If you are going thus to describe the USDCJ who presided over your (losing) trial, whereat you went down for fraud per Section 7206(1) and Section 7206(2), please allow me to suggest that you (a) don’t do it in writing, (b) don’t send that writing to IRS Appeals as a prelude to your supplemental CDP hearing on the NFTL IRS laid upon you for the Section 6663 fraud chops, (c) don’t attach the writing to a status report you file with Tax Court, and (d) especially don’t do it with Judge James S. (“Big Jim”) Halpern.

Read and heed Harjit Bhambra, Docket No. 1395-16L, filed 2/22/19. Judge Big Jim has obligingly laid out the whole nine yards in a designated hitter.

IRS already won summary J for the court-ordered restitution. The only thing left is the Section 6663 fraud chops. Bham hadn’t a chance to contest these, so he gets a supplemental CDP to try.

But instead of offering evidence when Appeals offered Bham a telephone hearing, he “…responded by letter…, in which he demanded an in-person hearing that he would record and made inflammatory statements; e.g., ‘that the IRS agents are well qualified liars and cannot be trusted for any reason’ and the District Court judge in his criminal trial is a ‘reckless buffoon.’ Order, at p. 2.

Well, Bham got no in-person, but he did get a supplemental NOD saying that Bham had proffered no evidence to rebut Appeals’ determination.

Judge Big Jim, desirous of doing justice, tries to get Bham and IRS on the blower to discern a path to resolution.

“Following receipt of the supplemental determination, we reached out to the parties to discuss how to proceed. We were unsuccessful in our attempts in December 2018 and, following the government shutdown, in February 2019, in arranging a conference call with petitioner. For example, on February 11, 2019, petitioner did not answer at the time he had previously agreed to. In response to our attempts to reschedule the call at 5:00 P.M. on February 13, 2019, petitioner responded: ‘I’m working on February 13, 2019, and vacationing from 2-14-19 to March 8, 2019, please send me in writing whatever the [judge] has for this case.’” Order, at p. 3.

I do not recommend this as a response to a judge who is trying to find some way to help you. I also remind you to be very careful of what you ask for; you might just get it.

Bham certainly does.

“We will take petitioner up on his invitation. We assume that, in asking for us to send whatever we have in writing, petitioner seeks no further hearing and has no argument to make. Considering the supplemental determination, [the SO’s] narrative, and the…letter, we do not think that Appeals erred in sustaining the NFTL and the assessment of civil fraud penalties. [The SO] reports that, during his September 11, 2018, telephone conference with petitioner, petitioner did not address the civil fraud penalties. Generally, we may not consider issues or arguments that a taxpayer does not raise as part of a section 6330 hearing.“ Order, at p. 3.

Fraud chops sustained.

Is Still Frivolity

Even The Judge With a Heart, STJ Rob’t N Armen, can’t find sympathy for Jeffrey P. Heist, Docket No. 8724-18L, filed 2/22/19.

Jeff ran a burglar alarm company and filed three (count ‘em, three) years’ worth of what appeared to be straight returns, reporting tax and underwithholding (Jeff never paid ES), but paying nought. IRS assessed and filed NFTLs and NITLs, to which Jeff riposted with 1040-Xs showing zeros. IRS countered with the Section 6702 frivolous return chops.

Jeff claimed he wasn’t running a trade or business, using the old protester jive from Section 7701(a)(26) “including-means-limited-to.”

Except of course it doesn’t.

“Subsec. (a)(26) defines ‘trade or business’ to include the performance of the functions of a public office. The argument that a ‘trade or business’ includes only a public office is baseless and frivolous. Eg.,[sic] Hill v. Commissioner, T.C. Memo. 2013-265 and T.C. Memo. 2013-264; Slingsby v. Commissioner, T.C. Memo. 2011-3.” Order, at p. 3.

