That Obliging Jurist Judge David Gustafson has no trouble with the concept in Sara Bareilles’ and Jack Antonoff’s 2013 digital hit “Brave”, but he does insist that, when you “say what you wanna say, and let the words fall out,” if you’re making a motion in Tax Court, you should follow Rule 50(a) and “state with particularity the grounds therefor.”

In other words, if you want something, say something. See my blogpost so entitled, 4/4/14.

Moreover, tell the Judge precisely why you’re entitled to the something you’re asking for, citing names, dates, amounts, and places, attaching copies of documents; and maybe accompany your motion with a memorandum of applicable law and regulations.

The lawyer for Ricky J. Evans, Docket No. 16602-13L, filed 5/2/14 did none of the above, and therefore earns a mild rebuke from Judge Gustafson.“This case involves the collection of trust fund recovery penalties under section 6672 for seven calendar quarters. Petitioner’s one-paragraph motion alleges that ‘Payments that had been misapplied by the IRS payment system have been successfully identified and applied to the appropriate trust taxes’ and asks us to dismiss the case (apparently on ground of mootness). The motion does not identify payment amounts or taxable periods and is not accompanied by any affidavit, documentation, or other factual support.” Order, at p. 1.

Not a good start, and IRS is all over Ricky J. and counsel. “…respondent filed an opposition to the motion, asserting that for the liabilities at issue, balances remain unpaid. To the opposition, respondent attached copies of transcripts of account for the seven periods at issue, showing balances due totaling more than $250,000.” Order, at p. 1.

Judge Gustafson gently refers Ricky J.’s counsel to Rule 50(a). And bounces his motion.

So, while he may “wanna see ya be brave”, Judge Gustafson would like you to throw in some particulars if you’re asking him for something.

Al Dubin’s and Harry Warren’s 1933 classic, as sung on the silver screen by Ruby Keeler and Clarence Nordstrom, is the advice The Great Dissenter, a/k/a The Judge Who Writes Like A Human Being, Judge Mark V. Holmes, has for the IRS in three (count ‘em, three) designated hitters, but I’ll only link to one of them, US Oil & Gas Ventures JV 2007, Energy Resource Management, LLC, Tax Matters Partner, et al., 000260-12, filed 5/2/14.

Case is on for trial next month in Buffalo, New York, but that isn’t going to happen.

After figuring out who is the tax matters partner and what his address might be, Judge Holmes confronts the bane of modern litigation: discovery. IRS files the usual show-and-tell motions (produce documents and answer interrogatories).

Well, we all know about Branerton: the rules are play nice and talk among yourselves.

But there’s a catch: “As petitioners’ representative managed to point out in the conference call, respondent here did ask for an informal discovery meeting (a Branerton conference, to use Tax Court jargon) but set it for Dallas. Since these cases are to be tried in Buffalo, the Court can’t really say this was reasonable. (But the Court will also not say it was at all in bad faith — the original place of trial was Dallas, and that’s where respondent’s counsel works. Still, we can’t say that our commitment to informal discovery can be met with a demand for a meeting nearly 1400 miles from the place of trial if petitioner objects.) That means that we must deny —for now –respondent’s various motions to compel in these cases.” Order, at pp. 1-2 (Emphasis by the Court).

But Judge Holmes is not a happy camper. “And all of that means that in these cases filed more than two years ago, not even informal discovery has been completed. This is entirely unsatisfactory, and the Court expects that these cases will be heading to a pretrial-order track very shortly.” Order, at p. 2.

So, as a former law partner was wont to say “Kick it into gear!”

No, not a reprise of the late Sir George Harrison’s 1963 classic performance from the Beatles’ “Please Please Me” album. No, this is the further interface between Judge Laro and Jeffrey J. Manquen & Camille A. Manquen, Docket No. 26666-12, filed 5/1/14.*

Remember Jeff and Cam? No? Then check out my blogpost “Taking The Fifth”, 4/22/14, wherein Jeff and Cam show their prowess as immunologists, dodging embarrassing answers by taking the Fifth aforesaid.

Once again Judge Laro encounters dodging from Jeff and Cam, this time to do with trade secrets. Jeff and Cam are pizzaristi, running a couple of Little Caesar franchises. So IRS wants all the books, papers, pictures, descriptions, accounts, manuals and cheatsheets the Little Caesar folks give to the favored applicants for their pizza-centered beneficence. Like what Jeff and Cam have.

Jeff and Cam claim disclosure will void their franchise agreement, which has a strict non-disclosure provision. And that’s true, because I’ve read and reviewed such agreements. But the Little Caesar guys can take care of themselves.

