We all know that once you petition Tax Court for a given year, everything is on the table. In case anyone tuned in late, see my blogpost “Agree With Thine Adversary Whilst Thou Art In The Way”, 8/24/13.

Well, Illinois Tool Works, Inc., and Subsidiaries, Docket No. 10418-14, filed 12/2/14, tried to get around the principles CTSJ Panuthos enunciated in my blogpost abovecited, and doesn’t succeed; Judge Lauber, that distinguished alum of Clare College Cambridge U., lets IRS up the ante by a whopping $14 million.

The Illini were fighting over a payment from one of The Illini’s offshore subsidiaries to The Illini. The Illini claimed it was return of capital; IRS claimed it was a dividend and handed The Illini a $70 million deficiency.

IRS never mentioned a Section 6662 penalty, neither accuracy nor substantial understatement, in the SNOD, but sought to raise it in their answer. The Illini claim they’re being hit with understatement (Section 6662(d)), but IRS’s answer says accuracy (Section 6662(a)).

Whichever, The Illini claim that the Administrative Procedures Act, Chenery and Mayo Clinic don’t permit this.

Quick recap- For Chenery, see my blogpost “Chen-Chenery”, 8/21/14. For Mayo Clinic, see my blogpost “Carpenter, Colony, Chevron and Mayo”, 4/26/11.

The Illini want Judge Lauber to strike the penalty portion of the answer, claiming “…such assertion would be inconsistent with what petitioner describes as a prior ‘determination’ by respondent [IRS] not to assert that penalty. As such, the delayed assertion of the penalty would supposedly be analogous to a disfavored ‘post hoc rationalization’ by the agency.” Order, at pp. 2-3 (Citation omitted).

The Illini get a Taishoff “Good Try, Second Class”, but get a Judge Lauber “fuggedaboutit”, and he’s the decider.

In the first place, Tax Court won’t strike if the allegation has any cognizable legal basis. And this one has plenty.

Judge Lauber: “This argument clearly proves too much. Our Rules explicitly permit respondent to assert an increased deficiency or ‘new matter’ in his answer, Tax Court Rule 142(a), and Congress has specifically granted this Court jurisdiction to hear such claims. Section 6214(a) provides the Court with jurisdiction to redetermine a deficiency greater than that set forth in the notice of deficiency, ‘and to determine whether any additional amount, or any addition to the tax should be assessed, if claim therefor is asserted by the Secretary at or before the hearing or rehearing.’ On petitioner’s theory, such a determination would be impermissible because it would be inconsistent with a supposed prior ‘determination’ by respondent–embodied in the notice of deficiency–that a smaller deficiency was correct or that the new matter should not be asserted. That is clearly not the law. In this and in other respects, the specific procedures that Congress has ordained for this Court in the Internal Revenue Code may differ from the more general rules embodied in the APA.” Order, at p.3.

Lest IRS’s team slap themselves a premature “high five” at this point, Judge Lauber has a caution for them.

“This is not to say that respondent can delay with impunity in asserting a new matter or an increased deficiency. When respondent does so, our Rules require that the burden of proof be shifted from petitioner to respondent concerning the increased deficiency or new matter. Tax Court Rule 142(a)(1). That, rather than striking respondent’s pleading, is the ‘sanction’ imposed by our Rules. To the extent that petitioner’s motion advances other arguments, the thrust of which is that the penalty should not be imposed, petitioner is free to advance those contentions at trial and on brief.” Order, at p. 4 (Footnote omitted, but it says that IRS’s answer is clear enough, so IRS need not provide a more definite statement).

Takeaway–See my first-cited blogpost; if you can settle, settle.

No, not the 1968 Dick Francis Edgar-winning mystery, rather this is the story of how a criminal forfeiture of retirement accounts mutates into taxable income plus a bunch of chops–or does it?

That Obliging Jurist Judge Gustafson gives IRS a second chance to brief the issues in a designated hitter, James Leevann Howard, Docket No. 17939-12, filed 12/1/14.