STJ Armen proceeds with “somber reasoning and copious citation of precedent,” including without limitation “…Notice 2010-33, 2010-17 I.R.B. 609, at part (III)(1)(e), listing as frivolous the position that a taxpayer has the option under law to file a document or set of documents in lieu of a return or elect to file a return reporting zero taxable income and zero tax liability even if the taxpayer received taxable income during the taxable period for which the return is filed, or similar arguments described as frivolous in Rev. Proc. 2004-34, 2004-1 C.B. 619, discussing the ‘zero return position’.” Order, at p. 8.

He also shows Jeff the Section 6673 yellow card, at no extra charge.

Don’t try this at home (or anywhere else).

Not only did that snow falling faintly as above stated cause my soul to swoon slowly, as it did Gabe Conroy’s in Jimmy Joyce’s greatest story, but it also blotted out today’s opinions and orders at The Glasshouse.

Snow day, with no notice on the website or on the answering machine in the Clerk’s office, the hard-laboring clerks and flailing datestampers not having made it in.

Fortunately, a hard-laboring, hardy law clerk in a certain Judge’s chambers put me wise.

It’s snowing here in The Apple, too, but I’m on the job.

See y’all tomorrow.

Echoing an old advertising slogan, two Judges, neither one notorious for his sufferance toward the wayward petitioner,  give ‘em a break.

First, Ch J Maurice B (“Mighty Mo”) Foley. Instead of tossing Anthony Dallamarco, et al, Docket No. 16643-18, filed 2/19/19, for his late filing under another docket number, Ch J Mighty Mo gives Anthony and the al a second chance. Note the dates here.

“…petitioner timely filed an imperfect petition with the Court at Docket No. 16643-18, challenging the notice of deficiency dated July 30, 2018, issued to him for taxable year 2015. By Orders dated September 4, 2018, and November 7, 2018, the Court directed petitioner, on or before November 29, 2018, to file a proper amended petition and to pay the filing fee in that case. On December 17, 2018, the Court entered an Order of Dismissal for Lack of Jurisdiction at Docket No. 16643-18, due to petitioner’s failure to file an amended petition and to pay the filing fee as directed.

“On November 30, 2018, petitioner filed a second petition at Docket No. 23752-18, as to the same notice of deficiency for 2015.” Order, at p. 1. So Ch J Mighty Mo orders Anthony and the al to show cause why they should not be tossed again.

Instead of awaiting Anthony’s and the al’s reply to the OSC, Ch J Mighty Mo vacates his first toss, closes petition no. 2 as duplicative, and if Anthony and the al pony up the Big Green Sixty, they can go at it.

Next up, ex-Ch J Michael B (“Iron Mike”) Thornton. He’s drawn Jeremiah Francis Manning, Docket No. 22609-17, filed 2/19/19, whom y’all will remember from before the Dia de los Presidentes break as the star of my blogpost “Ubique,” 2/15/19.

Jeremiah wants more time to proffer the documents upon which he intends to rely at trial, because shutdown.

At first ex-Ch J Iron Mike is loath to grant Jeremiah’s request.

“Petitioner indicates… that his request for an extension is warranted by the shutdown of the Federal government without detailing how the shutdown affected his ability to provide respondent’s counsel the documents or other materials as ordered by the Court’s order dated November 15, 2018. The Federal government reopened on January 28, 2019, and petitioner’s motion is silent as to his efforts to provide the documents or other materials to respondent’s counsel at any time before the filing of petitioner’s motion [for more time] on February 14, 2019.” Order, at pp. 1-2.

It does seem a wee bit sketchy. Jeremiah never claims he works for the guvmint in any capacity. Of course, without knowing what the documents or other materials are, one can’t say that Jeremiah didn’t need the largest temporarily-shuttered doors at 1111 Constitution Ave, NW, to swing wide for his stuff, with strong-armed IRS functionaries standing ready to receive same.

So ex-Ch J Iron Mike gives Jeremiah a break, too.

“Nevertheless, giving petitioner the benefit of the doubt, we shall provide a short extension of time for the parties to exchange information. The Court does not contemplate granting further extensions.” Order, at p. 2.

Jeremiah gets two (count ‘em, two) weeks.