Judge Laro: “In their motion for a protective order, petitioners also seek protection for IP belonging to Little Caesar. Petitioners allege that disclosure of Little Caesar’s IP will put them in breach of their non-disclosure agreement with Little Caesar, which could cause them to lose their Little Caesar franchises. … Little Caesar moved for a protective order seeking protection of its own IP. Therefore, we do not address in this order whether a protective order over Little Caesar’s IP is appropriate. Accordingly, we do not address in this order respondent’s motion to compel production of documents that are responsive to request nos. 31 and 32, as these requests pertain to Little Caesar’s IP.” Order, at p. 2, footnote 2.

Still, Jeff and Cam claim they have their own trade secrets. And they can’t tell Judge Laro what they are.

“The underlying premise of petitioners’ argument is that it is impossible to describe their purported trade secret in any detail without completely disclosing the trade secret itself. This premise is contrary to common sense and one which we do not accept. The Court does not ask petitioners to expose their purported trade secret. Rather, because the Court can not grant a protective order until petitioners establish that a trade secret exists, the Court only requires petitioners to describe their IP in sufficient detail for the Court to make such a determination.” Order, at p. 4.

After all, the Courts must not only do justice, but show the public that justice is being done. The people have the right to know. That’s part of the First Amendment penumbra.

I’ll spare you the cynical comments, as you can easily find those elsewhere on the Internet, at least for now. Remember, this is a non-political blog.

Now the best Jeff and Cam can do to describe their trade secret is that it is a “…method and process for utilizing and applying the principles of psychology, neuro-linguistic programming, the powers of positive thinking and creative visualization to various business practices and problems, that produce a significant change in the ‘commitment’, ‘public persona’ and ‘inter-personal skills’ of the staff of the Petitioners’ LC [(Little Caesar)] stores which is reflected and expressed in the ‘condition’ of Petitioners’ LC stores, the ‘experience’ of the customers who visit Petitioners’ LC stores, and the ‘motivation’ of these customers to increase the frequency of their visits to Petitioners’ LC stores.” Order, at pp. 5-6.

Neuro-linguistics aside, the Little Caesar people say in their request for trade secret protection for their IP: “As we understand it, the Petitioners’ theory is that their trade secret consists of running their Little Caesar franchise in some way that is different from what has been prescribed by the franchisor [Little Caesar]. While this would be a default under the franchise agreement and would not be permitted, our understanding is that the Petitioners employ ordinary, routine practices such as engaging customers in conversation, engaging in community activities, and the like, but try to call that a trade secret in order to evade paying taxes on the income produced by their franchises. These are obvious business practices that are fully known to the public, and cannot possibly qualify as trade secrets. * * *.” Order, at p. 6.

Obvious business practices to try to call something a “trade secret” that evades paying taxes? Well, it’s been tried often enough.

Trade secrets are generally (love that word) information not generally known to the public or to others who can obtain economic value therefrom, and that were reasonably protected from disclosure by the holders thereof. And inadvertent disclosure must cause such holders verifiable economic harm.

That’s not what Jeff and Cam have. Being nice to customers and participating in local events are the basics of any business, especially one that deals with the dining public.

No protective order.

*Manquen 26666-12 5 1 14

Nothing doing in Tax Court today, 4/30/14. True, there are two designated off-the-benchers from that obliging Jurist, Judge David Gustafson, Mufutau Sanni, Docket No. 013190-13, filed 4/30/14, and Osvaldo Britez, Docket No. 08335-13, filed 4/30/14; but both are unreported income and indocumentado deductions cases. Poring over bank statements and self-serving testimony is all very well when it’s your client and your case, but there are no useful pointers here for the in-the-trenches preparer or practitioner.

So it’s getting close to the time to prepare this month’s bills and get them off. And that’s a better endeavor than rehashing well-known principles.

Hence the headline for this blogpost.

Yes, horseracing continues with Merrill C. Roberts, 2014 T. C. Memo. 74, filed 4/29/14, but also on tap today is another couple entries (hey, Judge Holmes, this one’s for you) in my “best excuses” no-prize sweepstakes, although Judge Paris, while amused, isn’t buying either.

Merry was a nightclubber turned horse trainer, and the case, fact-intensive as they all are, involves four runnings of the Section 183 vs. Section 162 optional allowance races, with Merry taking the last two and IRS winning the first two.

As an extra added attraction, a short course in claiming race tactics can be found at p. 10, footnote 12.