Judge Gustafson ordered post-trial briefs, and asked IRS to address specifically “…why the forfeiture of petitioner’s retirement accounts should be taxable in the same manner as property seized to satisfy a distinct liability. Particularly, we asked how petitioner could be enriched (such that the forfeited retirement accounts should be taxable) when the forfeited retirement accounts did not satisfy a preexisting liability. We observed that, in a typical seizure case, the taxpayer’s assets are seized by the government to satisfy a pre-existing liability. But it seems that in the case of a criminal forfeiture, a criminal defendant may not have a pre-existing liability, and arguably the forfeiture does not yield any accession to wealth because it involves no satisfaction of such a liability. Rather, the defendant simply forfeits to the Government whatever property he has, of whatever value.” Order, at p. 1.

Apparently IRS also wants failure to file, failure to pay tax shown, and failure to pay estimated tax chops from James Leevann, notwithstanding that the Federales have plundered him of his last centime.

IRS has some “‘splainin’ to do”, but inasmuch as Judge Gustafson gave everybody a tight briefing deadline, he allows IRS time to explain how James Leevann could have known at the beginning of the year that he would have estimated tax due when he forfeited his retirement accounts at the end of the year.

And IRS can explain how a criminal forfeiture enriched James Leevan by finding a case that deals with something beside the Section 72(t) early withdrawal penalty, apparently not an issue here.

As to the Section 6651 chops, IRS can explain “…respondent’s view on whether petitioner’s incarceration and forfeiture of all his real and personal property satisfies the reasonable cause exception for section 6651(a)(2).” Order, at p. 2

And just so IRS’s counsel doesn’t feel neglected, counsel can also “…discuss (a) whether he considered waiver of the section 6654(a) addition to tax because this was arguably an unusual circumstance (as described in section 6654(e)(3)(A)) in which the imposition of the tax might be against equity and good conscience, and, if so, (b) whether this Court has jurisdiction to review respondent’s decision, either de novo or for abuse of discretion.” Order, at p. 3.

IRS counsel, you have until December 20 to answer all of Judge Gustafson’s questions.

Footnote to the foregoing–IRS folded. See Order, 2/5/15.

Echoing the immortal words of RAF Sgt. “Jock” MacPherson in the World War II film classic “Target for To-Night”, I’m in the office and at my desk, but at 400 Second Street, NW, the flailing datestampers and the “somber reasoning and copious citation of precedent” are laid aside for today, Black Friday.

Yes, the boys and girls at USTC have taken the day off.

Here’s the skinny:

 “NOTICE

 “The United States Tax Court will be closed on Friday, November 28, 2014. For purposes of computation of time under Rule 25, Tax Court Rules of Practice and Procedure, November 28, 2014, shall be treated in the same manner as a legal holiday. See Rule 25(a)(2) and (b), Tax Court Rules of Practice and Procedure.”

No doubt we will have a busy day on Monday to start the final month of the calendar year, but for the moment I expect the crew is busy with whatever guided largesse Walmart, Target and Costco have to offer.

I wish all my readers, both constant and casual, a happy Thanksgiving.

And I’m thankful for, among many other things, blogpost 1000.

It’s been fun.

More to come, if time permits.

If your qualified plan gets revoked, you can go to Tax Court. But what happens when you get there? Well, Judge Buch will let you know in RSW Enterprises, Inc, 143 T. C. 21, filed 11/26/14.

If the contents and completeness of the administrative record is in dispute, you can get a trial.

Huh, you may well ask, isn’t the Section 7476(a) declaratory judgment proceeding limited to a strict review of the administrative record as to initial qualification or continuing qualification?

Yes, but.

The “but” is that a qualification is covered by Section 7476(a), but so is disqualification. And Rule 217(b)(2) permits summary judgment in a declaratory judgment (DJ) proceeding like this.

IRS claims Rule 217(b)(2) not only permits summary J in a qualification DJ, but mandates that only the administrative record can be considered.

RSW and its companion Key Lime Investments, Inc., claim the administrative record contains unsupported conclusions and doesn’t contain material facts that IRS disputes.