The old Engineers’ motto furnishes me a title for Tax Court subpoenas, in Jeremiah Francis Manning, Docket No. 22609-17, filed 2/15/19. This is another discovery geeks’ delight, as Jeremiah wants to depose a CPA and EA, to whom I’ll hereinafter refer to as Jason.

Jeremiah has laid five (count ‘em, five) documents on ex-Ch J Michael B (“Iron Mike”) Thornton, alleging why he has to depose Jason. Jeremiah was on for trial but got continued. Jeremiah wanted to try this case in Our Fair City, but Jason apparently hangs out in San Jose, CA. Wherefore Jeremiah fears a Tax Court subpoena won’t avail him at trial, as Jason won’t show in The Apple. And ex-Ch J Iron Mike can’t make him, he says.

Wrong.

“Petitioner’s request is based on the false premise that [Jason] is beyond the subpoena power of this Court because he does not live or work within 100 miles of the place of trial in New York, New York. Section 7456(a)(1) provides for the subpoena of witnesses and necessary documents and other evidence by the Tax Court ‘from any place in the United States’ to appear or to be produced at any designated place of hearing. Thus, [Jason] may, in fact, be subpoenaed to attend the place of trial in New York, New York. Moreover, petitioner has not alleged, much less demonstrated, that there is a substantial risk that the proposed deponent will not be available at the trial of this case.” Order, at p. 4.

For you died-in-the-wool discovery geeks, ex-Ch J Iron Mike unpacks all of Jeremiah’s discovery requests, with “somber reasoning and copious citation of precedent,” at great length. And tosses them all.

It would really be better for pro ses to concentrate on assembling evidence, rather than chewing up hours on futile paperwork.

Not Free, But Deductible

Jeffrey Siegel and Sandra Siegel, 2019 T. C. Memo. 11, filed 2/14/19, have a Valentine’s Day story in reverse, as Jeff’s payment to loved-once and daughter’s 529 plan both avoid the slammer for Jeff and give Jeff and Sandra a $242K tax deduction.

IRS claims it’s a money judgment, not back alimony, that Jeff paid loved-once Belinda.

Jeff’s business went broke, and so did he. He owed beaucoup alimony to Belinda, and she and her attorneys were nowise loath to pursue Jeff, getting a money judgment in Nassau County Supreme.

Jeff didn’t pay, so five (count ‘em, five) years later Belinda finally cornered Jeff in Supreme Nassau. The judge offered Jeff the option of writing the aforesaid couple checks (hi, Judge Holmes), or being adjudged in contempt of that august tribunal and doing 150 (count ‘em, 150) days in the Nassau County Correctional Facility.

Jeff takes the expected option, and coughs up. And cash-basis Jeff takes the deduction for the whole $247K he paid that year (the $225K back alimony plus another $17K in current alimony he paid that year). Of course, Jeff’s divorce decree is pre-12/31/18, so the 2017 TCJA cold-storage treatment of alimony deductions plays no part here.

IRS first raises the deficiency ante, and then says it’s a money judgment, and therefore not alimony. Burden of proof not an issue, as no facts in dispute.

Lump-sum alimony payments generally retain their character as alimony. The earlier money judgment Belinda got specifically granted her judgment for a sum certain, bringing in our old friend Section 71(b)(1)(D) liability-after-death-of-payee-spouse.

But this one was to enforce the decree of the Court.

And Judge Colvin lays out NY law to show how this works. NY lawyers, pay attention.

“Respondent contends that the [contempt] order was (or should be treated as) a money judgment because FCA [NY Family Court Act], sec. 454(2)(a) (McKinney 2018) provides that the judge, upon a finding of failure by a party to comply with a lawful support order, ‘shall’ enter a money judgment under FCA sec. 460.” 2019 T. C. Memo. 11, at pp. 9-10.

But NY law goes further. It gives our judges the power to order either or both fines or imprisonment for those who fail to do what they’re told when it comes to alimony and child support.