And if you thought that tax cases were only dull regurgitations of statutes and parsings of obscure regulations, here’s a note on how some trainers try to fix a horserace, and how to outwit their skullduggery: “For example, petitioner learned of ruses that unscrupulous racers would use to maximize profit potential. In one case, petitioner heard of racers affixing raw cuts of meat to a horse’s ankles so that the horse would appear to be in poor shape and not be claimed. A racer that is aware of the ruse may claim the horse and profit from the transaction.” 2014 T. C. Memo. 74, at p. 27.

Howbeit, we come to the excuses aforementioned.

Merry lost some records due to his firebrand ex-girlfriend, and tries thereby to excuse one year’s late filing: “Petitioner contends that he had reasonable cause to file his return late because some of his records were burned in a fireplace by a former girlfriend. Petitioner cites a case where a taxpayer was not held liable for a section 6651(a)(1) addition to tax because a hurricane destroyed critical tax documents. The wrath of a former girlfriend may be a formidable force, but it is not analogous to a hurricane-like natural disaster, and it does not constitute a reasonable cause outside petitioner’s control. Further, petitioner did not present any evidence showing the records were actually destroyed or document any attempts to find the lost information.” 2014 T. C. Memo. 74, at p. 48.

And Merry claims he suffered from high anxiety because IRS had audited him: “Petitioner also suggests that the Commissioner’s audits of prior-year returns was a reasonable cause for his delay. He contends that he knew the …tax return would likely be audited, and he spent extra time to make sure the return was correct. Preoccupation with an audit, however, does not constitute a reasonable cause for failing to timely file a Federal tax return.” 2014 T. C. Memo. 74, at p. 48 (Citations omitted).

Well, I’m giving Merry one “Taishoff good try” for the ex-girlfriend story, and he’s entered for the no-prize best-excuse sweepstakes.

Edited to add, 8/23/21: Judge Posner (who else?) reverses Tax Court in Roberts v. CIR, 820 F.3d 247 (CA 7, 2016). But Judge Posner treats Judge Paris a lot nicer than he did poor Judge Wherry_”We mustn’t be too hard on the Tax Court. It felt itself imprisoned by a goofy regulation (26 C.F.R. § 1.183-2, Treas. Reg. § 1.183-2: Activity Not Engaged in for Profit Defined; see, e.g., Faulconer v. Commissioner, 748 F.2d 890 (4th Cir. 1984)) that we feel bound to set forth in its full tedious length….” 820 F. 3d 247, at p. 250.

For Lawyers

 Following on my blogpost “The Phone Call”, 4/15/14, a further cautionary tale for lawyers emerges today from the word processor of Judge James S. (“Big Jim”) Halpern, a reminder that Judge Big Jim keeps the Section 6673(a)(2) hammer by his side.

Remember the Section 6673(a)(2) hammer? No? Well, it’s the delay of the game by reason of unreasonably and vexatiously multiplying the proceedings of a case. Stale pun (sorry, Judge Posner, but you don’t read my blogposts anyway): vexatious (Vic Seixas) played on the US Davis Cup teams, winning the 1953 David Cup matches.

Back to serious business. The case in point is Leonard L. Best and Evelyn R. Best, 2014 T. C. Memo. 72, filed 4/28/14.

I’m limiting my frivolity discussion to L.L.’s and Eve’s attorney, whom I shall call Mac.

Judge Big Jim hits L.L. and Eve with a $5K Section 6673(a) chop, notwithstanding that L.L. and Eve claim: “‘Petitioners, who are high school educated and lack any sophistication, in good faith relied on their competent, qualified, and independent counsel; this alone is sufficient to demonstrate good cause, thus negating imposition of the sanction sought.’” 2014 T. C. Memo. 72, at p. 20.

Judge Big Jim isn’t listening: “…petitioners’ arguments that (1) [the SO] abused her discretion in relying on computer transcripts to verify that their unpaid tax had been properly assessed and (2) collection cannot proceed because respondent has failed to furnish them records of the assessments of their … tax lack merit and are contrary to established law. The deficiencies in petitioners’ arguments are well known. Indeed, the Commissioner has taken pains to describe for taxpayers the requirements of section 6203, the procedures implementing that section, and the procedures for answering a taxpayer’s request for a copy of the record of the assessment. See Rev. Rul. 2007-21, supra. Arguments very much like the ones petitioners here make are described in Notice 2010-33, 2010-17 I.R.B. 609, listing positions identified as frivolous for purposes of application of the section 6702 frivolous tax submissions penalty. Respondent’s counsel brought the revenue ruling and the notice to the attention of [Mac] in February 2012, three months before the parties jointly moved for leave to submit this case for decision without a trial. Petitioners could have pulled the plug then and very likely avoided any sanction.” 2014 T. C. Memo. 72, at pp. 20-21.