And Rule 217(a) allows summary J on the administrative record only when the parties agree that the administrative record is complete and that no facts are in dispute.

RSW and Key Lime claim they aren’t jointly controlled by The Waage Law Firm. IRS claims they are, as Ms. Waage and her sister are running the show at RSW and Key Lime via certain trusts, which IRS claims are shams. If jointly controlled, then The Waage Law Firm employees should be included in the RSW and Key Lime Defined Benefit Plans, which they aren’t and so the Waage Plan and the RSW and Key Lime are all DQed.

IRS’ one big case is a continuing qualification case (initial plan OK, but challenged when amended to comply with a change in law).

But that case arose in the context of a discovery demand by petitioners (disgruntled employees). “The legislative history of section 7476 makes clear that Congress did not expect the Court to conduct a trial de novo in declaratory judgment actions arising under that section, no matter whether that action arose with respect to the initial qualification or the continuing qualification of a retirement plan.” 143 T. C. 21, at p. 8.

But Rule 217(a) says the administrative record rules only where the parties agree it is complete and no facts therein are disputed.

When Rule 217(a) was adopted, Tax Court said “The distinction in treatment under this Rule for cases involving a revocation results from the difference in processing of such cases by the Internal Revenue Service, which usually bases its determination of revocation on its own investigation rather than by accepting the facts asserted by the applicant and which go into the administrative record in other cases. * * *” 143 T. C. 21, at p. 9.

So the plan’s proponent is at a disadvantage if it can’t challenge the facts adduced by IRS’ independent investigation.

Judge Buch: “Although RSW and Key Lime do not dispute the genuineness of the items in the administrative record, they maintain that the administrative record contains facts that are conflicting and in dispute. Further, respondent’s own motion states that respondent lacks evidence regarding the actions of the trustee and the stock transfers. The filings from RSW and Key Lime indicate that such evidence is available. Nothing in our Rules precludes RSW and Key Lime from producing this evidence or using it at trial.” 143 T. C. 21, at p. 11.

While IRS, RSW and Key Lime exchange argy-bargy about what Rule 217 means, Judge Buch has no doubt what it means in this case.

“The parties argue about the meaning of Rule 217. We hold that under that Rule, we are not limited to the administrative record in this proceeding concerning plan revocations because the parties do not agree that the administrative record contains all of the relevant facts and that those facts are not in dispute.” 143 T. C. 21, at p. 12.

No summary J, so go try the case.

Edited to add, 4/24/21: They apparently didn’t try the case. A stiped decision was entered 12/29/16, but the Genius Baristas have sealed it. Apparently the Genius Baristas never heard of Rule 27.

No, not Robert Browning’s verse drama, nor yet the sixth-class city in Knott County KY. This is a case where a Partial Payment Installment Agreement meets CNC meets a sole proprietorship, and gets sent back to Appeals.

Here’s Arleta S. Stover Reflections Counseling, Docket No. 15276-13L, filed 11/25/14.

It’s Arleta’s solo operation, but she owes a bushelbasketful of 941 money. Arleta filed the returns, but didn’t send in the cash.

Arleta requested CNC (Currently Not Collectible) in her go-round with Appeals, and sent in all manner of documentation. She had used one checking account for both business and personal moneys, which didn’t help, but I would point out that many small businesspeople do likewise, especially when the business income and expenses are really small.

And anyway, the SO found Arleta had little or no assets. But the SO denies CNC. So Arleta offers a PPIA.

SO says no, but here’s a straight installment agreement. Arleta says no, gets a NOD and heads for Tax Court. IRS wants summary judgment, but doesn’t get it.

Abuse of discretion is the guideline here. Arleta admits she owes.

“This Court has consistently held that an abuse of discretion cannot be established solely on the fact the Commissioner rejects a taxpayer’s PPIA proposal. However, the IRM offers guidance in granting or denying a PPIA: ‘Before a PPIA may be granted, equity in assets must be addressed and * * * in most cases taxpayers will be required to use equity in assets to pay liabilities.’ IRM 5.14.2.2(2) (July 12, 2005).” Order, at p. 9. (Citation omitted).

