have to be refunded and thus should be reflected on Thrasys’ financial statement as a customer ‘deposit’ offset with a ‘deposit obligation.’ 2018 T. C. Memo. 199, at pp. 16-17.

A “deposit” or “advance payment” characterization goes off on whether the lucky recipient has a good chance of keeping the boodle, or having to disgorge.  But that doesn’t matter for Rev. Proc. 2004-34 purposes, because that states that deferral does not depend upon the chances of having to give the money back based on a condition subsequent.

Nevertheless, the independent auditor’s conclusion may have justified use of the deposit method based upon changed facts.

So no summary J.

A few days back, I got a lengthy proposed comment  to an old blogpost from the losing petitioner. I didn’t bother putting it up. His diatribe (and name-calling) was much of a muchness. In fifty-one (count ‘em, fifty-one) years of doing this, I’ve heard it all: All lawyers are liars (his own lawyer said so); the Tax Court is corrupt; IRS is corrupt; the Circuit Court of Appeals (I don’t remember which) is corrupt; and as my would-be commentator deduced, I am a lawyer, so I am a liar, da capo.….

I learned a long time ago that we lawyers need broad shoulders (and again I thank an old law partner from my early days for the insight); we have to carry the weight of the world.

And when other lawyers go wrong, we have to express our indignation.

Here’s The Community Law Firm, Inc., 2018 T. C. Memo. 198, filed 12/3/18.

The Communitys were up in Tax Court three years ago and lost an off-the-bencher on a CDP where they failed to provide the SO with the info. I didn’t blog it.

Now they want to reinstate an IA on which they defaulted, and again produce no info.

But Judge Lauber has other ammunition in his locker. “In any event IRS records show that petitioner was not current in its tax filing obligations for at least five calendar quarters subsequent to the quarters at issue when the SO made her determination. The SO could properly have rejected a collection alternative on this ground alone.” 2018 T. C. Memo. 198, at pp. 8-9. (Footnote omitted; it says the Communitys claim they asked for an extension for the five quarters, but has no evidence thereof.)

And the Communitys have another CDP going for the quarter before the three quarters at issue.

Now Judge Lauber has not broken the bruised reed nor quenched the smoldering wick, as a much Higher Authority put it, without lots of justification. But today from under the judicial robes he brandishes the Section 6673 yellow card.

“Petitioner is a law firm.  We presume that its principals are conscious of their Federal tax obligations and their responsibility to participate meaningfully in administrative proceedings they have commenced.  Petitioner’s track record in this Court suggests that it may be invoking the CDP process ‘primarily for delay,’ see sec. 6673(a), wasting the resources both of the Government and this Court. Petitioner is warned that it may face penalties if it continues to do this.” 2018 T. C. Memo. 198, at p. 10.

Read and heed.