Finally, “The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled principles before they file returns and litigate.” 2014 T. C. Memo. 72, at p. 22.

What about Mac? “Rule 33(b) sets standards in connection with counsel’s signature on a pleading and provides that upon our own motion we may sanction counsel for failure to meet those standards. Although we have found petitioners deserving of a section 6673(a)(1) penalty, we believe that [Mac]’s conduct may be deserving of a sanction for unreasonably and unnecessarily bringing and prolonging these proceedings. Indeed, in his declaration in support of petitioners’ response to respondent’s motion to impose a sanction on petitioners, he acknowledges that, following the earlier deficiency proceeding in this case, petitioners ‘had a major collection problem and * * * I decided to try the assessment issue believing there is some chance of lack of proper assessment which will result in voiding the assessment and causing the clients to be free of the debt as a result of the statute of limitations’.” 2014 T. C. Memo. 72, at p. 23.

And Mac then concedes one of his arguments is “a dead letter”. 2014 T. C. Memo. 72, at p. 22.

But since Mac hasn’t had a chance to defend himself, Judge Big Jim tells him to show cause why he shouldn’t get either the Rule 33(b) you-signed-it sanction or the Section 6673(b)(2) vexatious-unreasonable-multiplication chop.

Counsel, you have been warned.

A rare occurrence in ice hockey, when a player is deprived of a clear scoring opportunity, principally on a breakaway, where the player has eluded all opposing players and has a clear path to the opposing goal, but is thwarted by a foul committed by the opposing team (e.g., grabbing from behind or slashing with a stick).

Here, although IRS may be clear of opposition from Vernice B. Kuglin, Docket No. 14065-13L, filed 4/25/14, STJ Lewis (That Man Can Spell) Carluzzo won’t award IRS the penalty in this designated hitter.

IRS seeks dismissal for failure to state a claim, and throws in a request for the Section 6673 frivolity chop. To support its penalty seeking, IRS says Vernice has a track record of commencing cases and then conceding on the eve of trial, causing much waste of resources.

STJ Lew told Vernice either to amend her petition or oppose IRS’ motion. Of course she did neither.

STJ Lew: “We consider petitioner’s failure to reply to the above-referenced Order to reflect her concession that respondent’s motion is well-made as it relates to petitioner’s challenge to the determination made in the notice. Moreover, we view the allegations contained in the petition to be meritless challenges to respondent’s statutorily authorized procedures. Those allegations do not give rise to any justiciable issues.” Order, at p. 1.

Time for the Section 6673 chop?

No, STJ Lew is scrupulous. “Given the burden imposed upon respondent pursuant to section 7491(c), however, we do not consider petitioner’s failure to respond to the above-referenced Order to be a concession that she is liable for a section 6673(a) penalty. Furthermore, although positions advanced in the petition might suggest the imposition of a section 6673(a) penalty, we do not, under the circumstances, consider it appropriate to impose that penalty as part of this summary disposition.” Order, at p. 2.

Remember, Section 7491(c) provides: “Notwithstanding any other provision of this title, the Secretary shall have the burden of production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title.”

All IRS has produced is that Vernice has a history of fooling around, and submitted a defective petition now. Not quite enough.

So Vernice’s petition is tossed, and IRS can go levy.

But STJ Lew doesn’t say Vernice is absolutely in the clear on the Section 6673 chop.

“Upon appropriate motion by respondent, the Court will vacate this Order of Dismissal and Decision in order to allow respondent to pursue his claim for the imposition of a section 6673(a) penalty.” Order, at p. 2.

Vernice, get those pads on and get into the goal crease.

In the immortal words of the late great Lorenz Milton Hart, master versifier, “I’ve seen a lot/I mean–a lot”. Hence the title of this blogpost.

But today, April 24, 2014, a day where nothing much is doing in US Tax Court (one small-claimer Section 152 jumpball, where Divorced Daddy can only prove half a year of quartering junior, when he needs more than one-half to get the credits, rebates, etc.; so at least theoretically Divorced Mommy can’t get the tax breaks either), there comes a one-paragraph order that makes me shake my balding head in wonderment.

Let us consider Enrique Rodriguez, Docket No. 30095-13, filed 4/24/14, from the word processor of Chief Judge Michael B. (“Iron Mike”) Thornton.

It’s a short story, and I’ll let Ch J Iron Mike tell it: On two separate occasions, “…the Court directed petitioner to file an Amended Petition and pay the Court’s $60.00 filing fee. Petitioner paid the Court’s filing fee, but failed to file an Amended Petition as directed.” Order, at p. 1.