But the IRM isn’t law. “The IRM merely reflects the Commissioner’s internal procedures and does not have the force of law. Therefore, it does bind this Court. Vallone v. Commissioner, 88 T.C. 794, 807-08 (1987). When the Commissioner deviates from its own internal procedures, such action does not automatically render an abuse of discretion. Id. However, when the Commissioner bases its determination of a case wholly on misapplication of internal procedures, there may exist an abuse of discretion. See e.g., Fairlamb v. Commissioner, T.C. Memo. 2010-22.” Order, at p. 9.

Whatever the numbers might yield, the SO didn’t explain them to Judge Paris’ satisfaction. The SO didn’t explain why CNC should not be granted, and why the PPIA Arleta offered wouldn’t satisfy the Collection Status Expiration Date requirement. And ultimately the numbers showed, and the SO didn’t disagree, that Arleta has minimal collection potential.

But Arleta doesn’t win. She must go back to Appeals, and the SO should make the omitted explanations.

Now for a word of complaint on my part, not to do with Arleta or Appeals.

Judge Paris, you just wrote an order with a lot of useful learning for the in-the-trenches practitioner. You obviously gave this thought. But why do you bury it in eight pages of  “pay the $60” or  “continuance granted”? I can’t read every order coming out of Tax Court; I don’t think any rational human being could without suffering severely adverse effects. Please designate your orders; all of us, they, you and I deserve it.

Although candor should be applauded, this is not a good reason to fail to file returns, much less pay the tax due, especially if one has an unbroken twenty-year record of not filing returns.

And there is even a better reason not to say so to the IRS. It might prove fraudulent nonfiling, which sets up the 75% chop.

This is the lesson Judge Chiechi teaches Paul Neil Filzer, a successful attorney and investor, in 2014 T. C. Memo. 241, filed 11/25/14.

When it comes to the trial of the six nonfiling years at issue in this volume of Paul Neil’s saga, Paul Neil defaults. No brief, no show.

When he was still speaking to the IRS, Paul Neil said “…he had no good reason for not filing his tax returns, except that he knew he would owe a lot of money.” 2014 T. C. Memo. at p. 4 and p. 5.

IRS well-pleads all of Paul Neil’s various delictions and departures from the path in its answer, which Judge Chiechi quotes in extenso. So I’ll spare you; little irks me as much as CLE or CPE lecturers whose lectures consist of reading aloud their materials, which I already have in my possession, to me, as if I were illiterate.

There is a permissible inference, if not a rebuttable presumption, that attorneys, who are also Enrolled Agents, can read the English language, and possibly even comprehend what they have read.

Anyway, IRS gets a Rule 123(a) default against Paul Neil. That, you’ll remember (and if not see my blogpost “Defaulters”, 5/27/14) is not dismissal for failure to prosecute, but a real default (like what we call here in NY a default judgment), which means that IRS is deemed to have successfully borne whatever burdens of production or burdens of proof it might have had.

Hence Paul Neil gets the 75% fraud chops on everything.

So, while candor is to be applauded generally (there’s that word “generally” again), “telling it in Gath, and whispering it in the tents of the Philistines”, to misquote a much more exalted source, can get very expensive.

The SO thought that a NFTL was cast in bronze when sculptor Jim Budish wanted an installment agreement to pay off the $200K he owed Oom Sam, but Judge Halpern says not so, in James B. Budish, 2014 T. C. Memo. 239, 11/24/14.

Jim is a sculptor, and successful. He “works in cast bronze and sells his artwork through his wholly owned S corporation, Jim Budish Sculptor, Ltd. (Sculptor, Ltd.), for which he is a salaried employee. Over the years, petitioner has relied on a particular Arizona foundry (Metalphysic Sculpture Studio, Inc.) (foundry) to provide the material he uses in his sculptures and to do the actual casting. Typically, the sculptures are commissioned by the buyers who pay for them before casting. Thus, petitioner does not maintain an inventory from which he regularly sells his sculptures.” 2014 T. C. Memo. 239, at p. 4.