The judgment was a chop for contempt of court, not for recompense to Belinda. But she gets the money, and Jeff gets the deduction.

For family lawyers with decrees post-12/31/18, put this one in the cold storage file, and examine 12/31/25.

Edited to add, 2/15/19: Judge Colvin has given family lawyers a tax-planning move that really deserves to be remembered. Note that Belinda (the loved-once) had gotten a money judgment against Jeff five (count ’em, five) years prior to the contempt order at issue in this case. If Jeff had paid up at any time post-judgment during those five years, and tried to take a Section 215 alimony deduction, he’d have foundered on Section 71(b)(1)(D), as if Belinda dies, the judgment is not extinguished by her death, but belongs to her personal representative. And this is the case even if Belinda is alive and well when Jeff pays.

But if Jeff waits until he’s haled before the judge, who orders him incarcerated for contempt unless he pays up, and asks for his checkbook and a Mont Blanc as the Corrections officers are robing him in orange, he gets the deduction.

Do we really want a tax system that rewards the deadbeat dads with a deduction if they stall long enough, where the law-abiding ones get Section 6662 chops if they pay up?

A Section 7430 Legal & Admins Checklist

This blog is directed at the work-a-day, in-the-trenches practitioner. I keep each post as short as possible, but not shorter. Each post should either instruct or amuse, preferably both, but instruction is foremost.

Here’s Judge Gale doing a document correction (a task which befalls Tax Court Judges more than any other judges), and giving a how-to to Yasuko Ogawa, Docket No. 3020-14, filed 2/14/19, and trusty attorney, while incidentally giving a Valentine’s Day present to all of us.

Yas stiped to a decision last year, but left off the Section 7430 legals & admins, so she and trusty attorney move a month later for same. A wee bit late, says Judge Gale, but no worry.

“Claims for litigation and administrative costs are governed by section 7430 and Rules 230 through 233. Under Rule 232(f), ‘[t]he Court’s disposition of a motion for reasonable litigation or administrative costs shall be included in the decision entered in the case.’ See also Note accompanying amendment to Rule 232(f), 93 T.C. 1021 (noting that the requirement ‘is designed to simplify appeal procedures by incorporating into a single document the Court’s disposition of both the substantive issues in the case and the motion for reasonable litigation or administrative costs’). In sum, the Court’s Rules governing awards of litigation costs contemplate only a single decision being entered in a case.” Order, at p. 2.

Now Yas and trusty attorney should have moved for a vacation of the stiped decision, and thrown in their legals & admins evidence. They didn’t, so Judge Gale, emulating that Obliging Jurist Judge David Gustafson, treats their motion as a motion to vacate and grants it.

He also treats the stiped decision as a stip of settled issues, at no extra charge, curing Yas’ Rule 231(c) miscue.

And he also gives Yas and trusty attorney a checklist of the evidence they need to make a prima facie case for legals & admins.

“…we find that the Declaration of [trusty attorney] fails to satisfy Rule 231(d), which provides:

‘A motion for an award of reasonable litigation or administrative costs shall be accompanied by a detailed affidavit or declaration by the moving party or counsel for the moving party which sets forth distinctly the nature and amount of each item of costs for which an award is claimed.’

“The Declaration provides: “The total time spent by counsel relative to representation of both Husband and Wife Petitioners [cases were consolidated. ed] is 231.15 hours to and through trial preparation twice, to research treaties, and taxation of foreign sourced income and ultimately settlement.’ The Declaration also provides that out-of-pocket costs of $1,661.94 were expended for ‘Online computer research’. However, the Declaration does not describe the specific nature of the work [trusty attorney] performed, the number of hours he worked on each matter for each petitioner, or the date such work was performed. We therefore find it lacks the specificity required by Rule 231(d) and will direct petitioner to file a supplemental declaration addressing the aforementioned deficiencies.” Order, at p. 3. (Citation and footnote omitted, but the footnote is important.)