Why one would pay the fee and not send in something, even a downloaded form with a halting narrative, does raise a question. There must be more to this story.

But Ch J Iron Mike has lost patience with Enrique, notwithstanding his unguided largesse directed at 400 Second Street, N.W.

“In view of the foregoing, it is ORDERED that, on the Court’s own motion, this case is dismissed for lack of jurisdiction on the ground that petitioner failed to file a proper Amended Petition.” Order, at p. 1.

And of course Tax Court will keep Enrique’s $60.00.

Enrique, time for a motion to set aside the order. And send in the Petition form with it.

That’s Judge Wherry’s answer to Bruce M. Kraft, in 142 T. C. 14, filed 4/23/14. Bruce was petitioning off a NOD in a levy CDP.

Bruce admitted he owed the taxes he reported for the year at issue, but claimed that invading his irrevocable grantor trust to pay the tax plus interest and penalties would cost him less in interest than IRS taking his distributions.

Now self-reported tax liabilities can be contested “generally” at a CDP, but Bruce didn’t raise that issue, so it’s off the table.

So are years which Bruce wants considered but for which SNODs or NODs haven’t yet been issued, and also whether Bruce wanted an installment agreement (although at the hearing before Judge Wherry he said he didn’t, he did check that box on his Form 12153), because that’s irrelevant now.

Bruce’s spendthrift trust is the issue. Applicable law (DC) says a creditor can reach the maximum amount the beneficiary-spendthrift could reach. Here, the trustee could give Bruce the entire trust corpus, so it’s all up for grabs.

Except IRS doesn’t have to grab it, and it isn’t an abuse of discretion for a SO not to try.

“Petitioner [Bruce] asserts that respondent [IRS] should levy the Kraft Trust because it is a quicker and a more efficient way to satisfy his tax deficiency; however even if respondent were to levy upon the Kraft Trust there is a very real possibility that the trustees of the Kraft Trust could feel that their fiduciary duties require them to oppose such a levy, which could cause even more litigation and additional delay.” 142 T. C. 14, at pp. 14-15, footnote 5.

“Even if the Commissioner was inclined to specifically levy on the Kraft Trust, there would first need to be a ‘thorough investigation’ into the status of the specific property. See sec. 6331(j)(1). There is no evidence in the record that a ‘thorough investigation’ of the Kraft Trust has occurred. Caselaw has made clear that while there must be an inquiry of whether, inter alia, there is enough equity in property owned by the taxpayer, such matters occur later in the collection process.” 142 T. C. 14, at p. 15 (Footnote omitted).

And there is no statutory requirement for IRS to make such an investigation. The statutory lien for taxes encompasses everything a taxpayer owns.

So Bruce’s distributions will be grabbed until he’s paid up in full.

Petitioning Tax Court can be hazardous–to your wallet if not to your health. And not just to attorneys, as to whom see my blogpost “Practicing In Tax Court Can Be Hazardous”, 1/28/14.

Case in point: Dwight A. Newby & Sally A. Newby, Docket No. 5153-14, filed 4/23/14. Yes they are, but I’ve forsworn the obvious pun. I’ve no desire to incur a judicial beat-down as a result of lame attempts at humor, such as Judge Posner laid on poor whimsical Judge Wherry in Superior Trading LLC in the Seventh Circuit. See my blogpost “There Goes The Neighborhood”, 9/3/13.

The point of all this? Oh yeah, the point; almost forgot.

Dwight and Sally A. sent in their petition and the requisite $60.00 check, which the clerks at 400 Second Street, N.W., fell upon and negotiated with their wonted celerity.

A month or so later, Dwight and Sally A. sent in an Application for Waiver of the filing fee, and affidavit in support thereof.

Even if said Application was meritorious (and Ch Judge Michael S. (“Iron Mike”) Thornton isn’t telling), “(U)nfortunately, however, Tax Court procedures and systems do not contemplate the issuance of refunds of filing fees once paid, thus rendering petitioners’ application moot.” Order, at p. 1.

As Judge Gustafson recently reminded us in one of the Joe Insigna episodes, Tax Court can’t cut checks or tell anyone else to do so. See my blogpost “We Don’t Need No Stinkin’ Badges”, 4/2/14.

So Dwight and Sally A. are out the $60.00.

Takeaway- When preparing petition, check out the form of Application for Waiver and Affidavit, at http://www.ustaxcourt.gov/forms/Application_for_Waiver_of_Filing_Fee.pdf

And if you qualify, you can save the $60.00.