Jim doesn’t contest he owes big time, but claims he has zero assets, and whatever will pay the installment agreement must come from sales of his castings. The SO agrees with Jim’s staff of attorneys on the number for the installment agreement.

SO says IRM 5.14.1.4.2 mandates a NFTL because of all the money Jim owes.

Jim’s attorneys (all three of them) claim the foundry will cause Jim to founder if there’s a NFTL, because they won’t grant him the usual credit but will demand cash up front, the buyers will run because they’ll be afraid whatever they pay and their precious bronzes will be grabbed by IRS. Finally, American Express will cut off Jim’s ability to pay for stuff with his trusty “don’t-leave-home-without-it”.

Since Jim admits he owes, it’s abuse-of-discretion.

Whatever the IRM says, Section 6330(c)(3)(C) requires IRS to legitimately balance and weigh the interests of efficient governmental collection of taxes against the taxpayer’s legitimate concern that collection action be no more intrusive than necessary.

What ultimately bails out Jim is that lovely phrase “in general”. I love that phrase, because what invariably follows is any number of exceptions, waffles, wriggle-room and definite maybes.

Judge Halpern: “In IRM pt. 5.12.2.4.1, the term ‘in general’ in describing the circumstances, including the existence of large, outstanding liabilities, under which a notice of lien ‘should be filed’ clearly indicates that there may be occasions in which it is not necessary to file a notice of lien, even where such circumstances exist.

“As petitioner suggests, the filing of a notice of lien might not be in the Government’s best interests in this case if, as petitioner argues, the lien would hamper rather than foster collection of his outstanding liability. In arguing that this case presents one of those occasions in which a notice of lien would be counterproductive for respondent, petitioner points to the nominal amount of his net assets as compared with that liability and also to the fact that a notice of lien filing would put him out of business, thereby cutting off the only source of funds sufficient to discharge his liability and making it impossible for him to honor his commitment under the installment agreement.” 2104 T. C. Memo. 239, at pp. 18-19.

“It is also clear that IRM pt. 5.12.2.4 (Oct. 30, 2009) lists circumstances under which an ‘NFTL filing determination must be made’, not circumstances under which a notice of lien must be filed. Thus, pursuant to IRM pt. 5.12.2.4, the Appeals officer was required to make a lien filing ‘determination’, which petitioner does not dispute; but she was not required, by that provision, to determine that a notice of lien be filed.” 2014 T. C. Memo. 239, at p. 19.

The record isn’t sufficiently clear for Judge Halpern, so he remands.

But because this is an interesting case, he can’t resist telling counsel, both IRS’s and Jim’s Gang of Three, how to try the remand.

“On remand we anticipate that the Appeals officer assigned the case will want to investigate, facilitated by petitioner’s furnishing supporting documentation or affidavits where necessary, petitioner’s representations that the mere filing of a notice of lien will cause the foundry to drastically and unfavorably alter its working relationship with him and cause his customers to do the same, both resulting in a sharp decrease or stoppage of his income from the production and sale of sculptures, thereby causing him to default on the proposed installment agreement. In that connection we agree with respondent that counsel, in a letter to the Appeals officer, overstated the foundry’s reaction to the possibility of a Federal tax lien against petitioner’s assets. The foundry did not cite that possibility as ‘the impetus’ for its proposed changes in its business relationship with petitioner. Rather, it cited the actual suspension or delay of payments due it as the linchpin of those changes.

“We also anticipate that the Appeals officer will make a judgment as to the accuracy of petitioner’s representations regarding the value of his assets and the amount of his cashflow that might be subject to a Federal lien. In that connection, petitioner might want to make further arguments or submissions concerning whether the foundry work in process and/or the finished products are assets belonging to him, to Sculptor, Ltd., or, by virtue of their advance payments, to his customers. Presumably, a notice of lien against petitioner’s assets would not attach to the assets of either Sculptor, Ltd., or its (petitioner’s) customers.