Here’s the footnote: “Additionally, we note that ‘[i]n determining the amount of an attorney fee award, courts customarily require the applicant to produce contemporaneous billing records or other sufficient documentation so that the district court can fulfill its duty to examine the application for noncompensable hours.” Order, at p. 3, footnote 3.

Oh, and notwithstanding Rule 232(b), IRS gets a chance to respond.

I wonder if Judge Nega is a fan of Paul Simon’s 1972 reggae hit.

Take a look at William French Anderson & Kathryn D. Anderson, Docket No. 23789-16, filed 2/13/19.

Wm seeks to deduct his legal fees for appealing from his criminal conviction, claiming he was wrongfully accused and convicted in an effort to deprive him of his intellectual property, the nature of which is not specified.

IRS wants summary J that said expenses are personal and not ordinary and necessary business expenses.

“Based on the record before the Court, there appears to be a genuine dispute as to an issue of material fact regarding Mr. Anderson’s actual innocence. In other words, the parties fundamentally dispute whether or not Mr. Anderson factually engaged in the physical act elemental to the crime for which he was convicted. We observe that, to this extent, respondent’s motion appears to rely exclusively on Mr. Anderson’s criminal conviction, but avoids substantively addressing the question of material fact essential to the dispute in that criminal case and now the dispute before this Court. Instead, respondent’s motion appears to conflate a context for the claim with the origin of the claim. We find this approach unavailing due to the factually intensive nature of the origin-of-the-claim inquiry before this Court, and because petitioners’ argument in that respect appears to fundamentally rely on a factual finding that Mr. Anderson did not engage in the acts for which he was convicted.” Order, at p. 3 (Footnote omitted).

Maybe Wm gets to retry his criminal case. IRS’ motion for summary J is a loser.

Howbeit, while jousting over Wm’s conviction, the names of the mother and father of a minor child, as well as of said child, nonparties to this case, were mentioned at the hearing on IRS’ summary J motion. Judge Nega ordered the parties to agree on redactions to the hearing transcript, per Rule 27a. But they can’t; IRS wants all three names redacted, but Wm & Kathryn agree only to redact the name of the minor child.

“Tax Court Rule 27(a) generally provides that in an electronic or paper filing with the Court, a party or nonparty making the filing should refrain from including or should take appropriate steps to redact certain specified information, including (1) taxpayer identification numbers, (2) dates of birth, (3) names of minor children, and (4) financial account numbers. The Rules further provide procedures for redaction and protective orders under Rule 103(a) when good cause is shown. See Rule 27(d).” Order, at pp. 3-4.

Mothers aren’t on the list, and Judge Nega is a staunch believer in the public’s right to know.

“Respondent seeks to redact the names of the mother and father which such names are not covered under Tax Court Rule 27(a). Although the Court understands respondent’s concerns, we find that redacting the names of the mother and father are not appropriate at this time. Therefore the Court expects that the parties’ positions will be further developed as they prepare for trial and may at a later time, file a motion under Rule 103(a) or take such action as it deems appropriate.” Order, at p. 4.

So although Judge Nega does not give IRS a false hope, the mother and child reunion may only be a motion away.

That phrase used to appear many years ago in advertisements in the financial sections of various periodicals. The advertisements, known as “tombstones” for their severe format and dark black type, announced the placement of securities by an underwriter, but were not themselves an offering of those securities. The advertisement drew attention to the latest coup.

Too many times I’ve blogged scams, dodges and traps for the unwary. As I wrote them, I was sure that those who read them didn’t need them, and those who needed them would never see them. So once again, I write “as a matter of record.”

Clemmie Lee Pennington, Docket No. 19115-17SL, filed 2/12/19, paid $3K to an outfit that promised him a TGTBT OIC, a $100 lump-sum walkaway. Eventually Clemmie Lee wound up with a $250/mo. IA, and a NFTL at no extra charge.

Oh yes, TGTBT means Too Good To Be True. It was, of course; IRS kicked the $100 deal to the cliché in a New York minute.

We’ve all seen these late-night telehucksters and internet spamspreaders, hawking bogus OICs. They have imposing names and some claim credentials like EA. Shame on them! The shady OIC-floggers need a few chops of the Section 6673 variety, or maybe a pate-whanging from some State AG.