“Petitioner might also want to explain why his rejection of a bond in lieu of a notice of lien, because of cost or otherwise, is reasonable under the circumstances.

“Lastly, we think it advisable that the Appeals officer, with the assistance of his or her counsel, if needed, consider the impact, if any, on his or her determination of section 6323(b)(3), which provides that a Federal notice of lien ‘shall not be valid’ against a purchaser of tangible personal property purchased at retail in the ordinary course of the seller’s trade or business unless, at the time of purchase, the purchaser actually intends the purchase to (or knows that it will) ‘hinder, evade, or defeat’ the collection of tax. Section 301.6323(b)-1(c)(2), Proced. & Admin. Regs., defines ‘retail sale’ to mean ‘a sale, made in the ordinary course of the seller’s trade or business, of tangible personal property of which the seller is the owner. That definition would appear to cover the sculptures sold on petitioner’s behalf by Sculptor, Ltd. Should it be determined that section 6323(b)(3) does apply herein, its application would appear to weaken both parties’ positions. On the one hand, the Government’s lien would not be valid as against a purchaser’s interest in petitioner’s sculptures, which would mean, assuming petitioner’s representations with respect to his lack of other valuable assets are true, that a lien would do little to protect the Government’s interests and, therefore might not be necessary. On the other hand, the failure of the lien to have priority over a purchaser’s interest in the sculptures would negate petitioner’s argument that it would effectively put him out of business.” 2014 T. C. Memo. 239, at p. 25-27.

In any case, let Appeals consider Section 6323(b)(3).

I can’t help thinking that Jim’s counsel should ask Judge Halpern if they should go home and let him try the case.

Takeaway–If you offer an installment alternative, and Appeals wants a NFTL or NOTL, tell them Section 6323(b)(3) trumps IRM 5.12.2.4.

While nonreceipt of an 1153 billet doux doesn’t invalidate the Section 6672 TFRP, it does raise the question (no it doesn’t “beg” the question, a locution that betrays an imperfect education) whether the petitioner had a chance to contest the penalty.

And here IRS loses summary J, because apparently it shot a blank at the late John W. Houston, co-resident of Omaha, NE, with the great Warren Buffet.

The late John’s cudgel is taken up by his surviving spouse Sarah, in Estate of John W. Houston, Deceased, Sarah V. Houston, Personal Representative, Docket No. 11561-12L, filed 11/24/14. Sarah cross-moves, but doesn’t win either.

The late John was CFO of Merit Transportation Company, LLC, but Merit had little Merit. It stiffed the fisc of $700K in withholdings a month before firing the late John, and filed bankruptcy thereafter.

Judge Paris checks out the late John’s job description. He was:“…in charge of overseeing the ‘comp controller [sic]’ and the individual in charge of the company’s payroll. Decedent was listed on one copy of Merit’s bank account signature cards, which appeared to give him authority to direct funds on behalf of the company. This signature card was not dated and the other bank cards were not signed by decedent and there is no evidence that decedent actually used this authority to write any checks.” Order, at p. 2.

A somewhat shaky case for IRS. And it doesn’t get better.

“Decedent’s Letter 1153 was purportedly sent to decedent and petitioner’s undisputed address in Omaha, Nebraska. … the Postal Service directed the envelope back to the sender because it was ‘not deliverable as addressed’ and ‘unable to forward’. The same day… respondent received and acknowledged the envelope returned from the Postal Service. The envelope was returned within 48 hours of the initial deposit into the mail and upon return, the revenue officer in charge of the case determined that besides waiting 60 days, no further notice action was needed to assess a trust fund penalty against decedent. The revenue officer determined the mere lapse of 60 days from posting the envelope was adequate notice.” Order, at pp. 2-3.

Well, that should do it, right? Section 6672(b)(2) says give the notice, wait 60 days, and then go get ‘em.

Not quite. There was a minor problem with the letter.