The taxpayer could do just as well their own selves, or get the Taxpayer Advocate on the case, or a law school LITC (e.g., those Texas Technophobes, Golden Gophers, Harvard Fierce Fighters, the Dave Clark DC Livewires, or Dandy Sandy Freund and the Jersey Kids).

Clemmie Lee gets some sympathy even from Judge Joseph Robert (“Take No Prisoners”) Goeke in this off-the-bencher.

“We also note that petitioner’s arguments relative to the original offer in compromise are misplaced in that he subsequently agreed to the payment of $250 a month, which subverts the reasonableness of his original offer and compromise for a lump sum payment of only $100. It’s unfortunate in this situation that the petitioner was taken in by irresponsible representatives and paid $3,000 or agreed to pay $3,000 to seek a resolution of his tax case, which was too good to be true in all likelihood.

“But in any event, he has not established any basis on which we can accept his argument that the notice of Federal tax lien should be withdrawn. And the position of the Internal Revenue Service as filed in the notice of Federal tax lien, to protect the revenue, was valid and properly balanced the IRS’ need to collect the tax liability with petitioner’s personal situation.” Transcript, at pp. 6-7.

OK, NFTL sustained.

But there’s a puzzlement in the middle of the transcript.

“The taxpayer entered into an installment agreement under section 6159. Withdrawal of the Federal tax lien would facilitate collection of the tax liability, and the National Taxpayer Advocate consents to the withdrawal of the Federal tax lien because it is in the best interest of the taxpayer and the United States.” Transcript, at p. 6. Is the NFTL sustained or not?

This gets a Taishoff “Mein! Was ist das?” First Class.

I take my text for the story of Traci Newburn, s/a/k/a Traci Breinholt, Docket No. 24737-17L, filed 2/11/19, an off-the-bencher from Judge Buch, from the works of Wm Sidney Porter. But unlike the widow in O. Henry’s “A Departmental Case,” it was IRS and not Traci who “came out particularly strong on Insurance.”

Traci’s late husband (referred to throughout by the punctilious Judge Buch as “Mr. Breinholt”) ran a couple businesses (hi, Judge Holmes) in a somewhat lackadaisical fashion. “He did not maintain files well. Invoices were often stacked or scattered with no discernable pattern to how they were kept. The bank account for [Mr.’s Sub S] was used to pay both personal and business expenses ranging from DVD rentals to airline tickets.

“Household finances were not handled much better. Household expenses were often paid from [Mr.’s Sub S] account. Mr. and Ms. Breinholt maintained separate bank accounts, neither of which had a significant balance during [years at issue]. Mr. Breinholt occasionally wrote checks to Ms. Breinholt on the [Mr.’s Sub S] account. She would deposit those checks into her personal account and use the funds for family expenses. Ms. Breinholt, at the direction of her husband, also wrote checks on the [Mr.’s Sub S] account.” Transcript, at pp. 4-5.

The Breinholts were also nonfilers, Traci only coming up with three years’ worth of returns a couple weeks (hello, Judge Holmes) before trial. Traci thought maybe Mr. Breinholt paid their taxes, except they lost their home on a short sale and lived a modest lifestyle (although they took vacations). Although on one of the returns they did file, Traci was listed as co-owner of Mr.’s Sub S, there’s no other paperwork on the subject, and as Traci and the late Mr. Breinholt were residents of AZ (a community property state), co-ownership via State law doesn’t count.

Confronted with a NITL, Traci sought a CDP, but never proposed a collection alternative nor provided a Form 433-A. She did seek equitable innocent spousery, but conceded the rest.

Judge Buch trudges through the multifarious factors, but one factor stands out.

“Ms. Breinholt was also the beneficiary of a $1 million life insurance policy. Ms. Breinholt has invested the life insurance proceeds, but the record does not establish the current balance of her investment account.” Transcript, at p. 7.

Innocent spousery denied.