“On the copy of the envelope introduced into evidence, decedent’s address does not appear on the front side of the envelope that was supposedly sent to him. The envelope has a clear window, which is supposed to align with an address printed on a sheet inserted into the envelope’s enclosure. The clear window of Letter 1153 does not show any address; instead the window shows what appears to be a security pattern on either the inside of the envelope or paper within the envelope. In any case, the envelope does not display decedent’s address and raises the issue of whether a letter was ever properly inserted into the envelope or if the Postal Service’s prompt return reflecting that it was ‘not deliverable as addressed and unable to forward’ should have alerted the revenue officer of a failed mailing. Neither decedent nor petitioner protested the proposed assessment.” Order, at p. 3.

Appeals gave Sarah a hearing, but said the IRS’ self-generated certified mail receipt showing a letter sent to the late John’s last-known address (the correctness of which no one contests) means “game over” as far as contesting liability.

Sarah petitions.

It’s one thing if the nonreceipt is the result of a USPS error or malfunction. If IRS correctly addressed and mailed the letter, that’s it as far as contesting liability goes. And if the letter was stamped “UNCLAIMED” by USPS, or the addressee ducked delivery, likewise. But see my blogposts “You Didn’t Get It”, 5/31/13, and “You Didn’t Get It – Part Deux”, 5/31/13.

And here all IRS has is the self-generated certified mail receipt.

But maybe IRS can produce something from USPS showing proper mailing of the 3172; no summary J for IRS–yet.

And no summary J for Sarah.

No, not the Peter Fonda – Dennis Hopper 1969 tale, but the story of Ben Evans, a youth with what Judge Vasquez calls the natural talent and drive to race motorcycles at a professional level.

Young Ben lived in Boise, ID, a mecca for motocross, “a motorsport in which competitors race motorcycles at high speeds on dirt courses containing jumps and obstacles.” 2104 T. C. Memo. 237, filed 11/20/14, at p. 6.

In fact, so adept was Young Ben that in one year he “won the Amateur Motocross National Championship 458 Pro Sport class at the Loretta Lynn Motocross Ranch (Loretta Lynn) in Nashville, Tennessee. The Loretta Lynn title is the premiere title in the national amateur racing circuit. Every year 25,000 entrants compete to qualify to race at Loretta Lynn, but only 40 actually make it to the championship.” 2104 T. C. Memo. 237, at p. 4.

Just to make it clear that Loretta Lynn is the coal miner’s daughter and not an apparently failed nominee for Attorney General, Judge Vasquez footnotes: “The event is named after the country singer of the same name.” 2014 T. C. Memo. 237, at p. 4, footnote 4.

Anyway, Young Ben is ticketed for stardom, but Tax Court is concerned with Mom and Dad, William D. Evans and Caroline F. Evans. Mom and Dad’s personal tax return notes Dad’s income from his construction company, licensed in Idaho and doing business nowhere else.

And arriving at that income, Dad deducts money he spent on a motorhome to haul Young Ben and his motorcycles, which actually were carried in the motorhome, thus taking the motorhome out of the Section 179(d)(1) trap that knocks out lodging type property from the quick-kick deduction in Section 179.

Dad loses some deductions for a utility trailer for want of evidence, and he did put income and expenses on the wrong lines of his return, but as his trusty CPAs were qualified and had all the info, no penalty for Dad.

Finally, even though Young Ben’s racing took place afar from Boise, ID, there was some benefit to Dad’s construction business. There’s caselaw that supports racing as a promotional endeavor for construction firms. And even pizza purveyors.

But since Dad can’t show what was the industry standard for racing expenses, or what was the exact benefit his construction company got from Young Ben’s easy riding, Judge Vasquez gives Dad a Cohan approximation.

And while agreeing with IRS that just because the expenses Dad deducted were a small fraction of Dad’s gross receipts doesn’t make the expenses reasonable, Judge Vasquez allows that the Cohan rule covers this case.

So the lesson for the offspring of construction company moguls is “get on your bike.”